State Assessment of Internal Controls Final Report, May 2007
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V. CONCLUSIONS AND RECOMMENDATIONS
This pilot examined the implementation of the State Internal Control Self-Assessment Instrument as a method for reviewing and documenting the adequacy of a State’s internal control system, identifying internal control weaknesses, and providing documentation of findings and possible corrective actions. This chapter presents the conclusions and implications derived from the nine pilot States' experiences. The chapter concludes with recommendations for future pilots.
Based on the self-assessment process, the nine pilot States offered the following conclusions for future pilots:
A successful Instrument implementation process needs involvement across program areas. States realized that the scope of the self-assessment process was broad, requiring the involvement of common supporting areas that cross walk several different programs, such as Human Resources and Information Technology. As a result, the commitment of all parts of the organization is critical to the success of the self-assessment process.
High-level management support is important for optimal implementation. For those States without the necessary organizational support, the self-assessment process was a greater challenge. The States that found the self-assessment process most rewarding were those States that had a high level of commitment from the top State organizational level.
Redundancies in the Instrument did not serve a useful purpose. All nine pilot States expressed a need to streamline the Instrument and eliminate the redundancies. States also requested creating a section specific to the child care program. WRMA revised the Instrument as explained in the section below.
States need to allow adequate time to complete the self-assessment process. States recommended establishing an agreed upon timeframe to ensure timely and thoughtful completion of the Instrument. Most States indicated that a 90-day timeframe for Instrument completion was adequate. Several States recommended scheduling the self-assessment process to occur within a timeframe that does not conflict with other major agency activities. Most States recommended updating the Instrument every two years.
States may use hyperlinks to refer to documents on the State’s Internet and/or Intranet Web site to ensure that the Instrument stays current by linking dynamically to continuously updated documentation. Most States indicated that combining all of the documentation in a single document was helpful. Using the hyperlink rather than printing the complete set of documentation was beneficial because the link will route to the most current version of a document. This is important as many policy documents are on a regular schedule for updates. The Illinois Project Team recommended establishing an area on the CCB Web site for States to provide links for sharing internal control documentation, which is not available on either the Internet or the State agency Intranet.
Agency allocation of an overall project coordinator is critical to the self-assessment process. The project coordinator needs to have top-down management support, sufficient authority to set deadlines, availability during the entire process to provide clear instructions, answer questions, consult with team members and coordinate with top agency leadership.
Despite the scope and complexity of the Instrument, the costs of conducting a State Internal Control Self-Assessment are relatively modest. Kentucky and Maine estimated costs of approximately $3,000, while Montana and Washington estimated between $8,000 and $9,500. The range for all States was $3,032 through $9,445. The costs for the Commonwealth of Puerto Rico were significantly higher, due to several factors. Puerto Rico involved the greatest number of personnel in the site visit and in the Instrument implementation process. Puerto Rico also expanded the scope of the self-assessment process to examine areas needing attention as identified in a prior audit.
C. Revisions to the Instrument
The nine pilot States recommended elimination of the redundancies and the tailoring of certain elements to the child care program. Based on the advice of the participating States and ACF staff in Regional Offices, WRMA modified the Instrument. The objective of the modifications was to reduce the redundancy, clarify the instructions, and tailor Section III to include elements specific to the child care program. In order to involve all pilot States in the process of Instrument modification, WRMA shared the revised Instrument with the States and the ACF staff in the Regional Office who drafted the initial Instrument. Following receipt of all of the comments, WRMA made further revisions to the Instrument. Appendix M contains the revised Instrument.
The modifications to the Instrument included:
- Eliminating or combining 23 elements in Section I and II (Control Environment and Risk Assessment) for a reduction of 23%;
- Reviewing and clarifying all instructions for each section of the Instrument;
- Revising Section III: Common categories of control activities to specifically focus on the child care program; and
- Making minor changes to Sections IV and V.
The modifications did not affect the integrity of the Instrument.
