2d. Internal Controls
Internal controls are a combination of tools designed to minimize the misuse of funds and poor record keeping, and to maximize the likelihood of detecting problems if they occur. Internal controls require that multiple people with different roles review each and every financial transaction. They cross check one another to make sure that budgets, costs, records, and reports all match up. In this way, internal controls help make sure that funds are being used appropriately and that no one person can defraud the organization.
What Are the Key Elements of Internal Control?
The key elements of an internal control system include:
- Organizational structure, as documented through organizational charts and position descriptions
- Policies and procedures, including hiring policies
- Separation of duties, especially related to the handling of revenue and expenditures
- A secure recordkeeping system
- Regular reconciliation of budgets and records, including within a HUD system such as TRACS