Talking Stick - January/February 2018 - 35

BUSINESS OPERATIONS

	 Internal controls help ensure the
proper authorization of transactions
and increase the reliability of financial
information. One source, a former
external auditor, notes that "Cash is
king. Almost all transactions revolve
around the bank account, i.e., payables, receivables, equipment, everything. It is also the easiest item in the
organization to steal. Most auditors
place the majority of their time on this
account for those obvious reasons."
While internal controls are important,
the organization must also step back
and look at the risks. Each entity must
determine the point of balance between risk and control, a point that will
be different for each organization. A
decision to gamble with excessive risk
could lead to loss of assets, donors,
or grants; poor business decisions;
non-compliance with audit or accounting standards; increased regulation;
or public scandal. On the flip side,
excessive controls may cause reduced
production, increased complexity and
bureaucracy, and an increase in cycle
time and no-value activities.
	 Understanding the characteristics
of fraud and theft will help an organization design the appropriate controls.
Fraud usually begins with motivation,
which is typically a situational pressure. The person may be deep in debt
or may have a desire to live beyond
their means and will look for an opportunity to gain or misuse the asset.
Personal integrity and moral standards
will determine whether the person will
carry out the plan. Of these three characteristics (motivation, opportunity,
personal characteristics), opportunity
or access is the one controlled by the
organization. By implementing wellconstructed internal controls, the organization may deter the person from
following through with their plan.
	 With all the talk about dishonest
employees and how to prevent misuse
of assets, it is important to consider

34

TALKING STICK

that not all discrepancies are fraud.
Mistakes happen, systems hiccup,
people are human, and errors of omission and commission are all possible.
These errors are not intentional and

. . . BY
UNDERSTANDING
THE PURPOSE,
IMPORTANCE, AND
RESPONSIBILITY
OF INTERNAL
CONTROLS,
EMPLOYEES WILL
LEARN TO WORK
WITH THEM RATHER
THAN AGAINST
THEM.

will be caught in the normal operation
of internal controls. However, management should be aware of red flags: that
is, any unusual discrepancy between
actual performance and anticipated results. Examples of red flags include receipts and deposits that do not match,
disbursements to unknown and/or
unapproved vendors, pre-signed blank
checks or one-signature checks, gaps
in receipt or check numbers, consistently late reports, and any signs of
disregard for internal control policies
and procedures.
	 Management has the responsibility of establishing and maintaining
internal controls, and they must continually assess the needs of the entity.
Some controls are intuitive, and others
are implemented before starting
operations. Other controls are added

as employees find a work-around
for existing controls. "Management
should reevaluate controls periodically
to ensure that they have not become
obsolete and to determine whether
they are still effective," Jansen emphasizes. Controls that are properly implemented and monitored keep a higher
education institution in good standing
with the public and with prospective
students. If these controls are not put
in place and maintained, institutions
risk having their reputation marred
by theft or loss and their plight turned
into a topic for worldwide news. At this
point, they would have lost not only
assets but also customers.
	 Auditors review, evaluate, and
make recommendations for improving
controls. Unless there is a problem,
most entities are only audited once a
year. Auditors will test the controls to
determine their strength. The stronger
the controls, the less testing of data required. As the former external auditor
explains, "Auditors only review internal controls in order to be able to place
reliance on them that the transactions
are properly recorded, documented,
and in accordance with the company's
rules for procurement. If they can rely
on controls, it allows them to do less
substantive (independent) testing than
they would if they couldn't rely on
controls." 
	 Employees either strengthen or
weaken the internal control system.
Good employees will follow the
policies and procedures establishing
internal controls. If these employees
discover a weakness, they will report it.
Conversely, an employee looking for a
weakness will not report it and will use
it for self-fulfillment. Lack of a written
policy does not prohibit good business
practice; just because there is no policy
for an action does not mean that the
action is legitimate.
	 Internal controls should not take
time away from day-to-day activities

and responsibilities; the most effective
internal controls are built into business processes. Controls will enhance
the operational efficiency of any operation. "The foundation of any control
structure is the control-conscious
environment tone at the top. This type
of environment supports ethical values
and business practices. Without a
control-conscious environment, other

controls will most likely be ineffective.
Management must lead by example
and communicate the ethical tone by
example and words," Jansen says.
	 Bottom line: All employees at
all levels must be aware of internal
controls and their purpose. It is the
responsibility of everyone to understand why these controls are necessary because understanding improves

