New York State s  Internal Control Program

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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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New York State s Internal Control Program

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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 86 Commissions 56 Boards 98 Committees 63 Councils 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 Albany Med World Trade CenterFlorida – wrong leg amputated Albany Med 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 AFEGUARD assets

19. Internal Controls Are: THE SAFEGUARDS AND MANAGEMENT OVERSIGHT DESIGNED TO:

20. Safeguards/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

21. Safeguards/Management Oversight Detecting program/operation breakdowns: Examples: Risk Assessments Reviewing, testing, and monitoring controls Audits Complaints

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 Assess Risk/Vulnerability 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 Your Procedures 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 Contact: Thomas Lukacs Senior Budget Examiner New York State Division of the Budget State Capitol Albany, NY 12224 (518) 474-8473 [email protected]

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