The article shows some aspects contemplated in Resolution 297 of the Ministry of Finance and Prices, dated September 23, 2003; referring to internal control in Cuban entities, with a new approach, because it not only allows internal oversight to be organized in an organized and structured manner, adjusted to the specific characteristics of each entity, but at the same time it encourages the required articulation of all its processes, in order to be able to direct and manage organizations as a single system; as well as being able to achieve a better interaction with their environment. Important aspects in contemporary conditions, making evident the valuable contribution that this resolution makes to the Cuban business fabric.
Introduction
The complexity and dynamics of the contemporary environment and of the internal processes and activities of the organizations have prompted the creation of a business culture that emphasizes internal surveillance in an organized and structured manner, which also adequately adjusts to the characteristics and objectives of each entity.
Internal surveillance that has become wider and deeper, with the required flexibility and of a systemic nature, that is, that encompasses the entire organization and guarantees reasonable security in the management of all its processes. Integrating its conception in what has been defined as internal control.
Internal control with a new approach, which emphasizes the importance of complying with the standards established in accounting and financial activities, to guarantee the necessary reliability of the information. But at the same time, act consciously, accurately and in a timely manner in the required articulation of all the organization's processes and allow it to better interact with its environment. Conception that has been incorporated to all entities in Cuba, through Resolution 297/2003.
Consequently, the main purpose of this article is to describe, with a generalizing approach, the valuable contribution that contemporary internal control exerts on the entities existing in the country. Established by Resolution 297/03, in correspondence with the conditions and characteristics of the Cuban economy.
Development
Resolution 297 of the Ministry of Finance and Prices, dated September 23, 2003, constitutes a document that regulates the criteria and exercises the consequent orientation to implement in practice, in an orderly manner, internal control in all entities existing in the country., taking into account its characteristics, particularities, purposes and objectives.
An internal control that as a process, in the author's opinion, is essentially characterized by two fundamental aspects, referring to:
- Its systemic character Its transcendental capacity for change
A process that highlights and reinforces the importance of the systemic, dynamic and open nature of organizations, that promotes the incorporation of change in an integral way and that also allows reaching, developing and consolidating their own constant capacity for change, through effective management in their management.
Control system that, as defined in the resolution itself, is a process that provides reasonable security for achieving the following objectives:
- Reliability of information Efficiency and effectiveness of operations Compliance with laws, regulations and established policies Control of resources of all kinds available to the entity
Reasonable security related to the existence of certain limitations inherent in the implementation of the system, due to the appearance of possible and certain causes. Which, when explicitly recognized, by Resolution 297/03, in terms of cost feasibility, gives it a realistic and objective conception of internal control, which in turn allows it to achieve the objectives it sets.
Conception of reasonable security that clarifies and highlights the importance of emphasizing an adequate, systematic and sensitive control of perfection; taking into account the dynamics and articulation of its five components.
1. Control Environment
2. Risk Assessment
3. Control Activity
4. Information and Communication
5. Supervision and Monitoring
Components that characterize, frame and integrate the true directions on which every organization must focus, regardless of what its social purpose is. At the same time, they emphasize the systemic, dynamic, flexible and sensitive character of improving that the contemporary approach to internal control possesses.
Therefore, if all components are exposed in an integrated way to ensure compliance with the objectives of internal control. The analysis, design and evaluation of each one of them must include as a fundamental criterion their relevant interrelationships, which in turn must be adjusted to the characteristics, particularities and objectives of each entity.
As the basic condition for achieving a positive impact on the implementation and sustained operation of internal control, is to clarify and undertake it as a system within the organization, it must be guaranteed at all stages of its process, from creation from the control committee until its implementation and subsequent monitoring, not only a close interaction of its five components, but at the same time, determining the order and quality with which they must be undertaken. Giving an express priority to the preparation and training of all personnel, in a systematic and dynamic way, to promote their involvement, broad participation, responsibility and commitment. Stages that are presented in aggregate through the following figure:
Aggregate stages of the internal control process.
Source: Own creation.
