Transcript 2014 PACAH Annual Conference

2014 PACAH Annual
Conference
Affinity
Health Services
Senior Community Management
and Consulting Services
Conducting a Business Office
Internal Audit
How to protect your assets,
increase your controls and
utilize best practices for the
operation of your business
office and accounting
functions
Program Objectives
 What are internal
controls
 Why are they
important
 How to maintain
compliance with
policies and
procedures
 Duties segregated
for small/large
facilities
 Downfall/Risk of Non
compliance
Program Objectives
 Best Practices with
GAAP (Generally
Accepted
Accounting
Principals)
 Segregation of
Duties
 Sample written
policies and
procedures
Definitions
Internal Control
 Systematic measures (such as reviews, checks and
balances, methods and procedures) instituted by an
organization to:
 1. conduct its business in an orderly and efficient
manner
 2. safeguard its assets and resources
 3. deter and detect errors, fraud, and theft
 4. ensure accuracy and completeness of accounting
data
 5. produce reliable and timely financial and
management information
 6. ensure adherence to its policies and plan
Why are Internal Controls
Important and What am I
protecting?
 Your professional reputation
 Your decision making
 Your cash flow/expense
management
 Your facility
 Your County
 Your dedicated employees
 Your …………………..
This is for real – criminal
activity
 Former Conecuh
County nursing home
employee convicted of
theft of resident funds
 Former nursing home
bookkeeper in DeKalb
County convicted of
stealing funds
 Payroll Fraud – A big
threat and how to
avoid it
This is for real – criminal
activity
 Employee Personal Care
Home
 Payroll Fraud
 Happens in 27% of
businesses
 Occurs nearly twice as
often in small
organizations (100 or
less)
 Ghost employees
 Checks/direct deposit
 Approximately half of the
payroll checks were direct
deposit and others paper
checks
 Payroll clerk put herself on
direct deposit and cut a
paper check –
administrator and
accountant signed checks
 How was that caught? –
through the financial
statement budget variance
review process - (internal
control)
Differences between just bad
business, common
mistakes/lack of training and
theft/fraud
 Resident Trust doesn’t reconcile
 Payroll errors – payroll clerk doesn’t understand overtime
calculation
 Aging past due not being collected – wrong information, billing
errors, lack of collection progress. Incorrect 162 recorded
 Miscoded Accounts Payable
 Incorrect Cash Balances
 Untimely reports
 No review process – financials/A/P - aging
 Census reconciliation incomplete
 How do we train without policies and procedures
Policies and Procedures
 Foundation for all business processes
 The who, what and how tasks are performed
 Brings structure to the organization
 Serve as internal controls
 Managers have guidelines and do not make unauthorized
decisions
 Employees need to know how to apply, how to enforce
 Training of new employees
Best Practices
How to avoid bad things from
happening
 Policies and
Procedures
Do you have them?
Do you follow
them?
When was the last
time they were
updated?
Do you know
where they are?
 Bad Things
 No guidance for new
employees
 Costly errors
 Theft
 Surveys
 Audits
 Inaccurate reports
 Bad management
decisions
What Policies should I
have?
 Accounting Policies
 Accounts Payable
 Purchase Order
 Accounts Receivable
 Request for Capital
 Adjusting Entries
 Void Check
 Bank Reconciliation
 Chart of Accounts and
management of same
 Capitalization /
Depreciation
 Bad Checks
 Check Requests
 Cash Receipts
 Month End Closing
 Check signing
 Petty Cash
What Policies should I
have?
