Maintaining Internal Control Processes and Procedures During Turnover in Local Government Agencies

High Turnover in Your Local Government’s Financial Department? These days, many local governments financial departments’ biggest challenges are being understaffed + high turnover. Maintaining internal control processes and procedures during these high stress periods is critical to your current staff’s workflow, mindset, and overall department stability.

In this post, we will be talking about

• WHY strong internal controls are important
• HOW & WHEN to evaluate your internal controls and procedures
• WHAT steps to take to incorporate new or strengthen existing internal controls

WHY strong internal controls (especially during transitions) are important

Procedures and controls in a local government agency are there to protect the taxpayers but also to protect the workers from themselves. High turnover increases stress on staff and managers and can cause temptations (whether with intent or not) to cut corners or override controls to “get the job done.”

For example:

Family emergencies and natural events occur every day. For instance, Sally, your AP clerk, must leave the agency without giving notice because one of her kids is seriously ill. Mary was reviewing Sally’s checks. If Mary now writes the checks and no one has been trained to review checks, she has complete control over the entire process; this opens an opportunity for mistakes, or even fraud, to occur.

HOW & WHEN to evaluate your internal controls and procedures

In the previous example, it’s easy to see that the control and procedure for writing checks was breached – maybe because controls were not in place or because they had not been evaluated recently. But how do you evaluate your controls?

Here are the steps to evaluate the existing controls:

1. Are workers generally stressed? Do they have a sense of their workday and what they’re supposed to do? It may seem counterintuitive, but sometimes stress is reduced by more control, as people know what’s expected of them and what is not.
2. When an employee leaves (and they do), is there pandemonium? Do bills go unpaid? Does work pile up in one area? Have a back-up plan for when your process gets interrupted (Plan B!).
3. Do some checks and balances look “a little off?” Sometimes an odd sense of not-right can indicate that controls and procedures need reevaluation.

Bottom line: Evaluating your processes is a constant cycle to keep your internal controls tight and accurate, especially during turnover.

WHAT steps to take to incorporate new or strengthen existing internal controls

The best time to work on problems is before they happen. Here are some steps.

1. Plan your controls so that your procedures and controls are stable during turnover.
   1. Design the controls based on your knowledge of the systems you have.
   2. Discuss the controls and procedures based on past events and existing rules and regulations for your agency’s level and the local government council’s direction.
   3. Document the findings based on your agency’s protocols for PDFs, hard copies, electronic documents, etc.
2. Find the employee manual for the agency. Is it current?
   1. Is there a job description for each person in the organization?
   2. Does each staff member have a separate (backup) person who knows their job? Is that part of the culture in your agency?
   3. Is there a backup to the backup? Backed-up backups are achieved by multiple cross-training activities while still maintaining segregation of duties.
   4. Has each staff member signed something showing their knowledge of their job description and work rules/benefits/etc.?
3. Have a Transition Plan.
   1. What happens when someone leaves suddenly?
   2. What happens when someone gets promoted or changes positions?
   3. Do the managers know how to do everyone’s jobs in their departments or at least have a good idea so they can step in… especially in a particularly small agency?
4. Regularly (make that continuously) test each internal control/procedure to see if they’re airtight. If something could be improved, fix it. Rinse and repeat. Internal controls and procedures are not a once-and-done. Things change.
5. Seek outside help if you do not know or if you do not have the time to monitor your methods. Sometimes it’s best not to wait to find out if your systems are broken. Even if you’re new to the agency, or there are suddenly lots of problems, a huge number of people leaving, and stress has reached DEFCON 1, it’s a good idea to call for outside help. An independent reviewer can help to identify problems areas and provide recommendations for improvement.

Final Thoughts

Even if things seem to be going well, having a yearly, semiannual, or even quarterly audit of your internal controls will not only keep your staff trained and involved but processes up-to-date and accurate to keep the machine (your department!) well-oiled and going.

With proper internal controls and sound work procedures, your team can be confident they’re doing the right thing, and everyone sleeps better at night.

Please contact LSL CPAs if you have questions on this topic.