Post on 07-Apr-2018
8/4/2019 McKneeley Internal Controls
1/16
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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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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Higher Education Challenges