This is the second part of the post that covers the remaining 3 key areas for the development of an internal controls framework.

  • Assets:
    • It is critical to have an asset register that accurately records assets, their location and who is responsible for them.
    • Are all the assets in safe working order and are properly maintained?
    • Are the assets properly secured against theft?  For example, are assets securely stored away at the end of the day, is there a security system or security cameras.
    • Are security codes o access property and equipment changed on a regular basis?
    • Ensure the insurance policy adequately covers the value of the assets?
  • Financial:
      • Do you receive accurate financial reports that show the overall performance as well as being compared to a budget?  Ensure reconciliations are completed on a regular basis throughout the year and not just once at the end of year.
      • Financial reports are received on a regular basis, in a timely manner and are understood.  This also highlights the importance of a written finance report that describes what has occurred.
      • Are financial transactions consistently allocated to the correct accounts?  A Chart of Accounts can assist you to achieve this but you still need to do regular checks.
      • Ensure all payments and receipts are supported with proper documentation and paperwork that has been checked and authorised?
      • Track and monitor funding agreements to ensure you are meeting the contracted obligations and not over spending?
      • Do the assets and liabilities actually exist and are they recorded at the correct amount?
      • Are you properly accounting for GST, PAYG and if you have salary packaging, FBT?
      • Are financial delegations, account approvals and payment processes adhered to?
      • Is an independent audit completed each year with the audit reviewed Board. 
  • Risk:
      • Do you have a risk management system that allows you to identify, assess and manage risks?
      • Do you have adequate insurance in place that covers, for example, public liability, professional indemnity and Directors and Officers.
      • Do you have a business continuity plan in the event your business suffers a major disruption such as from a fire, flooding or storm damage. 
      • If you have intellectual property how do you ensure it is properly protected.
      • How do you store and back up your computer files?  

    • As discussed at the start of this post in part 1, the purpose of these points was to provide a guide for the development of an internal controls framework.  These points are not intended to be a complete list but to highlight the extent of the issues that need to be addressed as you develop your internal control systems.  Again and as detailed in part 1, for more information follow this link to the CPA Australia website and the publication they have that is title Internal controls for small business.