It's all about life, space

compliance and compliance increases
the efficiency and effectiveness of the
operation. 
Kay Sisco is the budget director for the
department of university housing at the
University of Tennessee in Knoxville.

 ssisco@utk.edu

lifespace

& creating community

Brill
Company
www.brillcompany.com

JANUARY + FEBRUARY 2018

35


http://www.brillcompany.com

Talking Stick - January/February 2018

Table of Contents for the Digital Edition of Talking Stick - January/February 2018

Talking Stick - January/February 2018
Contents
Vision
Just In
Calendar
Your ACUHO-I
Transitions
Res Life
Facilities
Business Operations
The Outsourcing Question
Born to Be Wild
Conversations
First Takes
Around Student Affairs
New Members
Snapshot
Talking Stick - January/February 2018 - Intro
Talking Stick - January/February 2018 - Talking Stick - January/February 2018
Talking Stick - January/February 2018 - Cover2
Talking Stick - January/February 2018 - 1
Talking Stick - January/February 2018 - 2
Talking Stick - January/February 2018 - Contents
Talking Stick - January/February 2018 - 4
Talking Stick - January/February 2018 - 5
Talking Stick - January/February 2018 - 6
Talking Stick - January/February 2018 - 7
Talking Stick - January/February 2018 - Vision
Talking Stick - January/February 2018 - 9
Talking Stick - January/February 2018 - Just In
Talking Stick - January/February 2018 - 11
Talking Stick - January/February 2018 - 12
Talking Stick - January/February 2018 - 13
Talking Stick - January/February 2018 - 14
Talking Stick - January/February 2018 - 15
Talking Stick - January/February 2018 - 16
Talking Stick - January/February 2018 - 17
Talking Stick - January/February 2018 - Calendar
Talking Stick - January/February 2018 - 19
Talking Stick - January/February 2018 - Your ACUHO-I
Talking Stick - January/February 2018 - 21
Talking Stick - January/February 2018 - Transitions
Talking Stick - January/February 2018 - 23
Talking Stick - January/February 2018 - Res Life
Talking Stick - January/February 2018 - 25
Talking Stick - January/February 2018 - 26
Talking Stick - January/February 2018 - 27
Talking Stick - January/February 2018 - Facilities
Talking Stick - January/February 2018 - 29
Talking Stick - January/February 2018 - 30
Talking Stick - January/February 2018 - 31
Talking Stick - January/February 2018 - Business Operations
Talking Stick - January/February 2018 - 33
Talking Stick - January/February 2018 - 34
Talking Stick - January/February 2018 - 35
Talking Stick - January/February 2018 - The Outsourcing Question
Talking Stick - January/February 2018 - 37
Talking Stick - January/February 2018 - 38
Talking Stick - January/February 2018 - 39
Talking Stick - January/February 2018 - 40
Talking Stick - January/February 2018 - 41
Talking Stick - January/February 2018 - 42
Talking Stick - January/February 2018 - 43
Talking Stick - January/February 2018 - Born to Be Wild
Talking Stick - January/February 2018 - 45
Talking Stick - January/February 2018 - 46
Talking Stick - January/February 2018 - 47
Talking Stick - January/February 2018 - 48
Talking Stick - January/February 2018 - 49
Talking Stick - January/February 2018 - 50
Talking Stick - January/February 2018 - 51
Talking Stick - January/February 2018 - Conversations
Talking Stick - January/February 2018 - 53
Talking Stick - January/February 2018 - 54
Talking Stick - January/February 2018 - 55
Talking Stick - January/February 2018 - First Takes
Talking Stick - January/February 2018 - Around Student Affairs
Talking Stick - January/February 2018 - 58
Talking Stick - January/February 2018 - New Members
Talking Stick - January/February 2018 - Snapshot
Talking Stick - January/February 2018 - Cover3
Talking Stick - January/February 2018 - Cover4
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