Creative controls

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Creative controls

• Kate Sayer
• Judith Miller
• September 2009

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This mornings themes

• Controls that are creative
• Control environment that does not stifle
  initiative/creativity
• Opportunity to explore/discuss

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What are internal controls?

• An action which increases the likelihood of
  achieving the charitys objectives and provides a
  safeguard against something going wrong
• More than financial controls

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Description of controls

• I guess that control is about having an aim,
  making sure that you have the means to achieve
  it, and managing those risks that can impair your
  ability to get there. It is a driving force that
  moves you in the right direction, but it sets
  your energys within a framework of policies,
  guidelines, ethical rules and accountability. It
  seeks to promote achievement but also depends on
  compliance with these policies. Also, it should
  provide safeguards against fraud and corruption
  and make sure value for money is secured as we
  strive toward excellence.
• (Source KH Spencer Pickett, Internal Control
  A managers journey)

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Definition of internal control

• The whole system of controls, financial or
  otherwise, established in order to provide
  reasonable assurance of
• Effective and efficient operation
• Internal financial control
• Compliance with laws and regulations
• (Source Chartered Institute of Management
  Accountants)

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Description of controls

• Most agree that control is based around three
  key concepts. That is
• It is a process that runs throughout the
  organisation
• It is based around people and how they behave at
  work.
• It can only provide reasonable not absolute
  assurance that objectives will be achieved.
• (Source KH Spencer Pickett, Internal Control
  A managers journey)

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Internal controls Why?

• Meeting objectives/managing risk
• Trustee responsibilities
• Protection of charity assets
• Protect beneficiaries and staff (and themselves)
• Protect reputation
• Apply income to charitys objects

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Why

• ..do controls fail?
• ..do you get non-compliance?

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How should we be approaching the design of our
control environment?

• Risk analysis
• Risk helps you identify any control gaps and
  address them
• It helps you streamline too where you are doing
  too much!

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Controls framework
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The Titanic what they had what they didnt
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Controls Framework

• Preventative
• Aims objectives
• Accountability
• Planning
• Training Competencies

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Controls Framework

• Detective
• Direct controls
• Monitoring
• Employee Welfare
• Independent review

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Start from the controls
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Controls mapping

• Map the existing controls onto the framework
• Insert questions into each box that are relevant
  to the particular activity
• Informed by risk appetite and experience
  controls you would expect

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The risk management cycle
Risk Identification Whats the concern? What is
the control risk?
Design What system design will give us adequate
control?
Effectiveness Is the system effective? Does it
control the risk?
Compliance Are we complying with our design in
practice
(Source Financial Stewardship of Charities,
Adrian Poffley)
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The right environment

• How do you get people engaged?
• How do you get them to take responsibility?
• How do you know it is working?

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Things to consider

• Provide boundaries without stifling
• Get those involved in the process to identify the
  risk and design the controls
• Do not design individual controls in isolation
• Think what sort of environment you want to create
• Controls need to evolve with the organisations
  growth

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Further information

• www.sayervincent.co.uk
• knowledge bank governance and control
• www.internalcontrolsdesign.co.uk
• Matthew Leitch radical new ideas on risk
  management, forecasting

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Questions