Aggregate stages of the internal control process explained below:
The Control Committee: It is the key body in the internal control process within the organization, it has the maximum responsibility and authority at all stages to achieve its proper implementation, monitoring and sustainability. Its members as the main agents of change must be examples of professionalism, responsibility and commitment within the entity, as well as having a broad mobilizing and uniting capacity that generates involvement, trust and security in all personnel. They are the main exponents to guarantee the adequate and timely preparation and training of all workers, as a driving force in the effectiveness of the internal control system.
The diagnosis: It constitutes an important stage to achieve the definition of the need and orientation of the change of integral character, in the conditions of the entities in Cuba. Its purpose is to demonstrate the gap or distance that organizations have to travel, referring to the norms implicit in the five components, to meet the objectives of internal control.
In this diagnostic stage, the entity must begin with a review of its strategic design, of the current regulations, both internal and external, related to internal control; as well as its processes and structure. Aspects that emphasize the role of the Control Environment Component as the cornerstone of the entire system, to subsequently apply the necessary techniques and instruments and refer to the different implicit standards in its five components.
Using the diagnostic techniques and instruments, the norms of the five components and their necessary interrelation are evaluated. Analysis that reveals the aspects where there are no difficulties, as well as the main insufficiencies that the entity faces. Which must be overcome through a concrete action plan, which of course must also reflect the executors, managers, execution time and the resources that have to be mobilized, depending on the design stage of the internal control process.
Design: It constitutes the decisive stage within the entire internal control process, because it is precisely here, where new concepts, approaches and projections are introduced to promote organizational change and its assurance in each of the implicit norms in its five components, taking into account its own dynamics and interrelation, adjusted to the characteristics, particularities and objectives of each entity. But, ensuring that the order in which the components must be assumed is guaranteed.
In this design stage, you must start by updating or reformulating the entity's strategic layout. As well as, the design of the process management and the elaboration of the procedures manuals, prior to the design of the structure; if necessary to undertake it. Aspects that must conform the Organization Manual, to continue with the introduction of the new projections referring to the standards of the Control Environment Component.
An important contribution to the current vision of internal control, which in turn contributes to the efficiency and effectiveness of organizations and their competitiveness in the relevant markets, is the incorporation of the process approach.
The incorporation of the process approach as an important support for the implementation, operation and sustainability of internal control, contributes to the fulfillment of its objectives, its systemic nature and consequent articulation of its five components. At the same time, it reinforces the role of the Control Environment Component.
Because the internal control system based on the process approach contributes to the effective design and operation of the structure, clarifies the levels of hierarchy and the definition of the corresponding areas, as well as the content of the jobs through standards and procedures manuals, which, in turn, correctly guide the learning lines that must be established, the relevant rotation of personnel and the fair evaluation required in job performance. It also facilitates the delegation of tasks, by determining the correct allocation of authority and responsibility in search of better results in the organization, as well as favors the role and functioning of the collective labor bodies.
Aspects that increase professional skills, favor the organizational climate, reinforce the need to incorporate a reliable information system and adequate vertical and horizontal communication in the entity. At the same time that they promote participatory management methods and styles, they develop the collective responsibility, commitment, involvement and sense of belonging of the staff and grow the willingness to share values as the essence of a culture oriented to change.
The Control Environment Component constitutes the cornerstone of the entire internal control process, because it interacts with the dynamics of the other components, mobilizes the entire organization in pursuit of its objectives and policies, in addition to accentuating its systemic nature. Aspects that guarantee that the transformations that are implemented in the entity, achieve a positive impact on the results of its management, performance and competitiveness.
Subsequent to the design of the Control Environment Component, one must proceed with the Risk Assessment component, associated with the Control Activity Component. The incorporation of process management reveals which are the critical or vulnerable points of the entity, which are generally associated with risks, which must be incorporated, evaluated and managed to mitigate its uncertainty and, therefore, its undesired impact on compliance with the objectives of the organization and effectiveness of its management. Therefore, they must be subject to adequate and relevant control activity.
Correct analysis of the Risk Component places the entity in a more advantageous position to make strategic decisions and manage all its processes. But what is truly important is that the organization does not settle alone, with incorporating the evaluation of risks, both internal and external, that affect a certain period of time, but rather, concentrates its energies on generating a constant capacity for evaluation and management of the same.
