Encl. (3) to COMDTINST 5700.10
SUMMARY OF STANDARDS FOR INTERNAL CONTROL IN THE FEDERAL
GOVERNMENT
Internal control, in the broadest sense, includes the plan of organization, methods and procedures
adopted by management to meet its goals. Internal control includes processes for planning, organizing,
directing, controlling, and reporting on agency operations.
The three objectives of internal control are:
Effectiveness and efficiency of operations,
Reliability of financial reporting, and
Compliance with applicable laws and regulations.
The safeguarding of assets is a subset of all of these objectives. Internal control should be designed to
provide reasonable assurance regarding prevention of or prompt detection of unauthorized acquisition,
use or disposition of assets.
Management is responsible for developing and maintaining internal control activities that comply with
the following standards to meet the above objectives:
Control Environment,
Risk Assessment,
Control Activities,
Information and Communications, and
Monitoring
A. Control Environment
The control environment is the organizational structure and culture created by management and
employees to sustain organizational support for effective internal control. When designing, evaluating or
modifying the organizational structure, management must clearly demonstrate its commitment to
competence in the workplace. Within the organizational structure, management must clearly: define
areas of authority and responsibility; appropriately delegate the authority and responsibility throughout
the agency; establish a suitable hierarchy for reporting; support appropriate human capital policies for
hiring, training, evaluating, counseling, advancing, compensating and disciplining personnel; and
uphold the need for personnel to possess and maintain the proper knowledge and skills to perform their
assigned duties as well as understand the importance of maintaining effective internal control within the
organization. The organizational culture is also crucial within this standard. The culture should be
defined by management's leadership in setting values of integrity and ethical behavior but is also
affected by the relationship between the organization and central oversight agencies and Congress.
Management's philosophy and operational style will set the tone within the organization. Management's
commitment to establishing and maintaining effective internal control should cascade down and
permeate the organization's control environment which will aid in the successful implementation of
internal control systems.
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