HOW TO CREATE A SUPPORTIVE CONTROL ENVIRONMENT - INTERNAL CONTROL PERSPECTIVE





The control environment is the foundation for all other components of internal control. To create a supportive internal environment for internal control, the basis should be to address each of the basic principles making up the component “control environment”.

This involves the followings;

Develop and Implement Sound Integrity and Ethical Values


The management should make sure high standard of ethical behavior exists and processes are in place to ensure staff comply and fulfill their duties with integrity.


HOW TO CREATE A SUPPORTIVE CONTROL ENVIRONMENT - INTERNAL CONTROL PERSPECTIVE




To achieve this is the organization has to:


i.    Develop, integrate, and disseminate a Code of Conduct: The code should stipulate the expected behaviors of employees and management in the organization.

ii.  Provide training opportunities on ethics: Training and sensitization opportunities should be given to all employees in areas of ethics to ensure that employees have the knowledge of what is expected of them.

iii. Institute disciplinary and motivation measures: Make known explicitly that penalties or disciplinary actions will be enforced on non-compliance with the Code of Conduct.



 Develop Supportive Management Philosophy and Operating Style


Management actions and attitude should be supportive towards effective internal control at all times. This is what is known as “tone at the top”.

The following issues will help the Management achieve this:


i.    Management to internalize the code of conduct: This is by exhibiting behaviors that are consistent with the Code of Conduct.

ii.  Management must “lead by example”: Management should demonstrate high ethical

values, compliance to all organization’s policies and procedures.


iii. Fair and honest interaction. Management’s interaction with suppliers, customers, and other external parties should reflect fair and honest dealing.

iv. Institute Investigation of Non-compliance to the code of conduct: Management should institute  time  inquiries,  investigations  and  corrections  on  any  suspected  unethical conduct.



Establish Mechanisms to Recruit and Retain Competent Employees


Favorable internal control environment also requires competent and honest staff. In this case the

PSO management must makes sure that they put in place policies and procedures that facilitate to attract, develop and retain talents in support of the organization’s objectives including policies

and practices for managing performance.


The following practices can help to achieve this:


i.    Establish  and  maintain  up-to-date  job  descriptions  for  all  employees.  The  job descriptions should detail the responsibilities of each position as well as the qualifications needed to fill the position.

The  job  description  should  be  kept  up-to-date  to  adapt  to  changes  in  knowledge, technology and responsibilities.

ii.  Follow appropriate hiring policies. Among the practices here could include having an open and transparent hiring process, which is documented to ensure conscious and un- conscious biases are avoided.

Before hiring, all potential new employees are thoroughly checked their backgrounds, qualifications, past employment records, and on references.

iii. Assign  authority  and  responsibilities  in  an  appropriate  manner:  Employees  should posses all the authority and only authority needed to fulfill their assigned responsibilities as outlined in their job descriptions.

iv. Provide proper training to employees: To maintain a competent workforce, providing training opportunities using a combination of on-the-job and formal training.

v.   Conduct period performance evaluations: Management must periodically review and document employees’ performance on an individual basis, and corrective actions should be taken when needed.

vi. Set appropriate criteria for promotion: Management should set appropriate criteria for promotion based on performance goals.

The criteria should be realistic which will not invite employees to “cut corners”.




Establish Appropriate Structure, Authority, Responsibilities and Accountability


The management of the organization must establish appropriate reporting lines and authorities and responsibilities in pursuit of objectives, holds individuals accountable for their internal control responsibilities in the pursuit of objectives.

The following considerations will help achieve this:


1.   Design and organizational structure/chart: The structure should establish reporting lines from top to lower levels of management (e.g. board/council, CEO, Senior Management, Management, Personnel etc).

2.   Define, assign, and limit authority and responsibilities: Use the established organisation structure to assign responsibility and authorities to different organs and employees.

Pay particular attention on achievement of appropriate “segregation of duties” at various

levels of the organisation.


3. Enforce accountability: Hold individuals accountable for their internal control responsibilities in the pursuit of organizational objectives.

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