Establishing and maintaining effective internal management systems and controls is important for tribes and tribal organizations to provide for proper checks and balances in the operation of programs and expenditure of funds. Internal controls are processes designed to help safeguard an organization’s assets and minimize risks. Internal controls are intended to minimize risk and protect assets, ensure accuracy of records, promote operational efficiency, and encourage adherence to policies, rules, regulations, and laws. Different types of internal controls exist – they can be preventative or detective, automated or manual; all of these are impacted by people. Federal awarding agencies require recipients of federal awards to maintain internal controls systems addressing financial, procurement, and property management; and prescribe minimum standards for these systems. While not a
federal government requirement, it is incumbent upon recipients to also maintain internal control requirements relating to human resources management, or personnel management.
A common audit finding involves lack of program operational policies, procedures, and internal controls. A key component of annual federal audits is to evaluate whether the recipient or auditee maintains internal controls to: (1) ensure efficient conduct of programs; (2) safeguarding assets; (3) preventing and detecting fraud and other unlawful acts; (4) ensure completeness and accuracy of financial records, (5) timely preparation of financial statements. The OMB Audit Compliance Supplement (and Addenda) provides instructions to auditors to evaluate the above criteria.
All programs contain a certain degree of inherent risk. Class exercises will help identify potential risks associated with administrative and financial management functions and program operations; and will help develop preventative measures or internal controls. The expected outcomes of this course should be to incorporate the identified elements of internal controls into program control standards and tribal-wide written internal control standards.