Which Of The Following Is Not Considered One Of The Five Major Components Of Internal Control?
Budget Bulletin
B-0350
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Governmental Internal Control And Internal Audit Requirements
| Constructive Appointment: 03/18/2018 | Printable PDF version |
| Supersedes: 01/04/2018 |
i. Purpose and Scope
This Budget Policy and Reporting Manual (BPRM) Item outlines internal control and internal inspect requirements of State Agencies identified in Attachment A for compliance with the Governmental Accountability, Audit and Internal Control Act (the Internal Control Act or the Act). The Internal Control Act defines a Country Agency as "any state department, country university of New York, city university of New York, board, bureau, partition, committee, commission, council, office or other governmental entity performing a governmental or proprietary office for the land, or any combination thereof, except any public authority or public benefit corporation, the judiciary or the state legislature." To identify all Land Agencies requiring implementation of the BPRM Item, the Director of the Budget issues and periodically revises a Schedule of Covered Country Agencies Subject to Internal Control Requirements (see Attachment A).
This BPRM item provides State Agencies with guidance on internal control responsibilities, internal audit responsibilities, reporting, and professional standards. These activities enhance the integrity of government operations, provide reasonable oversight of State operations, and promote compliance with laws, regulations and policies to ensure State funds and resources are used efficiently and finer.
This BPRM too item provides Land Agencies with instructions for completing the Internal Command Certification form which must exist submitted to the Division of Budget (DOB) annually. The Internal Control Certification demonstrates the level of the State Bureau'south compliance with the Internal Control Act. Country Agencies should attach to the guidance within this BPRM and refer to the applicable laws, policies, and standards mentioned herein to consummate the certification.
This BPRM has been updated for consistency with the current Committee of Sponsoring Organizations of the Treadway Committee (COSO) framework, which was revised in 2013 and incorporated into the Standards for Internal Controls in New York Country Government, March 2016.
2. Background
ii.one Internal Control Act
The passage of the Internal Control Human activity requires State Agencies designated by the Director of DOB to institute and maintain a system of internal control and a program of internal control review. The Internal Control Act was updated to clinch compliance with electric current professional internal control standards and made permanent constructive January 1, 1999. The Internal Control Act establishes six internal control responsibilities for State Agencies to follow and model their procedures from. See Attachment E.
3. Internal Control and Internal Audit Guidance and Standards
iii.1. Standards for Internal Control in New York Land Government 2016
The Role of the New York Land Comptroller (OSC) issues the Standards for Internal Command in New York State Regime to establish standards all entities subject to OSC audits must follow. This publication outlines techniques and practices to create an efficient and effective internal command system in Country Agencies. It incorporates professionally-accepted standards across private, not-for-profit and public firms, like COSO and the U.Due south. Regime Accountability Office (GAO), to create all-time practices for New York State. The techniques and practices outlined in the publication are framed effectually the five basic components of internal control (control environment, information and communication, risk assessment, control activities and monitoring) and the two main supporting activities (strategic planning and internal inspect).
3.two Committee of Sponsoring Organizations of the Treadway Committee
COSO's mission is to meliorate organizational performance and governance through effective Internal Control, Enterprise Gamble Management, and fraud deterrence. In 2013, COSO released Internal Control—Integrated Framework, an updated version of its 2004 framework and provided an constructive construction for State Agencies to place opportunities to improve efficiency and/or effectiveness. This model has been adopted as the generally accepted framework for Internal Control and is widely recognized as the definitive Standard confronting which organizations measure the effectiveness of their systems of Internal Command.
three.iii U.South. Authorities Accountability Function Standards
GAO is an independent, nonpartisan agency that provides auditing, evaluation, and investigative services for the United States Congress. The GAO is the supreme audit institution for the United States and problems the Standards for Internal Control in the Federal Government, known as the "Green Book," which sets the standards for an effective internal control arrangement for federal agencies. The Green Book may also be adopted by state, local, and quasi-governmental entities profit. The GAO too issues Standards for Federal and State auditors such every bit the Regime Auditing Standards, known as the Yellow Book. The Yellowish Book outlines the requirements for audit reports, professional qualifications for auditors, and inspect arrangement quality command. Auditors of Federal, State, and local authorities programs employ these standards to perform their audits and produce their reports.
