Financial Management & Internal
Control for Utility Companies
Julia Barber, CPA and
Sherman, Barber & Mullikin, CPAs
Madison, IN 47250
Introduction
This presentation is designed to help
individuals gain a better understanding of the
effect that proper financial management and
internal controls can have for utilities. It is
based on the expertise of Sherman, Barber &
Mullikin CPAs, who works closely with
utilities, their staff and boards of directors.
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Financial Management
The primary role of Financial Management is to
control and direct the resources of the utility in
support of its mission and goals.
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Elements of Financial Management
Oversight of the utility’s manager and/or superintendent
Oversight of utility’s compliance with applicable laws,
agreements and regulations
Budgeting & projecting cash flows
Timely receipt and review of financial reports
Consistent and accurate financial records
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Effective internal controls
Benefits of Financial Management
Provides a financial plan to support utility’s goals
Promotes proactive decision making, rather than
reactive
Establishes trust and confidence with utility users
Ensures integrity of your utility
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Financial Management Should Ask…
Do we have a sound financial plan?
Do we have enough cash?
Are our reserves satisfactory?
Are our major expenses in line?
Are we meeting our budget?
Are our expenditures appropriate?
Are we insured appropriately against risks?
Are we meeting the applicable guidelines and
requirements?
Are internal controls in effect to assure reliability of
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financial reporting?
Internal Control
Definition of Internal Control
A process, affected 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
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Why is it important to your utility?
An effective system of internal controls will protect
the utility from employee dishonesty
Efficiencies of operations will improve with
effective controls leading to reduced costs
Financial reporting will be more reliable
Internal controls assist with compliance with
applicable laws and regulations
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Financial Management & Internal Control
How effective financial management can complement
internal controls:
No one person has sole control over financial transactions
and assets
 Proper segregation of duties
 Checks require two signatures
 Employees take vacation/Their duties performed by another person
Reconciliation processes are in place
 Bank statements and reconciliations are reviewed by financial
management
Accounting personnel are qualified and trained
Qualified accounting service providers are engaged
Implement recommendations from outside auditors to
improve controls
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