N.Y. Comp. Codes R. & Regs. tit. 10 § 451.167

Current through Register Vol. 46, No. 51, December 18, 2024

Section 451.167 - Internal control

(a) The general methodology by which management is carried on within an organization; also, any of the numerous devices for supervising and directing an operation or operations generally. Internal control, a management function, is a basic factor operating in one form or another in the administration of every organization, business or otherwise. Although sometimes identified with the administrative organism itself, it is often characterized as the nervous system that activates overall operating policies and keeps them within practicable performance ranges. The principal elements contributing to internal control are usually these:

(1) recognition that within every organizational unit there are one or more functional or action components known as activities, cost or responsibility centers, or management units with appropriate segregation of functional responsibilities;

(2) delegated operating authority in each organizational unit permitting freedom of action within defined limits;

(3) the linking of expenditures--their incurrence and disposition--with specified individual authority;

(4) end-product planning:

(i) by means of a budget fitted to the organizational structure and to its functional components, thus maintaining dual forward operating disciplines; and

(ii) the adoption of standards of comparison and other performance measurements such as standard costs, quality controls and timing goals;

(5) an accounting process and system of record procedures adequate to provide organizational and functional administrators with reasonable accounting control over assets, liabilities, revenues and expenses and also provide administrators with prompt, complete and accurate information on operating performance, and comparisons with predetermined performance standards;

(6) periodic reports, consonant with accounting and related records, by activity heads to supervisory management; reports serving as feedbacks of informative pictures of operations, and as displays of favorable and unfavorable factors that have influenced performance;

(7) internal check, built into operating procedures, and providing maximum protection against fraud and error;

(8) frequent professional appraisals, through internal audit, of management and its policies and operations generally, as a protective and constructive management service, its emphasis varying with the quality of operating policies and their administration.

(b) The construction of the above controls in such a manner as to stimulate and take full advantage of those natural attributes of individual employees, i.e., personnel of a quality commensurate with responsibilities.

N.Y. Comp. Codes R. & Regs. Tit. 10 § 451.167