Internal Controls For Municipalities Vermont State Auditors Office

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Internal Controls For Municipalities Vermont State Auditor’s Office – August 2008

Internal Controls For Municipalities Vermont State Auditor’s Office – August 2008

What Are Internal Controls ? A process designed to provide reasonable assurance about the

What Are Internal Controls ? A process designed to provide reasonable assurance about the achievement of an entity’s objectives concerning: Financial reporting Effectiveness of operations Compliance with laws and regulations

Why Are Internal Controls Important ? • Effective internal controls prevent fraud, waste, and

Why Are Internal Controls Important ? • Effective internal controls prevent fraud, waste, and abuse • They protect both the town and the town’s employees

Five Elements of Internal Controls • • • Control Environment Risk Assessment Control Activities

Five Elements of Internal Controls • • • Control Environment Risk Assessment Control Activities Information and Communication Monitoring

Control Environment • • Tone at the Top Commitment to Competence Management’s Philosophy/Integrity Management’s

Control Environment • • Tone at the Top Commitment to Competence Management’s Philosophy/Integrity Management’s Direction/Assignment of Responsibility • Human Resources Policies and Procedures

Risk Assessment • Identify the Risks to Achievement of the Town’s Objectives in relation

Risk Assessment • Identify the Risks to Achievement of the Town’s Objectives in relation to: Financial Reporting Cash Management Town Operations Compliance with laws and regulations • Prioritize them (Probability X Impact) • Develop a plan to manage them

Control Activities Specific to your operation and may include the following: • Policies and

Control Activities Specific to your operation and may include the following: • Policies and procedures to protect against fraud, waste, and abuse • Authorizations and approvals • Verifications • Reconciliations • Segregation of duties • Review operational performance

Information and Communication • • • Financial Reporting Operational Reporting Accounting Manual Compliance Reporting

Information and Communication • • • Financial Reporting Operational Reporting Accounting Manual Compliance Reporting Codes of Conduct Keep the communication lines open

Monitoring • • Budget to Actual Internal Audits Reconciliations to General Ledger Management review

Monitoring • • Budget to Actual Internal Audits Reconciliations to General Ledger Management review of controls Review of exception reports External Audit Committee

It’s Not That Difficult Ask for Help

It’s Not That Difficult Ask for Help

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