Is your government entity prepared for what is yet to come of COVID-19? Do you have questions about the steps you may need to take once the smoke clears? Join us as CRI Partners Robert Lemmon, Ray Roberts, and Becky Hammond answer some of our clients most frequently asked questions regarding government entities and the current economic climate.
From Carr, Riggs, & Ingram. This is It Figures: The CRI Podcast, an accounting advisory and industry focused podcast for business and organization leaders, entrepreneurs, and anyone who is looking to go beyond the status quo.
Hello, and welcome to another episode of the CRI It Figures Podcast. This is part three of governmental COVID-19 questions. I’m Becky Hammond, audit partner in our New Orleans office of CRI. I have over 20 years of experience in governmental audits, as well as lots of single audits and I’m also on the LCPA, which is Louisiana Society of CPAs, governmental accounting and auditing committee here in Louisiana. So, I have some great questions to ask our panel today. Today, joining me are Rob Lemmon and Ray Roberts. So if you guys could introduce yourself. Rob, why don’t you start?
Hey Becky, my name is Robert Lemmon. I’m an audit partner in the Gainesville office in Florida. Been an auditor for about 14 years and now work primarily with governments. So hopefully I’ve got a few useful tips that I can share today.
Thanks so much, Rob. And our big hitter today, Ray Roberts. Somebody that I call all the time with questions and things to help me with. Ray, why don’t you introduce yourself?
Thanks, Becky. My name is Ray Roberts from Albuquerque, New Mexico and I’m the lead for the government and not-for-profit industry lines for CRI. Over the years, I’ve been on a few different committees at the state level and the national level specifically to the AICPA government audit quality center executive committee in charge of a government task force for the peer review committee. I’ve been on the professional ethics committee and done peer reviews coast to coast, specifically in the government area. So, I have a little bit of experience. I won’t say how long I’ve been doing it though.
Well, let’s dive into our first question today. There’s so much COVID-19 information floating around. How can we cut through to the most important things to focus on? Anybody want to take this question?
Yeah, Becky I’ll take a stab at it. So, you might not be much different than me. When I get home I don’t want to watch the news about the COVID-19. Just tired of it. But at work, I have to have the latest and greatest information on it and you can get overwhelmed about all the information out there. So just like anything, you have to go back to planning and see what information you need. What specific information. You just can’t put in COVID-19 and see what pops up.
But if you can get some key words in some kind of searches or stuff, it might be a little bit more helpful. For instance, are you needing information on management issues during COVID-19? HR issues? Hazard pay? Available grants? Compliance to those grants? How to cut costs and save some money? How to do budgeting during the process? What are some other forms of funding?
All of these. There’s just a crazy amount of different topics out there that you can look at and to save some time and to fish through all this information, you’re going to have to just go out there and try to drill down yourself. But it really goes back to the planning and what your group needs it for specifically. And go one level higher than that. So you might catch something similar or related, but not right on topic that might help you make your decision. Different ways to look. Of course you can do the old faithful Google search, but you’ll need some good topics or keywords there. Of course, at Carr, Riggs, & Ingram’s website. They have quite a bit of information out there between articles and webinars and podcasts. We’ve blanketed everywhere. IRS website has some really good questions and answers specifically about the CARES Act, different things. So, those Q and A’s are just a really long and you can get some really good information, some specific information off the IRS website.
Your different states, the state auditor in New Mexico, legislative auditor in Louisiana, whatever it might be. They might have something, just a governor’s office, just various places throughout your different States. Also the AICPA, that’s our national association for CPAs, they have a lot of information and they manage to watch what the FASB and the GASB, OMB, all those different things are putting out and they have specific topics and a specific area, just like everybody else does, that’d be a good place to start. In addition, don’t forget the municipal leagues and your professional associations. If you’re a school district, maybe ASBO, GFOA, all of those different areas will have content for COVID-19 and on a lot of the different topics that might interest you.
So you’re right, Becky, there’s a ton of information out there and you just have to work at planning and figuring out the specific place you need to look and the specific topic and try to narrow it down some or you’ll get overwhelmed.
Ray, I’m really glad you took that question, Ray, because I had a couple of ideas, but not as many as you that’s for sure. But I just of wanted to echo one thing you said about the IRS website. I feel like the last bunch of questions, the last few days I’ve been answering, that was the answer. A lot of people right now are trying to figure out the payroll and the FICA and those sorts of implications. But that IRS website, that’s been a particularly useful one for a number of my clients recently.
So, I don’t have as many good ideas as you, but when you said that one it resonated with me. That was the one I was thinking of was the IRS website right now. It seems to be helping a lot of people.
Thanks guys. That was some great advice. We’ll move on to the next question. This one was submitted by one of our clients. “I work for a small government with a small team and I’m worried that things might fall through the cracks during all this chaos. What should we look out for and do to try to prevent this?”