3.4 Institute of Internal Audit Professional Standards
The Institute of Internal Auditors (IIA) is an international professional clan which bug the Standards for Internal Auditing known as the International Professional Practices Framework (IPPF). The Standards provide a framework for performing and promoting internal auditing and evaluating its effectiveness on operations.
4. Internal Command
Internal command is a process, afflicted by an entity's board of directors, direction, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and Compliance. The State Bureau's internal control surround has a direct bear upon on State Agency processes and operations. Strong internal controls contribute to achieving the State Agency mission and strategic objectives.
four.1 Internal Control Officer
Each State Agency head is required by Article 45 of the Executive Law and the Internal Control Human action to designate an Internal Command Officer (ICO). The officer should written report directly to the head of the State Agency to implement and review the responsibilities for maintaining the organization of Internal Controls. The ICO works with appropriate personnel within the Land Agency to coordinate the internal control activities and to help ensure that the internal control program meets the responsibilities established by this BPRM Item. Although the ICO evaluates the adequacy of the internal command reviews, program and line managers are primarily responsible for conducting reviews to assure adherence to controls, and for analyzing and improving control systems. The ICO should be an individual with sufficient authority to human activity on behalf of the Country Agency head in implementing and reviewing the State Agency'southward internal control program. This individual should have a broad knowledge of the Country Agency's operations, personnel and policy objectives.
4.two Internal Audit
The Internal Audit function strengthens a State Agency'due south internal controls. The Human activity defines internal audit equally an appraisal activeness established by direction for reviewing Country Agency operations to clinch compliance with management policies and the effectiveness of internal controls. Internal audits must exist conducted in conformance with mostly accepted standards for internal auditing. State Agencies should refer to the IIA Guidance (Red Book) and the references provided in this BPRM item for standards for internal auditing. Internal auditors accept a professional duty to provide an unbiased and objective view therefore, the Internal Audit role is independent from management. It is vital the Internal Audit part, led by the Director of Internal Audit (DIA), reports to the head of the State Agency. The Internal Inspect function provides value by identifying weak areas through conducting audits and reviews and subsequently providing recommendations for improvement to management.
4.3 Components of an Constructive Internal Control Organization
An effective internal command system consists of the following 5 components:
control environs, control activities, run a risk assessment, information and communication, and monitoring. COSO expanded on these components and developed 17 respective principles. Refer to Attachment F for a consummate list of the v components and 17 principles. Land Agencies should document the assessment of the presence and functioning of the 5 components and seventeen principles of COSO 2013 and any major deficiencies. The post-obit department details the components and principles and how State Agencies can accommodate these principles to fulfill the requirements of the Internal Control Deed.
Command SurroundA set of standards and processes that provide the structure for conveying out internal control across the organisation |
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The control environment is the foundation of an internal control system. It includes the overall attitude and actions of management regarding the importance of controls in their system. Internal controls are likely to function well if management believes the controls are important and communicates that view to employees at all levels. Therefore, the attitudes of leadership or "tone at the top" plays a pivotal function in establishing and maintaining a control environs with effective internal controls. Weak internal controls threaten the power for the State Agency to complete their mission and work against strategic planning efforts.
The State Agency head has oversight responsibleness for carrying out internal controls across the arrangement. The ICO works with the State Agency caput to implement and review the organisation of internal controls. When developing an internal control arrangement, the State Agency should consider all functions and structures of the State Bureau. Clear reporting lines should be in place with appropriate oversight over the Country Agency functions. The Land Agency must hold individuals accountable for their internal control responsibilities. Accountability is reinforced through reporting structures and lines of authorisation. Management defines, assigns, and limits authorities and responsibilities in pursuit of agency objectives.
The Land Agency must establish policies and procedures to ensure employees are competent to carry out work functions. Detailed policies and procedures for the operation of specific functions are articulated in administrative manuals, employee handbooks, job descriptions, and applicable policy and procedure manuals. While it is not necessary for all employees to possess all manuals, employees should be provided with, or have access to, applicable policies and procedures for their position. Land Agencies are required to implement education and grooming efforts to provide employees with an understanding of internal controls within the arrangement and how it relates to their work. Such pedagogy and preparation should exist on-going and tailored for the needs of each separate grouping within the agency (eastward.1000., line staff, middle managers, executive management). For organizations with established internal audit functions, grooming and instruction should be offered on the appropriate office of the internal auditor inside the organization's internal command system.
