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Internal Controls

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

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Internal Controls

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

  2. 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

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

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

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

  6. 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

  7. Control ActivitiesSpecific 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

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

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

  10. It’s Not That Difficult Ask for Help

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