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Internal Control

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STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
SUITE 500
525 PARK STREET
SAINT PAUL, MN 55103-2139

REBECCA OTTO
STATE AUDITOR

(651) 296-2551 (Voice)
(651) 296-4755 (Fax) state.auditor@state.mn.us (E-mail)
1-800-627-3529 (Relay Service)

Statement of Position
The Importance of Internal Controls
Internal controls are designed to protect a local government unit from loss or misuse of its assets. Internal controls also ensure that all transactions are properly authorized and the information contained in financial reports is reliable.
This Statement of Position will provide public officials and employees with practical answers to some of the questions most frequently asked about internal controls.
What is the purpose of internal controls?
Internal controls help safeguard funds, provide efficient and effective management of assets, and permit accurate financial accounting. Internal controls cannot eliminate all errors and irregularities, but they can alert management to potential problems.
How much will this cost?
The cost of internal controls should never exceed their expected benefit. When adopting polices and procedures on internal controls, maintain a balance between what is needed to ensure public confidence and to maintain the integrity of the financial systems with the cost of providing the control in terms of money, time, and efficiency. Many simple and cost-effective internal control procedures are available.
Does someone need to review every transaction?
No. It is not practical or profitable to attempt to independently review every transaction.
Instead, management should be alert to “red flags” that could indicate potential problems.
Looking into “red flags” will not only detect irregularities, it will prevent them from occurring in the first place because an environment of accountability will have been established. What are...

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