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UCSD Office of the Controller 1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

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Page 1: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 1

SAS112 Implementation UCSD Status Update

Page 2: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 2

SAS112 Refresher

Communication to the Governing Board of Internal Control Related Matters Noted in an Audit.

Significantly “lowers the bar” as to what is required to be reported.

Is effective for universities for the current fiscal year that began June 30, 2006.

Page 3: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 3

SAS112 Levels of Reporting

A control deficiency exists when the design or operation of a control does not allow for the prevention or detection of misstatements in a timely manner.

A significant deficiency is a control deficiency that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of our financial statements that is more than inconsequential will not be prevented or detected.

A material weakness is a significant deficiency that results in more than a remote likelihood that a material misstatement of our financial statements will not be prevented or detected.

Page 4: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 4

SAS112 Reporting Triggers for UCSD

A significant deficiency is triggered for the campus if the misstatement “could be” $2.9 million.(0.2% of Oper. Exp.)

A material weakness is triggered for the campus if the misstatement “could be” $14.7 million.(1% of Oper. Exp.)

Certain conditions defined are “presumptive” of the above.

Page 5: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 5

SAS112 Presumed Significant Deficiencies or Material Weaknesses

Ineffective governance or ineffective oversight of internal control.

Material misstatement of the financial statement discovered by the auditor during the annual audit.

Ineffective internal audit or risk assessment function.

Ineffective regulatory compliance function. Identification of any fraud on the part of senior

management. Failure by management to assess a significant

deficiency that has been communicated to them, and failure to correct such deficiency.

Page 6: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 6

Requirements for Key Controls Under SAS 112

A key control must exist.

A key control must be functioning effectively.

A key control must be documented.

Page 7: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 7

Why is a Reportable Condition Under SAS112 Likely at UCSD?

Similar requirements in the corporate world resulted in an initial high percentage of reportable matters.

UCSD’s control environment is highly decentralized.

SAS112 has already been in effect for UCSD for 8 months.

All requirements of a key control will be difficult to meet initially.

We are trying to do this with existing resources. Corporations spent millions.

Page 8: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 8

Strategies in Response to SAS112

Identify Key Controls Non-IT controls have been identified

and confirmed. IT controls in process.

Assess Key Controls Beginning with core business functions. Working on improving systems for

overall mitigating controls.

Page 9: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 9

Strategies in Response to SAS112

Assess Presumptive Conditions Evaluation in progress.

Make Necessary Changes in Response to Assessments Will proceed as assessments are

completed. Communicate Widely Regarding

Control Responsibilities Working with VC offices to establish

contact with leaders in various areas. Presenting to all business officer forums.

Page 10: UCSD Office of the Controller1 SAS112 Implementation UCSD Status Update

UCSD Office of the Controller 10

Principles of Good Internal Control

Internal Control is the responsibility of EVERYONE.

Control is a person at the source, knowing the right thing to do, and DOING IT.

If you are relying on someone else to be the “bad guy”, we have lost control.

Accountability is essential if we are all going to do the right thing every time.