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Nov. 30, 2004
Compliance Issues and Audits
TOPICS TO BE DISCUSSED
• Audits – definition, types of auditors, types of audits
• Role of WSU Internal Auditor
• Internal controls – definitions and types
• Selected compliance issues
Roles and Responsibilities
• Controller’s office – establishes, maintains and reviews the system of internal control.
• Organizational unit managers - responsible for internal control within that unit.
OBJECTIVES
• Provide employees with knowledge and skills so that we can be better prepared for an audit.
OBJECTIVES
• Encourage all employees to “take ownership”
OBJECTIVES
• Decrease overall risk for WSU Extension/CAHNRS
OBJECTIVES
• Create/maintain organizational efficiencies and local control
BUSINESS AFFAIRS/CONTROLLER’S OFFICE OTHER CENTRAL SERVICES
EXTENSION, CAHNRS, VETMED, SCIENCES, ETC.
DEPARTMENT /DISTRICT ADMINISTRATIVE ASSTS.
COUNTIES
PRINCIPAL INVESTIGATORS, PROGRAM DIRECTORS, LEARNING
CENTER COORDINATORS; INSTRUCTORS; EXTENSION ADMINISTRATOR
EMPLOYEE
• Systematic review
• Evaluate conformance to some norm or benchmark
What is an Audit?
Types of Auditors
• Internal – WSU Employees
• External – State Auditors, Private Firms
• Governmental Audit Agencies (GAA)
Types of Audits
• Financial Statement Audits - assure users that statements are fairly presented (External and GAA)
• Compliance Audits – obtain reasonable assurance of compliance with state and local laws and regulations (Internal, External, GAA)
Types of Audits
• Single Audits – meet the needs of all federal grantor agencies (External, GAA)
• Investigative – Fraud, whistleblower (Internal, GAA)
• Performance - Coming soon?
FREQUENCY OF AUDITS
• CAHNRS – last six month period• Compliance audit – payroll, external auditor•Whistleblower
CONSEQUENCES OF AUDIT FINDINGS
• Financial Statement Audit: Restatement
• Compliance Audit: • Implementation of Internal Controls to Avoid Future
Findings;
• Investigative• Repayment, dismissal, hard-time
CONSEQUENCES OF AUDIT FINDINGS
• Single Audit• Repay unallowed costs• Extrapolate to all of WSU
• Performance
• All Audits: Unwanted publicity, loss of respect and/or trust
INTERNAL AUDITOR’S OFFICE
• Presentation by Norm Coffman
Internal Controls
•Management process for keeping an entity on course in achieving it’s organizational objectives.
• Provide reasonable assurance that entity objectives are being met.
Entity Objectives
• Compliance with state laws and regulations
• Reliability of financial reporting
• Effectiveness and efficiency of operations
Internal Control System Requirements
• Should provide reasonable assurance that an organization will accomplish its objectives
• Reasonable assurance recognizes that cost of an internal control should not exceed the benefit derived therefrom
Internal Control System Requirements
•Management defines level of risk the organization is willing to accept and strives to maintain risk within those levels
Types of Internal Controls
• Control Environment – sets the tone of an organization, influences control consciousness of its people, foundation for all other components.
TYPES OF INTERNAL CONTOLS
• Risk Assessment – Identification and analysis of relevant risks to achieving the objectives
Types of Internal Controls (cont)
• Information and Communication – Pertinent information must be identified, captured and communicated in a form and time frame that enables people to carry out responsibilities.
TYPES OF INTERNAL CONTOLS
• Control Activities – Internal policies and procedures that help address the risks.
TYPES OF INTERNAL CONTOLS
•Monitoring – Assess quality of performance over time.
SINGLE AUDIT ACT
• Selected items specifically related to Sponsored Projects by Dorothy Heitter
TEMPORARY EMPLOYMENT
• Selected items specifically related to Temporary Employment by Trudy Kenny
TRAVEL
• Selected items specifically related to Travelling for WSU business by Michelle Ely.
Cash Handling – Compliance and Investigative
• Auditor’s check list for Cash Handling by Tucson Smith
Purchasing – Compliance Audits
• Do purchases meet local, WSU, state, guidelines for allowability?
• Highest risk – purchases under $2,500 (k-orders, purchasing cards)
• Internal controls • Communication – BPPM, training, BFO• Approval – somebody who has knowledge• Review
Purchasing – Investigative Audits
• Investigative Audit – Are state funds being used for personal gain? Examples (non-existant vendors, purchasing goods for
self)
• Counties and small departments – segregation of duties can be problematic.
Purchasing – Investigative Audits
• Internal Controls – local level highly important Authorization Review – purchases for authorization
- budget statements for purchases
Purchasing – Investigative Audits (cont)
• Internal Controls Risk Assessment – is there adequate separation
of duties? Control Activities – authorized signatures, review
budget statements Monitoring – review orders for signature, sample
orders from budget statements
ASSET MONITORING - Audits
• Compliance Audit: Are assets being used for mission of university?
• Investigative Audit: Are assets being used for personal gain?
ASSET MONITORING - Controls
• Physical Safeguarding• Cash, mail meters
•Written policies regarding usage• Challenge course equipment• Volunteers using assets
ASSET MONITORING - Controls
• Authorization codes• Phones, fax machines,
• Review budget statements
QUESTIONS?
THE END
•THANK YOU FOR JOINING US!