Run a risk AssessmentInvolves a dynamic and iterative process for identifying and analyzing risks to achieving the entity's objectives |
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Take a chance is the possibility of an event to occur. The furnishings of run a risk may exist positive or negative. Risks may have brusk, medium and long-term impacts. It is the Country Agency management's responsibleness to determine the corporeality and type of risk that an organization is willing to take to meet their strategic objectives (take a chance ambition). A chance cess consists of the following steps:
- Specify the Country Agency's mission and strategic objectives
- Identify quantitative and qualitative risks that could influence the Land Bureau'due south ability to acquit out its mission and strategic objectives.
- Evaluate risks in terms of likelihood and touch.
- Determine the State Bureau'south risk tolerance and prioritize risks to determine which risks need to be addressed.
An organization's take a chance assessment is an iterative process and should be reviewed and updated when changes occur, or new risks emerge.
State Agencies should refer to COSO 2013 for detailed instructions on how to complete a risk assessment.
Control ActivitiesDeportment established by the policies and procedures to help ensure agency's power to mitigate risk |
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Internal control activities are the policies, procedures, and the organizational structure of an organization. This utilise of bookkeeping systems, information technology, and other resources ensure that appropriate controls are put in identify and operating properly. Controls may be preventive, requiring a bluecoat to access loftier security areas, or detective, monthly reconciliation reports. Country Agencies should ensure control activities match the risk. Excessive controls can reduce productivity. Putting control activities in place help ensure identified risks practice not prevent the State Agency from reaching objectives.
Information and CommunicationCommunication should occur internally and externally to provide the agency with needed information |
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The flow of advice within a Land Bureau should be ongoing between and throughout various levels and activities of the agency. Data must be communicated to those who need it. Communication should occur both internally and externally. This includes communication between the Land Agency and vendors, recipients, and other State Agencies. Information about controls should exist communicated to management in a timely manner, so that deficiencies tin exist quickly addressed.
MonitoringOngoing evaluations to assess whether the five components of internal control are finer functioning |
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State Agencies should continually assess whether controls are performance as intended. Management must too accept a process in place to monitor cosmetic actions for previously identified risks. The ICO should conduct periodic assessments of the State Agencies control environment and work with management to identify and address gaps. The internal audit role also provides independent reviews or audits of Country Agency programs and functions.
5. Agency Requirements
5.1. Internal Command
State Agencies are required to comply with the Internal Control Act and implement the following internal control requirements. Country Agencies should refer to Zipper E for examples of State Bureau activities related to each requirement.
- Found and maintain guidelines for a system of internal controls for the agency.
- Establish and maintain a system of internal controls and a programme of internal control review for the bureau.
- Make available to each officer and employee of the agency a clear and concise statement of the mostly applicable management policies and standards with which the officeholder or employee of such agency is expected to comply, along with detailed policies and procedures the employees are expected to adhere to in completing their work.
- Designate an Internal Control Officer (ICO), who reports to the Country Agency head, to implement and review the internal control responsibilities established pursuant to this BPRM item. The designation of the ICO should also exist communicated to employees.
- Implement education and training efforts to ensure that officers and employees have achieved adequate awareness and agreement of internal control standards and, every bit advisable, evaluation techniques.
- Periodically evaluate the need to institute, maintain or alter an internal inspect (IA) function.
5.ii Internal Inspect
5.2.1 Evaluate need for Internal Inspect part
State Agencies are required by the Deed to periodically evaluate the need to found, maintain or alter an IA function; peculiarly when organizational, operating, fiscal, programme, legal or personnel changes occur, which touch the Land Agency's exposure to risk or which could otherwise change the results of the initial cess. While all Land Agencies are required to have present and functioning systems of internal control, only some Land Agencies warrant maintaining a total Internal Audit role. The Director of the Budget determines which Country Agencies covered by the Act are required to accept an Internal Audit function. The Director of the Upkeep publishes a listing of these State Agencies and periodically revises it based on Bureau Internal Control and Internal Audit evaluation required by this BPRM. The electric current List of Agencies Required to Establish and Maintain an Internal Audit Function is included as Attachment B to this BPRM. State Agencies included on this list are generally those with: varied and circuitous programs; decentralized organizational structures; large budgets; significant revenue, grant or reimbursement functions; or major regulatory or investigatory responsibilities.
