A large part of the responsibility of elected and appointed public officials is to exercise prudence and integrity in the management of funds, including custody of funds and financial transactions. Prudence in the management of public funds requires adequate control procedures be in place to protect those funds.

While independent auditors and similar outside parties often provide valuable assistance to management in meeting internal control related responsibilities, their contribution can never replace management’s direct and informed involvement with internal control. In addition, while management is primarily responsible for internal control, elected officials also have a responsibility to ensure management meets its obligations in this regard.

Management must obtain the information and training needed to meaningfully take responsibility for internal control. In addition, all employees responsible in any way for internal control must also receive the information and training they need to fulfill their particular responsibilities.

Internal control procedures should be documented, whether formally in a procedures manual or informally. The documented internal control procedures should include some practical means for lower level employees to report instances of management override of controls which could be indicative of fraud.

Documentation should be reviewed on a regular basis to ensure the personnel, duties and processes are current and still offer proper internal control. Periodic management evaluations should be made to ensure the internal controls:

• are properly designed to achieve the intended purpose
• have actually been implemented
• continue to function as designed

The periodic evaluations should include the effectiveness and timeliness of the government’s response to indications of potential control weaknesses.

If you would like further information regarding designing internal controls, contact Lewis, Hooper & Dick, LLC at (620) 275-9267.

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