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SAS 112 - New Internal Control Documentation Requirements

To L4 Department Financial Managers:

The Controller's Office is offering training sessions on the new requirements for internal controls documentation that will impact departments immediately. Sign up on ICE for one of the following sessions with course code 6220:

March 29, 2007 2 pm - 4 pm 150 University Hall

April 11, 2007 3 pm - 5 pm 150 University Hall

The presentation and checklist that will be discussed in the sessions are available online at http://controller.berkeley.edu/sas112/.

The new standard is known as SAS 112 (Statement of Auditing Standards No.
112, "Communicating Internal Control Related Matters Identified in an Audit"). This standard will be incorporated into our external financial audit conducted by PricewaterhouseCoopers (PwC).

SAS 112 lowers the bar for reporting internal control deficiencies to the Chancellor and The Regents. Control deficiencies could subject the University to greater scrutiny by the federal government and may even impact the University's ability to obtain research funding. Clearly, the University wants to avoid negative findings.

The Controller's Office has been working with our PwC audit team to identify our controls that support financial reporting. Additionally, there have been a series of meetings with various groups on campus from the Chancellor to Chief Administrative Officers discussing SAS 112. The goal is to ensure that key controls are in place and we can demonstrate that they are operating as intended.

SAS 112 has important implications for all campus departments, not just those in the central offices. Starting in January 2007, departments are responsible for documenting key controls in the following areas:

* General Ledger Verification (All Funds)

* Overdraft Funds

* Payroll Expense Verification

* Effort reports (PARS)

* Physical Inventory

* Purchasing and Payables Invoices

* HRMS/OPTRS

Departments need to review the key processes and controls within their organization, the amount of existing documentation, and the steps that might be taken to improve the control environment in their area.
Departments need to ensure that they maintain sufficient evidence of review for the key controls. Departments can use a checklist to document their key controls. Please note, the key controls identified for the preparation of the financial statements are not the only controls that departments need to monitor. Other controls exist for governance and regulatory compliance.

Please contact Sharon Kurek, Manager of Controls and Accountability, in the Controller's Office if you have any questions via email at skurek@berkeley.edu.

Last updated: March 28, 2007