Question

Imagine, you are an Internal Auditor of the college and you meant to do following tasks. Please justify your answer with examples.  

What Monitoring techniques you can apply for documentation purpose. Please also advise which one do you think is the most cost-effective control?

Answer 1

The main source of revenue in an educational institution is from the students. The control on the student’s records is the key control mechanism for ensuring that the revenue is recorded completely and correctly. Since various departments - accounts department, academic (daily attendance), registrar, examination department, etc. maintain separate records for the students on roll, it is imperative that all these records are reconciled to ensure that the student’s strength is the same at all places.

The second important factor is the prompt charging of expenditures to the student accounts. As discussed earlier, expenses are incurred on the students continuously by various departments, such as the class teacher, the games section, the housekeeping section/the hostel warden, etc. All such expenses must be promptly charged to the account of the student, as sometimes the students may leave the educational institution in the middle of the term. Before handing over the transfer certificate and refunding the security, it must be ensured that the student has paid all his dues. The controls and procedures for forwarding of such details by the various departments to the centralised accounts section must be very clear, so that there is no loss on this account.

The financial management of the educational institution, like any other entity, may effectively be undertaken by resorting to budgeting.

Apart from serving as a tool for forecasting and planning, it also serves as an important feedback tool at the end of the financial period through generation of variance analysis. Control on revenue items can be effectively exercised through budgets and periodic variance reporting serves as an important management information report.

Another crucial aspect, which may be taken into account in the preparation of budgets, are the provisions contained in Txationa Laws, which require an institution to utilise a prescribed percentage of its funds for charitable purposes so as to be eligible for exemption from the income tax. It is essential that the management should be aware of the provisions of the Tax Laws, so as to be able to gauge the impact of non-utilisation of funds in accordance therewith.

Monthly track of the variances should be kept by the management so as to ensure that the application of the required percentage is done before the year-end. Non-utilisation of funds would entail tax liabilities on the unutilised portion.