What is Internal Control System (ICS)?

Refers to an organization’s whole system or network of methods, procedures, and plans which govern its activities to accomplish its goals and objectives.

According to the Commission on Audit, in its Training Handbook on Property and Supply Management System Expenditures, these are the components of an effective Internal Control Sytem:

1. All financial transactions must be properly documented.

The Agency’s ICS, policies, procedures in all financial transactions must be clearly documented and adequately supported.

2. Promptly record transactions and events.

All financial transactions and events should be promptly recorded in accordance with state accounting standards.

3. Transactions must be authorized.

All transactions should be executed by persons acting within the scope of their authority.

4. Segregate functions of authorizing, custody and accounting.

Key duties and functions such as authorization, custody and accounting shall be assigned to separate offices and individuals to eliminate opportunities to conceal errors and irregularities.

5. Ensure supervision scheme.

Qualified and continuous supervision of subordinates should be provided to assure adherence to approved policies and procedures.

6. Physical control and access to Agency resources should be safeguarded.

Tangible assets and records should be physically safeguarded. Access to these assets and records, both direct physical access through document processing, shall be in accordance with management’s authorization.

7. Asset accountability should be assigned and maintained.

Accountability for the custody and use of an asset should be assigned and maintained. Likewise, periodic comparison should be made of the existing asset with the recorded accountability (i.e., periodic physical count of asset) and that appropriate action should be taken on any differences discovered/known.

8. Built-in checks must be present.

Proofs of accuracy and documented trail of transactions are features that should be built into the execution and recording of transactions to assure their correctness.

9. Appraisal activity must be ensured.

Reviews of transactions and internal control should be performed in an on-going basis for proper monitoring of adherence to prescribed policies and procedures.

10. Prompt resolution of audit findings is necessary.

Officials shall promptly evaluate the findings and recommendations reported by auditors, determine proper action in reponse to audit findings and recommendations, and complete within established time frames all actions that correct or otherwise resolve the matters brought to management’s attention.

Reference: Commission on Audit | Training Handbook on Property and Supply Management System Expenditures