LBNL Financial Management General Overview, Core Principles, Key Concepts, and Best Lab Practices

1
LBNL Financial ManagementGeneral Overview, Core
Principles, Key Concepts, and Best Lab Practices

• Presented by
• Doug Goodman, OCFO Field Operations Manager

2
Table of Contents

• Topic Page
• Course Objectives 3
• Office of Chief Financial Officer (OCFO) Key
  Information 4
• Resource Stewardship The 10 Financial
  Commandments 7
• Budgeting, Funding, and Cost Concepts and
  Processes 9
• Funds Control Concepts and Best Practices
  31
• Accounting Concepts and Processes 47
• Procurement Property Management Concepts and
  Processes 63
• Financial Information Systems Concepts 68
• Travel and Conference Services Key
  Information 70

3
Training Objectives

• Provide an overview of Berkeley Lab financial
  management
• Provide financial management core principles and
  key concepts, and why they are important
• Become familiar with and embrace funds control
  best practices at the Berkeley Lab

4
OCFO Organization
5
OCFO - Lead Organizational Contacts

• The OCFOs senior leadership team is comprised
  of
• Jeffrey Fernandez, Chief Financial Officer, ext
  5547, JAFernandez_at_lbl.gov
• Cynthia Jones, CFO Administrator, ext 4242,
  CMJones_at_lbl.gov
• Anil More, Operations Manager, ext 5254,
  AVMore_at_lbl.gov
• Linda Wuy, Business Manager, ext 7418,
  LDWuy_at_lbl.gov
• Minh Agon Huebner, Budget Officer, ext 5293,
  MAHuebner_at_lbl.gov
• Jeanne Kissel, Controller, ext 5957,
  JTKissel_at_lbl.gov
• Derrol Hammer, Procurement Property Mgr, ext
  6019, DJHammer_at_lbl.gov
• Jeff Weiner, Sponsored Projects Officer, ext
  7143, JWeiner_at_lbl.gov
• Chuck Axthelm, Business Systems Analysis Mgr,
  ext- 4461, CAAxthelm_at_lbl.gov
• Doug Goodman, Field Operations Manager, ext
  7632, DGoodman_at_lbl.gov
• The CFOs website is http//www.lbl.gov/Workplace
  /CFO

6
OCFO Financial Policies and Procedures

• The Labs website for its financial policies and
  procedures manual can be found at
  http//www.lbl.gov/Workplace/CFO/fpt/policies/inde
  x.html
• The site is designed to provide an authoritative
  guide and information source that will serve as
  the basis for financial accountability,
  compliance, sound business practices, and
  effective financial decisions at the Lab
• Labs Financial Policies and Procedures manager
  is Michele Mock and she can be contacted at ext
  2415 or MMMock_at_lbl.gov
• This manual can also be accessed through the
  Labs Regulations and Procedure Manual (RPM), the
  Labs official manual for its administrative and
  operational policies and procedures. The RPMs
  website is http//www.lbl.gov/Workplace/RPM/

7

• Financial Management Starts with Stewardship

Websters on Stewardship Its the careful and
responsible management of something entrusted to
one's care The concept of stewardship is at
the very heart of how we view financial
management at the Laboratory - its everyone
responsibility!
8
The Labs 10 Financial Commandments

• Core financial management principles that
  ethically guide actions and behavior --- they are
  located on the OCFO website
• 1. Dont spend dollars you dont have -- Funding
  must be in UC Contract 31, not just in the
  Approved Funding Program (AFP) or contract award
• 2. Spend funding only on the purpose for which it
  is intended
• 3. Dont mix funding sources for projects without
  documented rationale
• Do not charge research costs to an indirect
  budget (except for LDRD) e.g., overhead,
  organization burden, recharges
• Have a causal-beneficial relationship between the
  cost elements of an indirect budget and its
  corresponding distribution base.

