1. How to Complete an Audit Quarterly Internal Audit Report (IAR-1) Annual Internal Audit Report (IAR-1) 2014 Regional Conference Cycle National Internal Audit Committee Training

2. 2 Chair Myrna Phillips, CPA, MBA PMP Alumnae Members Pamela Hill, MAcc, MPA Courtney Smith, CPA, CIA Collegiate Member Ivyanne Kenya London Staff Liaisons Gwendolyn Dailey Crystal Mitchell Terry Jones National Internal Audit Committee CNIACDST@gmail.com hillpamelar@gmail.com cesmith217@gmail.com ivyanne_london@aol.com gkdailey@deltasigmatheta.org cmitchell@deltasigmatheta.org tjones@deltasigmatheta.org

3. 3 Agenda Purpose of Internal Audit Constitutional Requirements Code of Conduct Penalties Acceptance of Responsibility Form Purpose of the Internal Audit Committee Internal Audit Communication Planning the Internal Audit Chapter Annual Audit Requirements Audit Sample, Procedures & Testing Audit Communication IAR-1 Quarterly and Annual Form Input Questions?

4. Why Perform A Quarterly Audit?

5. 5 An internal audit is the mechanism by which a chapter assesses the level of compliance to chapter policies and procedures and internal controls Purpose of an Internal Audit The better the control environment, the less likely unexpected events are to adversely affect an entity's ability to execute on its strategies and achieve its objectives. Performing quarterly internal audits helps prevent:  Theft  Fraud  Embezzlement

6. 6 Purpose of an Internal Audit  Increases accountability  Improves: - ethical and professional practices - the quality of output and supports decision-making and performance tracking  Can be used : - to examine and evaluate activities - as a service to the institution promoting effective control at a reasonable cost  Helps organizations achieve their stated objectives An Internal Audit:

7. 7 The misappropriation of funds is due primarily to fiscal officers not performing their duties and responsibilities Purpose of an Internal Audit All chapters should have fiscal policies and procedures in place that define its internal controls for safeguarding chapter assets. The audit assesses whether fiscal officers are performing their duties according to the written policies. The audit also helps highlight potential problems that may result in future financial losses if not corrected.

8. 8 Constitutional Requirements Audit of Chapter Accounts Constitution and By-Laws Article X; Section 12.B The books of a chapter shall be audited by a certified public accountant or an audit committee within 30 days of the close of the fiscal year. A copy shall be submitted to National Headquarters by August 31. NOTE: Failure to submit the Internal Audit Report (IAR-1) and/ or a copy of the external audit to National Headquarters by August 31 st is a violation of the Constitution and By-Laws and may be subject to sanctions and fines as stated in Section 5 C of the Code of Conduct.

9. 9 Code of Conduct Penalties Failure to submit Annual Audit Report (IAR-1 Form):  By the required deadline (August 31st) Fine $200  30-90 days after the required deadline Fine $300  More than 90 after the required deadline Suspension for 6 Months or Fine $500 Failure to submit the Internal Audit Report(IAR-1) and/ or a copy of the external audit to National Headquarters by August 31 st is a violation of the Constitution and Bylaws and may be subject to sanctions and fines as stated in Section 5 C of the Code of Conduct.

10. 10 Acceptance of Responsibility Form Purpose: To ensure Chair, Internal Audit Committee clearly understands, acknowledges, and accepts her responsibilities –Conduct quarterly audits and the annual audit according to the due dates established by the National Internal Audit Committee –File the IAR-1’s and the Annual IAR-1 in the Red Zone according to the due dates established by the National Internal Audit Committee –Discuss the draft recommendations and findings on a quarterly basis with the Fiscal officers –Report the findings and recommendations of the audits to the Executive Board and then to the chapter on a quarterly basis Due: August 31 st of each fiscal year New Requirement for Chapter Internal Audit Chairs

11. 11 Acceptance of Responsibility Form National Website Print and complete the form Make a copy for the chapters records Mail the original form to: Delta Sigma Theta Attention: Director of Finance 1707 New Hampshire Avenue, NW Washington, DC 20009

12. Purpose of the Internal Audit Committee

13. 13 The committee’s purpose includes: Purpose of the Internal Audit Committee  Recommending for chapter approval an independent auditor to conduct the annual review/audit (if applicable)  Reviewing and proposing internal controls  Performing the chapter’s quarterly internal audits  Reporting audit findings and recommendations to the chapter  Submitting the IAR-1 Form for each quarter online  Submitting the Annual IAR-1 Form online by August 31st

14. Selection of the Internal Audit Committee

15. 15 Who should be on the Internal Audit Committee?  Target sorors who have financial or audit backgrounds  Sorors who know about the chapter’s finances, but who are not the current fiscal officers  A designated external person can be selected to perform the audit if the chapter’s size does not permit the establishment of an internal audit team

16. 16 Who should not be on the committee?  Current Fiscal Officers President, Treasurer, Financial Secretary, Assistant Treasurer, Assistant Financial Secretary  Members of the Budget/Finance Committee  Chapter Advisors  NOTE: While not ideal, Immediate Past Financial officers may serve as long as they do not audit or review transactions which they initiated or were privy to.

