1. Management Advisory and Compliance Services Towson University Management Advisory and Compliance Services Internal Controls

2. Management Advisory and Compliance Services Internal Controls  Effectiveness and efficiency of operations  Reliability of financial reporting  Accomplishment of established goals and objectives  Compliance with laws and regulations  Safe guarding university assets Processes that help to reasonably ensure:

3. Management Advisory and Compliance Services Risk The possibility that an organization will NOT:  Achieve its goals  Operate effectively and efficiently  Protect itself from loss  Provide reliable financial data  Comply with laws and defined policies  Safe guard assets

4. Management Advisory and Compliance Services It is a Balancing Act!

5. Management Advisory and Compliance Services Responsibility vs. Accountability You can delegate some of the duties you are responsible for, but you cannot delegate accountability!

6. Management Advisory and Compliance Services Control Activities Overview  Reasonable assurance  YOU are ultimately responsible for tasks  The trust issue  Preventive vs. detective controls

7. Management Advisory and Compliance Services Key Control Activities  Creation of a control-conscious environment  Segregation of duties  Authorizations, approvals and verifications  Control of physical and intellectual assets and records  Monitoring

8. Management Advisory and Compliance Services Tool #1: Control Conscious Environment  Integrity and ethics  Commitment to competence  Leadership philosophy  Organizational structure

9. Management Advisory and Compliance Services Tool #2: Segregation of Duties  Segregation of duties is a preventive control that aids in the timely detection of errors and irregularities in the normal course of business.  Functions are divided so that no one person has control over all parts of a transaction.

10. Management Advisory and Compliance Services Functions to be Separated  Authorizing transactions  Reconciling transactions  Custody of assets  Recording transactions

11. Management Advisory and Compliance Services Higher-risk Transaction Types  Purchase of Goods  Purchase of Services  Cash Receipts  Payroll  Procurement Card  Inventory

12. Management Advisory and Compliance Services Tool # 3: Authorizations, Approvals and Verifications  Limit authorization authority  “Rubber Stamping”  Secure access to electronic signatures or other signatory devices  NEVER, EVER sign a blank form  Develop written procedures outlining delegation guidelines

13. Management Advisory and Compliance Services Tool # 4: Asset Control Activities  Periodic asset counts  Periodic comparisons  Investigation of discrepancies  Physical safeguards against theft and fire

14. Management Advisory and Compliance Services Tool # 5: Monitoring Monitoring is a detective control that aids in identifying losses, errors or irregularities. “But I’m so busy…”

15. Management Advisory and Compliance Services Five Control Tools 1. Control-conscious Environment 2. Segregation of Duties 3. Authorizations, Approvals, and Verifications 4. Control over Assets 5. Monitoring

16. Management Advisory and Compliance Services Red Flags of Fraud  No vacation  Voluntary overtime  Unexplained variances  Complaints  No reconciliation  One employee “does it all”  Documentation is not original  “Rush” requests

17. Management Advisory and Compliance Services Questions For additional information go to the Management Advisory and Compliance Services website: http://wwwnew.towson.edu/adminfinance/macs