9
The Labs 10 Financial Commandments (Contd)

• Maintain consistency in cost distribution over
  time
• Use Full Cost Recovery No subsidies
• Record all costs of a project in the accounting
  period for which services were performed or goods
  delivered (includes accruing for all appropriate
  costs in the correct period of performance to
  that project)
• Transfer costs only if necessary, appropriate,
  fully documented and justified (as outlined in
  the LBNL Resource Adjustment Policy)
• Comply with DOE funding categories and related
  thresholds (colors of money)
• 50K for Capital Equipment, 5M for General Plant
  Project (GPP), and 2M for Major Item of
  Equipment (MIE)

10
Critical Elements of a Budget

• Identifies Project Manager/PI and funding source
• Description of work scope and deliverables
• Resource requirements and cost details
• Time dimension
• Period of performance
• Phases of work/resource level fluctuations
• Budget assumptions documented

11
Direct vs. Indirect Costs

• Direct costs are specifically identifiable with a
  particular project

• Indirect costs those that are not defined as a
  Direct cost
• Under similar circumstances, the same type of
  costs can not be treated as a direct cost in one
  area and as an indirect cost in another area

12
What is an Indirect Budget?

• An Indirect Budget is a means of allocating costs
  which benefit multiple projects, examples
  include
• HR centers
• Janitorial services
• Payroll
• Types of indirect budget at LBNL
• Overheads
• Institutional (e.g., GA, LDRD, IGPP, etc)
• Divisional (e.g., Org. Burdens)
• Recharges/Service centers (e.g., Procurement
  charge, Telecom, Fleet, CSO, etc)

13
Elements of an Indirect Rate Calculation

• An Indirect budget rate calculation consists of
  the three steps
• Identifying the cost pool (budget)
• Identifying the allocation base
• Calculating the rate

Example Fleet budget (GSA vehicle lease, fuel
costs, fleet management, etc.)
1,343,000 Base number of miles driven
695,555 mi FY07 Fleet recharge rate
1.93/mi
14
LBNL Allocation Hierarchy
15
Reporting Purposes Direct Costs

• Costs that are specifically identifiable with a
  particular project.
• Labor (salaries benefits)
• Materials, Subcontracts, Procured Services,
  Travel
• Service center charges (e.g., CSO, Shop,
  Electricity, Telecom, Procurement and Travel
  burdens)

16
Effort Measures

• Headcount
• Effort Hours
• Work Months (WM)
• Full Time Equivalents (FTE)

17
Cost of Labor - Overview

• The total cost of labor of an LBNL employee to an
  activity depends on
• Compensation rate
• Employee classification/Payroll burden rate
• Time reported in LETS
• Charged to a work project
• Charged to a leave project/account
• Organization code
• Project ID (proxy for source/use of funds)

18
Cost of Labor Is More Than Salary

• Indirect allocations are added to an employees
  salary
• Check the LBNL Rate Handbook on the CFO web site
  for current rates
• Rates can change during a year
• Most rate changes are retroactive to beginning of
  fiscal year
• Rate Handbook can be found at the following
  website http//www.lbl.gov/Workplace/CFO/assets/do
  c/bgt/internal/rate_handbook.xls
• Rate Handbook also contains various labor
  price-outs based on type of funding (e.g., DOE,
  WFO) used

19
Why the Federal Budget is Important to Lab

• U.S. Department of Energy (DOE) provides 80 of
  LBNLs annual funding
• DOE is funded through the Federal Governments
  Annual Appropriations process
• The Flow of ...Congress DOE LBNL
• Decisions made during the process determine how
  much funding DOE receives the more the better!
• How the money DOE receives is to be spent is also
  determined in the process (earmarks, limitations,
  etc.)

20
Passage of an Appropriations Bill in Pictures
subcommittee
hearings
FULL
subcommittee
hearings
FULL
Conference Committee
In a perfect world enactment on Oct 1
21
Federal Budget Cycle
The Federal budget is passed into law each year
by Congress and is signed by the President -
until UC Contract 31 is modified, you do not have
funds to spend!
22
Impact of a Continuing Resolution (CR)

• A CONTINUING RESOLUTION is legislation enacted by
  Congress to provide budget authority for federal
  agencies to continue operating if the fiscal year
  ends without a new appropriation in place --- no
  new program/project starts
• A CR or multiple CR increments are strong
  possibilities at the start of any Fiscal Year
• Instead of receiving annual funding up-front,
  under a CR, funding is received in increments
  based on the prior year or the lower of House or
  Senate mark funding level
• Under a CR we are still responsible for managing
  costs within funding control levels (9 digit BR)

23
Managing Through a CR

• Requires careful Divisional management and
  coordination with HQ Programs
• What happens if you do not have enough funding?
• Divisions are expected to spend their carryover,
  then stop work until additional funds arrive
• Work for Others projects should be minimally
  affected by a Continuing Resolution
• New starts are OK with a signed contract
• Work closely with Federal Agencies other than DOE
  that may be affected they would also be under a
  CR

