Disability Housing Network
Fall Conference
Workshop Notes
Session 4: Financial Management
"Minding the Money:
Best Practices for Financial Reporting and Internal Controls"
Cathy Roche, CPA with Dyer, Hughes, Roche and Wilson
December 1, 2010
Ms. Roche spoke from a PowerPoint presentation. Given below in black is the text
from her slides, along with notes, in blue, taken by DHN Technical Assistance
Consultant Cathy Allen. Questions from the audience, along with the answers given,
appear at the end of the notes.
Handouts: Internal Controls Checklist, 1-4
Internal Controls
 Understanding
 Implementing
 Performing
 Monitoring
 Mission
Three Topics
 What do we mean by internal control?
 Why do we need internal control?
 What are the best internal control practices?
What are internal controls?
 Ideas
 Examples
 Horror Stories
Checks and balances. Usually means having more than one person handling the
money.
COCO - Committee of Sponsoring Organizations
 Definition: "A process, effected by an entity's Board of Directors, management
and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives in the following categories:

Effectiveness and efficiency of operations

Reliability of financial reporting

Compliance with applicable laws and regulations"
What does this mean to you?


Integrating a system that covers an organization's

Activities

Plans

Attitudes

Policies
This system will:

Direct

Monitor

Measure - what people are producing. These are the
financial reports.
What does this really mean to you?
 Your organization will have assurance that it will reach its objectives and mission.
Internal Control in an Organization
 Affects every aspect of organization
 You can't run an organization without internal control.
 Defines good management
 Success depends on people
 Most effective when central to organizational culture
 Provides a level of comfort
These are integrated into an organization and affects every element of the organization.
What purpose does it serve?
 Discuss
What internal control can/should do
 Promote orderly, economical, efficient, effective operations
 Produce quality products and services
 Safeguard resources
 Promote adherence to laws and contracts
 Develop and maintain financial and management data
 Accurately present data
 Quality financial reports
The last two are closely related. Internal controls protect against loss due to fraud,
waste and human error.
Internal Controls Depend on People
The tone of an organization is set at the top. The board should continually monitor staff,
vendors and customers. Sometimes a person's position in the organization determines
where they are in the system of internal controls. The attitude of the people involved
determines the success of the program. Everyone in the organization has a role in the
system. It is developed by people, conducted by people and holds people accountable.
It varies greatly from organization to organization. There is no cookie cutter, but there
are some general principles.
5 Components (from Committee of Sponsoring Organizations)
 Control environment - tone is set at top
 Risk Assessment - determining where you are vulnerable. Each side of the
balance sheet has its own risks. These need to be identified, then plan for
monitoring and measuring.
 Control Activities - everyday controlling, accounting policies and procedures
(invoice approval procedure, for example.)
 Information/Communication - first step is gathering information. Identify where
the financial statements are off, then communicate t responsible employees.
 Monitoring - Make sure all relevant documents are being presented. This is a key
aspect of internal controls.
Practical Internal Controls
 Accounting policy and procedures - Manual. Put it in writing. Helps organizations
know who performs which function.
 Segregation of duties - Don't have one person with authority to create, execute,
review and monitor all transactions. Get others involved. If your organization is
very small, pull in someone from the board such as the treasurer. The board has
responsibility.
 Important new policies - Whistleblower policy, for everyone in the organization. If
someone sees something wrong, they should be able to go to someone in the
organization to tell. Conflict of interest policy. The organization should know if the
board or trustees have other business interests that would conflict with
responsibilities for their organization.
 IT general controls - control access to electronic data, especially when
transitioning from one system to another. Much can go wrong.
Key Control Examples
 Cash receipts, revenues, receivables - endorse checks immediately, maintain
cash receipts journal, including any restriction on use.
 Cash disbursements, expenses, payments - prepare authorization of purchase
orders, review and reconcile credit card statements and bank statements
 Monitoring internal and external - auditors assure the public that the organization
is using resources wisely. The auditor will provide a letter regarding the internal
controls.
Management helps to do this internally, helps establish new goals, correct errors and
revise procedures.
Internal Controls Checklist
See handouts: four internal controls checklists. These were downloaded from the
internet. Choose one that seems most closely sited to your organization and change it
to meet your needs.
Takeaway Message
 Internal Controls matter


Take them seriously
They help your organization achieve its mission
Your auditor takes them seriously
Q. We are a very small organization. How can we make sure our deposits are checked
and balanced?
A. You might look in to third party deposit systems, so no one at the organization ever
touches the money.
Q. How often should we change audit firms?
A. Some people change every three to six years. In this model, the previous auditor
becomes a consultant. If you are working with a large firm, you can switch to a different
partner within the same firm. It is a good idea to switch. Gives another auditor a chance
to ramp up and give a fresh eye.