Internal Control for Local Governments

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Internal Controls for Local Government

A Training Presentation for City of Tampa’s Leaders

Training Objectives
What you should know after this class:
• • • • • Types of risk Who commits fraud and why Internal controls - who needs them 5 internal control components What you can do!


What are Internal Controls?
To put it simply, internal controls are an exercise of common sense. You are practicing good internal controls when you? • Balance your checkbook • Keep your ATM/debit card pin number separate from your card • Keep copies of your tax return • Compare your monthly credit card statement to the credit card receipts • Lock your car doors • Other examples….??? 3

What are Internal Controls?
Internal controls are an integral part of any organization’s financial and business policies and procedures. Internal controls consist of all the measures taken by the organization for the purpose of: • Protecting its resources against waste, fraud and inefficiency • Ensuring accuracy and reliability of accounting and operating data • Ensuring compliance with the policies of the organization • Evaluating the level of performance in all organizational units of the organization 4

What are Internal Controls?
Important concepts concerning internal controls include: • Internal control is a process. It is a means to an end, not an end itself. • Internal control is effected by people. It’s not merely policy manuals and forms, but people functioning at every level of the institution. • Internal control is geared to the achievement of objectives in several overlapping categories. • Internal control only provides reasonable assurance to an institution’s leaders regarding achievement of operational, financial reporting and compliance objectives. 5

What are Internal Controls?
What Internal Controls Do... • Promote orderly, economical, efficient and effective operations. • Safeguard resources against loss due to waste, abuse, mismanagement, errors and fraud. • Promote adherence to laws, regulations, contracts and management directives. • Develop and maintain reliable financial and management data, and accurately present that data in timely reports.


What are Internal Controls?
Who is Responsible for Internal Controls? • Everyone has a part in the internal control system. • The roles vary depending upon what level of responsibility and the nature of involvement by the individual. • Managers and supervisors are responsible for ensuring that internal controls are established and functioning to achieve the mission and objectives of their unit. • Each employee within an area should be made aware of proper internal control procedures associated with their specific job function. 7

What is Risk?
• Anything that could negatively impact the City’s ability to meet it’s operational objectives.


What are Internal Controls?
Assessing Risk... Management must be able to identify, analyze and manage any risk that prevents them from achieving their objectives. Basically you should ask yourself what could go wrong and what assets do we need to protect. • Please Note Risk…. will increase during a time of change (i.e. personnel turnover and adding a new service).


5 Types of Risk
• Strategic - risk that would prevent a department from accomplishing it’s objectives. • Financial - risk that could result in a negative financial impact to the City. • Regulatory (Compliance) - Risk that could expose the City to fines and penalties from a regulatory agency due to non-compliance with laws and regulations. • Reputational - risk that could expose the City to negative publicity. • Operational - risk that could prevent a department from operating in the most effective and efficient 10 manner.

What are Elements of Internal Control?
• Control Activities…. These are the policies and procedures that help to ensure that actions necessary to achieve the department’s objectives are effectively carried out. • Policies and...
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