Finance: Control Freak

Internal controls play a vital role in keeping your organization financially strong. With revenues tight and regulatory oversight likely increasing it makes sense to do whatever you can to tighten your internal control structure and make sure the controls you’ve established are as robust as possible.

Internal controls can seem like pointless tasks for non-accounting staff members but the truth is they allow organizations to function much more smoothly. “The reason we have brakes in our cars is so we can go faster and the same applies to internal controls” said Jorge Rey audit manager with Kaufman Rossin and Company a South Florida-based accounting firm. “Controls are here to help us function better but people will always think they are doing the opposite.”

Although nonprofits and privately held companies aren’t yet required to comply with Sarbanes-Oxley auditors lenders and other stakeholders have higher expectations regarding implementation testing and the overall strength of internal controls because of this legislation. If stakeholders have high expectations and better internal controls can make your organization more effective it makes sense to go for it.

Linn Swanson chief audit officer at the University of Pittsburgh Medical Center a 20-hospital system based in Pittsburgh Pa. trained employees across the health system in internal controls as part of a major Sarbanes-Oxley compliance program several years ago. By involving teams in all parts of the health system the organization was able to fix broken processes and ultimately implement a stronger internal controls system.

Following are three steps you can take to strengthen your internal control processes.

Identify and assess risks
Risk identification and assessment is the backbone of any internal controls program. The Committee of Sponsoring Organizations (COSO) of the Treadway Commission established common definitions of internal controls standards and criteria identifying three overarching objectives for effective internal controls: effectiveness and efficiency of operations reliable financial reporting and compliance with laws and regulations.