Land Agencies should attach to the applicable steps below to comply with the Human activity'south requirements
- State Agencies with Internal Audit functions should review current operations to make up one's mind whether those operations should be altered or maintained and should assess whether having an inspect committee would be benign and appropriate for the Country Bureau.
- All State Agencies without internal inspect functions must submit the Internal Audit Evaluation Form Attachment D (Give-and-take Doc) with the Internal Control Certification. DOB will review these forms to assess whether there is a need for the Internal Audit function within the State Agency.
5.2.two Guidelines for Director of Internal Audit position creation
For the State Agencies required to establish and maintain an Internal Audit function, the Internal Audit function should be managed past a DIA. The DIA is appointed by the Land Agency caput based on candidates' internal inspect credentials, didactics and experience. The DIA must study directly to the State Agency caput. The DIA position must always remain separate and apart from the ICO position.
The State Bureau must define the verbal duties of the DIA position consistent with mostly accepted internal audit standards and develop specific qualifications inside the parameters of the minimum and preferred qualifications (outlined below) that will be required for the position.
Pursuant to the Act, the position of the DIA is an exempt position and except in the case of the department of audit and control and section of constabulary, such appointment is subject to the approval of the Managing director of the Budget.
Country Agencies must also obtain formal Civil Service Commission approving to place the DIA position in the exempt grade. Land Agencies should contact the Civil Service Commission at (518) 473-6598 for more data on obtaining Civil Service Commission blessing for placing the DIA position in the exempt class.
five.2.3 DIA Qualifications
Pursuant to the Human activity, the Director of the Upkeep reviews and approve all appointments to DIA positions. As part of the review, DOB takes appropriate steps to ensure that appointments to DIA positions adjust – to the extent practicable – to the minimum and preferred qualifications outlined below.
Effective functioning as a DIA requires a broad base of feel and skills. DIAs must accept a working noesis of professional auditing standards, and goals and techniques of internal auditing and program evaluation. DIAs must likewise have knowledge of governmental operations and exist able to identify management, organizational and operating problems and to assess their implications. An ideal DIA possesses effective communication skills to articulate audit objectives, complex findings and audit recommendations in a clear, curtailed and convincing manner.
DIAs must be good supervisors, trainers and evaluators of employees. DIAs must exhibit good interpersonal skills to bargain effectively with management and staff.
Equally a guideline, when recruiting individuals for appointment to DIA positions, agencies should use the following listing of minimum and preferred qualifications:
Minimum Qualifications
- An undergraduate degree (or equivalent combination of instruction and feel); and,
- Five years of progressively responsible experience conducting or managing i or more of the post-obit: audits, examinations or plan reviews, including two years in a supervisory capacity.
Preferred Qualifications
- Professional person certification, such as Certified Internal Accountant (CIA), Certified Public Accountant (CPA) or Certified Information Systems Auditor (CISA); and,
- Chief's degree in bookkeeping, business, public administration, economic science, management or a field closely related to the agency's service sector.
Desired Knowledge, Skills and Abilities
- Extensive cognition of professional inspect standards;
- Demonstrated oral and written communication skills;
- Experience focusing on the activities of the corresponding agency's service sector; and
- Extensive cognition of authorities operations.
5.2.4 DOB Approving Process for DIA
The State Agency must frontwards its recommended candidate to the Manager of the Budget for his or her review and approval. The recommendation must include the candidate'southward resume, an system and staffing plan for the Internal Audit function, and other supporting documentation every bit requested past DOB. DOB submits the Director of the Budget'southward approved DIA candidate to the Governor'southward Center for Recruitment and Public Service for its review and approval.
half dozen. Agency Deliverables
six.1 Internal Control Certification form
This BPRM item requires all covered Country Agencies to complete the Internal Control Certification form in Attachment C. State Agencies should refer to Attachment E for a guide to fulfilling each of the 6 Internal Control Act requirements in the certification. A State Agency'due south submission of the Internal Control Certification represents the justification for a Land Agency's level of compliance with the requirements of the Internal Control Act as outlined beneath.
In the responses to the six requirements in the certification, the State Agency must:
- Provide a thorough explanation of the specific deportment the State Bureau has taken to comply with each requirement and employ as much infinite as needed to respond;
- Indicate the State Agency's level of compliance with each requirement and include justification for this exclamation; and
- Include, for each requirement that is not fully compliant, an action plan and estimated engagement of completion.
