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 Community Foundation 1

What are Internal Controls Community Foundation 2

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 Community Foundation 3

Objectives of Internal Control are Interrelated Operations Safeguard Assets Financial Compliance Reporting Community Foundation 4

Principles of Internal Control ● Process ● Achieved by people ● Gives reasonable assurance ● Benefits the organization ● Tailored to the environment ● Must be cost-effective Community Foundation 5

Control Environment ● Management & Board set tone ● Influences control effectiveness ● Provides discipline & structure ● Includes technical competence ● Maintain ethical commitment Community Foundation 6

High Risk Areas Community Foundation 7

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 Community Foundation 8

Areas where fraud is most likely ● Cash & valuable items ● Payroll fraud ● Vendor fraud ● Banking transactions Community Foundation 9

RATIONALIZATION: Justification of Dishonest Actions FRAUD TRIANGLE OPPORTUNITY: PRESSURE: Ability to Carry Out Motivation to Commit Fraud Community Foundation 10

Red Flags of Potential Fraud ● Employee living beyond means ● Unwilling to take vacation or delegate ● Financials prepared late ● Unexplainable variances ● Controlled relationships Community Foundation 11

Assemble a Team Community Foundation 12

Polling Question Do you have an active Audit or Finance Committee? 1.Yes 2.No 3.Planning to implement Community Foundation 13

Audit/Finance Committee ● Oversee system of internal control ● Oversee annual audit Meet with auditor twice/year pre-audit & post audit with opportunity to meet without staff present Community Foundation 14

Board of Directors ● Provide guidance & oversight with mission at top of mind ● Set the tone of the organization Community Foundation 15

Board of Directors ● Ensure an engaged finance/audit committee is in place ● Knowledgeable about activities be objective & inquisitive Community Foundation 16

Board of Directors ● Governance Best Practices • Review Form 990 • Conflict of Interest Policy • Whistleblower Policy • Document Retention & Destruction Policy • Gift Acceptance Policy Community Foundation 17

Management ● Set the tone of the organization ● Identify & address risks ● Hold employees accountable for their actions Community Foundation 18

Document Policies & Procedures Community Foundation 19

Polling Question Does your organization have policies/procedures documented in writing? 1.Yes 2.No 3.Somewhat 4.We are going to start Community Foundation 20

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 Community Foundation 21

Assess What Can Go Wrong ● Identify potential fraud risks • High Risks • Low Risks • Likelihood • Impact Community Foundation 22

Resources Community Foundation 23

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 Community Foundation 24

● Future Learning Circles ● Resources in Packet • Today’s Slides • Internal Controls Checklist • Community Foundation Internal Control Charts • Resource Listing Community Foundation 25

Questions & Answers Community Foundation 26