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Best Practices

 

  The best practice examples listed are not all inclusive and are intended to provide the reader with simple explanations.

 

 

 

Efficiency and Effectiveness

Goals and objectives obtained in an defined and timely manner using minimal resources can  result in efficient operations.  Inefficiencies occur when processes are performed that provide no additional benefit or value.  Operations are considered effective when they are functioning as intended and produce the desired result.  If two individuals are both responsible for executing the same function within a process, a duplication of efforts would exist.  This is an inefficient and ineffective use of time and resources.

 

Best Practices:

 

  1. Analyze business processes and identify and eliminate duplicated efforts;
  2. Streamline processes by reducing an non-value added procedures;
  3. Identify any processes that have been done merely because "that's the way we've always done it".  Determine if those processes are still needed.  If they are, identify methods that would allow steps to be completed either more timely or effectively;
  4. Strive to process documents and transactions in a minimum required time to increase the efficiency and effectiveness of the department;
  5. Employ a cost-benefit methodology when analyzing and developing new processes.  If the costs outweigh the benefits, then consider eliminating the procedures or reduce the number of steps needed to complete the process;
  6. Look for more innovative ways to accomplish goals and objectives; and
  7. Automate where possible.

 

Policies and Procedures

 

Written policies and procedures establish management's criteria for executing the university's operations.  Developing and documenting policies and procedures is the responsibility of management.  Management should document business processes, personnel responsibilities, departmental operations, and promote uniformity in executing and recording transactions.  Thorough policies and procedures serve as effective training tools for staff and faculty. If written policies and procedures do not exists, are inaccurate, incomplete, outdated, irrelevant, not written succinctly, and/or not communicated; the following could result:

 
  • Inconsistent practices among employees and/or departments
  • Processing errors due to a lack of knowledge
  • Inability to enforce employee accountability

 

Best Practices:

 

  1. Document all significant all significant business practices, processes, and policies;
  2. Effectively communicate new policies and procedures to personnel;
  3. Ensure policies and procedures are accurate, complete and current at all times;
  4. Revise policies and procedures for changes in business processes and policies.  This is important when new systems are developed and implemented or other organizational changes occur;
  5. Communicate significant changes to all affected personnel to ensure they are aware of any revisions to their daily duties and responsibilities; and
  6. Policies and procedures are only effective if people are aware and understand them.

 

Segregation of Duties

 

Segregation or separation of duties involves ensuring that staff members do not perform incompatible duties.  The following responsibilities should be assigned to different individuals:

 

 

  • Authorization
  • Custody of Assets
  • Recording of Transactions

Separation of the above duties reduces the opportunities for any individual to both perpetrate and conceal errors or fraud in the normal course of duties such as the following:

 

  • Misappropriation of Assets
  • Misstated financial statements
  • Inaccurate financial documentation
  • Improper use of funds
  • Modification or manipulation of data or records

 

Best Practices:

 

  1. A system should be designed that the work of one individual provides a crosscheck on the work of another individual (reduce opportunity); and
  2. One individual should not perform a process from the beginning to the end.  For example: one person should not be able to accept cash, record deposits, make the deposit and reconcile the account.

 

 

 

Compensating Controls

 

Compensating Controls are less desirable then separation of duties because they generally occur after the transaction is complete.  Relying completely on compensating is less desirable because it takes more resources to investigate and correct errors, and recover losses, than it does to prevent them. However, in some circumstances, departments do not have the staff resources to establish adequate separation of duties, so they have no choice in the matter. In these instances it is important for management to implement controls that compensate for the increased risk. Following is a list of the types of compensating controls a department can implement to address not having adequate separation of duties. This can be a valuable reference as well as a potential cost savings in the audit process when a control is more expensive to implement and test that it's compensating control counterpart.   

 

