Business Procedures Workshop

1. Business Procedures Workshop Daniel Adams Director of Internal Audit October 26, 2009

2. Internal Audit’s Mission • …to provide independent, objective assurance (audit) and consulting services designed to add value and improve the operations of Montana State University…by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.

3. Internal Control • A process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance of the achievement of objectives in the following categories: • Effectiveness and efficiency of operations • Reliability of financial reporting • Compliance with applicable laws and regulations

4. Auditing Methods • Comparison of what’s occurring to what should be occurring as defined by: • Laws, regulations, policies • Best business practices • Interviews • Questionnaires and Surveys • Review of data and documentation (invoices, contracts, payroll records, etc.)

5. Upcoming Internal Audit Engagements • IT Inventory • Personnel and Payroll Processes • Cash Receipts Controls

6. Sponsored Programs ControlsAssurance Engagements • Time & Effort • Cost Sharing • Cost Transfers • Subrecipient Monitoring • Technical Reporting

7. University Fraud Happens • Student Health Services Cashier • Timesheet fraud

8. Fraud Triangle

9. Departmental Cash Handling Control Activities • If you take money, have a cash receipt system. • The system should be only as complex or cumbersome as necessary to manage the risk associated with your cash receipt volume. • If your cash receipts involve the following, call Internal Audit or UBS for free management consulting: • Billing and accounts receivable • In-the-field • Foundation activities

10. General • Clear assignment of responsibility • Physical security where cash is processed and stored • Protect cash, checks, forms, and records from unauthorized use • Restrictive endorsement of checks as quickly as possible • No cashing of personal checks or notes of personal indebtedness

11. Receipt • Mail • Two people present (one opening, one recording) • Manual log or cash register system scan • Over-the-counter or in-the-field • Sequential pre-numbered multi-copy cash receipt forms, especially if volume is low and staff turnover is high • Top copy to customer • Next copy with deposit • Bottom copy kept in book • All copies kept in book if receipt was voided • Cash register (high volume)

12. ReceiptSample

13. Deposit • Physical security until deposited • Timely deposits (State Law) • Daily if greater than $200 cash or $750 cash and checks • Weekly if any amount • Unknown final disposition • Deposit slip duplicate copy retained

14. Deposit SlipSample

15. Reconciliation • Reconcile cash receipt records, duplicate deposit slips, and accounting records (e.g., Banner system) • Look into, document, and correct the following, as appropriate: • Shortages or overages • Unusual delays in deposits • Unusual trends or proportions • Report suspected or actual theft to Internal Audit

16. Separation of Duties

17. Compensating Controls • Control activity that reduces the risk that a control weakness (usually lack of segregation of duties) results in errors or omissions • Provides benefit for supervisors or employees

18. Compensating Controls Supervisory review • Summary reports reviewed by supervisor who knows typical activities and volume • Look into unusual significant variations • Periodic reports of transaction detail of receivables and cash receipts • Periodic sampling (spot checks) by supervisor to determine whether receipts are accounted for through the process

19. Compensating Controls for Expenditures • Supervisory review of Purchase Card Reports with comparison to receipts • Comparison of timesheets to payroll reports • Compare Agbooks to Banner

20. Resources • Cashier activity http://www2.montana.edu/policy/business_manual/bus300.html • Departmental petty cash and change funds http://www2.montana.edu/policy/business_manual/bus300.html#330.00 • Timelydeposits http://www2.montana.edu/policy/business_manual/bus300.html#350.20 • Expenditure abatement http://www2.montana.edu/policy/business_manual/bus300.html#350.50

21. Internal Audit is available for your questions or concerns. Daniel Adams danieladams@montana.edu 994-1805 Ila Saunders, Auditor Brenda Mowers, Auditor isaunder@montana.edu bkm@montana.edu 994-7969 994-2973 State of Montana Hotline 1-800-222-4446