15j. Internal Controls

Internal controls are a combination of tools designed to minimize the misuse of funds and poor record keeping, and to maximize the likelihood of detecting problems if they occur. Internal controls require that multiple people with different roles review each and every financial transaction. In addition to maintaining secure records and up-to-date accounting policies and procedures, effective internal controls mandate the separation of duties so that no one person handles all aspects of financial transactions. (See Section 2.d.)

We encourage all SCMF Programs to consult with their independent financial auditor (a Certified Public Accounting firm) regarding the best method of guaranteeing a clear separation of responsibilities vis-à-vis the SCMF program and its requirements. At a minimum, HUD Form 1044D, the grant award “obligating” document, should be signed by a director or manager and then routine day-to-day transactions can be handled by the SCMF staff. Each situation will be slightly different, so it is essential to request CPA guidance if your agency does not have adequate separation of duties.

For example, it is not acceptable for one person to sign the application for funding, execute the grant agreement, approve third-party subcontracting agreements and submit vouchers for reimbursement. These duties need to be separated clearly in job descriptions, organizational charts, time sheets, and policies and procedures.