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- Memorandum from the President
- ESF's Internal Control Program
- Basic Definitions
- Internal Control Program
- Internal Control Foundations
- Risk Assessment
- Preventative and Detective Controls
- General Standards
- Specific Standards
- Who's Responsible for What?
- Positive Attitude
- Additional references
To: ESF Community
From: Quentin Wheeler, President
Re: Internal Control
April 10, 2015
Around this time each year, campus presidents are required to certify and comment on the internal control programs at their campus. I want to take this opportunity to affirm my personal commitment to internal control awareness and proper risk management at ESF and within our affiliated entities. I consider an effective internal control system to be a high priority and ask your cooperation as we work together to help ensure that ESF is successful in realizing its mission.
Internal controls are methods and measures adopted by the College to promote the thoughtful and efficient use of State and all other resources. For example, internal controls help ensure that all funds and cash receipts are properly accounted for and promptly deposited in bank accounts. Internal controls provide for complete and accurate recordkeeping with respect to student transactions, or that college equipment is properly cared for and used only for its intended purposes. In short, a well-designed system of internal controls safeguards college assets and ensures accuracy and reliability in the use of such assets and in the performance of our respective jobs. All of us are responsible for adhering to the institution's applicable internal controls.
In addition to topic-specific internal control protocols, there is one essential value upon which all the internal controls depend, individual integrity. Each member of the College community is expected to conduct him or herself with the appropriate standard of care. We all have a responsibility to model integrity in all that we do. The consequences for organizations arising from a lack of integrity can be devastating, as newspaper headlines regularly attest.
A successful internal control program depends on the participation of all employees at every level. Although we are each responsible for establishing internal control in our units, the formal responsibility for reviewing campus controls has been assigned to the Business Office with Dave Dzwonkowski assuming the role of Internal Control Officer and Jim Fletcher, Assistant Internal Control Officer. You can expect to hear from them when your unit is selected for review of its internal control systems. Both are happy to answer any questions you might have or help you assess your department's controls for effectiveness.
In closing, I encourage each of you to cooperate fully with our campus internal control team. Thank you for your participation and cooperation in this important and ongoing endeavor.
ESF's Internal Control Program
The Internal Control Act, more specifically referred to as the New York State Governmental Accountability, Audit and Internal Control Act (originated in Chapter 814 of the Laws of 1987, then made permanent in Chapter 510 of the Laws of 1999), is the basis for the SUNY-ESF Internal Control Program. The Internal Control Act requires that all state agencies, including SUNY institute a formal internal control program. There are six requirements of the Internal Control Act of 1987 as shown below:
- Maintain written internal control guidelines.
- Maintain an internal control system for continuous review of operations.
- Make a concise statement of policy and standards available to all employees.
- Designate an Internal Control Officer.
- Educate and train all employees on internal controls.
- Evaluate the need for an internal audit function.
Internal Controls are an integral part of each system used to regulate and guide operations. Internal controls are designed to promote performance leading to the effective accomplishment of an organization's goals and objectives.
Internal Control Systems
Internal controls with a common purpose are grouped together and referred to as internal control systems. Basically, internal control systems are the laws, policies and procedures that affect the daily operations and management of SUNY-ESF.
Examples of internal control systems include, but are not limited to:
- External (federal, state, university) laws, regulations, policies, and procedures
- Policies of the University Board of Trustees
- College handbook, catalog, and other statements of policy and procedure
- Academic curricular and course outlines
- Student registration system
- Financial and personnel procedures
- College long-range plan
- Collective bargaining unit contracts
- Financial and operational audits
- Employee performance programs and evaluations
- Accreditations (Middle States, etc.)
- Time and attendance reporting
- Property (equipment) control
- Electronic data and network security
- Public safety, environmental safety, code compliance practices
- Faculty Senate governance process
- Service contracts, revocable permits
- Building door lock systems and key control
- Student and employee identification cards, etc.
Internal control systems must provide reasonable assurance that the objectives of the campus will be met in a cost effective manner. Reasonable assurance provides sufficient confidence that internal controls are functioning to ensure the organization will meet its goals and objectives.
The Cost of Internal Controls
Internal control systems should remain cost effective and not exceed the benefit derived.
Internal Control Program
SUNY-ESF's Internal Control Program is based upon existing internal controls which are a part of our everyday operations. SUNY-ESF's Internal Control Program provides us with a formal mechanism to help identify existing controls and evaluate their effectiveness.
There are five specific objectives to SUNY-ESF's Internal Control Program. CARES stands for these objectives as described below:
- Compliance with applicable laws and policies
- Accomplishment of the campus' mission
- Relevant and reliable data
- Economical and efficient use of resources
- Safeguard assets
Internal Control Foundations
The foundations of SUNY-ESF's internal control systems are the various policies and procedures applicable to its daily operations. Below are samples of basic foundations that affect all employees of SUNY-ESF:
- SUNY Procedures Manual
- Public Officers Law
- Campus Purchasing Procedures
- Time and Attendance Policy
- Policy Handbook
- Hiring Practices
- Transaction Processes
The first step in the Internal Control Process is to segment the organization. Segmentation is the process of identifying the program and administrative functions necessary for the campus to carry out its mission. Functions identified through this process are called "assessable units" and provide the framework for the Internal Control Program.
After the campus is segmented into assessable units, each unit's risk is assessed. This process may be done through a self assessment survey or a one-on-one discussion with the unit manager and the Internal Control Officer. By means of this evaluation, the campus evaluates its susceptibility to conscious or unintended abuses and reduced operational efficiencies. Some of the factors examined in the risk assessment are: inherent risk of the unit, management's attitude toward internal controls, physical location, frequency of review, and the rate of personnel turnover.
