Minnesota’s Internal Control InitiativeNational Association of State Comptrollers

March 25, 2011

SpeakerJeanine Kuwik, MBA, CPA, CISADirector of Internal Control and Accountability

History of MN Internal Control Legislation

• Included in the Governor’s 2010-2011 budget recommendations

• Passed by the Legislature in the 2009 session (MS 16A.057)

• Budgeted for up to 6 staff in internal control and accountability

MS 16A.057 Responsibilities

• Adopt statewide internal control standards and policies

• Coordinate agency training and assistance• Share internal audit resources• Monitor MN Office of the Legislative Auditor

reports• Report on the system of internal controls and

internal auditing biennially

Agency Training and Outreach• Policies and standards development• Practical guidance and tools• Risk assessment pilot projects• Agency site visits and speaking engagements• Statewide internal auditor roundtable• Monthly internal control bulletins• ARRA involvement• Involvement in new ERP system development• Internal control website

COSO Internal Control Pyramid

Control Environment Tool• Contains 20 goals/control objectives that

model exemplary control behaviors• Lists recommended controls that allow

agencies to demonstrate an effective control environment

• Cites references to related Minnesota statutes, laws, rules, and policies

• Provides guidance, to be tailored to suit specific agency situations and circumstances

Goals Linked to COSO

• Integrity and Operating Style– Agency management fosters and encourages an

agency culture that emphasizes the importance of integrity and ethical values.

– The agency’s positive culture promotes appropriate moral and ethical behavior in dealings with co-workers. Employees know what kind of behavior is acceptable.

Goals Linked to COSO (con’t)• Integrity and Operating Style– Management has a sound basis for setting and

monitoring budgets and does not pressure employees to circumvent budget statutes, rules and instructions.

– The agency provides the legislature and other oversight bodies with timely and accurate information to allow monitoring of agency activities.

Goals Linked to COSO (con’t)• Management’s Philosophy and Operating Style– Agency employees have a clear understanding of

the organization’s mission, goals, and objectives.– Employees understand how their job duties and

responsibilities help to promote a strong internal control environment.

– Management looks externally for opportunities to improve the internal control process.

Goals Linked to COSO (con’t)

• Organizational Structure– The agency’s organizational structure facilitates

coordination and flow of information throughout the agency.

– The agency is able to maintain its priority services during an event that might threaten to disrupt those services.

Goals Linked to COSO (con’t)• Assignment of Authority and Responsibility– The agency assigns authority and delegates

responsibility to the proper personnel to achieve the agency goals and objectives.

– Management ensures that agency information is appropriately protected against loss, corruption or misuse.

– Valuable assets are appropriately safeguarded.– Agency facilities are protected against unauthorized

physical access.

Goals Linked to COSO (con’t)

• Human Resource Policies and Practices– Agency management strives to recruit and retain

competent people to carry out agency mission, goals and objectives.

Goals Linked to COSO (con’t)• Commitment to Competence– Management ensures new hires have the

appropriate level of knowledge and skills needed to satisfactorily perform their jobs.

– New hires are aware of the agency’s mission, goals, objectives and expected ethical behavior. They clearly understand their responsibilities and the expectations of their jobs.

– The agency continually seeks to improve or maintain employee knowledge and skills.

Goals Linked to COSO (con’t)

• Oversight Groups– Management values opportunities to improve

internal controls and correct deficiencies.– Management performs top level reviews of actual

performance.– The agency actively engages with the legislature,

oversight committees and/or oversight boards.

Control Environment – Key Steps1. Establish a team to do the evaluation and

appoint a champion from leadership team2. Ensure sufficient time is devoted to

performing the assessment and developing appropriate action plans

3. Monitor progress on implementing action plans

4. Ensure related documentation is organized, regularly reviewed and updated

Control Environment Implementation

• Completed control environment tool required in governor’s transition materials

• Allowed agency commissioners to share information with their successors

• Business continuity and improving employee skills identified as areas needing most attention

Cabinet Level Agency Results

Website• Website designed to provide internal control

information and improve site functionality• Website features include:

- Internal control tools and training materials- Links to statewide policies- Internal control bulletins (current and archive)- Links to internal control-related websites- Contact information

Contact Information

• Minnesota Management and Budget (MMB) Internal Control Website– http://www.mmb.state.mn.us/fin/ic

• Jeanine Kuwik, Internal Control and Accountability Director– Jeanine.Kuwik@state.mn.us– (651) 201-8148

Questions?