Internal Controls

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission defines internal control as a process implemented by management to provide reasonable assurance the following objectives are achieved:

• Financial and operational reports are reliable;
• Compliance with applicable laws, regulations, and internal policies; and
• Operations are effective and efficient.

COSO has established the following elements of internal control:

The Control Environment sets the tone for the organization. Factors such as integrity, ethical values, competency, management philosophy, and operating style form the foundation for other components of internal control, and for providing discipline and structure.

Risk Assessment represents the identification of circumstances which may impede the organization's ability to achieve its objectives, and the procedures in place that mitigate the identified risks.

Control Activities are undertaken by the organization to ensure compliance with sound business practices, including the development of policies and procedures, the review and approval of transactions, the segregation of duties, and account reconciliation, etc.

Information and Communication covers the transmittal of data to the right people at the right time to ensure employees have the information they need to carry out their responsibilities.

Monitoring activities ensure that the quality of performance is assessed over time through ongoing assessments and/or separate evaluations. Ongoing assessment includes regular supervisory and management activities.

INTERNAL CONTROL PRACTICES

Overall, having good internal control practices allows ASU 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 internal controls helps ASU's department: identify priorities, achieve department goals, issue reliable reports, meet compliance requirements, and safeguard ASU assets. The departments benefit by:

• Reducing and preventing errors;
• Ensuring priority issues are identified and addressed; and
• Providing appropriate checks and balances.

Following are the keys to good internal control practices:

Segregation of duties
Responsibilities should be divided among different individuals so that no one person has complete control over a transaction.

Accountability, authorization and approvals
Only the person with delegated authority should approve or authorize transactions.

Security over assets
Cash, equipment, and inventory should be adequately secured. Reduce the risk of access to the assets. Periodically count the assets and compare with the amounts shown on the control records.

Review and reconciliation
Transactions should be regularly compared with ASU official records to ensure accuracy, appropriateness, and compliance with requirements.

The following links provide information on internal control practices related to various business areas. Consider the information provided in these links and build appropriate internal controls into your operations.

Accounts Payable/Purchasing

Cash

Equipment

Information Systems

Personnel/Payroll