Office of the Controller and Internal Controls

1. Office of the Controller and Internal Controls Sandra Featherson Associate Director of Controls Office of the Controller February 2008

2. Abbreviated Organization Chart

3. Distinct and Complimentary Roles Office of the Controller Provide leadership in a campus-wide effort to ensure effective controls and accountability practices. Assist management in assessing their control environment and the effectiveness and efficiency of operations. Ensure that campus financial policies and procedures are clear, adequate, and current. Evaluate systems and participate in system development to ensure proper controls are implemented and compliance with policy. Audit and Advisory Services Independent evaluation of systems of accountability and control. Investigate reported cases of alleged improper financial activities. Serve as the liaison between the University community and external audit agencies.

4. UCSB Control Initiative

5. Assessments Departmental Control Self Assessments Departmental Process Risk Assessment Campus Wide Process Risk Assessment

6. Office of the Controllerhttp://controller.ucsb.edu Jim Corkill Controller Director of Accounting Services and Controls x5882 jim.corkill@accounting.ucsb.edu Sandra Featherson Associate Director of Controls x7667 sandra.featherson@accounting.ucsb.edu Vacant Administrative Analyst x8593 Neil Clark Administrative Assistant x8593 neil.clark@accounting.ucsb.edu

7. Internal Controls What are Internal Controls? Definition COSO Model Examples Why are They Important? Who is Responsible for Internal Controls?

8. Internal Control - A definition Internal Control is a process, effected by a college or university�s governing board, administration, faculty and staff, designed to provide reasonable assurance regarding achievement of objectives in the following areas: Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations

9. COSO Internal Control Model COSO stands for Committee of Sponsoring Organizations. Committee was formed to develop a common definition of internal controls and provide guidance on judging its effectiveness. COSO is referred to as an Internal Control Model or framework.

10. COSO Internal Control Model Officially adopted by the University of California A tool for departments to use in evaluating their internal controls.

11. COSO Internal Control Model There are five components of internal control in the COSO Model: Control Environment Risk Assessment Control Activities Information and Communication Monitoring

12. Control Environment Control Environment The �tone at the top� set by people in positions of authority Based on attitudes and habits of those in authority An element in establishing the organizational culture

13. Control Environment Control Environment Factors: Integrity and Ethical Values Commitment to Competence Management�s Philosophy andOperating Style Assignment of Authority andResponsibility

14. Risk Assessment Risk - Anything that gets in the way of meeting your goal/objective Risk Assessment - The identification and analysis of relevant risks associated with achieving business goals/objectives

15. Risk Assessment Why is a risk assessment important? Risks impact an organization�s ability to meet its objectives such as: Positive Public Image Providing Excellent CustomerService Reducing Overdrafts

16. Control Activities Control Activities Policies and procedures that help ensure management directives are carried out and necessary actions are taken to address risks

17. Control Activities - Specific Examples Segregation of Duties Transaction Reviews Reconciliations

18. Control Activities � Specific Examples Financial Performance Reviews Systems Controls Physical Controls

19. Information and Communication The information system must provide data that is: Relative to established objectives Accurate and in sufficient detail Understandable and in a usable form This information must be provided to the right people in time to allow appropriate action

20. Information and Communication Communication Up and down the organization Across organizational lines Communication Examples Employee duties and control responsibilities should be clearly communicated Ability to report suspected problems, without fear of repercussions

21. Monitoring Monitoring A process that assesses the quality of an internal control system�s performance over time

22. Monitoring Monitoring Activity Examples Management Review of actual expenditures vs. budgeted Comparison of various reports with physical assets Separate evaluations Assessment of internal controls by Audit and Advisory Services External auditors reviews

23. Internal Controls Why are They Important? Who is Responsible for Internal Controls?

24. Internal Controls and SAS 112 SAS 112: Statement of Accounting Standards Auditors will be reviewing not only the transactions and ensuring the numbers are correct, but also the controls in place to ensure those numbers are correct. Controls must be documented � or they are not considered controls.

25. Questions??