Internal Control Practices: Overview

 Internal Control Practices

Overview 

Learn how to incorporate internal control practices into your department's everyday procedures.

About control practices

Internal control practices enable UW-Stevens Point to achieve its objectives while maintaining an environment that focuses on ethics and accountability. Establishing an ethical environment at all levels of the organization is the most important element of accountability and control.

Effective control activities help you and your department identify priorities, achieve department goals, report reliably, meet compliance regulations, and safeguard university resources.

Your department benefits by:

  • Reducing and preventing errors in a cost-effective manner
  • Ensuring priority issues are idenitified and addressed
  • Protecting employees
  • Providing appropriate checks and balances

4 keys to great internal control practices:

With tightened resources, it’s more important than ever to minimize risk and focus on these key areas.

  1. Separation of duties: Divide responsibilities between different people so one individual doesn’t control all aspects of a transaction.
  2. Authorization and approvals: Be sure that only a person with delegated authority approves or authorizes transactions.
  3. Security of assets: Safely secure equipment, cash, inventory, and resources. Reduce the risk of unauthorized use. Count periodically and compare with amounts shown on control records.
  4. Review and reconciliation: Regularly examine transaction records against official university records to verify accuracy, appropriateness, and proper compliance.

Internal Control Practices: Cash

Internal Control Practices

Cash

To ensure that you protect, accurately process, and properly report University assets, follow the internal control practices of separating duties, obtaining appropriate authorizations and approvals, securing assets, and reconciling cash.

Definition: The University defines cash as currency, coins, checks, money orders, and e-commerce transactions like credit card transactions.

Separation of duties

One of the most important steps your unit can take to protect cash — and you — is to separate cash handling duties among different people. With proper separation of duties, no single person has control over the entire cash process.

  • Best practice is to have different people:
    • Opening mail, if you receive mail payments
    • Endorsing checks and receiving cash
    • Record cash payments to receivable records
    • Preparing and transporting deposits
    • Reconciling deposits submitted through the Bursar's office to WISER
    • Billing for goods and services
    • Following-up on collection of returned checks.
  • Potential consequences if duties are not separated:
    • Concealed errors or irregularities going unchecked
    • Lost or stolen cash receipts
    • Inaccurate application of cash receipts to department accounts

Accountability, authorization, and approval

Cash accountability ensures that cash is accounted for, properly documented and secured, and traceable to specific cash handlers.

  • When proper cash accountability exists, you can answer the four W's during a process:
    • Who has access to cash
    • Why they have access to cash
    • Where cash is at all times
    • What has occurred from the transaction's beginning to end
  • Best practices:
    • Record cash immediately upon receipt.
    • Keep funds secured.
    • Document transfers.
    • Give receipts to each customer.
    • Don’t share passwords.
    • Give each cashier a separate cash drawer, if applicable.
    • Supervisors verify cash deposits.
    • Supervisors approve all voided and refunded transactions.
  • Potential consequences if accountability does not exist:
    • Lost or stolen cash receipts
    • Inaccurate application of cash receipts to departmental accounts
    • Improper use of University assets

Security of assets

Be sure to keep all of your resources physically protected, including your cash handlers. Follow these practices to promote a safe work environment when working with cash.

  • Best practices:
    • All Cash Handling Units must have cash handlers, fund custodians (if applicable), and supervisors review Cash Handling Policy & Procedures and successfully complete online training program.
    • Restrict access of cash to as few people as possible.
    • Lock cash in a secure location like a safe or locked storage facility.
    • Provide combinations, passwords only to authorized personnel.
    • Change combinations, passwords annually, or when someone leaves.
    • Minimize the amount of funds held overnight.
    • Use a buddy system when taking funds from one location to another.
    • Count cash in a non-public area not easily visible to others.
  • Potential consequences if cash is not secured:
    • Unsafe work environment
    • Lost or stolen cash receipts
    • Loss of liability coverage with University insurance carriers

Review and reconciliation

Your reconciliation activities confirm that you've recorded transactions correctly. Perform monthly reconciliations of cash receipts and WISER to provide good checks and balances.

  • Best practices:
    • Compare receipts to deposit records.
    • Record cash receipts when received.
    • Count and balance cash receipts daily.
    • Perform periodic surprise cash counts.
  • Potential consequences if review and reconciliation activities are not performed:
    • Errors, discrepancies, or irregularities not detected
    • Lost or stolen cash receipts
    • Inaccurate application of cash receipts to department accounts

Office of Internal Audit
​

The mission of the Office of Internal Audit is to provide independent, objective assurance and consulting services designed to add value to, protect, and strengthen the management of the University of Wisconsin System and its universities, colleges, and extension.  Please use this site to learn more about our department and to browse our resources.

Integrity Hotline

Reporting Misconduct, Illegal Activity, Fraud & Abuse

If you have a concern about misconduct, abuse, fraud, illegal activity, violations of university policy, or if you fear retaliation for speaking out, the University of Wisconsin System provides a simple and anonymous way to file a report. Simply go online or dial 855-827-4950.​

Common Audit Observations
​

Lack of Reconciliation Procedures

The monthly accounting reports represent the official records of the University.  All transactions recorded in the accounting reports should be reviewed and verified on a monthly basis by the Department Chair, Director or Office Manager.  This review represents the final detective control in the accounting system.

Inadequate Segregation of Duties

A fundamental element of internal control is the separation of duties so that one individual cannot perpetuate and conceal errors and irregularities in the normal course of his/her duties.  Strong internal controls require the segregation of responsibilities for authorizing transactions, physical custody of assets and the related record keeping.  For example:

  • One individual should not have the ability to order, receive, approve for payment, and verify charges to the monthly accounting report.

  • One individual should not have the ability to receive payments through the mail, prepare the deposits, reconcile the bank statements, and post payments to the receivable system.

Lack of Written Departmental Procedures

All aspects of a department's operations should be clearly documented in an up-to-date procedures manual.  The lack of complete written procedures increases the risk of loss of funds, theft of University assets, and disruption of the operation.  Written procedures are also beneficial for the training of current and new employees, and are a valuable resource in the event that an employee leaves the department.  The procedures should include sufficient information to permit an individual who is unfamiliar with the operations to perform the necessary financial activities.

Absence of Adequate Supporting Documentation

All transactions should be supported by adequate documentation.  This documentation should include proper authorization and enough detail to provide a trail for future reviews/audits.

Noncompliance with State, System, University, or Departmental Policies and Procedures

All employees should be familiar with applicable policies, procedures, and laws, etc., and should strive to conduct University business in accordance with them.

Integrity Hotline

Reporting Misconduct, Illegal Activity, Fraud & Abuse

If you have a concern about misconduct, abuse, fraud, illegal activity, violations of university policy, or if you fear retaliation for speaking out, the University of Wisconsin System provides a simple and anonymous way to file a report. Simply go online or dial 855-827-4950.