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Internal Control Self-Assessment

Internal Control Self-Assessment. Yale School of Medicine November 15, 2002. Internal Control Self Assessment Part I – Quick Evaluation of Adequacy of Control Environment. Part II – More In Depth Understanding of the Control Environment and Who Does What.

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Internal Control Self-Assessment

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  1. Internal Control Self-Assessment Yale School of Medicine November 15, 2002

  2. Internal Control Self Assessment Part I – Quick Evaluation of Adequacy of Control Environment Part II – More In Depth Understanding of the Control Environment and Who Does What Combined Transaction Processing Checklist Guide to Certain Procedures

  3. Internal Controls • Safeguard Assets • Maintain Accurate and Reliable Accounting Information • Promote Operational Efficiency • Encourage Adherence to Prescribed Policies and Procedures

  4. The most common circumstances that may compromise the effectiveness of internal controls are: • Inadequate segregation of duties - a person is allowed to initiate and approve a transaction without any oversight. • Inappropriate access to information - someone is given access to update data when that person should have been restricted to read only of the data. • Form over substance - someone is given approval authority but lacks adequate knowledge of the transaction or area.

  5. The most common circumstances that may compromise the effectiveness of internal controls are: • Overriding of controls – although there may be situations that warrant exceptions to policies, exceptions must be properly monitored otherwise they pose significant risk. • Rubber stamping transactions – someone authorizes or approves a transaction without understanding the purpose and without asking the proper questions to determine that the transaction is valid. • Lack of documentation – not adhering to the policies and procedures of the University regarding the maintenance of proper documentation for all required transactions.

  6. Part I – Brief Statement – How are you organized (i.e. How do you operate day-to-day) • Centralized/Decentralized • Size of Administrative Staff • Duties Aligned • Control procedures used

  7. Control Environment 5. Are employee job descriptions accurate, current, and do they list all significant duties and the frequency of these duties? 6. Are periodic staff meetings held to communicate relevant issues and activities? 7. Are potential internal control risks within the department communicated to employees (i.e. risks associated with cash collection, procurement and confidential information)?

  8. Financial Review: 9. Procedure 1310 PR. 1 Is the Controller or University Auditing notified in the event of fraud, theft, and other significant adverse control or financial issues?

  9. 12. Procedure 3501 PR. 18 • Does the department administrator approve the hourly rate for casual employees? 15. Procedure 3501 PR.1; PR.2 • Is the approver of time entry different from the person who enters time entry in all cases? 17. Procedure 3501 PR.11; PR.13 • Is the termination checklist completed in a timely manner for all terminations? • Labor

  10. 18. Personnel Policies and Practices Manual 501.1 • Is sick time, vacation time, and personal time documented for each employee? If so, are records signed by employees annually and updated regularly? • Labor (continued) 22. Policy 3501 Is the Payroll Office immediately notified of undistributed paychecks for terminated employees or employees no longer in the department? Are these pay documents immediately returned to the Payroll Office?

  11. 25. Procedure 1315 PR.2 • For departments with sponsored research, are Effort Reports completed and certified in a timely manner? 26. Procedure 1315 PR.3 • For departments with sponsored research, are Indirect Cost Surveys (formerly called DA surveys) completed in a timely manner? C. Labor (continued) 27. Is the length of continuous employment by casual employees monitored to ensure it complies with the requirements contained in the "Guide for Casual and Temporary Employment" and applicable labor agreements?

  12. 28. Policy 3301.5 • Do authorizers ensure that personal expenditures and personal travel are not made with department funds? 30. Policy 3301.10 • Do expense report approvers review attached receipts and verify that the business purpose and expense are in accordance with University Policy? D. Procurement

  13. 34. Procedure 3205 PR.2 • Are competitive bids obtained for purchases over $2000? (Please describe the documentation and filing methodology in the Comment column.) 35. Procedure 3401 PR.1 • Do all contracts have legal review? 36. Procedure 3201 PR.6 • Does the business manager monitor departmental VIP numbers to determine that the "owner" and PTAEO are valid? D. Procurement (continued)

  14. 38. Procedure 3401 PR.4 Is the person who enters invoice transactions into WIP different from the person who approves WIP invoice transactions on WIP? 42. Procedure 3215 PR.1 Are periodic spot checks (at least annually) performed by a business manager on all Pcard holders? 43. Policy 2815.6 Are all petty cash reimbursements authorized by a department administrator who is not the petty cash custodian? D. Procurement (continued)

  15. D. Procurement (continued) 47. Do you periodically review the list of dept. approvers to ensure that terminated or transferred employees have been removed from the list? 48. Does your organization have a person who ensures that procurements on grants are in compliance with the cost principles (OMB Circular A-21), administrative requirements (OMB Circular A-110) and specific terms and conditions of the grant?

  16. 49. Policy 2805 Are all purchases recorded in the University financial system (i.e. no local checking accounts)? 52. Policy 2801 Are all cash receipts processed via RIF and delivered in person to Treasury Services daily (or weekly if receipts are less than $500)? E. Cash Controls

  17. F. Student Charges 56. Are procedures in place to ensure that all students are billed for all appropriate expenses?

  18. G. Transfer of Costs: 57. Procedure 1315 PR.1 Are transfers and labor distribution adjustments approved by a person with sufficient knowledge of the underlying transaction? 61. Procedure 1305 PR.4 Do you check that unallowable costs (for sponsored award purposes) are charged to unallowable expenditure types? 62. Procedure 1305 PR.2 Are all grant transfers made promptly, no later than 120 days after original transactions?

  19. H. Maintaining Data 65. Is system access periodically reviewed to ensure that only current employees of the department are authorized to access data and applications? 67. Is a complete and accurate inventory of all personal computers maintained? And are all personal computers in a secure environment? 68. Are all files and software removed from personal computers prior to sale or donation?

  20. I. Conclusion 69. Do you feel that your department has adequate controls? 70. What are your primary concerns? (Please provide detail in the Comment column or in the space below.)

  21. Part II • Additional questions for a further in-depth knowledge of the department’s internal controls • Identifying person/position that performs certain functions • Along with Part I should represent internal controls within a department

  22. Combined Transaction Processing Checklist Minimum Requirements in the following areas: • Vendor Setup • Purchasing Card • Virtual Internal Procurement (VIP)

  23. Combined Transaction Processing Checklist(continued) • Travel and Expense Reimbursement • Employee Reimbursement • Check Request • Petty Cash • Web Invoice Payments (WIP) • Labor • Cash Receipts • RIF • Wires • Non Residents

  24. Checklist Example: Purchasing Card (See Procedure 3215 PR.2 Purchasing Cards and Cardholder’s Guide) • Receipts are required …. >$75 and … attached to monthly statements. • Monthly statements must be signed…. as to valid Yale business…. • All purchases …. must comply with Policies and Procedures

  25. Checklist Example (continued) • Responsibilities: • Cardholder • Attend Guideline Review Session. • Submit original receipts (>$75) with signed …..statement…. • Utilize card for authorized University business…. only. • Provide proof of competitive price for items >$2,000.

  26. Checklist Example (continued) • Responsibilities: • Business Office • Receive…. email notifications & review…. • Review statements for completeness and compliance. • Follow-up on questionable items. • …. reclassify purchases into the proper accounts …. (SWAP). • Retain statements and receipts on file.

  27. Next Steps Complete Self Assessment Internal Control Questionnaire • Part I • Part II Controller’s Office • Assist in completion of Part I • Available to answer any questions • Feedback

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