THE UNIVERSITY OF IOWA FINANCIAL SUBCERTIFICATION WORKSHOP SESSION

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THE UNIVERSITY OF IOWAFINANCIAL
SUB-CERTIFICATION WORKSHOP SESSION 2 Finance,
Accounting Audit

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Todays Presenters

• Selina Martin
• Angie McMullin

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Todays Agenda

• Financial Sub-certification Website
• http//www.uiowa.edu/budgetofficers/subcertificati
  on
• Objective of todays training
• Review questions 3 through 8
• Review the underlying policies processes
• Identify related control document which indicate
  compliance with policies
• Identify the resources available to learn more
• Understand risks consequences of non-compliance
  Relevance to Sub-certification
• What should you do after this workshop?

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Sub-certification Question.

• Does the college/unit set expectations that
  employees with fiscal responsibilities should
  attend relevant financial systems and processes
  training offered by Finance Operations?

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Related Policies

• Educational Opportunities
• (Operations Manual)
• http//www.uiowa.edu/our/opmanual/iii/26.htm261

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Chapter 26 Educational Opportunities

• It is strongly recommended that individual
  colleges, departments, and/or units develop an
  educational plan for the benefit of their
  employees' continuous learning and to meet the
  needs of a changing work environment.

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Business Processes Series

• http//www.uiowa.edu/learn/series/businesshr.htm

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Who should enroll?

• For UI managers or supervisors responsible for
  business and human resources transactions
• For others who are interested in gaining this
  knowledge
• Elective courses will be offered as general
  offerings for open enrollment

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Certification Requirements

• Complete all six core courses
• Complete four elective courses
• Complete within a 2 year period

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Required Core Courses

• Finance Operations Roadmap to Success
• Ethics Responsibilities (ICON Course)
• Business Human Resources Processes Overview
• Internal Controls Security
• Contracts and Risk Management Basics Overview
• Lean Overview

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Elective Courses

• Data Access Courses (3 courses)
• Application Courses (10 courses)
• Other Courses (5 courses)
• ICON Courses (6 courses)

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Control Documents

• Key employees need to have training on financial
  systems and processes. Update the job
  descriptions of these employees make it clear
  that specific training is required.
• Self-Service "My Training" training records

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Resources to Learn More
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Resources to Learn More
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Resources to Learn More
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Sub-certification Question.

• Does the college/unit have processes and
  monitoring activities in place to ensure
  compliance with the University's Cash Handling
  Policy?

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Related Policies

• Cash Credit Card Receipts (Operations Manual)
• http//www.uiowa.edu/our/opmanual/v/04.htm
• Cash Handling Policy (website)
• http//www.bo.uiowa.edu/cashhandling/cash_handle_p
  olicy.pdf
• Credit Card Handling Policy (website)
• http//www.uiowa.edu/fustreas/Credit20Card20Han
  dling20Policies20and20Procedures.pdf

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Cash Handling

• Cash Equivalents Coins, currency, checks,
  money orders, credit card transactions, tokens,
  tickets, stamps, gift cards, parking vouchers,
  etc.

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Chapter 4.1 Ops Manual - Receipt of Funds

• If you handle cash, you must have approved local
  cash handling procedures!
• Every unit administrator and employee responsible
  for overseeing, receiving, depositing, or
  reconciling cash and equivalents must complete
  the certification process.

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Basic Principles of Effective Cash Handling

• Proper Segregation of Duties maintain clear
  separation of the following roles

Kyle Collects Cash
Beatrice Bills for Services
Debra Deposits Cash
Rick Reconciles Cash
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Basic Principles of Effective Cash Handling

• Adequate safeguards for handling, transporting
  and storing cash
• Safe or other secure place
• Prompt deposit of cash at the bank or designated
  deposit drop location on campus
• Cash on hand reaches 500 or at least weekly
• Submit to eDeposit system within 3 working days
• Designated drop off locations

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Basic Principles of Effective Cash Handling

• Independent reconciliation of deposit documents
  to the statement of accounts
• Performed by someone who has no actual cash
  handling responsibilities
• Must validate bank deposit ticket to departmental
  copy after deposit has been made
• Reconcile monthly
• Management oversight and review

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Who needs to know follow?

