Elements of Effective Internal Controls for University Operations

The following information provides important operational and control guidelines for various functions throughout the university. Managers of the respective units are encouraged to review and use these guidelines as fundamental best practices for their operations. For additional information, view best practices in higher education accumulated by Financial Affairs.


Accounts and Notes Receivable      Accounts Payable      Auxiliary Enterprises      Campus Cashier's Office
Central Purchasing      Construction      General Accounting      Human Resources      Payroll      Research      Student Financial Aid


Accounts and Notes Receivable

  1. Responsibilities for recordkeeping of receivables are properly segregated from the approval and collections functions.

  2. Receivables are booked timely based on valid documentation maintained by the university.

  3. The University limits its risk of not collecting a student receivable by placing a “hold” on all accounts at the time the student becomes fee liable.

  4. The university has followed established policies and procedures with respect to turning over delinquent accounts for collection.

  5. Evidence is maintained for monthly mailings of receivable statements.

  6. Employee receivables are handled in accordance with state statute.

  7. Appropriate methods and estimates are used to determine an allowance for uncollectible accounts.

  8. There are no undisclosed notes or accounts receivable loans made to “insiders”, i.e. university employees, management, or members of the Board of Trustees.

  9. An up-to-date manual of policies and procedures for managing receivables is maintained to effectively guide current employees in fulfilling their duties and assist in the training of new employees.

  10. Records for receivables are retained in accordance with the university’s official records retention schedule.

Accounts Payable

  1. Duties of employees involved with the A/P function are structured so that no individual has the ability to control the entire sequence of a transaction without detection. (i.e. create fictitious vendors and make unauthorized payments without detection by established monitoring procedures).

  2. The A/P unit maintains an up-to-date manual of policies and procedures to effectively guide current employees in fulfilling their duties and train new employees.

  3. Management uses monitoring controls such as reconciliations and exception reports to determine the possibility of anomalies in the timely and proper processing of payables.

  4. Transactions in excess of pre-determined limits are approved by management employees who were not involved with the initial approval or processing of the payable.

  5. Departmental records are retained in accordance with the university’s official records retention schedule.

Auxiliary Enterprises

  1. Staff members who are responsible for the auxiliary unit(s) are familiar with the appropriate operating policies and procedures.

  2. The auxiliary unit maintains an up-to-date manual of policies and procedures to effectively guide current employees in fulfilling their duties and train new employees.

  3. Contracts and leases entered into are approved by university management and legal counsel prior to the applicable contract or lease commencement date.

  4. If applicable, the Financial Affairs Division has approved the auxiliary as an authorized cash collection point.

  5. Checks are restrictively endorsed for deposit to the appropriate university bank account.

  6. Revenues collected by the auxiliary are deposited timely.

  7. Expenditures are appropriately recognized by the auxiliary and revenues earned are used to support the mission of the unit.

  8. Billings for services rendered by contracted vendors are reviewed for contractual compliance prior to payment.

  9. Budgeted revenues and expenses reflect applicable approved contracts and/or commitments and are closely monitored.

  10. Contracts for goods or services are approved by the appropriate level of management in conformity with established purchasing procedures.

  11. Contracts made with outside vendors are at arms length and do not conflict with university policy.

  12. Departmental records are retained in accordance with the university’s official records retention schedule.

Campus Cashier's Office

  1. Duties of Cashier’s Office employees are structured so that no one employee has the ability to control the entire sequence of a transaction without detection.

  2. The Cashier’s Office maintains an up-to-date manual of policies and procedures to effectively guide current employees in fulfilling their duties and train new employees.

  3. Cashier’s Office transactions are subject to daily supervisory oversight, including end of day balancing procedures.

  4. Appropriate logs or other records are maintained for monies received by mail, delivered from departments, and transferred between employees.

  5. Checks are restrictively endorsed for deposit to the appropriate university bank account.

  6. Bank deposits are balanced, secured, and delivered to an authorized courier service, with appropriate documentation of the transfer of funds maintained.

  7. Cashier’s Office employees do not have the capability to alter computerized systems used in accounting for the receipt, processing, and reporting of revenues.

  8. Any refund transactions are subject to supervisory review and are based on amounts and payees authorized by individuals not involved with routine cashiering functions.

