6.1.1.1.1

Purpose

Effective Date:

May 1, 1994

This part of the manual provides guidelines to state agencies for establishing a system of internal controls and internal audits that will safeguard assets, check the accuracy and reliability of accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies for accounting and financial controls.

6.1.1.1.2

Authority

Effective Date:

May 1, 1994

The Budget and Accounting Act (RCW 43.88) as amended by the Performance-Based Government Act of 1993 (RCW 43.88.160 (4)) requires the Office of Financial Management (OFM) to "Develop and maintain a system of internal controls and internal audits comprising methods and procedures to be adopted by each agency that will safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies for accounting and financial controls. The system developed by the director shall include criteria for determining the scope and comprehensiveness of internal controls required by the classes of agencies, depending on the level of resources at risk. Each agency head or authorized designee shall be assigned the responsibility and authority for establishing and maintaining internal audits following the standards of internal auditing of the Institute of Internal Auditors..."

6.1.1.1.3

Applicability

Effective Date:

May 1, 1994

6.1.1.1.3.1

This part is applicable to and binding on all agencies of the state of Washington, unless otherwise exempted by statute. The Budget and Accounting Act (RCW 43.88.020) defines the term "Agency" to mean and include "...every state office, officer, each institution, whether educational, correctional, or other, and every department, division, board and commission, except as otherwise provided..."

6.1.1.1.3.2

Agencies may request a waiver from complying with specific requirements of this part. The request must be in writing and must be approved in writing by the Director of OFM before the waiver may take effect. Such waivers automatically expire at the end of the fiscal biennium for which they were granted and must be reapproved in writing to remain in force.

6.1.1.1.4

Definition

Effective Date:

July 1, 1991

6.1.1.1.4.1

Internal control structure comprises the plan of organization and all methods and procedures adopted by an agency to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed policies. Internal control systems include both internal accounting and administrative controls. These two elements of internal control often overlap; however, it is not the intent of this policy to specifically address internal administrative controls.

Internal accounting controls encompass the plan of organization and all procedures and records that are designed to provide reasonable assurance that:

6.1.1.1.4.1.a

Obligations and costs are in compliance with applicable laws, regulations, and policies;

6.1.1.1.4.1.b

Funds, property, and other assets are safeguarded against waste, loss, unauthorized use, or misappropriation; and

6.1.1.1.4.1.c

All asset, liability, equity, revenue, expenditure/expense, and budgetary transactions are properly authorized, recorded, and accounted for to permit the preparation of accurate accounts and reliable financial and statistical reports and to maintain accountability over assets.

6.1.1.1.4.2

Administrative controls encompass all operational controls within an agency. Their purpose is to ensure that agency objectives are met economically, efficiently, and effectively; to ensure adherence to applicable laws, regulations, and policies; and maintain reliable information for evaluating managerial and organizational performance.

6.1.1.1.5

Basic Requirements

Effective Date:

July 1, 1991

6.1.1.1.5.a

Each agency director is responsible for establishing and maintaining on an ongoing basis an effective system of internal accounting control throughout the agency in accordance with Internal Control and Auditing Policies, Part 6, Chapter 1, of this manual.

6.1.1.1.5.b

Internal control systems are to provide reasonable assurance that objectives of the systems will be accomplished. The concept of reasonable assurance recognizes that the cost of internal control should not exceed the benefit expected to be derived. Reasonable assurance equates to a satisfactory level of confidence under given considerations of costs, benefits, and risks.

6.1.1.1.5.c

The policies and procedures contained herein are directed towards achieving the goals of internal control as given in the definition above and as required in the Budget and Accounting Act (RCW 43.88.160(4)). Chapter 2 of this policy contains internal control procedures, risk assessment checklists, and internal control checklists relating to specific types of assets and transactions. The procedures and checklists are by necessity very general in nature and may or may not apply to each agency's specific situation or needs. The checklists are provided as a tool for agencies to use in assessing risk and evaluating internal controls. In addition, agencies may use alternative methods to assess risk or evaluate internal controls. Agencies are encouraged to evaluate their environment and develop alternative methods or checklists that are specific to their individual needs. Alternative methods or checklists developed by agencies are to include, at a minimum, the areas from the general checklists that apply to their specific situation.