• Unit management
• Edeposit users
• Billers/invoicers
• Cash collection point cashiers
• Cash collection point supervisors
• Deposit preparers
• Reconcilers

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Departmental/Mgt Responsibility

• Maintain approved updated local procedures
• Establish an effective internal control system
• Maintain proper segregation of duties
• Require that staff is properly trained
  certified
• Review receipts and reconciliations on a regular
  basis, then sign date documentation
• No matter who is collecting, depositing and
  reconciling, management is ultimately
  accountable.

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Individual Staff Responsibility

• Understand his/her role in the cash handling
  process
• Complete the University of Iowa Cash Handling
  ICON course annually
• Review updated departmental procedures as
  provided by unit management in a timely manner.

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Credit Cards Handling Policy
http//www.uiowa.edu/our/opmanual/v/04.htm44

• We must have controls for credit card
  transactions in order to maintain proper security
  over credit cardholder information.
• Contact Controllers Office Treasury Operations
  to get approval to be a credit card merchant (not
  credit card processor)
• New credit card merchants will be required to
  complete training

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Credit Card Merchant Responsibility

• Obtain approval before
• entering into any contracts
• purchasing software and/or equipment
• Implementing any technology
• Establish departmental procedures for
  safeguarding storing data.
• Perform an annual security self-assessment
• Comply with Payment Card Industry (PCI) Data
  Security Standards

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Control Documents

• Approved local cash handling procedures
• Documented completion of Cash Handling training
  course for appropriate employees
• Documented completion of Credit Card Policy
  Merchant Training
• Payment Card Merchant Agreement form
• Annual Security Self Assessment
• Job descriptions which support duties as
  described in local procedures

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Resources to Learn More

• Cash Handling ICON Course
• https//icon.uiowa.edu/
• E-Deposit ICON Course
• https//icon.uiowa.edu/
• E-Deposit Training http//www.uiowa.edu/fusstfdv/
  catalog/workplace/226.html
• Cash Handling website
• http//www.bo.uiowa.edu/cashhandling/
• Credit Card Policy Merchant Training
  http//www.uiowa.edu/fustreas/Training_for_Credit
  _Card_Merchants.pdf
• Payment Card Industry (PCI) Data Security
  Standards https//www.pcisecuritystandards.org/pdf
  s/pci_dss_v1-1.pdf
• (sign up for all training through Self Service)

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Sub-certification Question.

Does the college/unit submit the required
information to Financial Management to ensure
compliance with the Service Center Policy?
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Related Policy

• Service Centers (Operations Manual)
• http//www.uiowa.edu/our/opmanual/vi/12.htm
• Service Centers Policy Website
• http//www.uiowa.edu/fusfm/rechargecenterpolicy.p
  df

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Service Center Policy Highlights

• Internal Sales (both sides of entry in GL)
• University Wide Recharge Centers
• Departmental Recharge Centers
• Specialized Service Facilities
• highly complex or specialized facilities and
  usually have federal revenue
• or, may not be complex but federal revenue is
  consistently greater than 25,000

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Accounting Issues

• Easily identifiable in GLDSS
• Unique at the Dept-SubDept level (no lower)
• Federal revenue identification
• Subsidies
• Transfer in
• Center expenses paid elsewhere unique
  Dept-SubDept identifies

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Break-Even

• 10 threshold of annual expenditures
• Monitor Fund Balance
• Account for subsidy
• Analyze what happened, create a plan
• Avoid ups and downs in rates

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Rate Calculations

• Required to perform rate calculations
• Must tie to rate list
• Budgeted expense/budgeted units
• Mark up for stores
• Include only allowable costs
• What are unallowable costs?

