Here’s the scenario. You have finally got a full-blown accounting policy manual in place. It has taken several months and a lot of work, but it’s done.
NB: This is an article from Hotel Financial Coach
Something to be proud of indeed! But wait a minute, it seems like no one knows about these policies and whenever you speak about such and such internal control not being followed, you get the deer in the headlights look. This all too familiar stare means one thing, these people have no idea what you’re talking about.
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Your policy manual might be complete but you’re still a long way from compliance. What’s the solution? The answer is you need a regular program to test your control points to ascertain whether people are indeed following policy in the key areas of your operation. You need to create a monthly internal control review program and that’s what this piece is all about.
The starting point and the great thing about your policy manual is it’s broken down into approximately 30 different sections. Everything from cash to inventories to systems to food and beverage and all the way back to security and budgets and forecasts. What you want to do is take your inventory of sections and break them down into 12 areas where you combine like sections. For example, combine the 3 sections, purchasing, accounts payable and inventories into one. Another example would be prepaids, accruals and contra into one section. In the end what you want are 12 sections, conveniently 1 for each month.
Here is what my ICR section titles are:
Most section titles have a natural sister or brother so matching them up is not too difficult. Now that you have your 12 section titles laid out the job is to pull out the most important control points. In my ICR program, I test about 55% of all my policies. In total, I have approximately 550 policies and about 300 questions or test points on my ICR spread over 12 months.
What you want to do to make the ICR come alive is take a policy and turn it into a question. For example, I have a policy # 04-16 titled “items not requiring a purchase order”. I turn this policy into a question like this, “Have purchase orders been used for all items, other than food and items falling under Policy 04-16?” Now I have a question on my internal control review program. You can go thru each section and pull out the most important points to test and turn them all into questions.