  1. Review Reports of Detail Transactions Charged to the Department - At a minimum, managers who have a staff member who can perform all the key activities of a transaction with no segregation of duties should be reviewing the reports of detail transactions for their department on a monthly basis to identify, investigate, and correct improper charges. An adequate review would consider the transaction date, vendor, description, dollar amount, and offset account, if any. Keep in mind that this review cannot be delegated to staff who can perform all the key activities of a transaction, as it would defeat the effectiveness of this compensating control.
  2. Review Reports of Detail Transactions Initiated by the Person who Can Perform All the Key Activities of a Transaction -  A manager can periodically pull and review a report that identifies all the transactions created by staff who can perform all the key activities of a transaction. An adequate review would look at purchase dates, vendor name, description of transaction, ship to location, and the departments charged, to identify, investigate and correct improper transactions.
  3. Pull Sample of Transactions -  A manager can periodically pull and review the supporting documents for a sample selected from transactions charged to his/her department. An adequate review would address the same data as are covered under 'Review Reports of Detail Transactions'.
  4. Take Periodic Asset Counts and Compare to Accounting Records - If a department purchases a significant amount of equipment or other tangible assets, it may be effective to conduct periodic counts and compare to inventory records to ensure equipment and supplies are on-hand.
  5. Prepare Budget Analysis and Cost Trends: Investigate Discrepancies -  A less effective compensating control is the preparation and/or review of budget and trend analysis of expenditures. While this does not provide the specific detailed review, it can be a way to identify problem areas where further detailed review needs to take place.

 

 

Safeguarding Assets

 

Assets are the economic resources the State owns that are expected to be of benefit in the future.  Examples are cash, office supplies, merchandise, furniture, equipment, land, buildings and sensitive or confidential data. Protective measures must be taken to ensure that assets are maintained in a properly controlled and secured environment.  The most important type of protective measure for safeguarding assets is the use of physical controls.  If physical controls are not in place the following could occur:

 

 

  • Theft
  • Items may be lost or misplaced
  • Fraud may be committed using the unauthorized data
  • Unauthorized transactions or processing could occur if data is not adequately safeguarded

 

Best Practices:

 

  1. Lock doors to unoccupied offices, storage or other rooms and buildings;
  2. Cash should be stored preferably in a fire-proof safe;
  3. Restrict access to data and other assets to a limited number of individuals within the department;
  4. Ensure proper access controls are in place in systems.  User ID’s are unique and passwords are forced to be changed frequently by the system;
  5. Issue Master keys only to persons with a legitimate need; and
  6. Perform periodic counting and comparison of actual assets with amounts shown in accounting records.

 

 

Review and Approval

 

When a process is performed within a department, there should always be another level of review and approval performed by a knowledgeable individual independent of the process.  The approval should be documented to verify that a review was performed.  Review and approval are controls to help management gauge whether operational and personnel goals and objectives are being met.

 

The lack of or inadequate review and approval could result in the following:

 

  • Errors may be overlooked resulting in misstatements that could affect financial, as well as, operational decisions
  • Inaccurate or incomplete information in accounts and reports
  • The inability to detect irregularities and/or errors

 

Best Practices:

 

  1. A thorough review of processes, transactions, and reports should be performed for accuracy, completeness, and timeliness;
  2. The reviewer should be someone who is knowledgeable about the items or areas being performed such that they are able to identify errors or omissions;
  3. The reviewer should preferably be someone who has the authority, who is able to authorize, provide direction, and make decisions about the items under review;
  4. The reviewer should be someone who does not perform the process; and
  5. Evidence of the review and approval should be documented; signed and dated by the reviewer.

 

Timeliness

 

Timeliness means meeting the arranged deadlines.

 

By failing to meet deadlines the following events could occur:

 

 

  • Inefficiencies
  • Legislative audit findings
  • Fines or penalties could be imposed
  • Operational processes could be negatively impacted

 Timeliness is an area where all employees can analyze their work-flows and identify ways to work smarter and save time.

 

Best Practices:

 

  1. Obtain an understanding of all the required deadlines particularly those that are invariable such as regulatory due dates;
  2. Prioritize activities when critical deadlines are pending;
  3. Ensure adequate resources are available, staff trained, and are able to complete the obligations;
  4. If deadlines cannot be met, notify the appropriate parties in advance and document and retain the communication.  Confirm a new date and meet the obligation.

 

  

Monitoring

 

Monitoring is the process that assesses the quality of internal control performance over time, by assesing the design and operation of controls (such as policies and procedures) on a timely and continious basis and taking corrective action if necessary.

 

Establishing and maintaining internal control is a responsibility of management.  Management must monitor controls to determine whether they are operating as intended or whether the controls should be modified to produce the University's desired outcome.  Failure to monitor controls and process could result in:

 

 

  • Inability to force employee accountability
  • Undetected errors or irregularities
  • Inability to assess the effectiveness and efficiency of operations, programs or projects
  • Violations of laws, regulations, and policies

 

Best Practices:

 

  1. Management should implement an ongoing monitoring activity into the normal recurring activities;
  2. Evaluate and review progress to identify inefficiencies, ineffectiveness, duplicative processes, and determine if adjustments should be made; and
  3. Make adjustsments to improve results and to ensure desired outcomes.