17. Internal Audit Communication

18. 18 Every successful audit is based on: Internal Audit Communication  Sound planning  An atmosphere of constructive involvement  Effective communication

19. 19 The Internal Audit Committee and the Chapter Fiscal Officers should work together to complete the internal audits by: Internal Audit Communication  developing a process (how it will be done), and  agreeing to a timeframe (when it will be done) Chapters should know that the Internal Audit Committee:  has an active interest in ensuring internal controls are in place and effective and,  wants to ensure that the established policies and procedures are being followed.

20. 20 The culmination of the internal audit is the audit report. Internal Audit Communication The audit report should be designed to assist chapter leadership in measuring its own performance - particularly with respect to the reliability and soundness of established internal controls. The Internal Audit Committee should report any audit findings and recommendations to the chapter after each audit. The results of the internal audit are confidential and should only be discussed through the formal communications mechanisms set forth in the chapter’s policies and procedures.

21. Planning the Internal Audit

22. 22 Planning the Internal Audit Key Audit Reporting Dates A NNUAL R EPORTS Report RED ZONE Due Date Annual Internal Audit Report (IAR-1) August 31 st External Review / External Audit August 31 st Q UARTERLY R EPORTS Report RED ZONE Due Date Quarter 1 (July 1 to September 30)December 1st Quarter 2 (October 1 to December 31)March 1st Quarter 3 (January 1 to March 31)June 1st Quarter 4 (April 1 to June 30)August 1st All reports must be filed using the on-line system in the Red Zone.

23. 23 Planning the Internal Audit The chapter’s financial records shall be audited quarterly, based on the sorority’s fiscal year (July 1 – June 30). The audit will begin two weeks after the end of the quarter. The schedule for the fiscal year audits is as follows: Scheduling the Quarterly Audits

24. 24 Audit Requirement Audit Levels

25. 25 AUDIT SAMPLE, PROCEDURES & TESTING

26. 26 Sample Selection When examining less than 100% of the transactions, a sample needs to be selected. It is preferable to use a statistical sampling method. Statistical Sampling – 1. Random sampling 2. Systematic sampling Nonstatistical Sampling – 1. Haphazard sampling 2. Judgmental sampling Statistical Sampling vs. Nonstatistical Sampling

27. 27 Receipts Receipts represent the total funds collected from dues, conferences, fundraising, etc. Objectives Ensure that all cash/check receipts are deposited timely (within 2 business days of receipt). Confirm that the receipts are recorded accurately. NOTE: Receipts do not include the movement/transfer of monies between chapter accounts (example transfers from Operating to Fundraising).

28. 28 Validating Receipts 1.Compare the Financial Secretary’s Logs to the Bank Statement Deposits 2.Compare the Financial Secretary’s Logs to the Treasurer’s Reports 3.Compare Receipt Books to the Bank Deposit slips 4.Verify Member Dues to the Member Log 5.NOTE: For the Annual IAR-1, compare the total gross receipts with the Annual Financial Report (Form 990). If these amounts are different, the Annual IAR-1 form WILL NOT BE ACCEPTED.

29. 29 Validating Receipts

30. 30 Validating Receipts

31. 31 Disbursements Disbursements represent the total checks and non check payments (wire transfers, etc.) issued. Objectives  Ensure that all disbursements are recorded timely  Disbursements are properly supported and approved  Disbursements are recorded accurately

32. 32 Member Dues Verification

33. 33 Disbursements Verification Obtain the Cash Disbursements Register for the audit period to verify gross expenses:  Verify that all check numbers are accounted for  Ensure that all checks issued are recorded  Obtain an explanation for checks issued out of sequence  Compare the total expenditures recorded  Compare the total calculated expenses with the Annual Finance Report (Form 990) cash disbursements and explain any differences  Verify unused check stock

34. 34 Disbursements Verification Verify Disbursements Select 25% of the total checks issued (but not more than 15 per quarter) and perform the following tests: – Examine supporting documentation for the disbursement – Compare the completed voucher with the budget line item amount – Verify that the disbursement was approved – Compare the details with the Disbursements register. – Compare the disbursement to the check copies or images – Verify that the check payee is not the check signer or the approver – Verify documentation and authorization for disbursements made using merchant accounts or secure online payment systems such as PayPal

35. 35 Validating Disbursements NOTE: Select a statistical sample of 25% of disbursements but no more than 15 per quarter. * This is the “Disbursements” tab from the IAR-1 form.

