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  • 8/4/2019 McKneeley Internal Controls

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    CACUBO Annual Meeting

    Internal ControlsPresented by:

    Kathleen T. McNeely

    Assistant Vice President for FinanceIndiana University

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    CACUBO Annual Meeting

    AgendaWhat is this thing called InternalControls?

    Review of Concepts

    Value of Internal Controls

    Specific Challenges in Higher Education

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    CACUBO Annual Meeting

    Internal ControlsInternal controls are a systemconsisting of specific policies andprocedures designed to providemanagement with reasonableassurancethat the goals and objectives

    it believes important to the entity willbe met.

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    CACUBO Annual Meeting

    Why have Internal Controls?Promote operational efficiency andeffectiveness

    Provide reliable financial information

    Safeguard assets and records

    Encourage adherence to prescribedpolicies

    Comply with regulatory agencies

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    CACUBO Annual Meeting

    Basic Concepts of Internal ControlsManagement, not auditors, must establishand maintain the entitys controls

    Internal controls structure should providereasonable assurance that financial reportsare correctly stated

    No system can be regarded as completely

    effectiveShould be applied to manual andcomputerized systems

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    CACUBO Annual Meeting

    Value of Internal ControlsTransactions are:

    valid

    property authorized

    Recorded

    properly valued

    Properly classifiedTimely

    Reconciled to subsidiary records

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    Control Environment Consists of:Management philosophy and operating style

    Tone at the top

    Organization structureSeparation of duties

    Fiscal officer reporting lines

    Assignment of authority and responsibilityDoes everyone understand their role?

    Responsibility without authority

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    Control Environment Consists of:Competent, knowledgeable personnel

    Personnel policies and procedures

    Training and developmentCommunication and information systems

    Internal audit functionEither in-source or outsource

    External influencesCompliance

    External auditors

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    Design a Control SystemIdentify RISKS in your environment

    Mission - Compliance

    Transactional - Assets

    Identify control points

    Analyze potential EXPOSURESDesign system to mitigate RISKS

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    Internal Control ProceduresPersonnel

    Proper procedures for authorizationAdequate separation of duties

    Adequate documents and records

    Physical control over assets and recordsIndependent checks on performances

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    Other Elements to Remember:Consistency of policy compliance

    Coordination in a decentralizedenvironment

    Completeness and relevancy of policies

    Issue escalation and resolution processAccountability

    Flow of financial information

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    Other Elements to Remember cont

    Linkages between technology, processand organizational structure

    Alignment of University objectives, risksand controls

    Early warning systems

    Training and other HR mechanisms

    Tools and techniques for monitoring

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    CACUBO Annual Meeting

    Key Concepts to RetainInternal control is a process. It is a means toan end, not an end itself.

    Internal control is affected by people. It isnot just manuals and policies, but the peopleat all levels of the organization.

    Internal control can be expected to providereasonable assurance, not absoluteassurance, to an entities management orboard.

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    CACUBO Annual Meeting

    Higher Education ChallengesFar removed from primary mission

    Lack of Knowledge/Training

    Decentralized

    Federal Compliance Requirements

    Perceived non-issue

    Cost of Internal Controls

    The future SAS 112

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    CACUBO Annual Meeting

    Higher Education Challenges


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