Current through Register Vol. 46, No. 39, September 25, 2024
(a)
The general methodology by which management is carried on within an
organization; also, any of the numerous devices for supervising and directing
an operation or operations generally. Internal control, a management function,
is a basic factor operating in one form or another in the administration of
every organization, business or otherwise. Although sometimes identified with
the administrative organism itself, it is often characterized as the nervous
system that activates overall operating policies and keeps them within
practicable performance ranges. The principal elements contributing to internal
control are usually these:
(1) recognition
that within every organizational unit there are one or more functional or
action components known as activities, cost or responsibility centers, or
management units with appropriate segregation of functional
responsibilities;
(2) delegated
operating authority in each organizational unit permitting freedom of action
within defined limits;
(3) the
linking of expenditures--their incurrence and disposition--with specified
individual authority;
(4)
end-product planning:
(i) by means of a
budget fitted to the organizational structure and to its functional components,
thus maintaining dual forward operating disciplines; and
(ii) the adoption of standards of comparison
and other performance measurements such as standard costs, quality controls and
timing goals;
(5) an
accounting process and system of record procedures adequate to provide
organizational and functional administrators with reasonable accounting control
over assets, liabilities, revenues and expenses and also provide administrators
with prompt, complete and accurate information on operating performance, and
comparisons with predetermined performance standards;
(6) periodic reports, consonant with
accounting and related records, by activity heads to supervisory management;
reports serving as feedbacks of informative pictures of operations, and as
displays of favorable and unfavorable factors that have influenced
performance;
(7) internal check,
built into operating procedures, and providing maximum protection against fraud
and error;
(8) frequent
professional appraisals, through internal audit, of management and its policies
and operations generally, as a protective and constructive management service,
its emphasis varying with the quality of operating policies and their
administration.
(b) The
construction of the above controls in such a manner as to stimulate and take
full advantage of those natural attributes of individual employees, i.e.,
personnel of a quality commensurate with responsibilities.