Right. I’d like to give it a shot. Ray will probably have some extra stuff to add at the end. But I actually received a very similar question because I think everyone’s feeling the chaos right now. So there was a lot to unpick when I tried to answer this question to the client because in my mind, it comes in a few stages. To prevent stuff falling through the cracks, there was definitely some short term type actions they needed to get on right away. And what I suggested to them is, number one, it’s all about prioritizing. Making sure that the processes that needs to keep functioning do and to prevent that fall through the cracks type situation. So definitely number one, prioritize everything. Then I advised them, this was another one actually, which I think was pretty crucial, so I really said they really got to make sure they track and record and document any process changes that they’re making as they go through and make sure they keep track of it and communicate to everyone who’s impacted by process changes exactly what’s expected in the new process, new situation. That should help things stop falling through the cracks if everyone’s on the same page. But the other benefit I was saying to, to keep in those documents and those process narratives for the revision of the processes is that the auditors are going to ask for them when they come in at the end of the year to do the audit. They’re going to be asking what changed in your processes this year and it’s going to be hard to recall that from memory if you don’t just sit down, as in when the changes are happening.
So, those were a couple of the short term things that I really recommended. A thing that was a little bit further down the line, but I think will also help stop things slipping through the cracks, is to do maybe more thorough reconciliations. Cash reconciliations or month end reconciliations in general. I was saying you might want to have a second person take a look at this or do it a little bit more frequently or maybe to a higher degree of precision because I hate to say it, but with all these process changes comes increased risk. Risk that transactions could get incorrectly recorded or missed or what have you.
So doing these, having an extra level of scrutiny on reconciliations. It’s going to help to catch those mistakes or possible mistakes and minimize that risk of error. So that was a medium term action that I recommended for them to do. And in longer term, I was saying that maybe use this experience as a chance to potentially streamline the processes that were in place. And maybe this will force you to change things, but it might be a change for the better, or you can look at your disaster recovery plan and maybe learn a few lessons and revise that whilst the experience is fresh in everyone’s memory.
So like I said, there’s a lot to unpick there and I’m sure Ray’s got some other thoughts. But in terms of stopping stuff slipping through the cracks that was my advice,
Rob, you did a great job there. The only thing I can think of to add is just like anytime you change processes, the staff will see the email, might not read, might be busy, say I’ll get to it later. But during these trying times and times where things are changing so fast, I think it’s important that you make sure that everybody understands what the new policies are and not just rely on a particular email.
Maybe you have a little online training for it and also get out there and have somebody go in and check to see if that process is being implemented sooner than later, you don’t want to find out, say, “Hey, I got this great program or process now.” And six months later, you find out that the majority of the people aren’t even implementing it or even remember it. So, with almost every change you make on processes, especially in this key time where mistakes happens, I think the inspection process, or monitoring process, whatever you want to call it, would be very helpful in reducing the errors and the risk related to that and increase compliance with following the new policies and procedures.
Ray, actually one other thing I was thinking was new vendor controls as well. What are your thoughts here? Because I’m thinking that’s an area as well. I would advise being a bit more thorough, a bit more precise on new vendor controls and making sure the legitimate new vendors for whatever new service we might be having to request in this time. Would you be placing more emphasis on these new vendor controls?
I would think so because there’s going to be so many new people coming out here trying to sell something and take advantage of the COVID-19 crisis. So, it’s a great idea to go out there and look to see, get that extra level review or scrutiny to that new vendor sheet and check your vendor master files to see if the changes being made are all approved by some sort of form or approval process. Because I could sure see where a fly by night somebody comes in and they’re really not even a legit business, but they come in and have a $20,000 contract, which would be easy when you have millions and millions of dollars floating around to ignore, and then next thing you know is they got their money and the work’s not done or it’s not done properly and they’ve left town. So, I think it’s really important to watch the vendors in this. Just like you would on your email scams, everybody’s trying to scam somebody during the crisis.
Yeah, that, that’s what I was worried about. That’s what I was thinking as well. And Ray, actually, did I see an email from you … Speaking of things slipping through the cracks, but I think I saw an email from you talking about the GASB, the new GASB standards recently and whether people are going to have to implement laws as quickly as previously thought for the new GASB standards. What’s the latest on that?
The latest. It’s really new here. As most everybody would know, there’s some really big changes to the government accounting standards coming down the pipe. Specifically in the fiduciary area and leases. Although there’s quite a few more besides those, those two are going to have a dramatic effect on how people report the information and prepare their financial statements. So those are big changes coming down, but the GASB has realized that potentially this COVID-19 has delayed a lot of different things and the people just don’t have time to implement fiduciary or asset retirement obligations or leases standard in the time that was originally determined. So what they’ve done, just recently on April 14th, so just last week, they came up and started a project. They had to go through due diligence, but they started a project to extend all the due dates on the GASB pronouncements that are not yet effective.
