Internal Controls Update – August 2024

Safeguarding Our University Through Policies and Procedures

From the Editor’s Desk

by Rod Smith, Director of Internal Controls

Earlier this summer, Accounts Payable and Vendor Services launched access to a new supplier self-service portal, PaymentWorks. Beyond streamlining supplier onboarding and updating their details, another benefit is that University staff no longer need to manage sensitive information during onboarding and verification. Removing this responsibility from our employees’ day-to-day workflows is just one way of helping to reduce risk through strong policies and procedures.

UNC-Chapel Hill is a complex institution with diverse functions, including academic instruction, research, student services and administrative operations. Given this, effective internal controls, particularly those related to policies and procedures, are crucial for ensuring its smooth operation and long-term success. Internal controls help universities manage risks, maintain financial integrity and support our educational mission.

Here’s why internal controls are important:

Ensuring Compliance with Regulations and Standards

Our University must follow federal and state laws, accreditation requirements and financial aid rules. Internal controls embedded in policies and procedures ensure compliance with these regulatory frameworks. For instance, controls related to federal financial aid programs ensure that funds are disbursed appropriately and that reporting requirements are met. Compliance with accreditation standards is monitored through controlled processes, ensuring our institution meets educational quality criteria.

Protecting Financial Resources

Internal controls are essential for safeguarding the University’s substantial financial resources from misappropriation, fraud or mismanagement. Policies related to budgeting, financial reporting and procurement provide a framework for monitoring and managing financial transactions. Procedures such as segregation of duties, authorization requirements and regular audits help prevent and detect financial irregularities, ensuring that resources are used effectively and transparently.

Supporting Effective Risk Management

We face a range of risks, and internal controls help identify and mitigate these risks through structured policies and procedures. For example, risk assessment processes might be established to evaluate potential threats to campus safety or research integrity. Data protection and cybersecurity-related policies address risks associated with sensitive student and research information. By proactively managing these risks, universities can protect their reputation and maintain operational continuity.

Enhancing Operational Efficiency

Operational efficiency is critical for us to fulfill our educational and research mission. Internal controls embedded in policies and procedures streamline administrative processes, reduce redundancies and improve resource allocation. Standardized admissions, registration and financial management procedures ensure consistency and accuracy, reducing administrative burdens and enabling staff to focus on core educational functions. Efficient operations contribute to a better student experience and more effective academic programs.

Safeguarding Academic and Research Integrity

Maintaining the integrity of academic and research activities is paramount for UNC-Chapel Hill. Internal controls related to academic policies, research compliance and ethical standards ensure that the institution upholds high standards of scholarly conduct. Procedures for managing conflicts of interest, protecting intellectual property and ensuring ethical research practices help preserve the credibility and reliability of academic outputs. These controls also support transparency and accountability in research funding and publication.

Promoting Accountability and Transparency

Internal controls foster a culture of accountability and transparency here at our University. Clearly defined policies and procedures outline expectations for faculty, staff and students, promoting ethical behavior and adherence to institutional values. Regular monitoring, reporting and oversight mechanisms ensure that deviations from established policies are addressed promptly. This promotes trust and confidence among key interest groups, including students, parents, donors and regulatory bodies.

Facilitating Strategic Decision-Making

Effective internal controls provide valuable insights and data that support strategic decision-making. By systematically tracking financial performance, operational metrics and compliance status, universities like UNC-Chapel Hill can make informed decisions about resource allocation, program development and institutional priorities. Policies related to strategic planning, performance evaluation and budgeting enable universities to align their operations with their long-term goals and adapt to changing circumstances.

Related Articles

Supplier invoice fraud: who pays up?

James Lockwood and Rahul Mansigani, Norton Rose Fulbright

If your business pays a fraudulent invoice by mistake, do you understand the legal position and what practical steps you should immediately take?

Fraudulent Activity by Persons Posing as Harvard Procurement Staff

Harvard University Risk Management & Audit Services (2021)

In 2021, there was an increase in fraudulent purchase orders and requests sent to external vendors at Harvard University, falsely claiming to be from “Harvard Procurement” staff. These scams often involved fake attachments and sought to purchase branded marketing items or request sensitive tax information. Some vendors confirmed the fraud by contacting Harvard, but others unfortunately experienced losses due to the scheme.

Fraudulent purchase order activity: Recent notice to suppliers

Macquarie University, Australia (2016)

Macquarie University detected a scam targeting Macquarie University and its suppliers. The fraud involved fraudulent quotations, credit account requests, and fake purchase orders. These orders appeared to have come from Macquarie but were from scammers. The goods were redirected once delivered, and suppliers were left unpaid.

FVS Eye on Fraud — Vendor Fraud

Amy Yurish, CPA — AICPA

Vendor fraud continues to be a significant threat to organizations. “Vendor, supplier, and procurement fraud” was cited as the second most prevalent fraud in the past 12 months by the 2016–2017 Kroll Global Fraud Annual Report. Further, technology has added a new layer of complexity to the fight against vendor fraud.