Audit Report on the Financial and Operating Practices of the Children of Bellevue, Inc.

Executive Summary

The Children of Bellevue, Inc. (CoB) is a non-profit organization established to provide funding and develop programs that benefit children who are patients at NYC Health + Hospitals/Bellevue (H+H) (Bellevue). Per its mission, CoB is responsible for the initiation, funding, and development of various programs at Bellevue that enhance the patient care of children admitted to the hospital.

As stipulated in its by-laws, CoB’s day-to-day operations are overseen by a Board of Directors. The Board of Director is further broken down into various subcommittees which provide guidance is specific areas of the CoB’s operations. Current subcommittees include the Executive, Audit, Finance, Governance, Development and Marketing, Program, and Toast Committees.

For Calendar Year 2018, CoB reported a total income of $1,230,608 and reported total expenses of $1,406,027. Thus, CoB incurred a net loss of $175,419 in Calendar Year 2018.

Audit Findings and Conclusions

Although CoB generally maintained adequate controls over its operations, we found several weaknesses in CoB’s internal control structure. Specifically, we found that CoB did not establish adequate written policies and procedures for employees on the proper way to manage all of the day-to-day fiscal activities of the organization. In addition to the lack of organizational policies and procedures, we found that H+H did not update its Operating Procedure 10-20 (OP 10-20), a procedure established to govern the operations of H+H’s auxiliaries; consequently, H+H officials stated that the OP 10-20 was outdated and no longer enforced. Thus, CoB operated without being held to any current H+H policy and oversight requirements. Consequently, we identified deficiencies within the organization’s revenue collection and recording practices. We also found that CoB did not consistently execute written agreements with its independent contractors. As a result, CoB incurred a relatively significant amount of expenses without a central agreement to document essential agreed-upon terms, such as price, period, scope of work, and other critical information.

We also found that CoB did not maintain accurate and consistent books and records for its donations across its multiple accounting systems. Specifically, we found discrepancies in the recorded donation information in its DonorPerfect and QuickBooks accounting systems. In addition to the inconsistently reported information, CoB’s accounting practices did not include a practical means of identifying transactions across its multiple accounting systems.

Audit Recommendations

CoB’s Board of Directors should:

1. Establish additional written policies and procedures that include detailed guidance to its employees on the day-to-day fiscal activities of the organization. Specifically, written procedures should be established for the following:
   1. Segregating duties and/or implementing alternative controls over its revenue collection and reporting processes and all other important segments of its operations;
   2. Implementing verification procedures to ensure all donations are properly accounted for;
   3. Entering into written agreements for all independent contractors and vendors providing service to the organization; and
   4. Reviewing all new and existing agreements with independent contractors on an annual basis; and
2. Ensure that CoB employees are notified of the requirements as set forth in the policies and procedures and effectively monitor their adherence to such requirements.

CoB should:

3. Ensure all revenue and expense information is accurately and consistently reported across all accounting/management systems used by the organization;
4. Utilize a unique identification number or an alternative means of identifying transactions across its accounting systems and records; and
5. Ensure that all financial and operational information reported to the Board of Directors and H+H accurately reflects the organization’s financial position.

Agency Response

Although CoB addressed each of the audit’s recommendations in its response, it did not clearly state whether it agreed or disagreed. Overall, CoB asserts that it has established and implemented adequate internal controls.  In its response, CoB states that it “has established strong controls that ensure the accuracy and integrity of donation processing and will formalize these verification procedures with written policies and/or procedures to document the existing practice.” CoB also states that “[t]here are sufficient compensating controls in place to ensure the integrity and accuracy of revenue collection and reporting processes given the size of the organization and the practicality of segregating duties further. We will formalize these compensating controls with written policies and/or procedures