Internal Controls

Internal controls are an important part of any business as well as a university.  An internal control system includes policies and procedures that management designs and implements to provide reasonable assurance that its objectives will be met.  Such objectives include safeguarding university assets, promoting efficiency and providing financial information and records.

Internal control systems are based on the principle of segregation of duties.  This segregation makes it more difficult for theft or undetected errors.  No one person should be in a position to control a transaction from initiation to completion and recording in the books.

These are some recommendations for developing an internal control system surrounding cash.

  1. Designate the cash handling responsibilities to specific individual(s).
  2. Do not allow the person responsible for bookkeeping to handle the cash.  There must be a segregation of duties.
  3. Use pre-numbered receipts for all cash collections.
  4. Carefully review all bank deposits before making the deposit.
  5. Promptly make deposits intact (no money held back for expenses).
  6. Secure cash in a locked drawer, file cabinet, or cash register.
  7. If cash register is used, establish policies for overs and shorts.
  8. Make all payments by checks or Procard except for very small amounts to be paid by petty cash.  Petty cash should be maintained on the imprest method, requiring documenation to support all inflows and outflows of cash.
  9. Use proper documentation to support all disbursements.
  10. Keep all cash-related documents locked up when not in use.
  11. Whenever possible, use outside documentation to compare against your records.
  12. Make a visible indication of reviews on documents reviewed.  The control system should never exist on paper only, and employees should see evidence of its application.
  13. Set up the control system early to prevent problems, rather than as a reaction to loss.
  14. Provide the internal control system with ways to identify the source of errors to allow for correcting remedial errors.