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SchoolsSchoolsInternal AuditInternal Audit
Treasurers Office Presentation
Internal Audit Plan Fiscal Year2009/10
Michael Alao
October 8, 2009
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AgendaAgenda
IntroductionIntroduction
Internal Audit FunctionInternal Audit Function
Internal ControlInternal Control
Internal Audit PlanInternal Audit Plan
Questions, comments, concernsQuestions, comments, concerns
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IntroductionIntroduction
Name: Michael AlaoName: Michael Alao
Education: B.S. Accounting, VCU 1999Education: B.S. Accounting, VCU 1999
Certification:Certification:
Certified Public Accountant (VA, OH)Certified Public Accountant (VA, OH)
Certified Internal AuditorCertified Internal AuditorCertified Fraud ExaminerCertified Fraud Examiner
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Introduction cont.Introduction cont.
Experience:Experience:
10 years of audit experience10 years of audit experience
State of Virginia, Richmond, VAState of Virginia, Richmond, VA International Paper, Memphis, TNInternational Paper, Memphis, TN
FedEx, Memphis, TNFedEx, Memphis, TN
PricewaterhouseCoopers, DC & BaltimorePricewaterhouseCoopers, DC & Baltimore
Wolseley, Reading, United KingdomWolseley, Reading, United Kingdom
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Internal Audit FunctionInternal Audit Function
What is internal auditing?What is internal auditing?
Internal Auditing is an independent,Internal Auditing is an independent,objective assurance and consulting activityobjective assurance and consulting activitydesigned to add value and improve andesigned to add value and improve anorganizations operations.organizations operations.
It helps an organization accomplish itsIt helps an organization accomplish itsobjectives by bringing a systematic,objectives by bringing a systematic,
disciplined approach to evaluate anddisciplined approach to evaluate andimprove the effectiveness of riskimprove the effectiveness of riskmanagement, control, and governancemanagement, control, and governanceprocesses.processes.
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Internal Audit FunctionInternal Audit Function
cont.cont. IndependentIndependent ObjectiveObjective
Concerned with:Concerned with:
Effectiveness and efficiency of operations;Effectiveness and efficiency of operations; Reliability and integrity of financial andReliability and integrity of financial and
operational information;operational information;
Safeguarding of assets; andSafeguarding of assets; and
Compliance with laws, regulations, andCompliance with laws, regulations, andcontracts.contracts.
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Internal Audit FunctionInternal Audit Function
cont.cont. IndependenceIndependence
Board of Education
Finance Committee
Audit Committee
Internal Auditor
SuperintendentCFO/Treasurer
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Internal Audit FunctionInternal Audit Function
cont.cont.
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Internal Audit FunctionInternal Audit Function
cont.cont.
Independence per CPS IA Charter:Independence per CPS IA Charter:
the Internal Auditor shall have no directthe Internal Auditor shall have no direct
responsibility or any authority over any ofresponsibility or any authority over any ofthe activities or operations subject tothe activities or operations subject to
review. The Internal Auditor shall notreview. The Internal Auditor shall not
develop and install procedures, preparedevelop and install procedures, prepare
records, or in engage in activities whichrecords, or in engage in activities whichwould normally be reviewed by internalwould normally be reviewed by internal
auditors.auditors.
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Internal Audit FunctionInternal Audit Function
cont.cont.
ObjectivityObjectivity
- An unbiased mental attitudeAn unbiased mental attitude
- Use of testing and evidenceUse of testing and evidence
- The whole pictureThe whole picture
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Internal Audit FunctionInternal Audit Function
cont.cont.
External AuditExternal Audit Internal AuditInternal Audit
Legal requirementLegal requirement
CAFR andCAFR and
compliance onlycompliance only High materialityHigh materiality
Independent CPAIndependent CPA
firmfirm
Not requiredNot required
Financial,Financial,
compliance, andcompliance, andoperationaloperational
Low materialityLow materiality
District employeeDistrict employee
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Internal Audit FunctionInternal Audit Function
cont.cont.
Why have an internal audit function?Why have an internal audit function?
SEC requirement for public companiesSEC requirement for public companies
State requirement (e.g. NY schoolState requirement (e.g. NY schooldistricts)districts)
Reactive response to fraudReactive response to fraud
ProactiveProactive
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Internal Audit FunctionInternal Audit Function
cont.cont.
Cincinnati Public SchoolsCincinnati Public SchoolsBoard of EducationBoard of Education
Fiscal Accountability PledgeFiscal Accountability Pledge
Approved Unanimously 2/20/2008Approved Unanimously 2/20/2008
To ensure fiscal accountability, the BoardTo ensure fiscal accountability, the Boardhas established an internal audit position andhas established an internal audit position andan external audit committee with aan external audit committee with acommitment to report quarterly to the publiccommitment to report quarterly to the publicon financial management.on financial management.