  9. Cashiers’ over/short positions are investigated timely and appropriate action taken in the circumstances.

  10. Safe combinations are changed whenever employees with knowledge of the combination(s) are terminated or transfer from the Cashier’s Office.

  11. Departmental records are retained in accordance with the university’s official records retention schedule.

Central Purchasing

  1. Duties of employees involved in the central purchasing function are structured so that no individual has the ability to control the processes of establishing vendors, requisitioning commodities or services, creating purchasing orders, and receiving ordered items.

  2. The department maintains an up-to-date policies and procedures manual to effective guide current employees in fulfilling their duties and train new employees.

  3. Requests for the purchase of goods or services are reviewed for proper end-user approval and availability of funds before proceeding to generate purchase orders.

  4. The department is in compliance with provisions of its competitive bidding policies and any exemptions from competitive sealed bid requirements are documented and approved using the appropriate form(s).

  5. Management uses monitoring controls such as reconciliations and exception reports to determine the possibility of anomalies with pCard or other transactions.

  6. Departmental strategies include encouraging minority business enterprises (MBE) to participate in the university’s procurement process.

  7. Applicable department personnel have filed a Statement of Financial Interest (Form 1) within 30 days after hire and annually thereafter as required by Florida statutes.

  8. With respect to activities of its staff, the department is in compliance with the Code of Ethics and Standards of Conduct section of the purchasing manual.

  9. Departmental records are retained in accordance with the university’s official records retention schedule.

Construction

  1. Construction projects are consistent with the university’s master plan and budgets, and with other properly-approved institutional and SUS provisions.

  2. Facilities Planning maintains up-to-date policies and procedures manuals to effectively guide current employees in fulfilling their duties and train new employees with respect to construction management. These policies and procedures include, but are not limited to:
         • Project bidding
         • Contract negotiations
         • Change orders
         • Self-performed work by construction mangers
         • Compliance with legal and statutory requirements
         • Oversight of sub-contractors monitoring

  3. Prior to being signed by management, all proposed contracts are subject to review by legal counsel.

  4. Coordination is made with the university’s Controller’s Office to properly manage project funding, expenditures, and reporting requirements, both during and after construction.

  5. Records are retained in accordance with the university’s official records retention schedule.

General Accounting

Account Reconciliations

  1. Critical accounts have been identified for periodic reconciliations.

  2. Procedures for reconciliations are documented and periodically reviewed.

  3. Reconciliations are prepared:
    a. By an employee not involved with the initiation of transactions normally associated with the accounts; and,
    b. Timely, with any differences promptly documented, researched, and necessary accounting adjustments properly recorded.

  4. Reconciliations are signed and dated by the preparer and the reviewing supervisor.

Account Setup and Maintenance
Managerial control is exercised to ensure that setup and deactivation of accounts is based on bona fide business needs and proper authorization.

Journal Vouchers
Journal vouchers are posted timely to Banner Finance and supported by source documents which are properly approved.

Decentralized Money Collections

  1. Policies governing money collections by decentralized units are communicated throughout the university to encourage consistency in the processing of funds.

  2. Procedures are in place for establishment of any applicable petty cash funds.

UBIT and Sales Taxes
Procedures are in place to properly calculate and timely remit taxes in accordance with taxing authorities’ regulations.

Tangible Personal Property
The university has policies and procedures to ensure that property records are periodically reconciled to the general ledger, an annual physical inventory is performed, and property tags are affixed to property items.

Records Retention
Documentation for the above procedures and practices are retained in accordance with the university’s official records retention schedule.


Human Resources 

  1. All new employees are processed for proper documentation prior to commencing work with the university.

  2. Personnel Services maintains an up-to-date manual of policies and procedures to effectively guide current employees in fulfilling their duties and train new employees.

  3. Appropriate tracking systems are used to coordinate and manage the hiring, evaluation, disciplining, and termination of employees.

  4. The advice of legal counsel is sought with respect to employee situations which may potentially give rise to disagreements or lawsuits.

  5. Background checks are performed for all applicable newly-hired employees.

  6. The department confirms that the education and work experience of candidates have been verified by hiring departments as a condition for a formal offer of employment.

  7. Access to files containing sensitive personal employee information such as health records are restricted and only allowed to leave the department under limited circumstances.