 Business Office
Policies/Procedures
 MSP
 Monthly Calendar
 Admissions
 Personnel Records
 Bad Debt
 Resident Trust Fund
 Billing Adjustments
 Segregation of Duties
 Billing Process
 Other:
 Census Reconciliation /
Adjustments
Financial Statement Review
Process / Budget Variance
 Collections
 Central Supply
Internal Audit
Record Retention
Procedure – Segregation of
Duties
 Most effective procedures are those with the greatest
segregation of duties. The more people in the
process the less likely of an error or theft will occur
 For example the person that writes the checks should
not be the person signing the check
 The person who orders the products should not approve
the invoice
 The person with budget responsibility should not code
the invoice
 The person who receives the checks does not make the
deposit
Cash Receipts/Accounts
Receivable One Person Office
Title:
SEGREGATION OF DUTIES MODEL FOR CASH RECEIPTS
Accounts Receivables: One-Person Business Office
Procedure
Person Responsible
Administrator
Controller/Clerk
Receive Payments
X
Issue Receipts
X
Prepare Deposit
X
Verify Record of Receipts to Deposit
Slip Detail (pre-deposit)
X
Verity $ Total of Receipt to Validated
Deposit Total (post-deposit)
X
Take Deposit to Bank
X
Post Payments
Ensure Daily Depositing
X
X
Cash Receipts/Accounts
Receivable Three Person Business
Office
Procedure
Person Responsible
Admin.
Fiscal
Director
Bookkeep
er
Clerk
Receive Payments
X
Issue Receipts/Prepare Log
X
Prepare Deposit
X
X
Verify Record of Receipts to
Deposit Slip Detail (predeposit detail)
Verify $ Total of Receipt to
Validated Deposit Total (postdeposit)
X
Take Deposit to Bank
X
Post Payments
X
Ensure Daily Depositing
X
Generally Accepted Accounting
Principals (GAAP)/Audits
 GAAP- Accrual basis
Set of principals to
establish reporting and
disclosures
Relevance helps
decision maker understand
past, present and future
outlook and make informed
decision in a timely manner
Reliable is verifiable
and objective
Consistent is using the
same methods allowing
meaningful decisions
 CPA audited financials
create credibility, detects
fraud and is the main
source of management
performance
 During the audit the
auditors are
responsible to test
internal controls
 *Counties and single
County audits do not
necessarily
encourage GAAP or
internal controls
AUDITS – GAAP and Standard
Letter
 Standard representation letter is signed by management
 We acknowledge our responsibility for the design,
implementation and maintenance of internal control
relevant to the preparation of the financial statements,
notes and supplemental schedules that are free from
material misstatement, whether due to fraud or error
 We acknowledge our responsibility for the design,
implementation and maintenance of internal control to
prevent and detect fraud
 We are responsible for the estimation methods and
assumptions used in measuring assets and liabilities
 Typically in Counties these are signed by Courthouse
employees that manage the County
Compliance – Internal Audit
Maintaining Compliance
Internal Audit
 Frequent or ongoing audits
conducted by a firm’s own
accountants to:
 1. monitor operating
results
 2. verify financial records
 3. evaluate internal
controls
 4. assist with increasing
efficiency and
effectiveness of
operations and
 5. to detect fraud
Why?
 Identify control
problems and aims
at correcting lapses
before they are
discovered during an
external audit.
 Your policies are
your audit. Without
policies you don’t
have an audit.
NURSING HOME MANAGEMENT
We audit
everything
.............................................
..................except the
accounting and business
functions – why?
Its not a law, the County is
responsible for the audit and
internal controls or we lack the
resources/knowledge.
Nursing Facilities Internal
Controls/Audit - Medications
 Controlled Substances Medication subject to
abuse or diversion
 Stored in double locked
compartment
 Accountability record
 Keys maintained by
nurse and when keys are
transferred a physical
inventory is conducted
 If seals are broken
report immediately
WHY – it is required and we
deal with drug diversion
Nursing Facilities Internal
Controls - Medications
 Nurse forging physician orders
 Fax script to pharmacy
 Pick up the medication while she is on duty when
delivered
 Indicated in the MAR that medication was given (PRN
med)
 Pharmacy bill was indicating a lot of Oxycodone
 WHY? It is regulated, reportable and it is the Best Practice.
Many administrators and directors of nursing have had to
have people arrested and deal with the nursing board.
Nursing Facilities Internal
Controls - Triple Check Audit
 Identify errors in billing
 Identify missing chart required documentation
 Identify documentation to support skilled services
 Check appropriate diagnosis
 Check basic data fields
 WHY –RAC audits, to avoid a ZPIC
audit, to get paid, to avoid rejected
claims and recouped monies
Conducting internal audits/policy
enforcement
Account Receivable
Funny I am making money
but don’t have any?
