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UMBC Management Advisory Services

This educational session aims to provide insights into the importance of internal controls in preventing occupational fraud and ensuring good business practices. Participants will learn about what internal control is, who is responsible for it, and the various components involved. Key topics include examples of failures in internal controls, the pressures and opportunities that lead to fraud, and critical control points to monitor. Attendees will also engage in discussions about the implications of inadequate internal controls and best practices for establishing effective control systems within their organizations.

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UMBC Management Advisory Services

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Presentation Transcript

  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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