INTERNAL CONTROLS KEEPING TABS ON THE CASH, ETC.!! INTERNAL CONTROLS

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1 INTERNAL CONTROLS KEEPING TABS ON THE CASH, ETC.!! Hilda Cuthbertson, CCC II, ICM Fellow Borjorquez Law Firm Court Consultant DEFINE INTERNAL CONTROLS HOW THEFT AFFECTS THE COURT COURSE OBJECTIVES CLERK S ROLE IN THEFT/FRAUD PREVENTION CRIMINAL SANCTIONS INTERNAL CONTROLS A Process For Assuring Achievement Of An Organization s Objective In Operational Effectiveness And Efficiency, Reliable Financial Reporting, And Compliance With Laws, Regulations And Policies.

2 IMPORTANT KEY WORDS IN THE DEFINITION ARE: Regulations Policies Laws Why is it important to have Internal Controls? WHY ARE INTERNAL CONTROLS IMPORTANT? Conduct Business Orderly Efficiently Deter Errors Ensure Adherence Fraud Plans Theft Policies

3 Fiduciary Responsibilities Took an Oath of Office Became an Officer of the Court Effective Controls Reduce Risk Compliance Minimize Potential Liability City Self Employees MUNICIPAL COURT SHOULD BE ABLE TO Have collected all the money or other property to which they are entitled; The money collected is properly remitted to the appropriate party; All money and other property is properly managed; and All money and other property is properly expended, properly accounted for, and properly reported. INTERNAL CONTROL COMPONENTS Control Environment Risk Assessment Control Activities Information & Communication Monitoring

4 CONTROL ENVIRONMENT Integrity and Ethical values Competence Philosophy and Operating style of management CONTROL ENVIRONMENT Assignment of Authority and Responsibility How personnel are developed RISK ASSESSMENT A systematic process of evaluating the potential risks that may be involved in projected activity or undertaking. Do we have any potential risks in Municipal Court?

5 Hazards Fire Explosion Workplace violence Terrorism Utility outage Cyber attack Pandemic Disease Assets at Risk People Environment Property Business Operations Supply Chain Systems /equipment Information Technology Impacts Financial Loss Causalities Fines and Penalties Law Suits Loss of Customers Business Interruption Loss of Confidence QUESTIONS TO PONDER What could go wrong? Where is the court most vulnerable? How could someone steal from the court? How could court information and data be manipulated? How do we collect delinquent amounts? What transactions provide the most risk? How can our controls be bypassed? CONTROL ACTIVITIES Appropriate Division of Duties Sound Procedures for Authoring, Recording, and Reporting Transactions

6 APPROPRIATE DIVISION OF DUTIES Person A Receives payment; issues receipt Person B Matches receipts to cash drawer balance Person A Makes Deposit Person A Checks and matches deposit against total posted to receipts journal Person B Posts receipts to receipts journal APPROPRIATE DIVISION OF DUTIES Authorization/Approval of transactions Recording of transactions Custody of assets (cash and other property) Rotation of duties Strict supervision Special double checking of work Enforce vacations Additional training to improve quality of work More frequent internal audits SOUND PROCEDURES Use & control of pre numbered forms Cross referencing of documents Periodic reconciliation of subsidiary records to control totals Proper authorization of transactions Safeguarding of assets Appropriate flow of documents Reasonable amount of checking work of others Bonding of all employees with access to cash and other valuables

7 COMMUNICATION & INFORMATION Information must be identified and communicated to enable employees Information should be communicated upwards and downwards MONITORING Supervising activities in progress to ensure they are on course and on-schedule in meeting the objectives and performance targets. It is systematic and purposeful observation. MONITORING TWO TYPES Ongoing Separate Evaluations

8 MONITORING ONGOING Regular Management Balancing Daily Daily Deposits Sending reports to Finance Daily Supervisory Activities Checking Processes Asking Questions Double Checking work Disciplinary actions, if needed Staff Activities Appropriate Authority Training Evaluations Vacations enforced MONITORING SEPARATE EVALUATIONS Audits Internal surprise audits City auditor External auditor Preventive Computer passwords Approval of any case reversals Written procedures Accountability Detective Reconciliation Audits/ back tracking an error Balancing a drawer immediately at counter MONITORING ACTIVITIES SHOULD ADDRESS THE FOLLOWING ISSUES ARE INTERNAL CONTROLS IN PLACE AND OPERATING? IS THE SYSTEM WORKING AS DESIGNED? ARE EXCEPTIONS AND PROBLEMS IDENTIFIED AND RESOLVED PROMPTLY? ARE CONTROLS PERIODICALLY REVIEWED?

9 CRIMINAL SANCTIONS Do you want to find yourself in the headlines? Will this taint your court? Would it be worth it to you, your family, your coworkers, your employees, or your community? Does it decrease the public s trust and confidence of the court and the judiciary as a whole? Would you ever be trusted to be in a position of trust or authority? So what is your role as clerk, or Court Administrator?

10 CLERK S ROLE Find out what your Finance department policies and procedures are? Take a Finance and/or an Accounting class. Do a better job of telling the court s story. Do more networking with fellow court peers. Cultivate relationships Join a listserv group. Find a mentor. Ask for help.

11 QUESTIONS??? GRAZIE!