  8. Personnel Services notifies the requisite classes of new employees that a Statement of Financial Interest is to be filed with the Florida Department of State within 30 days of hire.

  9. Benefits documented in the department’s policy manual are offered as described to each class of employee.

  10. Departmental records are retained in accordance with the university’s official records retention schedule.

Payroll

  1. No Controller’s Office employees have the ability to establish/set up HR Banner system records for new employees.

  2. The Payroll Department maintains an up-to-date manual of policies and procedures to effectively guide current employees in fulfilling their duties and train new employees.

  3. Management routinely monitors exceptional pay items.

  4. The payroll bank account is reconciled by an employee having no payroll duties.

  5. Reconciliations between payroll system totals and Forms 940, 941, and W-2 summaries are performed.

  6. All required reports associated with payroll have been filed with the appropriate governmental agencies and third parties.

  7. Payroll deductions are supported by legal documents or employee authorizations.

  8. Unclaimed wages are segregated for escheat reporting purposes in accordance with state statutes.

  9. Timely submission of properly-approved payroll certifications is monitored, with appropriate follow-up if necessary.

  10. The Payroll Department has a review process to ensure that employee deductions are remitted timely to the proper third party agencies.

  11. Payroll checks (and related pay advices) are properly secured prior to distribution and require signed evidence of pickup by authorized personnel.

  12. All employees who have elected to be paid by direct deposit receive electronic biweekly pay advice/earning statements for their review.

  13. Departmental records are retained in accordance with the university’s official records retention schedule.

Research

  1. The division maintains fiscal oversight for contracts and grants by preparation of pre-award worksheets, setup of accounting records, budget preparation, timely drawdowns of funds from sponsors, collection of receivables, accounting for cost sharing and program income, if applicable, and periodic reconciliation of accounts.

  2. Divisional units maintain up-to-date policies and procedures manuals to effectively guide current employees in fulfilling their duties and train new employees.

  3. Prior to being signed by management, all proposed contracts and sponsored research agreements are subject to review by legal counsel.

  4. Research contracts and agreements which involve transfer of intellectual property are subject to review by the division’s Office of Technology Transfer.

  5. Subcontracts are monitored and remedial action taken, if necessary, in accordance with OMB Circular A-133 guidelines.

  6. Outstanding receivables are billed timely and follow-up on delinquent accounts is performed as required by established policies and procedures.  Contracts with private companies or non-profit organizations are reviewed for creditworthiness and structured so as to reduce financial risk to the university.

  7. Contracts with private companies or non-profit organizations are reviewed for creditworthiness and structured so as to reduce financial risk to the university.

  8. New faculty members are oriented as to expectations for research projects, including intellectual property rights and obligations.

  9. A time and effort reporting system is in place to substantiate labor cost billings consistent with criteria outlined in OMB Circular A-21, Cost Principles for Educational Institutions.

  10. The division’s compliance unit maintains appropriate records to evidence on-going efforts to ensure that research involving human and animal subjects are consistent with grantor and regulatory requirements.

  11. For research funds donated to the FAU Foundation, the division reviews the proposed projects to ensure proper classification and monitoring.

  12. Records are retained in accordance with an official university records retention schedule and with OMB Circular A-21.

Student Financial Aid

  1. Duties of employees are structured so that no one employee has the ability to control the entire sequence of a transaction.

  2. The Financial Aid Office maintains an up-to-date manual of policies and procedures to effectively guide current employees in fulfilling their duties and train new employees.

  3. Financial aid is offered only to currently enrolled students and no student is awarded financial aid unless a (student) signed acceptance letter is on file.

  4. Student Financial Aid has filed all required federal and state regulatory reports on a timely basis.

  5. Any changes in the computer system or associated applications used to administer student financial aid is closely controlled and properly monitored by senior managers of the Student Financial Aid Office.

  6. Amounts to be refunded have been accurately calculated and returned timely to financial aid sponsors as required by regulations.

  7. Student Financial Aid has coordinated efforts with the Controller’s Office to ensure that refunds to sponsors are charged to student accounts.

  8. Departmental records are retained in accordance with the university’s official records retention schedule.

If you wish to communicate with the auditors contact our office at 7-3682 (internal calls) or 1-561-297-3682 (external calls) or e-mail Morley Barnett .

Page created February 2007.

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