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FAQs about Internal Control

What is the definition of internal controls?

So, what are internal controls?

What is the purpose of internal control?

What can my Department do?

How can I be sure my department has appropriate controls?

What is the definition of internal controls?

Internal control comprises the plan of organization and all of the methods adopted within an organization to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies. This definition...recognizes that a system of internal control extends beyond those matters which relate directly to the functions of the accounting and financial departments.

So, what are internal controls?

The above definition in question #1 really is the textbook definition.  Simply put, internal controls are anything we do to help us achieve our objectives. We believe everyone uses internal controls in their typical daily activities such as the following:

• Did you lock your doors at home before leaving for work?
  Probably so because you wanted to protect the assets in your home from theft.

• Do you write your PIN number on your debit card?
  Probably not because you know if you lose your card, you would also most likely lose your money.

• Do you balance your bank statement each month?
  Hopefully, because it ensures you know the correct balance in your account, ensures no one has inappropriately accessed your funds, and ensures that the bank hasn’t made mistakes in their records.

These items noted above, among other things, make up what we refer to as your personal internal control system. These are things you do to achieve your objectives in your own business and life. Many of these are simply logical, common-sense things you do every day. Just as we apply these things to our personal internal control system, we want to apply relevant controls to the College’s business and operational processes.

What is the purpose of internal control?

As noted above, the primary purpose is to help us achieve our objectives. Typically internal controls are noted for having four primary purposes:

• (1) to protect the University’s assets,
• (2) to ensure records are accurate,
• (3) to promote operational efficiency, and
• (4) to encourage adherence to policies and procedures.

What can my Department do?

Control activities include, but are not limited to, the following:

• Implement segregation of duties where duties are divided, or segregated, among different people to reduce risk of error or inappropriate actions. No one person has control over all aspects of any financial transaction.
   
• Make sure transactions are authorized by a person delegated approval authority when the transactions are consistent with policy and funds are available.
   
• Ensure records are routinely reviewed and reconciled, by someone other than the preparer, to determine that transactions have been properly processed.
   
• Make certain that equipment, inventories, cash and other property are secured physically, counted periodically, and compared with item descriptions shown on control records.
   
• Provide employees with appropriate training and guidance to ensure they have the knowledge necessary to carry out their job duties, are provided with an appropriate level of direction and supervision, and are aware of the proper channels for reporting suspected improprieties.
   
• Make sure University and departmental level policies and operating procedures are formalized and communicated to employees. Documenting policies and procedures and making them accessible to employees helps provide day-to-day guidance to staff and will promote continuity of activities in the event of prolonged employee absences or turnover.

Remember, everyone in the department has responsibility for internal control.

How can I be sure my department has appropriate controls?

• Perform a self assessment of your controls. Use the self assessment questionnaire below and Contact the College Office for assistance in this process.

• Request an internal audit. We budget several hours each year for administrative requests. Starting in the spring of 2006, departments will begin to be scheduled for internal audits, but you can request that your department be placed on the audit schedule sooner.

• Review the procedures and guidelines on the College Finance web page or call the College Office with any questions (7-1846)