statutory internal controls
TRANSCRIPT
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Statutory Internal Controls
KARA A. MILLONZI
PROFESSOR OF PUBLIC LAW AND GOVERNMENT
UNC CHAPEL HILL SCHOOL OF GOVERNMENT
How to Lose $Employee Mistake
Employee Misappropriation
Employee Fraud
Vendor/Contractor Fraud
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Fiscal Management
What’s your board’s role?
Control Activities
Preventative Detective Corrective
Statutory Control Activities Local Government Budget & Fiscal Control Act
Budgeting
Cash Management
& Investments
Obligating & Disbursing
Public Funds
Accounting & Financial Reporting
Auditing
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Dated Statutes
• Prepares proposed budget
• Executes adopted budget
•Maintains accounting system
• Controls bank accounts•Makes investments
• Approves obligations and disbursements
• Prepares financial reports
• Approves audit contracts
• Reviews audits
• Issues regulations governing financial management
• Provides assistance in financial management
• Approves debt
• Sells debt• Assumes financial control in
extreme circumstances
• Adopts / amends budget
• Sets fiscal policy
• Supervises budget officer
• Selects official depository(ies)
• Contracts for audit/receives audit report
• Requests and reviews financial reports• FIDUCIARY DUTY
Chain of Command?
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Decentralized Units
Budgeting
Cash Management & Investments
Obligating & Disbursing
Public Funds
Accounting & Financial Reporting
Auditing
LGC ReviewSegregation of
DutiesRotation of Duties
Duplication of Duties
Written ProceduresTraining
Independent AuditsBoard Review
Role of ManagementGet TrainedDevelop relationshipsAsk questionsAppoint internal auditor/audit committeeEstablish whistle-blower processReview audits/management lettersSET EXPECTATIONS
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Cash Management
Official Depositories: G.S. 159-31
Governing board selects official depositories
Daily Deposits: G.S. 159-32All moneys “collected or received” by an “officer or employee” of local government or public authority must be deposited daily “with the finance officer or in an official depository” or submitted to a “properly licensed and recognized cash collection service.”
Finance officer must “audit” collections at least once annually
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Petty Cash: G.S. 159-28
Statutory authority to pay with cash, if board adopts policy with sufficient internal controls
But, daily deposit requirement
$500 exception
Obligations and Disbursement
Budget Ordinance /
Project Ordinance
Determine costs of goods
or services
Preauditprocess
Order goods / execute
contracts
Goods arrive / services
performed
Disbursement process
Pay for goods / services
G.S. 159-28
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If finance officer believes that a bill is not payable consistent with G.S. 159-28, the governing board may authorize the payment directly. “The governing board shall approve payment by formal resolution stating the board's reasons for allowing the bill, invoice, or other claim. The resolution shall be entered in the minutes together with the names of those voting in the affirmative. The chairman of the board, or some other member designated for this purpose, shall sign the certificate on the check or draft given in payment of the bill, invoice, or other claim. If payment results in a violation of law, each member of the board voting to allow payment is jointly and severally liable for the full amount of the check or draft given in payment.”
Budget Ordinance /
Project Ordinance
Determine costs of goods
or services
Preauditprocess
Order goods / execute
contracts
Goods arrive / services
performed
Disbursement process
Pay for goods / services
G.S. 159-28
Employee ComplianceSheriff James received $2,665 check made out to “Washington County Detention”
Sheriff deposited $2,000 in Sheriff’s Office bank account and used rest for Sheriff’s Office petty cash
Money used for Sheriff Office purposes
Sheriff did not follow LGBFCA requirements
Jury found Sheriff guilty of EMBEZZLEMENT