The introduction of the Control Activity Component in a timely and consistent manner, expressed through regulations, procedures, actions and measures; it is not limited only to the accounting and financial sphere, on the contrary, its dimension is incorporated into the entire organization, integrating itself into the processes existing at the different levels. To contribute to the fulfillment of the objectives, policies and provisions or regulations of the entity.
Subsequently, the incorporation of the Information and Communication Component allows the integration of the other components and the management of all processes, thus accentuating the systemic nature of internal control and of the organization as a living organism.
The flow of information and communication, both internally and from and to its environment, that this component provides the organization, enhances its ability to assess and manage risks, as well as, enables it to adequately fulfill its obligations inherent to the Control Activity Component..
In addition, information and communication systems increase the effectiveness of the Control Environment Component, since they contribute to: improving the work environment and participatory management methods and styles, raising professional skills, promoting the operation of the structure, knowing the existing regulations, promote the fulfillment of objectives and policies, make better decisions, develop an adequate quality management and its assurance that satisfies its clients on the basis of their desired advantages. They make possible a more effective capacity for interaction and adaptation of the entity with its environment, as well as, allow to collectively know and analyze the results obtained by the actions of supervision and monitoring.
Finally, the Supervision and Monitoring Component strengthens the audit activity, both internal and external, to the entity and self-control. To the extent that the organization achieves greater systematization of its corrective or preventive supervision and monitoring actions, it will allow more effective feedback on the results obtained in its management, as a consequence of the implementation and sustained operation of the internal control system, thus as, the incorporation and development of benchmarking. In short, as an important concept, it generates a constant capacity for change and its effective management.
Preparation and learning: They constitute the fundamental driving motor of the internal control system. Develops and encourages the involvement and broad participation of all staff, as true protagonists, increases their confidence in achieving better results for the organization, strengthens the understanding of the meaning, need and opportunities it provides as a process of change.
The relevance of learning and preparation clarifies the need for their presence at all stages of the internal control process, taking into account the requirements and purposes that mark each one of them. The systematicity and appropriate orientation that is reached in both will facilitate the implementation of the internal control system, its operation and sustainability in the management of the entity.
Adequate, timely and systematic learning and preparation increases professional competencies, favors the work environment, contributes to achieving better job performance and emphasizes shared values and integrity in the organization. First order aspect, because the effectiveness of the internal control system is governed by the level of integrity that is achieved in the entity's values.
In this context, consulting constitutes an opportunity for organizations, which must intelligently take advantage and enhance, since through it, they can incorporate the new techniques and instruments necessary and specific in each of the stages of the process, which together with a Adequate training and preparation of all personnel, make the implementation of the internal control system viable, increase the effectiveness of its operation and create the basis for its sustainability. In short, it promotes change, its effective management and generates an internal capacity for continuous improvement in the entity.
In conclusion, internal control should not be understood by entities as an added aspect to their management, as an instrument that only emphasizes the internal focus of surveillance on the rational use of their resources, or as a commitment that must be fulfilled under Resolution 297/03. This constitutes a very limited vision of his valuable contribution.
On the contrary, by its own conception and nature, internal control is integrated into the organization, consolidates its systemic character and generates a constant capacity for change. Furthermore, its potential for systematic improvement constitutes an inexhaustible source of reserve utilization, which translates into real possibilities of creating or adding values. Aspects that together become criteria of effectiveness and competitiveness for all existing entities in the country.
For this reason, what is truly important for all the entities existing in Cuba lies in taking the most effective advantage of the various opportunities offered by the contemporary internal control system, through Resolution 297/2003.
Bibliography Consulted
• Resolution 297 of the Ministry of Finance and Prices. With its corresponding Annex. Year 2003. Havana City.
• Resolution 297. National Verification of the Ministry of Finance and Prices, Ministry of Audit and Control and the National Association of Economists of Cuba. Years 2004. Havana City.
• Resolution 013 of the Ministries of Audit and Control. Year 2003. Havana City.
• COSO Report, Monograph. Com. Internet. Google.
• COSO report. Ccss.sa.cr/auditoria/aud017.htm. Internet. Google.
• González Méndez, L. Internal Control and the Balanced Scorecard. A powerful Intangible Combination. Management: Focus on Opportunities. CEEC. Year 2005. Editorial Félix Varela. Havana City.
