Running head: AMERICAN RECOVERY AND REINVESTMENT 1
American Recovery and Reinvestment
Student’s Name
Institutional Affiliation
AMERICAN RECOVERY AND REINVESTMENT 2
American Recovery and Reinvestment
Why Commingling of Grant Funds is Illegal
Commingling of funds usually leads to a breach of trust, for instance, when the
fiduciaries decide to mix the funds for offering care to the clients with their funds, such that It
becomes uneasy to identify which portion belongs to which group. In the case of American
recovery and reinvestment, the commingling of about $2.7 billion made it difficult for the
researchers to determine the exact figures contributed by other sources and those from the FS
recovery (Charnley et al., 2012). Furthermore, commingled funds are not usually accessed
publicly but with a few individuals. For this reason, it isn't elementary for the outside sources or
investors to quote the average gains of profits, dividends, or received interests by the department.
Besides, commingled funds are not generally controlled by the United States Securities and
Exchange Commission (SEC); therefore, the council has the full authority to manage and utilize
the funds without any external monitoring.
Internal Controls Missing in the WFM Program
The first missing control is the SEC act. The council ought to have been banned from
depositing grant funds into the comingling account. From the case study, it was noticed that; FS
was not keenly following on the activities done by the FS in the WFM program; hence more
misappropriations came in during the audit reports. FS Recovery department should consider
deploying some of the representatives in the council to get involved in designing the audit
reports. By doing so, it can be easier to hold the board into accounts before requesting any
recovery funds from the FS. In the presence of audits, FS could have had an easy time to know
the actual expenses that the council had incurred before it offered more recovery grant funds.
AMERICAN RECOVERY AND REINVESTMENT 3
Besides missing audits as one of the internal controls, the WFM program also lacks the
reimbursement policies that guide the council in the manner of which it should disburse its funds
and where the funds must not be used. This is the reason why the council continuously, used the
recovery grant funds in non-FS projects like rents but could not be held accountable (McMullen
et al., 1996). Also, the program lacked procurement procedures to govern its processes of
assigning tenders.
How to Prevent the Unauthorized Payment Expenses Made by the Council
To prevent the act of paying for unauthorized expenses, that are not recognized by the
FS-WFM reimbursement grant funds act, all of the internal controls must be set in place to
ensure that, any payment is closely monitored. Trustworthy is a required fundamental principle
needed, especially when dealing with a large number of funds, such as it was the case by the
council. By having this, the body would have paid for other expenses like rent and additional
individual costs in before using the funds donated by other sources, so that the recovery funds
from the FS are entirely used to complete the expenditures related to the WFM program.
Furthermore, the council should seize from using the commingling account because it becomes
challenging to even for the board itself to specify what amount of funds should be used in doing
a particular project.
How the Situation Could Have Been Avoided
Nonetheless, the presence of internal controls such as bank reconciliations, procurement
procedure, reimbursement policies, and well-defined audits would have been of considerable
significance to the council in the WFM project, typically in avoiding errors such as paying for
the unauthorized expenses (McMullen et al., 1996). Bank reconciliations would help the FS
AMERICAN RECOVERY AND REINVESTMENT 4
department to manage and access the transactions made by the council, making it easier to
approve the accusations by the board that they have paid for certain expenses which in reality,
they had no. Procurement procedures would assist both parties to present the records of the
tenders and the exact costs paid; thus, an equal recovery would be made.
AMERICAN RECOVERY AND REINVESTMENT 5
References
Charnley, S., Jakes, P., & Schelhas, J. (2012). Socioeconomic assessment of Forest Service
American Recovery and Reinvestment Act projects: key findings and lessons
learned.CGen. Tech. Rep. PNW-GTR-832. Portland, OR: US Department of Agriculture,
Forest Service, Pacific Northwest Research Station. 44, p. 832.
McMullen, D. A., Raghunandan, K., & Rama, D. V. (1996). Internal control reports and
financial reporting problems.CAccounting Horizons,C10(4), 67.
