New York State Internal Control Association BUILDING ACCOUNTABILITY INTO REVENUE ACCOUNTING

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New York State Internal Control
AssociationBUILDING ACCOUNTABILITY INTO REVENUE
ACCOUNTING

• July 27, 2006

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OSC Evolves

• Changes to the State Constitution and evolving
  practices have resulted in many changes to the
  State Comptrollers Office to improve overall
  fiscal management and increase public
  accountability.
• OSC has evolved from Prison Warden, to Collector
  of Taxes, to Budget Director to the States Chief
  Financial Officer/Auditor.

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Promoting Accountability

• One of the Governments objectives is to provide
  services within budgetary constraints and be
  accountable to its citizens. Following an
  overview of the States budget cycle, this
  presentation is designed to
• Emphasize State laws and Comptrollers procedures
  and reports that are intended to provide control
  and accountability for State resources
  including Public Authorities.
• Highlight basic concepts and principles on how
  state funds and accounts are established,
  accounted-for, invested, reconciled, and reported
  on.
• Lets begin with some basic information.

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State Government Structure

• Executive ALL State Agencies
• Legislative Assembly Senate
• Judicial Court Administration

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Role of Comptroller - REVENUES

• Maintain Central Accounting System
• Provide Accounting Means to Demonstrate
  Compliance with State Laws for the RECEIPT
  DISPOSITION of all State Revenue
• Provide Financial Reports
• Advocate for Fiscal Responsibility

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Internal Control - Objectives

• Operations - Effective Efficient Use of
  Resources
• Transactions are in compliance with laws and
  regulations
• Financial Statements are complete, accurate and
  reliable

Operations
Reporting
Compliance
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Compliance Matters !

• Appropriation Controls
• Fund Controls
• Accounting for State Resources
• Tax Revenues
• Agency-Derived Revenues
• Appropriated Loans Receivable
• Federal Grants
• Borrowings

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STATUTES THAT GUIDE US

• The State Constitution
• Appropriation Bills
• Article VII Bills
• State Finance Law
• Other Consolidated Laws
• Federal Laws and Regulations

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Article VII Language Bills

• Along with the submission of the Appropriation
  Bills, the Governor also submits legislation to
  amend State laws governing programs and revenues.
• This Legislation is needed to implement the
  States Financial Plans for the upcoming fiscal
  year, and beyond.

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Federal Grant Compliance

• NYS Must Demonstrate Compliance with Federal Laws
  and Regulations
• Single Audit
• Cash Management Improvement Act (CMIA)
• Any Other Law or Regulation

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Federal Grant Payment Management

• The Federal Grant and Payment Management function
  captures the requirements for state agencies as
  both the recipient (grantee) of federal grants
  and distributor (grantor) of monies to
  recipients, vendors, municipalities and
  not-for-profit organizations. This function
  tracks grant awards, receipt of federal funds,
  grant encumbrances and expenditures.

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Federal Grant Compliance (contd)

• State Appropriations Authority MUST NEVER Exceed
  Grant Award Authority
• Grant Award No. is REQUIRED For All Federal Fund
  Appropriations
• CFDA No. is REQUIRED For Single Audit and CMIA
  Reports
• Advocate for Greater Efficiencies in the
  Management of Federal Grants

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Central Accounting System

• The Office of the State Comptroller (OSC) is
  responsible for the operation and development of
  the NYS Central Accounting System (CAS)
• The CAS is the hub of financial activity in the
  State it is used for accounting for all revenues
  of the State, controlling agency appropriations
  and spending levels, processing 18 million
  financial transactions annually, issuing 15,000
  payments daily, reflecting the results of these
  transactions in more than 700 reports for a wide
  range of users, and generating critical input to
  the audited financial statements for the State

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Financial Reports
Operations
Reporting
Compliance
Internal Controls are designed to provide
reasonable assurance regarding the reliability of
reports.
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Financial Reports