So, it’s a short turnaround. They usually have quite a bit of … Two months, three months of a comment period. But this has only 15 days. On April 30th, between now and then, if you have any comments about extending those due dates or the implementation dates, you have opportunity to talk to GASB and let them know your opinion.
But on May 7th, they’re supposedly going to decide if they’re going to extend these due dates on these implementations. If you’re a betting person, I’d put money down on May 7th being the time where they’re going to postpone this because I just can’t imagine them not doing that. And the way the exposure drafts written now, it’s postponing all the GASBs and implementation guides that are not yet effective. So that’s a 10 or 11 GASBs from GASB 83 all the way to GASB 93. There’s five implementation guides that’s affected.
And the big ones, to give you the idea, the one on fiduciaries. If you have a 12-31-20 effective date, or if you have a June you’re in it will be June 30th, 2021 effective dates. And similar type extension. If you have a 12-31, it’d be 12-31-21 effective date. And if you have a June you’re in, it’d be June 30th of 2022 effective dates. So I think the fiduciary and leases probably should have been pushed anyway, but COVID helped us out on this case. So, it’s all new. It’s not 100% official. But May 7th we’ll have the final information on the extensions of those implementation dates.
Yes, Ray. I certainly agree that that’s a pretty much a far gone conclusion that they’ll definitely be extended. You guys mentioned earlier about the control processes and changes to the procedures that happen during the year. What should you be telling or showing your auditor when they come in and ask about those controlled processes? What are our listeners need to make sure that they’re considering from a documentation perspective?
Becky, I’ll take the first stab at this. Rob brought it up earlier and I think it’s a good topic to give a little more information. Rob, feel free to chime in at the end. It’s just like anything through this process. Communication is key. You need to communicate with your own staff. Like we mentioned earlier. Make sure the staff knows what the policies and procedures are and the changes there, and actually go in there and inspect or monitor what they’re doing because it’s so important to make sure the policies and procedures are implemented correctly. There was a reason why you did that and it was reduced some risk. And so just talking about it and not doing it, it’s not going to help you in any way. But you don’t get spooked by the auditor’s asking you about this. I think the auditors are going to expect organizations to have new changes and policies and procedures, because people are working from home and different people are doing their jobs or different jobs.
So, we would expect as auditors to have changes in that. They could be just temporary changes, but for sure we expect changes. And so if we come in and there’s not any changes, then we start being more and more skeptical about what’s going on and it would increase our risk. But the auditors are there to help and make it better. So, keep in mind that they have a lot of experience on that. They know what other cities and counties and school districts are doing. And so they’ve seen some things that might be able to help you improve your system a little bit. Even you have a tweak that you made to a process or a procedure or a control, and they can come in and say, “Hey, did you think about this person doing this or adding one more step?” And then it could make it better. So, it shouldn’t be adversarial in that respect. So just talk to them in that way.
Also, we’ve seen that … and when there’s crisis going on or a lot of emotion, or, oh my gosh, what are we going to do? We have so much work to do. And they rush through some of these policies and procedures, it’s very possible that there are mistakes being made or something that could be improved. So, a new set of eyes looking in that would make all the difference in the world, I think. What do you think Rob?
I would definitely echo your sentiment that we’re anticipating changes and disruption and so on. So don’t be afraid to just be obviously honest, always be honest. But don’t be afraid that the auditors are out to get you for changing things up and having to adapt during the year with some slightly different procedures. I would be asking, a best-case scenario for me would be if you can provide written narratives to explain the specific changes so that there’s actually a document or a paper trail to show what was implemented in these alternative processes. That would be definitely very handy to say the least.
The second thing, if you really want to get the A plus grade from me, would be some documentation that you were monitoring these new controls as well. I think something you mentioned earlier was to show you’ve been monitoring, that these new controls were properly implemented and that you’re keeping an eye on them to make sure nothing did slip through the cracks and go wrong.
But it’s got to be evidenced. Obviously auditors are always looking for evidence to support what actually did happen. So that’s why I said not just a verbal explanation. Some kind of paper trail to show that you documented and wrote down the new policies and even better, if you want to get, like I said, the A plus, you actually did some monitoring and that you’ve got documentation to show you were checking and reviewing the new controls that were in place. That’s what I’d look for.
Thanks guys. That’s definitely some great advice. I couldn’t have said it better myself. So, well that about does it for this episode of CRI’s It Figures. Thanks to Rob and Ray for joining us. You guys have definitely given us a wealth of information today. Hope you listeners got some valuable information and thanks so much for listening.
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