Upon completing a risk assessment, a rating of low, average or high risk is assigned to the assessable unit. These ratings are considered when scheduling internal control reviews.
Internal Control Review
The internal control review analyzes procedures and policies to insure they are functioning as intended and that they assist the unit in meeting its goals and objectives. Examples of procedures and policies that may be reviewed include planning activities, program evaluations, the budget cycle, personnel transactions, information systems, cash activities, contract management and capital programs.
Upon completion of the internal control review, recommendations may be made. The recommendations may require adding, deleting or changing internal controls or procedures for the unit. If recommendations are accepted, a timetable for implementation is agreed upon.
The final component in the internal control process is follow-up. This step is performed to verify that the recommended actions have been properly implemented and that the unit continues to function as intended.
Preventative and Detective Controls
You will recall that internal controls are actions taken to make sure the right things happen and the wrong things don't. There are two types of internal controls: preventative controls and detective controls.
Preventative controls are designed to keep errors or irregularities from occurring in the first place. They are built into internal control systems and require a major effort in the initial design and implementation stages. However, preventative controls do not require significant ongoing investments.
Detective controls are designed to detect errors and irregularities, which have already occurred and to assure their prompt correction. These controls represent a continuous operating expense and are often costly, but necessary. Detective controls supply the means with which to correct data errors, modify controls or recover missing assets.
Internal Control Standards
Internal controls must meet basic standards to ensure that adequate internal control systems are established and maintained. There are two types of internal control standards: general and specific. General internal control standards describe what we want to achieve while specific internal control standards tell us how to achieve those objectives. Below are examples of general and specific internal control standards. Each example is followed by a brief explanation.
Internal control systems should provide reasonable assurance that the objectives of the organization will be accomplished.
Managers and employees should maintain and demonstrate a positive and supportive attitude toward internal controls at all times.
Managers and employees should have personal and professional integrity and maintain a level of competence that allows them to accomplish their assigned duties, as well as understand the importance of developing and implementing good internal controls.
Internal control systems should help to assure compliance with laws and that the campus meets its goals and objectives.
These are the means to accomplishing the objectives of the internal control systems (i.e. Specific Internal Control Standards).
Adequate records of all internal control systems, transactions and events should be maintained.
All transactions and events should be recorded promptly and accurately.
All transactions and events should be authorized and executed by persons within the scope of their authority.
Key duties and responsibilities in authorizing, processing, recording and reviewing transactions should be separated.
Adequate supervision must be provided to ensure that internal control objectives are achieved.
Access to and accountability for assets and records should be limited to authorized individuals.
Who's Responsible and For What?
Our competence and professional integrity are essential components of a sound internal control program. By knowing what our responsibilities are, we can help to provide reasonable assurance that our internal control systems are adequate and operating in an efficient manner. This section will identify the relationship between the theories and definitions presented thus far and your responsibilities as an employee.
- Fulfilling the duties and responsibilities established in one's job description. Meeting applicable performance standards.
- Attending education and training programs as appropriate to increase awareness and understanding.
- Taking all reasonable steps to safeguard assets against waste, loss, unauthorized use and misappropriation.
- Reporting breakdowns in internal control systems to your supervisor.
- Refraining from the use of your official position to secure unwarranted privileges.
Managers have these additional responsibilities:
- Maintaining an office environment that encourages the design of internal controls.
- Documenting policies and procedures that are to be followed in performing office functions.
- Identifying the control objectives for the functions and implementing cost effective controls designed to meet those objectives.
- Regularly testing the controls to determine if they are performing as intended.
The Internal Control Officer spearheads the campus' Internal Control Program and is responsible for the following:
- Monitor and evaluate the organization's overall internal control system.
- Coordinating the development and implementation of the campus' Internal Control Program.
- Monitoring identified weaknesses and required corrective actions.
- Ensuring that employees are informed of applicable policies and receive appropriate training in internal control.
- Complete Central Administration required reporting requirements.
Commitment of Top Management
Employee attitude affects the quality of job performance and, as a result, the quality of internal controls. A positive attitude is initiated and fostered when internal controls are a consistent priority. Members of top management must demonstrate commitment to the campus' Internal Control Program.
Statements of policies and standards were developed at each campus and made available to all employees. These statements identify the basic policies common to all employees and encourage adherence to these for the benefit of the campus. These statements demonstrate the commitment of top management to the campus' Internal Control Program.
Another factor essential to the success of SUNY-ESF's Internal Control Program is adequate training in the area of internal controls. Training should familiarize employees with the objectives of the internal control program, how it operates, and the benefits it provides. A video slide presentation "Internal Controls Essentials" was implemented in early 2015 and all employees are required to view this each year (a link is provided on this webpage or you can contact Jim Fletcher at extension 4894 if you would like to see this presentation again).
Adequate training helps all employees understand the importance of their role in the campus' system of internal controls. In addition, management should be open to employee suggestions concerning the campus' internal control systems. Users are the best source of improvements to a system.
Internal controls are already part of our daily operations. The controls developed and exercised by managers and their staffs are the substance of the internal control program. SUNY-ESF's Internal Control Program helps to ensure that the controls are properly documented and that they are functioning as intended.
The goal is not to make each person an expert in internal controls, but to increase our awareness and understanding of internal controls. In fact, the single most important success factor of the Internal Control Program is a high level of individual awareness and understanding. Internal controls are everyone's responsibility; therefore, it is critical that each person is able to identify the internal controls that exist in their unit. We are all responsible to know what internal controls exist and how to evaluate their effectiveness.
A successful Internal Control Program will help to streamline our processes and improve the level and quality of our services. The result of SUNY-ESF's Internal Control Program will be a better, more enjoyable work place and a quality institution of higher education.
For more information on internal controls or the status of SUNY-ESF's internal control program, please contact SUNY-ESF's internal control officer.