• Monthly/Annual Reports to the Legislature ALL
  Funds of the State
• Agency/Division/Program Level Reports
• Comprehensive Annual Financial Report
  (GAAP-based)
• Citizens Report of the Financial Condition of the
  State
• Bondable Capital Projects Spending
• Annual Information Statements
• Official Statements (Bond Offerings)
• Press Releases
• Public Policy Reports
• Audit Reports

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Financial Reports - Reliability

• Operational, Report Preparation, and Review
  Procedures are developed and available
• Transactions are complete and accurate in all
  material respects
• Transactions are in compliance with ALL State
  Federal Laws and Regulations
• Reports contain appropriate disclosures about
  events past and future
• FLUX analysis is documented

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STATE OF NEW YORK
FUND STRUCTURE 161 Funds
AS OF MARCH 2006
GOVERNMENTAL
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GENERAL
SPECIAL REVENUE
DEBT SERVICE
CAPITAL PROJECTS
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64
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STATE
FEDERAL
STATE
FEDERAL
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PROPRIETARY
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ENTERPRISE
INTERNAL SERVICES
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FIDUCIARY
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PRIVATE PURPOSE TRUST
PENSION TRUST
AGENCY
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General Ledger Accounting Fund Types

• GOVERNMENTAL FUNDS
• General
• Special Revenue
• Capital Projects
• Debt Service
• Permanent

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General Ledger Accounting Fund Types (contd)

• PROPRIETARY FUNDS
• ? Enterprise
• ? Internal Service

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General Ledger Accounting Fund Types (contd)

• FIDUCIARY
• ? Private Purpose Trust
• ? Agency

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ALL FUNDS OF THE STATE
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SFY 2005-06 Governmental Fund Revenues At A Glance
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Governmental Funds ReceiptsSFY 2005-06(Billions)
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NON-TAX REVENUESOF THE STATE

• Miscellaneous Receipts
• Agency Derived 9.1 billion
• Lottery 2.2 billion
• Tuition Fees 2.0 billion
• Public Authorities 1.9 billion
• Patient/Client Care 1.3 billion
• Abandoned Property .5 billion
• All Other 1.3 billion
• Federal Grants 35.1 billion

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Agency Revenues Includes

• Licenses
• Fines Penalties
• Sales, Rentals Leases
• Student Tuition Fees- CUNY SUNY
• Hospital Patient Care

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Sole Custody Funds

• Funds or Accounts held in the Sole Custody of a
  State Agency outside of CAS
• Revenue Collection Accounts
• Patient or Inmate Funds
• Commissary Accounts
• Monthly Annual Reporting is REQUIRED for all
  1400 accounts
• 10.222b as of March 31, 2006

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State Treasury
Agency Revenue Collection Accounts
Payroll Checks Direct Deposits
Local Assistance
Sole Custody Tax Accounts
NYS General Checking Account ALL Treasury Funds
Federal Grants
Vendor Payments
Transfers from Public Authorities
Transfers to Off-Budget Funds
Short-Term Investments
Borrowing
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Accounting for Revenues

• Taxes
• General fund vs. Dedicated
• Refunds
• Miscellaneous Receipts
• Agency-Derived Revenues
• Statutory Authority to Collect
• Statutory Authority to Deposit

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Accounting for Revenues (cont.)

• Federal Grants Payment Management
• Based on Disbursements made
• Relies on Grant Award contained in Appropriation
  records

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State Receivables

• Temporary Loans
• Cash Advances
• Appropriated Loans
• Revenue Contracts
• Fringe Benefit/Indirect Cost Assessments
• Annual Bulletin
• How Calculated
• Billing Payment Cycles

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Revenue Management Accountability

