Adding Value by Proactively Managing Departmental Risks Jereme Allison Candis Dickson Monday, September 12, 2016 10:30 a.m. 12:10 p.m. 1 Jereme Allison, MBA joined the Department of Internal Audit as a Senior Internal Auditor in September 2015. He previously worked for Kennesaw State University's (KSU) Office of Finance and Accounting. Candis Dickson joined the Department of Internal Audit as a Senior Internal Auditor in October 2014. She previously worked for KSU s Office of Research Grants and Contracts Accounting. 2 1
Definition of Internal Auditing Internal auditing is an independent, objective assurance AND consulting activity designed to add value AND improve an organization s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Source: The Institute of Internal Auditors 3 Mission of Internal Audit To enhance and protect organizational value by providing risk-based and objective assurance, advice, and insight. Source: The Institute of Internal Auditors 4 2
What Should Internal Auditors Provide Management? Assurance Audits Consulting Activities 5 How Can You Make Your Internal Audit Department More Valuable to Your University? CONSULTING SERVICES! 6 3
Difference between Assurance Audits and Consulting Services? ASSURANCE AUDITS LIMITED number of departmental managers who are audited during the year. CONSULTING SERVICES SIGNIFICANT number of departmental managers who are provided Consulting Services during the year. 7 Benefits of Consulting Services to MANAGERS! 1. Identifies risks and strengthens internal controls before being audited. 2. Better able to monitor expenditures and financial reports. 3. Gain a better understanding of the components of internal control. 4. The auditor is perceived as a Trusted Advisor. 5. Concentrate on achieving the department s objectives. 8 4
Benefits of Consulting Services to MANAGERS! 6. Willing to contact Internal Audit to help them with risks and processes. 7. Proactive in remedying systemic issues in their department. 8. Instills a mindset that risks should be assessed on an ongoing basis. 9. Consulting Services are voluntary, quick, customized, and free. 9 Benefits of Consulting Services to AUDITORS! 1. Perform 10-20 consulting services in the same time it takes to perform ONE assurance audit. 2. Builds positive relationships with managers. 3. Internal audit s value to the organization is increased. 4. Better informed about emerging risks and processes. 10 5
KSU s Four Consulting Services 1. Risk and Internal Control Assessments 2. Flash Expense Summaries 3. Workshops 4. Consultations 11 Risks and Internal Control Assessments 1. Voluntary Teaming Activity 2. Customized for each Division/Department 3. Participative Work Team 4. Free 5. Quick 12 6
Risks and Internal Control Assessments 6. Preventive 7. Not an AUDIT 8. Internal Control Weaknesses 9. We Discuss Eight Departmental Risk Types With Each Division/Department 13 EIGHT DEPARTMENTAL RISK TYPES 1. Departmental Processes - Risks that are specific to the activities and processes of the department. 2. Management Risks Risks associated with the components of an effective internal control structure (Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring). 14 7
EIGHT DEPARTMENTAL RISK TYPES 3. Operational Risks - Risks associated with the day-to-day responsibilities and operations of the department. 4. Inventory Risk Risk that supplies and equipment having more than a nominal value will be lost, stolen, or damaged. 5. Reputational Risk Risk that individuals will have a negative perception of the department as a result of certain activities or behaviors (newspaper test). 15 EIGHT DEPARTMENTAL RISK TYPES 6. Strategic Risk- Risk that management will not achieve their long-term goals and objectives. 7. Financial Risk Risk that financial data used or reported on financial statements is not accurate or complete and/or management is not aware of financial transactions occurring in their department. 8. Compliance Risk Risk of violating organizational policies and procedures (e.g., expenditures). 16 8
Flash Expense Summary Management s request Evaluate appropriateness and reasonableness of expenditures 17 Example of a Flash Expense Summary Department ID XXXXXX Account JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUNE TOTAL Employee Travel 1,525 925 1,285 8,436 1,121 525 698 825 1,169 1,378 1,420 1,621 $20,928 Supplies & Materials 525 651 739 1,208 1,159 7,238 927 1,244 1,725 451 677 816 $17,360 FY Small Value Inventory 2,468 2,590 9,528 1,609 1,128 1,439 246 2,122 918 612 1,825 2,987 $27,471 2013 Repairs 233 187 526 825 1,126 774 0 4,525 177 467 599 989 $10,428 Registration 525 231 705 79 866 1,025 988 47 829 9,288 789 466 $15,838 12,000 10,000 Employee Travel 8,000 Supplies & Materials 6,000 Small Value Inventory 4,000 2,000 Repairs 0 1 2 3 4 5 6 7 8 9 10 11 12 Registration 18 9
Workshops Risks and Internal Controls: What are risks and internal controls? How can internal controls help you? What are the types and components of internal controls? How to identify risks and develop internal controls to reduce risks? 19 Workshops High Risk Financial and Compliance Areas: P-Card Travel General Expenditures Cash Handling Petty Cash 20 10
Consultations Managers requests Internal Audit to provide customized advice on: Development of perpetual and physical inventory systems. Departmental emerging risks and processes. 21 How to Get Started with Customer Services 1. Determine the Services that You Will Offer 2. Discuss Services With Supervisor 3. Give Presentations 4. Follow-Up With Managers 5. Publicize Your Consulting Services! 6. Make Consulting Services a Part of Your Internal Audit Annual Plan 22 11
Consulting Services We ve Performed at KSU 1. Risk and Internal Control Assessments - 48 2. Flash Expense Summary - 35 3. Workshops - 7 4. Consultations - 23 23 Contact Information Jereme Allison jallis23@kennesaw.edu Candis Lobik Dickson clobik@kennesaw.edu 24 12
THANK YOU! Questions and Comments? 25 13