Compliance Issues
and Audits
Nov. 30, 2004
TOPICS TO BE DISCUSSED
• Audits – definition, types of auditors, types of
audits
• Role of WSU Internal Auditor
• Internal controls – definitions and types
• Selected compliance issues
Roles and Responsibilities
• Controller’s office – establishes, maintains and
reviews the system of internal control.
• Organizational unit managers - responsible for
internal control within that unit.
OBJECTIVES
• Provide employees with knowledge and skills so
that we can be better prepared for an audit.
OBJECTIVES
• Encourage all employees to “take ownership”
OBJECTIVES
• Decrease overall risk for WSU Extension/CAHNRS
OBJECTIVES
• Create/maintain organizational efficiencies and
local control
BUSINESS AFFAIRS/CONTROLLER’S OFFICE OTHER
CENTRAL SERVICES

EXTENSION, CAHNRS, VETMED, SCIENCES, ETC.

DEPARTMENT /DISTRICT ADMINISTRATIVE ASSTS.

COUNTIES

PRINCIPAL INVESTIGATORS, PROGRAM DIRECTORS,
LEARNING CENTER COORDINATORS; INSTRUCTORS;
EXTENSION ADMINISTRATOR

EMPLOYEE
What is an Audit?
• Systematic review
• Evaluate conformance to some norm
or benchmark
Types of Auditors
• Internal – WSU Employees
• External – State Auditors, Private Firms
• Governmental Audit Agencies (GAA)
Types of Audits
• Financial Statement Audits - assure users that
statements are fairly presented (External and GAA)
• Compliance Audits – obtain reasonable assurance
of compliance with state and local laws and
regulations (Internal, External, GAA)
Types of Audits
• Single Audits – meet the needs of all federal
grantor agencies (External, GAA)
• Investigative – Fraud, whistleblower (Internal, GAA)
• Performance -
Coming soon?
FREQUENCY OF AUDITS
• CAHNRS – last six month period
• Compliance audit – payroll, external auditor
• Whistleblower
CONSEQUENCES OF AUDIT FINDINGS
• Financial Statement Audit: Restatement
• Compliance Audit:
• Implementation of Internal Controls to Avoid Future
Findings;
• Investigative
• Repayment, dismissal, hard-time
CONSEQUENCES OF AUDIT FINDINGS
• Single Audit
• Repay unallowed costs
• Extrapolate to all of WSU
• Performance
• All Audits:
Unwanted publicity, loss of respect
and/or trust
INTERNAL AUDITOR’S OFFICE
• Presentation by Norm Coffman
Internal Controls
• Management process for keeping an entity on
course in achieving it’s organizational objectives.
• Provide reasonable assurance that entity
objectives are being met.
Entity Objectives
• Compliance with state laws and regulations
• Reliability of financial reporting
• Effectiveness and efficiency of operations
Internal Control System Requirements
• Should provide reasonable assurance that an
organization will accomplish its objectives
• Reasonable assurance recognizes that cost of an
internal control should not exceed the benefit
derived therefrom
Internal Control System Requirements
• Management defines level of risk the organization
is willing to accept and strives to maintain risk
within those levels
Types of Internal Controls
• Control Environment – sets the tone of an
organization, influences control consciousness of
its people, foundation for all other components.
TYPES OF INTERNAL CONTOLS
• Risk Assessment – Identification and analysis of
relevant risks to achieving the objectives
Types of Internal Controls (cont)
• Information and Communication – Pertinent
information must be identified, captured and
communicated in a form and time frame that
enables people to carry out responsibilities.
TYPES OF INTERNAL CONTOLS
• Control Activities – Internal policies and
procedures that help address the risks.
TYPES OF INTERNAL CONTOLS
• Monitoring – Assess quality of performance over
time.
SINGLE AUDIT ACT
• Selected items specifically related to Sponsored
Projects by Dorothy Heitter
TEMPORARY EMPLOYMENT
• Selected items specifically related to Temporary
Employment by Trudy Kenny
TRAVEL
• Selected items specifically related to Travelling for
WSU business by Michelle Ely.
Cash Handling – Compliance and
Investigative
• Auditor’s check list for Cash Handling by Tucson
Smith
Purchasing – Compliance Audits
• Do purchases meet local, WSU, state, guidelines
for allowability?
• Highest risk – purchases under $2,500 (k-orders,
purchasing cards)
• Internal controls
• Communication – BPPM, training, BFO
• Approval – somebody who has knowledge
• Review
Purchasing – Investigative Audits
• Investigative Audit – Are state funds being used for
personal gain?
 Examples (non-existent vendors, purchasing goods for
self)
• Counties and small departments – segregation of
duties can be problematic.
Purchasing – Investigative Audits
• Internal Controls – local level highly important
 Authorization
 Review – purchases for authorization
- budget statements for purchases
Purchasing – Investigative Audits (cont)
• Internal Controls
 Risk Assessment – is there adequate separation
of duties?
 Control Activities – authorized signatures, review
budget statements
 Monitoring – review orders for signature, sample
orders from budget statements
ASSET MONITORING - Audits
• Compliance Audit:
Are assets being used for
mission of university?
• Investigative Audit:
personal gain?
Are assets being used for
ASSET MONITORING - Controls
• Physical Safeguarding
• Cash, mail meters
• Written policies regarding usage
• Challenge course equipment
• Volunteers using assets
ASSET MONITORING - Controls
• Authorization codes
• Phones, fax machines,
• Review budget statements
QUESTIONS?
THE END
• THANK YOU FOR JOINING US!