Todays Keys What are Internal Controls What are High Risk Areas - - PowerPoint PPT Presentation

Today’s Keys What are Internal Controls What are High Risk Areas How to Assemble a Team How to Document Where to Find Resources

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What are Internal Controls

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Polling Question What Comes to Mind When You Hear “Internal Controls”? 1.Safeguard Assets 2.Compliance with Policies/Laws 3.Reliable Financials 4.Effective & Efficient Operations

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Objectives of Internal Control are Interrelated

Financial Reporting Compliance Operations

Safeguard Assets

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Principles of Internal Control

• Process
• Achieved by people
• Gives reasonable assurance
• Benefits the organization
• Tailored to the environment
• Must be cost-effective

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Control Environment

• Management & Board set tone
• Influences control effectiveness
• Provides discipline & structure
• Includes technical competence
• Maintain ethical commitment

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High Risk Areas

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Polling Question

What is your organization’s biggest risk? 1.We trust people too much 2.Potential for collusion 3.Weak segregation of duties 4.Lack of safeguards

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Areas where fraud is most likely

• Cash & valuable items
• Payroll fraud
• Vendor fraud
• Banking transactions

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FRAUD TRIANGLE

RATIONALIZATION: Justification of Dishonest Actions PRESSURE: Motivation to Commit Fraud OPPORTUNITY: Ability to Carry Out

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Red Flags of Potential Fraud

• Employee living beyond means
• Unwilling to take vacation or

delegate

• Financials prepared late
• Unexplainable variances
• Controlled relationships

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Assemble a Team

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Polling Question

Do you have an active Audit or Finance Committee? 1.Yes 2.No 3.Planning to implement

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Audit/Finance Committee

• Oversee system of internal control
• Oversee annual audit

Meet with auditor twice/year pre-audit & post audit with

• pportunity to meet without staff

present

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Board of Directors

• Provide guidance & oversight

with mission at top of mind

• Set the tone of the organization

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Board of Directors

• Ensure an engaged

finance/audit committee is in place

• Knowledgeable about activities

be objective & inquisitive

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Board of Directors

• Governance Best Practices
• Review Form 990
• Conflict of Interest Policy
• Whistleblower Policy
• Document Retention &

Destruction Policy

• Gift Acceptance Policy

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Management

• Set the tone of the organization
• Identify & address risks
• Hold employees accountable for

their actions

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Document Policies & Procedures

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Polling Question

Does your organization have policies/procedures documented in writing? 1.Yes 2.No 3.Somewhat 4.We are going to start

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Accomplish Good Controls

• Design with everyone in mind

ie: employees, board, etc.

• Segregate Duties
• Train people about expectations
• Use software where possible
• Make process a bit inconvenient
• Watch for signs

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Assess What Can Go Wrong

• Identify potential fraud risks
• High Risks
• Low Risks
• Likelihood
• Impact

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Resources

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Polling Question

What area does your organization need the most help strengthening?

• 1. Cash Receipts
• 2. Cash Disbursements
• 3. Payroll
• 4. Financial Close
• 5. Information Technology

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• Future Learning Circles
• Resources in Packet
• Today’s Slides
• Internal Controls Checklist
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Internal Control Charts

• Resource Listing

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Questions & Answers

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