Updated Internal Controls – Integrated Framework

Northern VA Nonprofit CPAIn 1992, the Committee of Sponsoring Organizations (COSO) of the Treadway Commission first issued a report on internal controls titled Internal Controls- Integrated Framework. This was intended to monitor and guide the design, implementation and execution of organizations’ internal controls and to evaluate their efficacy. Internal controls are any procedures that allow an organization to monitor and optimally perform its operations, such as reaching company objectives, reliably reporting finances and complying with policies, laws and regulations. Someone who works as a nonprofit accountant in Fairfax can tell you: overall, they are for controlling risk for an organization.

22 years after Internal Controls – Integrated Framework’s first issuance, the rules presented in COSO’s internal control guidelines no longer apply perfectly to business practice or nonprofit governance. New factors of business operation must be considered. Internal Control- Integrated Framework incorporates these new developments, which include: complexity, changes in law, technology, and increased global interaction. The new framework provides for greater accountability and transparency in order to keep the integrity of internal control systems that support business governance and decisions. As nonprofit organizations communicate, calculate and serve their beneficiaries at faster rates than ever, it is essential that internal controls keep abreast of these changes.

The amendments set forth will also give Internal Control broader application in reporting objectives and evaluating operations. It will also make clear the terms that constitute efficient and successful internal control. Since, as nonprofit accountants in NorthernVA,  Gurman & Co. provides tax services to many businesses and nonprofit organizations, we are already familiar with these updates. COSO is providing illustrative books and guidelines to help determine if an internal control system meets the standards presented by the new Internal Controls Integrated Framework.

Nonprofits need not fully adopt COSO’s new internal control guidelines. They are simply there to help improve the systems that nonprofits and other organizations already have in place. They are useful guidelines that were introduced in 2013 and will take effect on December 15, 2014. Contact our nonprofit accountants  today to learn more about how these changes might impact your nonprofit organization.