 Are there proper policies and
procedures that address:
 Are there regular aging
reviews? Who conducts the
review? Are their credit
balances and an
explanation of past due
accounts
 Have resident refunds been
processed timely
 Are there collection
progress reports on all
outstanding balances
 Are MA 162’s in an
organized binder
 Are there established
timelines for billing
 Are pending MA residents
paying their private resources
 Are MA Co insurances logged
onto Medicare Bad Debt log
 Are bad debt forms for write
offs completed with the
proper approvals/controls
 Are adjustments monitored on
a monthly basis
 Follow adjustments through
the system to verify validity
 Is the aging used as a real
time document
Petty Cash
Audits
 Are there limits on how
much can be paid out of
petty cash
Policies
 The following items must
not be paid out of petty
cash:
 Is there a policy
specifically stating the
use of petty cash
 Payroll transactions
 Are receipts signed by
both the petty cash
custodian and the
employee
 Resident Trust Fund
 NO SLUSH FUNDS
 Business Travel
 Cashing of personal
checks
 Barber and Beauty
charges
Bank Reconciliations
 Are all the accounts on
the General Ledger
 Is there a preparer and
reviewer
 Is the vendor name
included on the
outstanding check list?
 If a check appears on the
list of outstanding checks
for more than one
month, what happens
and how is it
investigated
Accounts Payable/Resident
Refunds
 Are there two signatures
required for all checks
 Is there a purchase order
policy
 Does the signer review
the actual invoice along
with the check being
signed
 Are vendor invoices
stamped paid
 Test a sampling of
invoices for the proper
coding
 Validate the credit
balance on the aging
 Process the refund
through the A/P process
with the appropriate
signatures
 Test timeliness of
refunds
 Verify that all charges
have been received and
entered prior to issuing a
refund request
Payroll
s

 Direct Deposits are
the same as your
payroll checks.
Simply because you do
not sign paychecks
does not negate the
approval process, the
preliminary check
register should be
approved by the
Administrator and
signed and dated prior
to the direct deposit
and manual checks
being processed. If
the administrator is
not available there
will be a designated
approval process in
place in their absence.
 Do Department
managers
authorize overtime
 Do checks require
more that one
signature
 Does the same
person that does
payroll enter new
employees into the
system
 Does the same
person who does
payroll handle the
employee files



s
Processing Payroll – Control
Activity Form - Auditors
 Individuals who prepare payroll checks cannot:
 Sign payroll
 Review and authorize electronic payroll disbursements
 Disburse payroll checks
 Control unclaimed payroll inquiries
 Resolve employee payroll inquiries
 Edit the payroll master file
 Open mail or copy checks received
Financial Statement Analysis
 Balance Sheet
 Do you compare balance
sheet accounts from
month to month
Income Statement
 Do you compare
financial performance
against budget and
identify variances
 Do you compare year
over year numbers to
determine reasonable
variances
 Are financial statements
timely therefore relevant
 Are financial statements
presented in an accrual
basis of accounting
 Do you evaluate
expenses on a cost per
patient day basis
 Do you have a method to
monitor cash
Resident Trust Funds
 Are residents/families required to authorize a resident fund
account
 Does the policy clearly identify what can be paid out of
resident funds
 Are the funds in excess of $50 in interest bearing account
 Are the trust funds account sent out in accordance with the
regulation
 Are refunds completed timely
 Is the Surety Bond adequate
 Is the staff trained on the unclaimed property procedures
 Are the duties for resident fund segregated appropriately
 Deposits separate from posting and reconciliation
Summary
 Nursing facilities are responsible for policies and procedures
of the facility as a whole. These are not limited to care
related and HR policies. (Policies and Procedures create
your internal audit)
 Employees are most successful with clear guidelines.
 Facilities are responsible to ensure safekeeping of resident
funds.
 The nursing home administrator is responsible for the
financial performance of the home, the integrity of the
business office operations and accounting transactions.
 Mistakes happen and without the proper audits, controls
and segregation of duties they are difficult to detect.
 Fraud happens and without the proper audits, controls and
segregation of duties it is difficult to detect.
Questions
Thank you for your time and
attention!
Denise McQuown-Hatter, President
[email protected]
Jeff Aiken
[email protected]
877-311-0110