All responses from the State Bureau must fully demonstrate their level of compliance. Incomplete responses volition crave resubmission.
6.ii Internal Audit Evaluation Grade
All State Agencies without Internal Inspect functions must submit the Internal Audit Evaluation Class, Attachment D, with the Internal Command Certification. These Land Agencies should note the Internal Control Certification is incomplete if the Internal Audit Evaluation Form is not included with the submission. All covered Country Agencies (Attachment A) that are not listed in Zipper B are required to submit the Internal Audit Evaluation form.
7. Internal Command Certification Submission Process
All State Agency Internal Control submissions must be sent to the DOB mailbox dob.sm.icreporting@upkeep.ny.gov.
- State Agencies must submit the completed Internal Control Certification to DOB by Apr 30th.
- DOB will review the certifications and contact the agency if additional information or documentation is required.
- Country Agencies will receive an Internal Control Certification Evaluation form when DOB review is complete.
- DOB volition perform follow up with designated agencies as necessary.
| March | DOB sends e-mail to State Agencies to complete Internal Control Certification |
| April | Certifications due to DOB by Apr 30th |
| June | DOB sends State Agencies the Internal Command Certification Evaluation |
8. Ongoing Monitoring
State Agencies that study fractional or noncompliance on any of the Internal Control Act requirements must include an activeness plan and estimated date of completion. DOB volition send a follow-upwards email to the Country Bureau on or around the indicated engagement of completion. The State Bureau must submit the Internal Command Certification Compliance Written report Template (Zipper H) and report on the status of the cosmetic action. Completed templates must exist sent to the DOB mailbox. If the corrective action program has not been implemented, the State Agency must provide a new action program and estimated date of completion. DOB will proceed to follow up with the Agency to monitor progress and facilitate completion.
9. Points of Contact
Please submit any questions related to this BPRM and the required submissions, to the
DOB mailbox dob.sm.icreporting@upkeep.ny.gov. If you demand immediate assistance, delight contact Kiyannah Joyner at (518) 473-0411.
10. References
New York State Internal Control Human activity
New York State Internal Control Human activity. (n.d.). New York State Part of the State Comptroller. https://www.osc.state.ny.us/agencies/ictf/docs/internal_control_act.pdf
Standards for Internal Controls in New York State Government
Standards for Internal Command in New York Land Government. (2016). Office of the New York Country Comptroller. http://osc.state.ny.us/agencies/ictf/docs/intcontrol_stds.pdf
Standards for Internal Control in the Federal Authorities
U.S Government Accountability Office. "U.S. GAO - The Dark-green Volume." U.S. Government Accountability Office (U.Due south. GAO). https://world wide web.gao.gov/greenbook/overview
Generally Accepted Government Auditing Standards
U.S Regime Accountability Function."U.S. GAO - The Yellow Book." U.S. Government Accountability Function (U.S. GAO).https://www.gao.gov/yellowbook/overview
New York State Internal Command Act Implementation Guide
The New York State Internal Control Human action Implementation Guide: Strengthening Compliance with the Deed and Standards. (2014). Internal Control Task Force. Available at: New York State Internal Control Act. (north.d.). New York State Function of the Land Comptroller. https://www.osc.state.ny.us/agencies/ictf/docs/implement_guide_20060907.pdf
Internal Control – Integrated Framework
Committee of Sponsoring Organizations of the Treadway Commission. "Welcome to COSO." About Us. http://www.coso.org/
New York State Internal Control Act Internal Command Review and Evaluation Guide
Internal Control Review Component and Principle Evaluation Guide (2018). NYSICA. http://nysica.com/uploads/3/4/8/five/34855847/internal_control_review_component_and_principle_evaluation_guide.pdf
eleven. Attachments
- Attachment A: Schedule of Agencies Subject to Internal Control Requirements
- Attachment B: Schedule of Agencies Required to Accept an Internal Audit Function
- Attachment C: Internal Control Certification
- Zipper D: Internal Audit Evaluation Form
- Attachment E: Internal Command Deed Requirements Reference Guide
- Attachment F: Five Components of Internal Control-COSO 2013 Framework
- Attachment G: COSO 2013 17 Principles Template
- Attachment H: Internal Command Compliance Report
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Which Of The Following Is Not Considered One Of The Five Major Components Of Internal Control?,
Source: https://www.budget.ny.gov/guide/bprm/b/b-0350.html
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