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Transcript of SUNY New Paltz Internal Control Program Presented by: Julie Majak Assistant Vice President for...
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SUNY New Paltz SUNY New Paltz Internal Control ProgramInternal Control Program
Presented by:Julie MajakAssistant Vice President for Administration and FinanceAnd Internal Controls OfficerandPeter FairbrotherInternal Controls Coordinator
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ObjectivesObjectives
Internal Controls – What are they, why we need them, and how we use them
Overview of New York State’s Internal Control Program
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New York State GovernmentNew York State Government
11th Largest employer in the nation – public or private
Nearly 190,000 Employees
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New York State GovernmentNew York State Government
57 Executive Branch agencies 86 Commissions 56 Boards 98 Committees 63 Councils 130 independent authorities
and quasi-public corporations
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New York State BudgetNew York State Budget
2003-2004 Enacted Budget
BILLION$94.4
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INTERNAL CONTROLS…INTERNAL CONTROLS…
What are they????
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INTERNAL CONTROL: INTERNAL CONTROL: The Recognized DefinitionThe Recognized Definition
Internal control or an internal control system is the integration of the activities, plans, attitudes, policies, and efforts of the people of an organization working together to provide reasonable assurance that the organization will achieve its objectives and mission.
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Simple DefinitionSimple Definition
Internal control is what we do to see that the things we want to happen will happen …
And the things we don’t want to happen won’t happen.
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Internal Controls Are…Internal Controls Are…
Basic and ordinary management practices, not only over fiscal operations but also over program activities.
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Internal Controls Are Internal Controls Are Common SenseCommon Sense
What do you worry about going wrong?
What steps have been taken to assure it doesn’t?
How do you know things are under control?
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Importance of Internal ControlImportance of Internal Control
Effectively manage operations
Provide reasonable assurance programs will meet established goals & objectives
Decrease the risks (obstacles)
In accordance with the NYS Government Accountability, Audit & Internal Control Act of 1987
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New York State’sNew York State’s Internal Control Act Internal Control Act
Establish and Maintain guidelines for a system of internal controls
Establish and Maintain an IC system and internal control review process
Make a clear and concise statement of managerial policies and standards available to all employees
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Designate an Internal Control Officer
Provide Internal Control education and training
Periodically evaluate the need for an internal audit function
New York State’s Internal Control Act
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Reporting RequirementsReporting Requirements
Covered State Agencies/Authorities submit by March 31 annually (BPRM Item B-350):
An Annual IC Certification, and A summary Internal Control Report
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Internal Control ProgramInternal Control Program
Components of Internal Control:
Control Environment Risk Assessment Control Activities Information & Communication Monitoring and Feedback
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Who Is Responsible Who Is Responsible For Internal Control? For Internal Control?
Senior management assures appropriate controls are
in place for all operations.
Every employee follows controls and reports problems or
improvements
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Weak controls make an organization susceptible to failure
Internal Control in the News
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Why Is Internal Control Important?Why Is Internal Control Important?
OMPLIANCE with applicable laws/policies
CCOMPLISHMENT of the entity’s mission
ELEVANT and reliable data
CONOMICAL and efficient use of resources
AFEGUARD assets
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Internal Controls Are: Internal Controls Are:
THE SAFEGUARDS AND MANAGEMENT OVERSIGHT DESIGNED TO:
Prevent, detect, and correct program and operational breakdowns
Ensure that goals are met
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Safeguards/Management OversightSafeguards/Management Oversight
Preventing program/operational breakdowns:
Examples:- Written guidelines for data access- Consistent criteria for review or approval- Controlled access/inventory controls- Written and communicated
policy and procedures
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Safeguards/Management OversightSafeguards/Management Oversight
Detecting program/operation breakdowns:
Examples:- Risk Assessments- Reviewing, testing, and monitoring controls- Audits- Complaints
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Reasonable AssuranceReasonable AssuranceInternal controls are to provide a reasonable
assurance that the objectives of the system will be accomplished.
The cost of internal control should not exceed the benefit derived.