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Rate Calculations

• No capital expenditures in rates or operations
• Depreciation transfers
• Plant Fund Reserve account
• Monitor for non-capital expenditures
• Monitor for negative balances

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Rate Calculations

• Discounts
• Cannot discriminate against Federal Grants
• Free is a discount
• Can impute revenue count against subsidy
• Off Peak Rates
• What are they?
• Rates must be available to federal grants

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Rate Calculations

• External Rates
• Market Rate for External Customers
• Account for profit
• UBIT issue (http//www.uiowa.edu/fusas/ubit.html)
  

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Service Center Reviews

• Specialized Service Facilities
• Tier I annual
• Tier II every other year
• Tier III compliance questionnaire
• Recharge Centers
• gt20,000 revenue - compliance questionnaire
• lt20,000 revenue - no review

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Control Documents

• Written request for the establishment of recharge
  center
• Annual rate analysis

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Resources to Learn More

• Recharge Centers Responsibilities Procedures
  http//www.uiowa.edu/fusfm/rechargecenterpolicy.p
  df
• Unrelated Business Income Taxes
• http//www.uiowa.edu/fusas/ubit.html (UI
  website)
• http//www.irs.gov/pub/irs-pdf/p598.pdf (IRS
  website)

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Sub-certification Question.

• Does the college/unit communicate guidelines
  for reporting material financial risks, issues,
  errors, etc. to senior administrators within the
  college and to the Controller?

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Communicating Within Your Unit

• Process may be unique to your organization
• Develop recurring meetings with clear
  expectations of outcome communicated to
  participants
• How often will you meet?
• Who will be involved and what are their roles?
• What types of issues will be addressed?
• What are acceptable threshold/materiality level?
• What issues will rise to the level of
  communicating to Controllers Office?

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Communicating to Controller
Future recurring meetings with clear
expectations of outcome topics may include

• Budget v actual
• Recurring deficits and corrective action plan
• Suspected or actual fraud
• Patterns of errors in charging
• Operational issues

• Status of audit Issues
• Financial sub-certification status/issues
• Regulatory issues
• Building plans (if applicable)
• Contractual violations

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Control Documents

• Regular recurring meetings with appropriate staff
  for the purpose of financial review (control
  document may be schedule, agenda, minutes, etc.)
• Communication to staff (i.e., memo) indicating
  what process to follow for reporting financial
  errors, problems, etc.
• Other documents (audit issues log)

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Resources To Learn More

• Unit Senior Fiscal Officer
• Controllers Office
• Other - SkillSoft courses

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Sub-certification Question.

• Has the college/unit addressed and resolved
  outstanding internal and external audit issues?

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Related Policies

• Internal Audits Policy
• http//www.uiowa.edu/our/opmanual/v/13.htm
• External Audits Policy (none)

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Internal Audit

• Authorized by Board of Regents to provide
  independent appraisal services.
• Serve a managerial control by measuring
  evaluating the effectiveness of financial and
  managerial controls.
• Authorized to have unrestricted access to
  University functions, records, properties, and
  personnel.

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What is reported to the Board?

• Any activity which is illegal or the legality of
  which is questioned by the audit staff
  immediately upon discovery by audit staff.
• Review of all audits (current follow-up of
  prior years)

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Internal Audit Expectations of Units

• Cooperate with staff
• Understand audit issues/findings
• Discuss recommendations for resolution of audit
  findings
• Implement changes as appropriate
• Follow up with internal audit with status
• Communicate as appropriate with unit leaders and
  Central Administration

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Common Issues Found by Internal Audit

• Rate methodology no documentation of supporting
  detail
• Charge capture cycle time
• Expenditures using incorrect institutional
  account
• Lack of segregation of duties
• Financial management untimely review
• Inappropriate use of blanket orders

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External Audit Expectations of Units

