Setting the Tone At The Top with Internal Controls
Internal controls are the necessary rules, technology, and structure that help catch honest errors and dishonest acts. These safeguards represent a much broader financial stewardship than simple fraud prevention. When well deployed, maintained, and enforced, these controls assure an organization will achieve its mission and its goals. In this post, we’ll be exploring the third and last component of truly effective internal controls: a culture of integrity (A.K.A. the ultimate success story).
If you missed the series finale on this subject you can catch up HERE, otherwise, skim the following post-op for a synopsis of the issues at play.
Here, at Cougar Mountain Software, we talk about a culture of integrity in the same terms we talk about scaffolding. Everyone has seen it but rarely does it catch the eye. One’s gaze usually slips beyond scaffolding to the architectural marvels being supported, fed, and grown by the vertical game of chutes and ladders. We remember the ebb and flow of hard hats, the inconvenience of construction traffic, the progress made upon the actual building — “today they added windows,” or “when did that stucco appear?” But it’s scaffolding that makes all of that doable. It’s scaffolding that allows civilization access to immense heights and enables us to create structures as tall as mountains. Just as it is with a healthy culture of integrity. The seemingly delicate, vulnerable, and transparent exoskeleton doesn’t intimidate. It is not enviable or awe-inspiring when looked at from the outside, nor do people think of it when describing the final construction. But the build wouldn’t have ever HAPPENED without it.
WITHIN the scaffolding, its significance changes. Safety rules and regulations are heavily enforced. Every puff of wind is noticed, and the flexibility and resiliency of the spindly structure become of utmost importance. All workers vigilantly watch for weak points, communicate danger areas, and act quickly when adjustments are required. When it is all said and done, employees will take pride in the craftsmanship of their cumulative creation and their own contributions to it. Even as they recognize it was made possible by, reinforced by, and protected by the scaffolding. Their experience with the scaffolding will determine whether they enjoyed working on a particular project or hated it. Results are secondary. A company’s internal controls need to be just as regulated, flexible, and resilient as those thin lifelines. They require the buy-in of the employees who operate within them and should give enough “room” for people to collaborate in tandem and synchronically.
The best laid internal controls, like the best-assembled scaffolding, lead to the most impressive constructions. Regardless of how you implement other security or deterrence measures, says Denise, “You’re going to need a strong, healthy culture that keeps people enthusiastic and working together to achieve your organization’s mission.”
“Take a minute to think about how your employees, your volunteers, granters, and other stakeholders of your organization would describe the culture of your organization.”
Where Cougar Mountain Software thinks ‘scaffolding’, Denise describes personality. “An organization’s culture IS its personality,” says Denise, and it will be determined as much (if not more so) by informal behavior as it is the official code of conduct. In her 22 minute presentation, Denise takes the audience through various “Accountability Failures” which can sneak into the DNA of a corporate environment. Ask yourself the following questions, she suggests.
If one or more of these lead to troubling or unknown answers, it may denote something malignant or missing within your organization’s culture. Such issues could leave you vulnerable to under-performing employees, unmet quotas, high turnover rates, or fraud. To illustrate this further, Denise examines the recent Wells Fargo scandal. Describing the incident as a model for “inconsistent culture” and “unrealistic goals,” she leads viewers through a jaw-dropping exercise by comparing the published “values” of the company to their real-life actions (segment starts around 8:16).
All of which emphasizes the importance of a strong, transparent, and accountable culture of integrity. Within forensic accounting and CFE circles, it’s called “The Tone at the Top” and few things have such a large effect on the overall health of the company. Denise ends her final webinar with a handful of tips and tricks that will help wayward work environments get back on track.
For the complete list (minute 17:30) and even more resources, we recommend you watch the webinar. Consider inviting your department leaders or other employees to view it as well; you may jump-start a conversation that’ll increase accountability and transparency.
Happy culture building!
Denise McClure is a forensic accountant and certified fraud examiner. Learn more about her and her fraud-fighting company, Averti Solutions, at www.avertisolutions.com.
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