36. 36 Disbursements Verification Other Disbursements – Non-check disbursements consist of wire transfers, EFTs, cashier’s checks and online payment systems such as PayPal. Verify that documentation exists to support 100% of non-check disbursements. Ensure that proper approvals exist to support the issuance of the non-check disbursements.

37. 37 Verify Non-Check Disbursements DateAmount Month on Finance Report Voucher existsComments 9/10/10875.00$ SeptemberYesWire Transfer 11/23/1066.63$ NovemberNoCheck Re-Order 12/13/10375.00$ JanuaryYesVendor Payment 1/05/11800.00$ JanuaryYesWire Transfer 2/08/11770.00$ FebruaryYesWire Transfer 3/15/114,400.00$ MarchYes Wire Transfer

38. 38 Verify Voided Checks  Examine the checks  Observe that the reason for voiding is documented and the check is cancelled  Verify that the voided check does not appear on the bank statement

39. 39 Verify Voided Checks

40. 40 Bank Balances The bank balances represent the amount of cash available in the chapter’s bank accounts. Objectives  Ensure the chapter bank balances are accurate  Ensure the chapter discloses all bank accounts and balances  Ensure the bank account reconciliations are performed timely

41. 41 Bank Reconciliation

42. Audit Communication

43. 43 Summary Report Audit Communication Summary Audit reports have three major objectives: 1.Inform 2.Persuade 3.Obtain results The Summary Audit report should contain:  Heading, including chapter name, period, and type of report  A high level overview of the scope including the period under review  A summary of the findings, and  An opinion of the overall state of the records

44. 44 Detailed Audit Report Audit Communication The Detailed Audit report contains the comprehensive results of the audit testing which supports the information in the Summary Audit report. Ensure that the report:  Is clear, concise, and free of unnecessary detail  Is consistent in any conclusions expressed  Summarizes operating policies and procedures referenced  Is easily understood, presented logically, and is to the point  Is constructive and balanced throughout  Use graphics or attachments, as appropriate, which help to convey points or provide additional information

45. 45 Recommendations Draft Audit Report  List recommendations and relate back to findings  Refer to Delta reference documents as necessary (Constitution & By-Laws, Chapter Management Handbook, Finance Workshop Manual, Chapter Policies and Procedures, etc.)

46. 46 IAR-1 Quarterly Form Input The IAR-1 Form should be input by the chapter’s current Internal Audit Chair. When all input is complete the current Internal Audit Chair will electronically sign the form. The current chapter president reviews the data input by the current Internal Audit Chair and then electronically signs the form.

47. 47 IAR-1 Quarterly Form Input -Go to the Members Area -Click the The Red Zone -radial button -Click Submit Log into The Red Zone – www.DeltaSigmaTheta.org

48. 48 IAR-1 Quarterly Form Input -Go to the Members Area -Click the The Red Zone radial button -Click Submit Log into The Red Zone – www.DeltaSigmaTheta.org

49. 49 IAR-1 Quarterly Form Input Log into the Red Zone

50. 50 IAR-1 Quarterly Form Input

51. 51 IAR-1 Quarterly Form Input Click on Audit Reports

52. 52 IAR-1 Quarterly Form Input Use your Sisters Portal logon and password here to enter the Financial Forms area

53. 53 IAR-1 Quarterly Form Input Select Quarterly Forms from the menu on the left side of the screen

54. 54 IAR-1 Quarterly Form Input Select Start a New Report from the menu on the right side of the screen

55. 55 IAR-1 Quarterly Form Input Enter your Chapter Tax ID if not pre- populated

56. 56 IAR-1 Quarterly Form Input Enter the indicated information from the Excel spreadsheet which has been completed in advance

57. 57 IAR-1 Quarterly Form Input Review the Instructions

58. 58 IAR-1 Quarterly Form Input Chapter Information will be Pre-populated.

59. 59 IAR-1 Quarterly Form Input Enter Chapter Bank Account information.

60. 60 IAR-1 Quarterly Form Input Enter chapter’s expenses and gross.

61. 61 IAR-1 Quarterly Form Input.

62. 62 IAR-1 Quarterly Form Input.

63. 63 IAR-1 Quarterly Form Input.

64. 64 IAR-1 Quarterly Form Input.

65. 65 IAR-1 Quarterly Form Input.

