(A) Principle 1: The oversight body and management demonstrate a commitment to integrity and ethical values.
(1) The city has the responsibility to establish and maintain an adequate system of internal control and to furnish to the Common Council, various boards and commissions, governmental agencies, creditors, and others reliable financial information on a timely basis. An adequate system of internal control is necessary for the city to discharge these responsibilities.
(2) Controls help ensure that assets are not exposed to unauthorized access and use, transactions are properly recorded in the financial records, and the resultant financial information is reliable. External organizations and stakeholders of the city rely on financial information to make decisions toward appropriations, loans and other debt, grants, and other contractual relationships. City resources are dependent upon the system of internal control. Auditors are required annually to report upon the adequacy of the city’s systems for control over financial reporting and compliance per I.C. 5-11-l-27(e). The safeguarding of city assets and the reliability that the city and others can place upon its financial records is dependent upon the effectiveness of the internal control process.
(3) As the fiscal body, the Common Council expects the city administration to effect an internal control environment with policies and procedures necessary to provide reasonable assurance that practices cause effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations.
(4) The system of internal control is meant to keep the city on course toward its mission and to minimize surprises. The system promotes efficiency, minimizes risks of asset loss, helps ensure the reliability of financial information, and compliance with applicable laws, rules, and regulations.
(5) Internal control is a process; a means to an end, and not an end unto itself. The control environment is the foundation upon which all components of internal control are based. It sets the tone for city operations. Internal control is about people, operations, communications, and the work environment. It is not about policies and forms, though it takes shape through the implementation of relevant policies, procedures, and practices. Internal control can provide reasonable assurance, but no system of control can provide absolute assurance to the Common Council and other users of financial information.
(6) The Finance Department shall be charged with:
(a) Conveying periodic messages of the city’s internal control philosophy and expectations to all appropriate employees;
(b) Evaluating the city’s internal control system for weaknesses on a periodic (but no less frequently than annual) basis, providing solutions to any discovered weaknesses, and informing employees of necessary changes in procedure;
(c) Working alongside the newly formed Human Resources Department to establish a confidential reporting system for individuals to report suspected fraud and abuse of internal control policies; and
(d) Working alongside the newly formed Human Resources Department to institute procedures to address violations of policies and consequences for violations.
(B) Principle 2: The oversight body oversees the entity’s internal control system. As the fiscal body for the city, the Common Council is responsible for setting the institutional expectations for internal control, ensuring management is aware of the expectations, requiring the upward communications channels are open through all levels of management, and evaluating management’s effectiveness toward monitoring the control environment and implementing sound control policies and procedures. As the city’s chief fiscal officer, the Clerk-Treasurer will be the Common Council’s chief agent in implementing and managing the internal control policies and procedures.
(C) Principle 3: Management establishes an organizational structure, assigns responsibility, and delegates authority to achieve the entity’s objectives.
(1) Individuals with delegated approval authority, Board appointees, and department heads are responsible for establishing, maintaining, and supporting a system of internal controls within their areas of responsibility, and for creating the control environment that encourages compliance with city policies and procedures.
(2) Adequate supervision is necessary to monitor that internal controls are operating as intended, and to help ensure the reliability of accounting and operational controls by pointing out errors, omissions, exceptions, and inconsistencies in procedures. All staff members in leadership roles are responsible for the application of this policy and the design, development, implementation, and maintenance of systems of internal controls focusing on the effectiveness of operations and the safeguarding of assets within his or her respective areas of responsibility. All levels of management and supervision are responsible for strengthening internal controls when weaknesses are detected. Department managers should periodically review departmental procedures to ensure that the general principles of internal control are being followed.
(3) The Finance Department has the primary responsibility for internal control over financial reporting and compliance with applicable laws, rules, and regulations. The Clerk-Treasurer is the city’s chief source for information and assistance to staff and department heads on this topic, and will make resources available to assist in administering this policy.
(4) The Mayor, department heads, and Board members are responsible for internal controls over employee recruitment, hiring, separation, promotion, job classification, employee rights, and salary administration.
(5) The Clerk-Treasurer and members of the Common Council are the city sources for information and assistance on this topic, and will make resources available to assist in administering this policy.
(6) All levels of internal control are subject to examination by external auditors who are required to report on the adequacy of internal controls over finance and compliance. Department heads are responsible for prompt corrective action on all internal control findings and recommendations made by internal and external auditors. The audit process is completed only after department heads receive the audit results and take action to correct internal control weaknesses, improve systems, or demonstrate that management action is not warranted. Department heads have the responsibility to ensure that those who report to them have adequate knowledge, skills, and abilities to function within, and contribute to, an effective internal control environment. This includes providing access to appropriate training on topics relevant to their job responsibilities.
(D) Principle 4: Management demonstrates a commitment to recruit, develop, and retain competent individuals.
(1) The city employee handbook provides a roadmap for recruiting and maintaining quality employees. Prior to employment, individuals may be subject to pre-employment background screening. While employed full-time, employees are entitled to a benefits package, including health insurance and certain other post-employment benefits. The city will continue to assess the best recruitment pools and tools for the different skill sets of skills necessary to adequately implement and maintain quality internal controls.
(2) Job descriptions will be updated where necessary to reflect internal control responsibilities and duties. Employees will be regularly trained in internal control methods and all training will be documented in employees’ personnel files. Employees will be regularly evaluated by his or her supervisors on internal control duties and receive feedback on possible improvements.
(E) Principle 5: Management evaluates performance and holds individuals accountable for their internal control responsibilities. Individuals are held accountable for his or her internal control responsibilities through a recognized structure that includes relevant job descriptions, operating procedures, periodic reviews, regular feedback, and a progressive disciplinary policy. Additionally, city administration seeks to address issues in specific departments and positions through regular one-on-ones with department heads.
(Res. 2016-15, passed 12-14-2016)