Program Integrity and Internal Controls

The SFA’s financial management system must promote program integrity and establish internal controls. 

Program Integrity is defined as an organized and strurally sound financial management system that promotes program efficiency and prevents the inappropriate use of program funds.

This type of financial management system provides safeguards that improve the administration of program income and costs and reduces fraud and improper payments through the use of internal controls.

When program integrity is applied to a financial management system, Internal Controls means a process designed to establish and maintain effective oversight or internal control over the SFA's financial management system that provides reasonable assurance that the SFA is managing the program in compliance with all federal, state, and local regulations and terms and conditions of the program award.

The SFA's financial management system must have written procedures that describe its:

1. method for determing of a cost is allowable,
2. process for making payments,
3. procurement procedures, and
4. records that clearly report all financial transactions.

The financial transactions described in this section are also subject to procurement regulations. SFAs must also follow proper procurement procedures in addition to the guidance in this section for their financial transactions.

Well-designed internal controls will result in the following qualities:

• Effective and efficiency of operations
• Trackable method to reconcile all financial transactions, including but not limited to, bank statements and claims
• Method to maintain accountability for assets
• Reliability of reporting for internal and external use
• Preparation of reliable financial statements and reports
• Safeguards for the loss from unauthorized use or disposition of funds, property, and other assets which safeguarded against loss from unauthorized use or disposition which includes, but is not limited to, the following:
  • Segregation of financial duties
  • Resitricted access to information, i.e., one person does not control all financial operations without oversight
  • Edit check mechanisms built into all financial management operations
• Compliance with applicable laws and regulations
• Demonstrate compliance with federal, state, and local statutes, regulations, and the terms and conditions of the program award
• Prompt action when instances of noncompliance identified in audit findings.

A SFA’s internal controls are expected to be in compliance with the Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States or the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

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