66. 66 IAR-1 Quarterly Form Input Enter the Dues Exceptions ONLY

67. 67 IAR-1 Quarterly Form Input

68. 68 IAR-1 Quarterly Form Input Select an Overall Finding

69. 69 Annual IAR-1 Input If the Internal Audit Committee is in transition: The outgoing IA Chair and committee have the responsibility of completing the 4 th quarter audit and ensuring the Annual IAR-1 form and external audit (if required) is completed and provided to the incoming IA Chair. (Note: the IA chair and committee will also sign the signature page as members) The current (incoming) IA Chair will input the data into the Annual IAR-1 form in the online system and electronically sign the form. The current (incoming) IA Chair is a participant in the activities related to the preparation of the Annual IAR-1 form and the external audit. She shall be attentive and open to actively observing during this transition period.

70. 70 IAR-1 Annual Form Input Use your Sisters Portal logon and password here to enter the Financial Forms area

71. 71 IAR-1 Annual Form Input Select Annual IAR-1 Forms from the menu on the left side of the screen

72. 72 IAR-1 Annual Form Input Start a New Report

73. 73 IAR-1 Annual Form Input Chapter Information will be pre- populated. Select Applicable Fiscal Year. Enter Date Internal Audit Completed. Enter Gross Receipts for fiscal period.

74. 74 IAR-1 Annual Form Input Review the Instructions

75. 75 IAR-1 Annual Form Input Review the Instructions Chapter Information will be pre- populated. Audit Date and Gross receipts will be pre- populated from entry on previous screen.

76. 76 IAR-1 Annual Form Input Reviews Section Answer each question under Internal Control Procedures

77. 77 IAR-1 Annual Form Input Internal Control Procedures – cont’d Answer each question under Internal Control Procedures

78. 78 IAR-1 Annual Form Input

79. 79 IAR-1 Form Input Bank Accounts Answer each question

80. 80 IAR-1 Annual Form Input Bank Accounts – Cont’d Be sure to include all accounts and Check Signers.

81. 81 IAR-1 Annual Form Input Bank Accounts – Cont’d Be sure to include all accounts and Check Signers.

82. 82 IAR-1 Annual Form Input Bank Accounts – Cont’d Verify that Bonded Member info is correct

83. 83 IAR-1 Annual Form Input

84. 84 IAR-1 Annual Form Input Select a statistical sample of 50% of total checks written but no more than 50.

85. 85 IAR-1 Annual Form Input Enter the Member Dues EXCEPTIONS

86. 86 IAR-1 Annual Form Input Select an Overall Audit finding, add Audit Committee members and upload External Auditor information if applicable.

87. 87 IAR-1 Annual Form Input Upload the Audit Form, Signature page and any CPA reports.

88. 88 Reminders Uploaded documents must be in PDF or JPEG format Form 990 must be submitted and accepted online prior to submitting the Annual IAR-1 form Gross receipts on Line 7 of the Form 990 must match the gross receipts amount on the Annual IAR-1 –The account balances on Line 15 of the Form 990 must match the account balances of the IAR-1 entered as Total Revenue and Total Expenses Complete Excel Audit Template & Worksheets before input to the Quarterly IAR-1 –Cash receipts worksheet –Disbursements worksheet –Member dues worksheet –NOTE: All worksheets and schedules of the IAR-1 must be completed.

89. 89 Reminders IAR-1 must be signed by both the CURRENT chapter Internal Audit Chair and the CURRENT chapter President to be accepted. Collegiate Chapters only- If the chapter has 3 members or less and does not have an Internal Audit Chair, the CURRENT chapter President must sign the IAR-1 and send an email/ or call the finance department at Headquarters to have the IAR-1 reviewed. Collegiate Chapter Advisors – CANNOT sign the IAR-1 nor can they prepare the IAR-1. If the chapter has three members or less and /or does not have chapter members with the expertise to complete an audit, the collegiate chapter must secure the services of an outside auditor to prepare the IAR-1 form (i.e. an alumnae chapter fiscal officer or and external auditor).

90. 90 Delta Audit Website The following forms and documents are available on the Delta Website: DST Quarterly Audit Form How to Conduct an Audit Webinar Internal Audit committee Webinar Q and A 2014 Internal Audit Manual 2013 Webinar Annual Online Internal Audit Reporting Form IAR- 1 - (contains audio) Quarterly IAR-1 Entry of Data Screenshots ANNUAL IAR-1 Entry of Data Screenshots Resources

91. 91 Chair Myrna Phillips, CPA, MBA PMP Alumnae Members Pamela Hill, MAcc, MPA Courtney Smith, CPA, CIA Collegiate Member Ivyanne Kenya London Staff Liaisons Gwendolyn Dailey Crystal Mitchell Terry Jones National Internal Audit Committee CNIACDST@gmail.com hillpamelar@gmail.com cesmith217@gmail.com ivyanne_london@aol.com gkdailey@deltasigmatheta.org cmitchell@deltasigmatheta.org tjones@deltasigmatheta.org

92. 92 QUESTIONS