Internal Controls Agenda
Definition: Measures adopted within an organization to:
- Safeguard Assets (cash, inventory, or other items of value).
- Check accuracy of accounting data (reliability and integrity of information)
- Promote operational efficiency (economical and efficient use of resources)
- Encourage adherence (compliance) to prescribed managerial policies
- Accomplishment of objectives and goals
Purpose: Internal Controls aim to ensure that the following are accomplished:
- Process transactions according to general or specific management authorizations.
- Record transactions in such a way as to ensure accountability of assets
-To realize revenue as it is received
-To realize expenditures as they are made
-To identify losses as they occur
- Limit access to assets.
- Compare accounting reports of assets to the actual assets at appropriate intervals. (i.e. Verification work is done to assure that cash or inventory is accurately reflected in the department’s records and that all receipts have been posted to department FRS revenue accounts).
Quotes
Method: The above is achieved through:
- Separation of Duties - a mistake cannot be made without being seen by at least one other person.
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Asset or cash handling
-Authorizing
-Reviewing Accounting reports
- Sound Accounting System - a system of routine checks and balances that should always be done in the same manner.
- Sound Personnel policies - properly manage the people to handle the transactions.
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Qualified personnel
-Rotation of work assignments
-Employees must take earned vacations
-Training to provide opportunity for improved competence
-Individual responsibility should be clearly defined
-Follow-up to ensure delegated assignments are properly carried out
- Sound review processes - check the work on a regular basis.
-Review/reconciliation of reports
-Cash counts
-Internal Audits
- University policies and procedures
-Clearly stated
-Written
-Communicated
Responsibilities of the parties upon Receipt of funds:
What are the responsibilities of the cash handlers under University Policy?
- Verify the cash or checks.
- Endorse checks with a restrictive endorsement.
- Provide the payer with evidence (a receipt) that the funds were received.
- Place all items immediately in a locked drawer or cash box. Negotiable items should never be left unsecured.
- Log receipts.
- Process (deposit) the monies DAILY.
- Cash drawers, change funds or petty cash funds should be verified and counted down daily by the respective custodians. Money should be counted down whenever it changes hands.
- An employee should not process (deposit) his/her personal transactions.
What are your responsibilities as a supervisor of cash handling functions?
- Make certain that duties are properly separated: one person records receipts in a log, other person prepares the distribution of deposit form.
- The log should be compared with the distribution of deposit receipts to verify that all monies received have been deposited.
- Gift monies, restricted or unrestricted, require supporting documentation to the University Gift Office.
- Periodic rotating of duties among the personnel available to carry out these functions.
- See to it that funds are secured and that keys, combinations, etc are restricted to authorized personnel.
- Insure that all funds are properly accounted for in FRS by ensuring that receipts are properly reconciled.
- Records, e.g., logs, receipts, etc., are retained in accordance with the University's Record Retention Policy.
Reconciliation Process:
All cash and credit card receipts received by the University of Arizona must be accounted for properly and must get posted properly into FRS. In order to insure that funds received were actually deposited into the appropriate account, the following steps should be taken:
- Compare distribution of deposit receipts listing to FRS reports.
- Investigate and reconcile any differences.
- Frequent errors and problems should be identified and responsible personnel counseled or re-trained.
- Notify FSO-Financial Management immediately if there are unreconciled or unidentified differences.
Resources Available:
- Cash Handling Policy section 8.10 and related sections of the FRS Departmental Manual
- Fund Accountant: separation of duty issues, reconciliation problems, and other routine questions where the FRS Department Manual may be unclear.
- Bursar's Office: aspects of cash handling and cashiering, bank-related issues.
- Internal Auditors: if serious problems arise.
Other Resoures:
6.10 Account Management
8.10 Cash Receiving
8.12 Gifts
16.00 Reports & Reconciliation
16.30 Account Reconciliation
18.10 Service Center Policy
18.30 Assigned Responsibility (Service Center)
18.41 Service Center Survival Guide
19.01 Segregation of Duties (refers mostly to payroll)
Reconciliation Flowchart.