Costs Benefits
Risk
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Types of Control and ExamplesTypes of Control and Examples
DOCUMENTATION - Policies and procedures
RECORDS - Recording transactions & events
AUTHORIZATION - Approving transactions
STRUCTURE - Separation of duties
SUPERVISION - Monitoring control objectives
SECURITY - Safeguarding resources
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Internal Control ProcessInternal Control Process
1. Identify Functions
2. Assess Risk/Vulnerability
3. Conduct Internal Control Reviews
4. Take Corrective Action
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Risk CategoriesRisk Categories
Business Interruption – system breakdowns or a catastrophe.
Erroneous Management Decision – bad judgment or could be based on erroneous, inadequate or misleading information
Fraud, Embezzlement and Theft – management fraud, employee theft, and customer and outside theft.
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Risk CategoriesRisk Categories
Statutory Sanctions – penalties arising from failure to comply with regulatory requirements, as well as overt violations
Excessive Costs/Deficient Revenues – expenses which could have been avoided, as well as loss of revenues to which the organization is entitled
Loss, Misuse or Destruction of Assets – unintentional loss of physical assets such as cash, inventory and equipment
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Internal Control ReviewInternal Control Review
Checks Whether Controls Work by:
Evaluating If Controls Are Adequate
&
Testing Whether Procedures Are Followed
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What Is Compliance Testing?What Is Compliance Testing?
It’s Like Placing Your Procedures
Under A Microscope
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““If You Can’t Measure It, If You Can’t Measure It, You Can’t Manage It!”You Can’t Manage It!”
Determine what is an acceptable performance level … if 99.9% is good enough, then…
12 babies will be given to the wrong parents each day
18,322 pieces of mail will be mishandled in the next hour
2 million documents will be lost by the IRS next year
22,000 checks deducted from wrong account in 1 hour
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Internal Control TestingInternal Control Testing
Makes sure controls “on paper” are:
Actually being used as designed
Really meet the control objectives
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Internal Control TestingInternal Control Testing
Smoke detector Failure to work during fire
In some cases, a simple test may prevent unwanted situations from occurring:
Test Prevents
Test drive a car Buying a lemon
Physical exam Serious health problems
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Select Test MethodsSelect Test Methods
Three methods for testing controls to determine if they are working :
1. DOCUMENT ANALYSIS – Review records, forms, or other documents
2. OBSERVATION – Watch the control being performed in practice
3. INTERVIEW – Elicit information from those performing that control
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Analyze Test Results To:Analyze Test Results To:
Identify departmental or devisional trends
Assess actual or potential impacts
Determine specific causes of variances
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Take Corrective ActionTake Corrective Action
When weaknesses are found, decide to:
Institute new controls
Improve existing controls, or
Accept the risk
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Areas with Weak ControlsAreas with Weak Controls
Inability to meet upper management’s deadlines for supplying information
Incorrect or unclear information
Unusually high employee turnover
Crowded, poorly organized files, requiring extra effort to locate material
Poor employee morale
Weak controls may not show up immediately but certain signs point to this deficiency:
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An Effective Control EnvironmentAn Effective Control Environment
Is a product of…Management’s philosophy, style and supportive attitude
Competence
Ethical values
Integrity
Morale of the organization’s people
Organizational structure
Accountability relationships
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Management’s ResponsibilityManagement’s Responsibility
The manager is accountable for system adequacy
This is an inherent responsibility, not an overlay
Additional resources do not automatically flow
In its broadest terms, every employee plays a part
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Lessons LearnedLessons Learned
Maintain visible leadership
Make it “that’s how we do business around here”
Keep the process as simple as possible
Monitor follow through as closely as the planning
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Statewide Agency ComplianceStatewide Agency Compliance
Annual Certifications
IC Program Depth & Breadth
Don’t Reinvent the Wheel!
Share Best Practices
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Examples of Ethical Values and Examples of Ethical Values and IntegrityIntegrity
Commitment to honesty and fairnessRecognition and adherence to laws and
policiesRespect for SUNY New PaltzCommitment to Excellence
Respect for AuthorityRespect for Employee Rights
Conformance to Professional Standards
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SummarySummary
We should recognize that Internal Controls are inherent in our day to day activities
All Employees Have responsibility for Internal Controls
It’s Not Rocket Science
It’s Not Just a Good Idea – It’s the Law!
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Internal Control TrainingInternal Control Training
Contact:Julie Majak or Peter FairbrotherOffice of Internal ControlsHAB 302845-257-3295 or [email protected]@newpaltz.edu
THANK YOU!!!THANK YOU!!!