• Transfer of Collections to State Treasury Must
  Be
• Done Timely No Less Than Semi-monthly or More
  Often for Large Balances
• Monthly Reconciliations of Bank Accounts to
  Agency Collection Records Are Required and
  Necessary
• Transfers to State Funds Must Be Reconciled to
  CAS Reports Monthly
• Discrepancies Must Be Reported to OSC and, Where
  Appropriate, to Agency Internal Control Officer
• Outstanding Checks Must Be Accounted for and
  Written-off After 1 Year

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Accounts Receivable Management and Collection

• Includes Revenue Contracts
• Cash Advance Accounts
• Fringe Benefit/Indirect Costs
• Legally-Enforceable Non-Tax Monies Owed to the
  State
• Re. Budget Policy Reporting Manual - Section K
• http//www.budget.state.ny.us/bprm/k/k000.html

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Annual Agency Financial Reporting

• New Internet Based Reporting System!
• The Office of the State Comptroller (OSC) has
  developed a new fully automated, internet based
  reporting system for the Agency Financial
  Reporting Package (AFRP).
• The State's accounting and financial reporting
  system under the control of OSC provides for the
  collection, summarization and reporting of unique
  financial data and information maintained at
  State agencies. Financial data and related
  information is required to ensure full and proper
  disclosure in financial statements prepared in
  accordance with generally accepted accounting
  principles (GAAP).

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Annual Agency Financial Reporting

• The AFRP has been developed for the purpose of
  gathering data-in-process which has not been
  entered onto the States central accounting
  system as of the closing date specified in the
  AFRP.
• In the past, State agencies and public
  authorities downloaded forms from the internet
  and returned them to OSC by email, fax or mail.
• The new system allows agencies and public
  authorities to key necessary information directly
  on the Internet. The data will be collected in a
  database which will assist in the generation of
  the States required Budgetary (Cash) and
  GAAP-based financial statements.

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Reporting Information Access

• Information Must Be Available to Financial
  Managers in a Timely and Useful Fashion To
• Support Budget Formulation and Execution,
• Support Fiscal Management and Program Decision
  Making,
• Monitor Data Integrity Within the System, and
• Support Internal and External Reporting
  Requirements
• Provide Users with a Variety of Standard and Ad
  Hoc Reports, Online Inquiries and Extracted Data
  Sets.

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For More Information

• OSC Website
• www.osc.state.ny.us
• Fund Classification Manual
• Accounting Bulletins
• Forms
• User Procedure Manuals
• Financial Reports

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Press Releases
Financial Reports
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Procedure Manuals, Bulletins, Fund Classification
Manual
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Fund Manual
Bulletins
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Forms
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For More Information
State Revenue Manual
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Internal Control - Defined

• Processes That Integrates the Activities, Plans,
  Attitudes, Procedures, Policies, Systems,
  Resources and Efforts of the People of an
  Organization Working Together, and That Is
  Designed to Provide Reasonable Assurance That the
  Organization Will Achieve Its Objectives and
  Mission.

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Internal Control - Objectives

• The Objectives of an Internal Control System
  Include, but Are Not Limited To
• The Safeguarding of Assets
• Checking the Accuracy and Reliability of
  Accounting Data and Financial Reporting
• Promoting the Effectiveness and Efficiency of
  Operations
• Ensuring Compliance With Applicable Laws and
  Regulations And
• Encouraging Adherence to Prescribed Managerial
  Policies.

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Internal Controls - Summary

• Include methods procedures used to safeguard
  assets and assure that assets are used
  effectively.
• Objectives are Clearly Defined
• Risk Assessments are Conducted
• Control Activities are Developed and Used
• Assess ATTITUDE

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Internal Controls Are People Dependent

• Developed by People
• Guides People
• Provides People With A Means Of Accountability

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Internal Control - Assessment

• Internal Control Review Processes Are Used
  Periodically to Evaluate the Ongoing Internal
  Control System and to Assess and Monitor the
  Implementation of Necessary Corrective Actions.
• Internal Control Education Training are KEY to
  Success

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Internal Control Pulling it All Together
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Cash Controls
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