Importance of Internal Management - Office of the Under Secretary ...

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10 Νοε 2013 (πριν από 3 χρόνια και 7 μήνες)

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Managers’ Internal Control
Program

(MICP)


FY2013 Workshop

The Importance of Internal Management Controls



Overview


Agenda



Importance of Internal
Management Controls


Internal Controls Standards


Introduce the COSO
Framework


1


Importance of Internal
Management Controls



Why is Internal
Management
Control so
Important?

Operational

Compliance

Financial
Reporting

Safeguard resources against loss
due to waste, abuse,
mismanagement, errors and
fraud.

Develop and manage reliable
financial data that accurately
represent evidence of
management internal controls.

Promote adherence to laws,
regulations, contracts and
management directives.

Organizational
Objectives

2


Safeguarding Resources


Misappropriation of assets


Expenditures and liabilities incurred for improper purposes


Unethical behavior of senior management


A need to hold management more accountable for their actions


Lack of transparency in financial statements


Against fraud in financial reporting




Operational

3


Promote adherence to laws, regulations,
contracts and management directives.



Office of Management and Budget Circular A
-
123 (OMB)


Federal Managers’ Financial Integrity Act 1982 (FMFIA).


Government Performance Results Act (GPRA).


Chief Financial Officers Act of 1990 (CFO Act).


Inspector General Act of 1978 (IG Act)


Federal Financial Management Improvement Act 1996

Compliance

4



Develop and manage reliable accurate
financial data
.




As an organization work towards achieving its mission, those actions
translate financial events and transactions.




Effective internal controls over financial actions produce, develop
and maintain reliable financial data and reports.



Without internal controls, the integrity of the financial data and
reports produced can be compromised.






Financial Reporting



5



Any action taken to enhance the likelihood that
established objectives and goals will be achieved.







What is Internal Control?

6


COSO, GAO and OMB

Define Internal Control Consistently






Internal Control Standards

COSO
GAO
OMB
Framework
Standards
Objectives
A defined process, effected by an entity's
An integral component of an
The three objectives of internal
board of directors, management and other
organization's management that
control include:
personnel designed to provide reasonable
provides reasonable assurance that the
Effectiveness and efficiency of operations
assurance regarding the acheivement of
following objectives are being achieved:
Reliability and financial reporting,
ojectives in the following categories:
Effectiveness and efficiency of operations
Compliance with applicable laws and regulations
Effectiveness and efficiency of operations
Reliability and financial reporting,
Reliability and financial reporting,
Compliance with applicable laws and regulations
Compliance with applicable laws and

regulations


7

What is COSO?


Created in 1985 through the joint
sponsorship of the AICPA , America
Accounting Association, Financial
Executives Institute and the Institute
of Management.



Accountants identify factors
associated with fraudulent financial
reporting and to make
recommendations to reduce
fraudulent reporting.


A defined
process
, effected by an
entity’s board of directors,
management and other personnel ,
designed to provide reasonable
assurance regarding the achievement
of objectives in the following
categories:


Effectiveness and efficiency of operations


Reliability of financial reporting


Compliance with applicable laws and
regulations

Committee of Sponsoring
Organizations

(Treadway Commission est. 1985)

The COSO Framework defines an
internal controls as:


8

COSO’s Internal Control Framework

9

Control Activities


Policies/procedures that ensure
management directives are carried
out.


Range of activities including
approvals, authorizations,
verifications, recommendations,
performance reviews, asset
security and segregation of duties.

Monitoring


Assessment of a control system’s
performance over time.


Combination of ongoing and
separate evaluation.


Management and supervisory
activities.



Internal audit activities.

Control Environment


Sets tone of organization
-
influencing
control consciousness of its people.


Factors include integrity, ethical
values, competence, authority,
responsibility.


Foundation for all other components
of control.

Information and Communication


Pertinent information identified,
captured and communicated in a
timely manner.


Access to internal and externally
generated information.


Flow of information that allows for
successful control actions from
instructions on responsibilities to
summary of findings for management
action.

Risk Assessment


Risk assessment is the identification
and analysis of relevant risks to
achieving the entity’s objectives,
forming the basis for determining
control activities.


Protect resources against, fraud, waste and abuse


All staff (management, staff, civilian and military
personnel) are responsible for ensuring that internal
controls are working “efficiently and effectively” within
the workplace.




Ensure financial transactions are recorded in accordance
with the internal controls that are in place.




The Goal of Internal Management
Controls

10