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2. Types of Internal Controls
The following types of internal controls are expected to be in place in an organisation, handling Tsunami Relief work to have effective control over operations.
• Structure of the Organisation
• Duties and Responsibilities of various individuals
• Lines of reporting
2.1 |
Organisational Controls
An organisation chart needs to be in place indicating clearly:
- Structure of the Organisation
- Duties and Responsibilities of various individuals
- Lines of reporting
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2.2 |
Segregation of Duties
No single individual should be allowed to execute and process a complete transaction. As far as possible the following functions need to be segregated:
- Initiation of a transaction
- Authorisation of a transaction
- Execution of a transaction
- Recording of a transaction
- Custody of assets
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2.3 |
Supervision
Supervision needs to be done at all levels and responsibility for supervision should be clearly laid down.
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2.4 |
Authorisation and Approval
All transactions should be approved by an appropriate person prior to undertaking same. The limits for authorisation and approval need to be laid down in writing.
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2.5 |
Arithmetical & Accounting Controls
These controls include checking the arithmetical accuracy of records, checking of totals, reconciliations, sequence checks and preparation of trial balances. All documents printed need to be pre-numbered. (Eg:Receipts, Goods Received Notes etc). Control should be exercised over printing, issue and custody of such document books.
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2.6 |
Budgetary Control
It is expected that budgets are prepared and approved for different activities before they are undertaken. Periodically actual should be compared with budget and major differences need to be investigated.
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2.7 |
Internal Audit
For large organisations an independent Internal Audit Department may be set up with the responsibility of reviewing and reporting preferably on a monthly basis on –
- The adequacy of the internal controls in existence
- Compliance with laid down rules and regulations
- Frauds and other irregularities
- Recommendation for improvements
The Internal Audit function can either be done by an independent team employed by the organisation or given to an independent firm of Chartered Accountants. The report of the Internal Auditors should be submitted direct to the Chief
Executive. |
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2.8 |
Rotation of Staff
Wherever possible the staff of the organisation should be rotated in such a manner that each person does not continue to perform the same scope of work at a particular location for a long period of time. This is recommended to prevent or minimise collusion among the staff and third parties.
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