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Internal ControlsInternal Controls
What is internal control?What is internal control?
A process effected by the entitys board ofA process effected by the entitys board of
directors, management, and otherdirectors, management, and otherpersonnel, designed to provide reasonablepersonnel, designed to provide reasonable
assurance regarding the achievement ofassurance regarding the achievement of
objectives in effectiveness and efficiencyobjectives in effectiveness and efficiency
of operations, reliability of financialof operations, reliability of financialreporting, and compliance with applicablereporting, and compliance with applicable
laws and regulations.laws and regulations.
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Internal Controls cont.Internal Controls cont.
What are internal controls?What are internal controls?
Procedures to safeguard assets and make moreProcedures to safeguard assets and make moreefficient and effective use of these assets.efficient and effective use of these assets.
Procedures to ensure compliance with DistrictProcedures to ensure compliance with Districtpolicy, State, and Federal laws.policy, State, and Federal laws.
Examples:Examples:
Budget process, reconciliations, segregation ofBudget process, reconciliations, segregation ofduties, policies and proceduresduties, policies and procedures
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Internal Controls cont.Internal Controls cont.
Why are internal controls important?Why are internal controls important?
Ensure mission accomplishmentEnsure mission accomplishment Reduce fraud opportunitiesReduce fraud opportunities Prevent loss of funds or other resourcesPrevent loss of funds or other resources Establish standards of performanceEstablish standards of performance Assure compliance with lawsAssure compliance with laws Preserve integrityPreserve integrity Eliminate adverse publicityEliminate adverse publicity
Assure public confidenceAssure public confidence
For our own protectionFor our own protection
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Internal Controls cont.Internal Controls cont.
Who is responsible for internal controls?Who is responsible for internal controls?
All staff responsible for following internal control proceduresAll staff responsible for following internal control procedures
Management is keyManagement is key
Establishes policies and proceduresEstablishes policies and procedures Monitors and evaluates proceduresMonitors and evaluates procedures
Must demonstrate commitment to abide by policiesMust demonstrate commitment to abide by policies
Must set a high standard and lead by exampleMust set a high standard and lead by example
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Internal Controls cont.Internal Controls cont.
Internal auditors are responsible for evaluatingInternal auditors are responsible for evaluatingthe adequacy and effectiveness of internalthe adequacy and effectiveness of internal
controls, and making recommendations wherecontrols, and making recommendations where
control improvements are needed.control improvements are needed.
Management is not required to followManagement is not required to follow
recommendations, but must then accept risk.recommendations, but must then accept risk.
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FY 2010 Internal AuditFY 2010 Internal Audit
PlanPlan
Types of Internal Audit EngagementsTypes of Internal Audit Engagements
AuditsAudits
Consulting ReviewsConsulting Reviews
InvestigationsInvestigations
Assisting External AuditorsAssisting External Auditors
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FY 2010 Internal Audit PlanFY 2010 Internal Audit Plan
cont.cont.
Process Assessments for Internal AuditsProcess Assessments for Internal Audits
Assessment Definition
Satisfactory A well-controlled process with nosignificant audit findings.
Marginal A process with weaknesses in key controlswhich, if not corrected, could result in anunacceptable environment.
Unsatisfactory A process with significant control issues.
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FY 2010 Internal Audit PlanFY 2010 Internal Audit Plan
cont.cont.
Internal Audit Plan DevelopmentInternal Audit Plan Development
Risk assessmentRisk assessment
Review of prior audit findingsReview of prior audit findings
Discussions with management andDiscussions with management and
staffstaff
Board and Audit Committee inputBoard and Audit Committee input
and approvaland approval
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FY 2010 Internal AuditFY 2010 Internal Audit
PlanPlan
Schedule of Expenditures of Federal AwardsSchedule of Expenditures of Federal Awards Consultant APD Approval ProcessConsultant APD Approval Process Blanket Purchase OrdersBlanket Purchase Orders Supplemental Educational Services (SES) ProvidersSupplemental Educational Services (SES) Providers
PNC Purchase CardsPNC Purchase Cards Student Activity FundsStudent Activity Funds Non-School Organizations (NSO)Non-School Organizations (NSO) Payroll CyclePayroll Cycle Progress on Performance Audit RecommendationsProgress on Performance Audit Recommendations
Progress on Business Operations Efficiency ReviewProgress on Business Operations Efficiency ReviewRecommendationsRecommendations
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Questions, comments,Questions, comments,
concernsconcerns
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Contact Information
Michael Alao
(513) 363-0433