• Make sure that the Controllers Office is aware of
  your interaction with external auditor
• Cooperate with audit staff
• Understand audit issues/findings
• Discuss recommendations for resolution of audit
  findings with Controllers Office
• Implement improvements in a timely manner

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Control Documents

• Documentation of response to auditors central
  administration describing the resolution of audit
  issue
• Documentation of process changes

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Resources to Learn More

• Controllers Office http//www.uiowa.edu/fuscntrl
  /
• Internal Audit http//www.uiowa.edu/intaudit/in
  dex.shtml
• Auditor of State http//auditor.iowa.gov/index.ht
  ml
• Other - SkillSoft courses

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Sub-certification Question.

Does the college/unit perform review of
transactions appearing in its general ledger
reports to internal source documents on a monthly
basis?
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Related Policy

• Monthly Review of Transactions Policy
• http//www.uiowa.edu/fuscntrl/reviewoftransaction
  spolicy.pdf

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Monthly Review of Transactions Policy

• Requires the monthly review of transaction
  detail in each account to ensure that financial
  information accurately reflects actual activity.
• Non-grant Reports ? SA3 (Statement of Accounts)
• Grant Reports ? TDS (Transaction Detail
  Statement)

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Who is involved?
Account Owner The person who has general
decision making authority over the account and
fiscal responsibility accountability for the
account.

• Departmental Administrator
• Business Manager
• Financial Officer

• Program Administrator.
• Principal Investigator
• May not be the Research Administrators

• Reviewer The person reviewing transactions and
  comparing to supporting documents.

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Responsibilities of Account Owner

• Document the purpose restrictions of each
  account
• Designate a Reviewer ensure that training
  tools are provided to effectively validate
  transactions.
• Confirm that the personnel charges reasonably
  reflect the efforts expended (federal research).
• Review deficit balances take corrective action
• Examine work done by Reviewer and discuss process
  used to validate that transactions are
  appropriate.

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Responsibilities of Reviewer

• Review each transaction
• General considerations
• Appropriateness of payroll charges
• Accuracy of non-payroll charges
• Transactions not yet posted
• Verify that prior months errors are corrected
• Document discrepancies and take appropriate
  action to resolve (in collaboration with Account
  Owner).
• Document that the review is complete and
  communicate all issues to the Account Owner.

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Adequate Documentation

• Departments are responsible for ensuring the
  existence of source documentation and retaining
  documents which are not maintained centrally.
• Adequate documentation answers the following
  questions
• What was purchased?
• Where it was purchased?
• When it was purchased?
• Be ready to explain why it was purchased.

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Control Documents

• Transaction reports (SA3 TDS)
• Supporting documentation (sub-system reports,
  analysis, correspondence, etc.)
• Documentation of review of detail transaction
  reports (notes, annotations, worksheets, etc.)
• Documented communication with Account
  Owner (email)

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Financial Sub-certification Focus

• Our internal controls should reasonably assure.
• Compliance with laws, regulations contracts
• Prevention detection of fraud
• Proper recording, classification valuation
• Adequate documentation disclosure

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Risks Consequences

• Loss of privilege to handle cash
• Loss of privileges to process credit card
  payments and the revocation of credit card
  merchant status
• Additional oversight scrutiny
• Management may make decisions which are made
  based on faulty, inaccurate, financial data
• Fraud or misuse of university resources
• Audit findings resulting audit opinion
• Fines penalties
• Reputation public disclosure

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Remember.

• Financial sub-certifications will be completed in
  fall 2009 for the fiscal year 2009.
• Accurate responses will help us to help you to
  strengthen internal controls.
• Progress will be made over time as we identify
  areas of opportunities to improve controls.

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What are your next steps?

• Understand your role in the sub-certification
  process
• Understand the general specific policies
  relevant to your roles responsibilities
• Share information with your staff colleagues
• Attend targeted training
• Review control documents checklist
• Provide feedback to central administration

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• Thank you!