Modernizing Internal Control Checklists in a State or Local Government.

• Author: Rakers, Jack

Internal control checklists aren't the most exciting topic to work on in a government. Frequently, they are left alone unless something goes wrong. If used correctly, however, a comprehensive, well-designed checklist can be the first line of defense to notify management that something is wrong. This article outlines the history of the State of Illinois internal control checklist and lessons learned for the future.

In fall 1989, the Illinois Legislature passed an amendment to the Fiscal Control and Internal Auditing Act (FCIAA) that required all state agencies to establish and maintain a system or systems of internal fiscal and administrative controls. The act required the Illinois Office of Comptroller (IOC) and the Department of Central Management Services (CMS) to establish guidelines for all state agencies to perform a review of internal controls starting the following spring with an approval by the Legislative Audit Commission.

An internal controls checklist is defined as a series of questions about good internal controls that should be present in an agency. For the State of Illinois, this includes a series of questions broken down into eleven broad categories covering areas from general business items to grant administration. Agency line managers are given certain sections to review and designate whether the control is present, not applicable, or not present. If it is missing or not applicable, they must explain why. Line managers must also certify the controls to the agency director, who then certifies the controls of the entire agency.

No more electronic tapes

The state's internal control checklist was created in mid-1991, but it hadn't been touched for nearly 30 years. Even though there might have been a discussion every couple of years about doing an update, the project never seemed to get off the ground. There were valid concerns about relevance when the project was revisited in earnest nearly three decades later. The checklist was out of date, wasn't tailored to the state's needs, and referenced obsolete processes and technologies. For example, it contained questions referencing "electronic tapes," the primary method for storing and transmitting electronic records at the time. It was clear that the out-of-date checklist was itself obsolete, and the only way to move forward was to align with current times and practices. This timing for the revamp had come, as a changing workforce due to retirements was ushering in a new team, forming the basis of the Bureau of Internal Audit (BIA).

BI A is an independent bureau housed within CMS, the administrative agency for the State of Illinois. It is responsible for many functions (such as personnel, benefits, and procurement) needed by other state agencies. While CMS has...