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UMBC Management Advisory Services

UMBC Management Advisory Services. Internal Control Education Session May 2004. Opportunity. Occupational Fraud. Pressure. Rationalization. Importance of Internal Controls. Prevent Occupational Fraud Good business practices Example – P-Card monthly checklist Good audit reports

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UMBC Management Advisory Services

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  1. UMBCManagement Advisory Services Internal Control Education Session May 2004

  2. Opportunity Occupational Fraud Pressure Rationalization

  3. Importance of Internal Controls • Prevent Occupational Fraud • Good business practices Example – P-Card monthly checklist • Good audit reports • Legislative audits • Internal audits

  4. Topics to be Covered • What is internal control? • Who’s responsible? • Examples: When internal controls go bad • Components • Limitations • Control points - checklists • How do I get there from here? • Where to get help

  5. What can happen without adequate internal controls? • How fraud occurs • Class discussion – grades for money • What enabled the fraud to take place? Pressures – student and registrar Opportunities – student and registrar • What procedure might have prevented the fraud?

  6. What Is Internal Control? • A process, effected by an entity’s management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: • Effectiveness and efficiency of operations; • Reliability of financial reporting; and • Compliance with applicable laws and regulations. Source: OMB Circular A-133

  7. Who’s Responsible? • The establishment, implementation and monitoring of internal controls is the responsibility of the: • President for the Institution. • Vice Presidents for their Divisions. • Deans for the Colleges. • Department Chairs and Directors for their Departments. • The tone is set at the top!

  8. Examples: When Internal Controls Go Bad • Payroll • Procurement • Cash Receipts • Travel reimbursements • Student refunds

  9. Components of Internal Control • Control Environment • Risk Assessment • Information and Communication • Monitoring • Control activities

  10. Control Activities • The policies and procedures that help ensure directives are carried out and objectives are achieved. • Includes activities such as: • approvals • authorizations • verifications • reconciliation • separation of duties

  11. Class Discussion • Internal controls • Compensating • P/R Processing PS – class discussion

  12. Break • Short break

  13. Limitations of Internal Control • Achievement of objectives is affected by limitations inherent to internal control systems. • Limitations include: • Judgment • Breakdowns • Management override • Collusion • Cost/Benefit

  14. Critical Control Points • Payroll • Cash Receipts • Procurement Cards • Expenditures – requisitioned goods • Equipment

  15. Opportunity Occupational Fraud Pressure Rationalization

  16. How do I get there from here? • Identify your needs. • Be willing to change. • Abandon the “We’ve always done it this way” mentality. • Work through your department head, Dean or Vice President to request appropriate resources.

  17. Where can I get help? • Business Services Managers • Request assistance from MAS • See attached list of web sites for UMBC policies

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