Survey raises awareness of internal controls
Effort part of university's multipronged approach
Jun 20, 2008
By Katie Quaranta
The results of a recent internal control self-assessment survey mark a step in Ohio University's efforts to raise awareness and establish best practices for the institution's internal controls.
Internal controls are the measures an institution takes to manage risk, protect against fraud and increase efficiency while establishing a positive environment relating to ethics, values and levels of competency within an organization.
The survey, which all benefits-eligible employees received, was meant to provide education about a subject that is part of a university's everyday operations but often not well understood or widely discussed. Although not designed to be a scientific diagnostic tool, it did provide some initial insights into where Ohio University can direct its efforts toward refining internal controls.
"We are following the lead of other universities and the nonprofit world, both of which have been adopting internal control best practices inspired by the Sarbanes-Oxley Act in the wake of scandals such as Enron's," Vice President for Finance and Administration Bill Decatur said of the effort. "The regulatory world has changed, too, and our Board of Trustees considers it good practice -- all of which made this a good time for us to address internal controls.
"Ultimately, following strong internal controls is simply good policy for an institution entrusted with the public's funds," Decatur added.
Controls are not just a concept that applies to Finance and Administration, said Senior Associate Vice President for Finance Chris Clifford. "They are a fundamental part of everyone's responsibilities on campus and need to be a part of everyone's mindset," he said. "Just doing this (survey) reinforces to the campus that internal controls are important to the university and will continue to be a priority."
Initial work on improving internal controls was charged to the Control Environment Improvement Committee, which Decatur formed in October 2006 and Internal Auditor Kathy Gilmore and former Associate Vice President for Finance and Administration Larry Corrigan co-chaired. It developed a universitywide code of conduct and a financial code of ethics, both of which are undergoing formal policy review. It also developed the survey.
The group modified a best-practices survey from the Institute of Internal Auditors, distributed a beta version to deans and executive staff for comment, made modifications and distributed the survey via e-mail to employees in February of this year.
The survey asked employees to indicate agreement or disagreement with statements that described the desired state of the control environment in categories including commitment to competence, human resource policies and practices, and leadership philosophy and operating style. The response rate was high for this type of survey, with 54 percent of the 3,687 employees who received it participating.
The primary finding from the survey was that the university must invest resources to further improve financial controls. To achieve this aim, Gilmore said, the university would implement a program to help employees better recognize the purpose and characteristics of financial controls and the policies that govern financial controls at the university.
Communication at the university also emerged as a likely area where internal controls could improve.
"Feedback from some survey respondents indicated that they did not entirely understand what internal controls or control environment means," she said. "The university must make significant progress in educating its faculty and staff about these concepts and their importance.
"We're a decentralized institution, and we are always looking for better ways to communicate," she added.
Clifford and Gilmore acknowledged that the survey -- which the university intends to conduct annually after improvements -- had weaknesses, including some potentially confusing questions and terminology. Although the survey is widely used at other institutions, the shortened version that the committee devised in order to improve response rates may have caused some of the confusion.
Gilmore said even though the survey tool had shortcomings, responses were in line with her expectations. Clifford agreed, saying the survey was a valuable jumping off point in planning future endeavors.
"This is not the end of the discussion, but the beginning," he said. "It gives us some signposts to show us where we need to go."
Next steps are to focus on indentifying internal-control areas that need to be strengthened and planning subsequent improvements. Two other steps toward better controls will include budget unit managers working more closely with the vice president for finance and administration, and a certification-like process for managers -- yet to be developed -- that would ensure their internal-control policies and processes are appropriate.
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Office of Internal Audit: http://www.ohio.edu/audit/internal.cfm
Published: Jun 20, 2008 3:16 PM