Objectives. Internal Controls What are they, why we need them, and how we use themOverview of New York State's Internal Control Program. New York State Government. 11th Largest employer in the nation public or privateNearly 190,000 Employees. New York State Government. 57 Executive Branch agencies86 Commissions56 Boards98 Committees63 Councils130 independent authorities and quasi-public corporations.
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1. New York State’s Internal Control Program Presented to: Delivered by:
State University of Tom Lukacs
New York Division of Budget
2. Objectives Internal Controls – What are they, why we need them, and how we use them
Overview of New York State’s Internal Control Program
3. New York State Government
11th Largest employer in the nation – public or private
Nearly 190,000 Employees
4. New York State Government 57 Executive Branch agencies
130 independent authorities and quasi-public corporations
5. New York State Budget 2003-2004 Enacted Budget
6. INTERNAL CONTROLS… What are they????
7. INTERNAL CONTROL: The 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.
8. Simple 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.
9. Internal Controls Are… Basic management practices, not only over fiscal operations but also over program activities.
10. Internal Controls Are Common Sense
11. Internal Control Myths
12. New York State’s Internal Control Act
13. Designate an Internal Control Officer
14. Reporting Requirements Covered State Agencies/Authorities submit by March 31 annually (BPRM Item B-350):
An Annual IC Certification, and
A summary Internal Control Report
15. New York State’s Internal Control Program Based on COSO elements of Internal Control:
16. Who Is Responsible For Internal Control? Senior management assures appropriate controls are in place for all operations.
17. Weak controls make an organization susceptible to failure Florida – wrong leg amputated
World Trade CenterFlorida – wrong leg amputated
World Trade Center
18. 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
19. Internal Controls Are: THE SAFEGUARDS AND MANAGEMENT OVERSIGHT DESIGNED TO:
20. Safeguards/Management Oversight Preventing program/operational breakdowns:
Written guidelines for data access
Consistent criteria for review
Controlled access/inventory controls
Written and communicated policy and procedures
21. Safeguards/Management Oversight Detecting program/operation breakdowns:
and monitoring controls
22. Reasonable Assurance Internal controls are to provide a reasonable assurance that the objectives of the system will be accomplished.
23. Types of Control and Examples
24. Internal Control Process Identify Functions
Conduct Internal Control Reviews
Take Corrective Action
25. Risk 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.
26. Risk 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
27. Internal Control Review Checks Whether Controls Work by:
Evaluating If Controls Are Adequate
Testing Whether Procedures Are Followed
28. What Is Compliance Testing? It’s Like Placing
Under A Microscope
29. “If You Can’t Measure It, You Can’t Manage It!” Determine what is an acceptable performance level …
if 99.9% is good enough, then…
30. Internal Control Testing Makes sure controls “on paper” are:
31. Internal Control Testing Smoke detector Failure to work during fire
32. Select Test Methods Three methods for testing controls to determine if they are working :
33. Analyze Test Results To:
34. Take Corrective Action When weaknesses are found, decide to:
35. Areas 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
36. An Effective Control Environment Is a product of…
37. Management’s Responsibility
38. Lessons Learned
39. Statewide Agency Compliance
40. New Initiatives – Best Practices
41. Summary Overview of Internal Controls and New York’s Internal Control Program
All Employees Have responsibility for Internal Controls
It’s Not Rocket Science
It’s Not Just a Good Idea – It’s the Law!
42. Internal Control Training
Senior Budget Examiner
New York State
Division of the Budget
Albany, NY 12224