The Instrument can provide the CCB staff in the Central and Regional Offices and States with a systematic method for reviewing and documenting the adequacy of a State’s internal control system, identifying internal control weaknesses, and providing documentation of findings and possible corrective actions. Recommendations include:
- Obtain the commitment of all parts of the organization prior to initiation of the process. A successful Instrument implementation process needs involvement across program areas. States realized that the scope of the self-assessment process was broad, requiring the involvement of common supporting areas that cross walk several different programs.
- Market the Instrument to programs in addition to the child care program. Some States adapted the Instrument to meet other needs beyond the child care program. Puerto Rico used the self-assessment process to re-examine fiscal areas highlighted in a previous audit, and included an action plan with the self-assessment findings. Maine intends to strengthen its Performance Evaluation System (PER) by including a section focusing on ethics and personal integrity.
- Consider involving an external entity to review the accuracy and validity of State responses. Arkansas recommended enlisting an external entity to validate the self-assessment responses from the agency. Puerto Rico and Maine also recommended developing a verification or validation process to ensure that responses were accurate and appropriate. Several States recommended the involvement of the Regional Offices to assist with the validation process.
- Consider integrating the self-assessment process with the agency’s strategic or business plans. High-level management support is important for broader implementation of the self-assessment process. States may choose to involve senior management staff initially to determine the applicability of the self-assessment process with the broader agency mission or strategic planning process. Within the child care program the Instrument can be combined with the CCDF State Plan to serve as a biannual update of State efforts towards the prevention of errors that could result in improper payments. Senior management staff can review responses to ensure consistency with agency mission and strategic and business plans.
E. Recommended Steps for Successful Implementation
Based on the first pilot State experience, Kansas offered several logistical steps that can maximize the effectiveness of the methodology process. The following steps provided useful guidance for the nine pilot States’ implementation experience and support the above recommendations. The steps include:
Previous Page | Table of Contents | Appendix A. Site Visit Agenda >>1. Select one overall project coordinator. It is critical that the project coordinator is available during the entire process to answer questions, consult with team members and coordinate with the CCB or WRMA.
2. Select a full range of State Project Team members. The following list includes potential County and Contractor staff for States where that may be appropriate. Appendix B provides a table listing potential team members and their functions. Potential team members may include:
a. High and Middle Level Management;
b. Audits;
c. Human Resources;
d. Information Technology;
e. Program Staff including those working on systems for programs if different than IT staff;
f. Quality Assurance;
g. Eligibility staff (State, County or contractors);
h. Licensing Staff;
i. Finance/Accounting;
j. Operations;
k. Public Information Officer;
l. Legislative Liaison; and
m. County management staff if County Administered.
3. Hold an initial team meeting to explain purpose, process and sell the project. If possible, have a senior level management staff person kick-off the project at this meeting. Go over each section of the document and make specific assignments to the team members for each section of the document. States that performed this step reported that it was very important to successful completion of the document.
4. Hold additional follow-up meetings to ensure that all participants tasked with completing sections of the assessment understand the purpose and process.
5. Make sure the identified coordinator is available during the entire process to answer questions, hold conference calls, consult with team members and coordinate with the CCB or WRMA.
6. Designate and involve support staff at the beginning for tracking and compiling data and information, editing for errors, checking grammar, and providing writing style consistency.
7. Provide all team members with an electronic version of the document to use in completing their assigned sections. Have all information entered on the electronic document and sent to coordinator who can then assign support staff to integrate it into one document. If more than one team member completes a section, integration with oversight from coordinator may be necessary.
8. Establish an agreed upon type style and font size so that responses can be inserted into the master document easily.
9. Discuss documentation: Web sites (hyperlink to both Internet and Intranet) and hard copy attachment options with all team members.
10. Hold additional meetings with all team members or sub-groups to share the completed document, receive comments and feedback, and make changes to document as needed.
11. Have senior management staff review responses to ensure consistency with agency’s mission and strategic or business plans.