What is Accountability?

Accountability for financial control purposes is the delegation of authority to qualified persons to initiate, approve of, process, and review business transactions and the holding of those persons responsible for the validity, correctness and appropriateness of their actions. Managers are accountable for negative results attributable to their failure to maintain reasonable internal control activities.

Internal Control Guidelines

Internal control refers to the methods and procedures used to provide reasonable assurance regarding the achievement of objectives in the following categories:

  • Safeguarding assets
  • Ensuring validity of financial records and reports
  • Promoting adherence to policies, procedures, regulations, and laws
  • Promoting effectiveness and efficiency of operations

In general terms, internal controls are simply good business practices. They include anything which serves to safeguard university assets or to improve the effectiveness and efficiency of operations.

Responsibilities

Management

Management is responsible for establishing specific internal control policies and procedures. Every employee is responsible for ensuring that established internal controls are followed and applied.

Compliance Specialists

Compliance Specialists evaluate the effectiveness of control systems, monitor control systems, and contribute to ongoing effectiveness of control systems.

External Auditors

External auditors review control systems for the impact they have on financial reporting and compliance with requirements of external agencies.

Control Principles

Authorization and Approval

Access to cash and cash receipts is restricted to only those individuals authorized by appropriate management personnel.

Segregation of Duties

A single individual is not authorized to perform more than one task in the chain of cash collection.

Recording

Cash receipts are recorded correctly as to account, amount, and period and are deposited promptly intact. Cash receipts are properly applied to customer balances.

Safeguarding

Cash is adequately guarded throughout the collection process.

Review and Reconciliation

Cash balance records are reconciled to Advantage records and differences are investigated.

Cost/Benefit
Costs associated with control processes should not exceed expected benefits.

Recommended Internal Control Practices

Cash Receipts
Accounts Receivable
Payroll
Procurement/Purchasing
Equipment/Inventory
Petty Cash

Cash Receipts

Authorization
  • Develop procedures to specify how the department is to comply with university requirements and department expectations.
  • Supervisors should verify cash deposits, voided transactions, and cash overages and shortages.
Segregation of Duties
  • Establish a chain of accountability immediately upon initial receipt of cash. Individual accountability should be maintained at all times. Transfers between two people should be jointly verified and documented.
  • Each cashier should prepare an independent record of cash receipts which should be turned in with cash receipts.
  • Different employees should be responsible for:
    • Receiving and recording cash collections.
    • Balancing daily cash receipts to related cash recordings.
    • Verifying that the deposit amounts reflected in the general ledger are in agreement with departmental records.
  • In departments where staffing levels do not permit this amount of segregation, senior management must be aware of this limitation and perform additional reviews of the records to ensure that funds are adequately protected
Safeguarding
  • Separate, lockable containers or compartments should be available to each person collecting money. The money should be locked when the cashier is not available. Keys to the cash box should be limited only to the cashier and the supervisor.
  • Checks should be restrictively endorsed upon receipt.
  • Cash counting area should be reasonably secure and free of interruptions.
  • Cash should be kept in a safe or locked drawer overnight.
  • Cash should be deposited weekly or immediately when the amount on hand exceeds $250.
  • Safe combination should be changed regularly. The safe should be physically suitable for its purposes.
Recording and Depositing
  • Deposits should be presented intact.
  • All cash receipts should be recorded on a cash receipt form, cash register, or a properly controlled computer database at the time of receipt.
  • Checks should be made payable to the Board of Regents.
Reconciliation and Review
  • All receipt numbers should be accounted for.
  • Detail of Workday records should match deposit records.

Accounts Receivable

Authorization
  • Invoices should be prepared for all charges and issued on a timely basis.
  • Invoices should be issued in numerical sequence.
Segregation of Duties
  • Different persons should be responsible for:
    • Billing and maintaining accounts receivable records.
    • Receiving or handling incoming payments.
    • Reconciling receivable records to the general ledger.
Safeguarding
  • Blank invoices, credit memos, and cancellation forms should be controlled to prevent misuse.
Recording and Depositing
  • Supporting documentation should be available for all accounts receivable activity.
Reconciliation and Review
  • Receivable reports should include aged listings of all amounts due, should be reviewed at least monthly, and should be balanced to the related accounts.
  • Delinquent account balances should be examined and follow-up with customers should be initiated on a timely basis to facilitate payment.
  • The department should establish and follow a specific set of procedures for determining bad debts and collection actions.

Payroll

Authorization
  • Forms should be approved only by persons with signature authority.
  • Employees should not approve actions affecting their own pay.
  • Supervisors should approve any time recording or reporting alterations.
Segregation of Duties
  • Different employees should be responsible for preparing employment documents and reviewing payroll reports.
Safeguarding
  • Payroll records should be filed in a secure location with access limited to authorized personnel.
  • Presentation of ID should be required when releasing checks to employees not known to the person distributing checks.
  • Payroll checks should be kept in a locked, secure area pending distribution.
Reconciliation and Review
  • Payroll expense reports should be reviewed and approved monthly. Any questionable or irregular entries should be reviewed.

Procurement/Purchasing

Authorization

All authorizations for disbursement of funds should have the required signatures. Procurement card records should have proper management review.

Segregation of Duties
  • To the extent practical, different individuals should be assigned responsibility for:
    • Approving purchase orders and requisitions.
    • Receiving ordered materials.
    • Reviewing and reconciling the general ledger reports.
Safeguarding

Receipt of goods and services should be verified prior to approving invoices for approval.

Reconciliation and Review
Verification should be made that invoiced amounts are correct, accounts charged are correct, and payment has not already been made.

Equipment/Inventory

Authorization
  • Purchase requisitions should be approved by a person delegated approval authority.
Segregation of Duties
  • Employees assigned to perform physical inventories to confirm that materials and equipment listed on inventory records are actually on hand should be persons other than those responsible for maintaining custody of the items or subordinates of the custodian.
  • Property movement requests should be approved by someone not directly responsible for custody or disposal of equipment.
Safeguarding
  • Security arrangements for safeguarding inventory should be proportional to its value and removability.
  • Off-campus use of university equipment should be allowed for university business purposes only, should be approved by the appropriate authority, and a written record should be maintained.
Recording and Depositing
  • Items should be inspected for condition prior to their inclusion in the inventory.
  • Obsolete, inactive, or damaged items should be removed from the inventory.
Reconciliation and Review
  • Physical counts of supply inventories should be taken at least annually.
  • A full review of inventory equipment should be performed at least annually.

Petty Cash

Authorization
  • Petty cash funds should be authorized and established by the Controller’s Office.
  • Funds should only be used for appropriate University business purposes as identified in the Petty Cash Fund Manual.
Segregation of Duties
  • When possible, separate individuals should be responsible for maintaining the fund and review and approval of replenishment of the fund.
Safeguarding
  • Funds should be maintained in a secure location accessible only by the fund custodian.
Recording and Depositing
  • Petty cash funds should be replenished as necessary, but at least during the month of June (to keep expenditures within the current fiscal year).
  • All disbursements from the fund should be supported by an original receipt documenting the expenditure.
Reconciliation and Review
  • A supervisory employee with signature authority and not responsible for custody of the fund should review the documentation, verify that the total fund amount is accounted for, and approve requests for fund replenishment.
  • The petty cash fund should be periodically reviewed to determine if it is necessary, or if the activity would be more appropriately accomplished by use of procurement cards.