24
Direct (External) Funding Sources

• Dept of Energy (DOE) Headquarters/ Office of
  Science (SC) our largest funding sponsor
• By Field Work Proposal (FWP) through federal
  budget development process
• Work For Others (WFO) DOE
• Integrated contractors
• Other DOE Operations Offices
• WFO Non-DOE
• Federal agencies
• Non-federal entities
• Other Sources
• Cooperative Research and Development Agreements
  (CRADAs)
• Gifts
• Licensing agreements (Royalties)
• Contracting Supported Research (CSR)

25
DOE Calls for Research Proposals

• DOE Annual Field Budget Submission (FBS) -
  March timeframe
• DOE Order 130.1 established DOEs budget
  formulation process and overall framework for
  each stage of the DOE budget process. Submission
  includes project level budget FTE requests for
• DOE (non-NNSA) programs Office of Science (our
  largest sponsor), Fossil, EERE
• Work for Others programs
• Crosscut exhibits and schedules
• National Nuclear Security Administration (NNSA)
  Planning, Programming, Budget, and Evaluation
  (PPBE) Process
• NNSAs process that directs their budget
  formulation and execution processes. PPBE was
  established to address those needs within NNSA
  that are unique from DOEs. Each major NNSA
  program has a separate call for data
• LBNL submissions include budget and FTEs for
  Non-Proliferation and National Security
• Off Cycle Calls Various Programmatic
  solicitations for Proposals throughout the Fiscal
  Year (FY)
• Office of Science Funding Opportunities via
  GRANTS.GOV

26
DOE Work Authorization System

• DOE Work Authorization System provides the
  DOE/Lab framework for the disbursement of funds
• DOE Work Authorization System (WASs) statements
  include programmatic guidance memos
• DOE Order 412.1A Work Authorization Process
• Chicago Operations Office will NOT fund without a
  WAS document in hand from the relevant DOE HQ
  Program Office (e.g. Office of Science, EERE)

27
Budget and Reporting (BR) Codes

• BR is an alpha-numeric code assigned by DOE to
  all funding sources (DOE accounts)
• Associated with all funding and costs
• Facilitates identification of funding/costs for
  specific research areas or projects on a DOE
  complex wide basis
• Referenced in a Work Authorization Statement
  (WAS)

28
Work for Others

• Contract between LBNL or DOE and a Federal or
  Non-federal sponsor for contract RD work to be
  performed by LBNL
• A unique Laboratory capability
• Work must fit within mission of LBNL
• Cannot compete with private sector
• All costs are recovered from the sponsor
• Requires DOE approval

29
Authorities for Sponsored Research at LBNL

• Only Sponsored Projects Office (SPO) has
  authority to submit proposals and accept awards
  on behalf of LBNL
• Delegation from UC through Lab Director
• Principal Investigator (PI) does not have
  authority to submit proposals or accept awards
• SPO website www.lbl.gov/workplace/CFO/SPO

30
Have SPO Review the Solicitation

• Before investing time and effort in a proposal,
  let SPO review the solicitation to determine
  LBNLs eligibility
• Three basic types of solicitations
• U.S. Govt. Request for Proposals (RFPs)
• U.S. Govt. Other Solicitations (BAAs, RAs)
• Non-Federal Solicitations

31
What is Funds Control?

• A systematic approach to ensure that
• Funds are expended solely for their authorized
  and/or appropriated purposes
• Obligations and costs are incurred within
  applicable time limits (e.g., funds are available
  before being obligated) and
• Funds are obligated and expended within their
  authorized amounts.

32
Why is Funds Control Important to the Lab?

• Promotes ethical behavior and public trust in the
  scientific mission
• Enables the Lab to operate in an open manner,
  with less intrusive external oversight pressure
• Avoids unallowable costs, which means more funds
  going to research
• Avoids negative audit exposure
• Avoids negative press
• Funds control violations of may result in UC have
  to prematurely re-compete Contract 31 with DOE
• Avoids the individual being personally liable if
  performing responsibilities legally
  appropriately

33
Legal and Administrative Requirements
LBNL has various legal and administrative
requirements to ensure that we do not spend funds
in excess of our Total Obligational Authority
(Carryover Budget Authority)

1. Anti Deficiency Act of 1885
2. Appropriations Law
3. DOE Directives
4. DOE Contract 31, Appendix B
5. Good Business Practices

34
Cost Allowability Key Concepts

• Reasonableness
• Ordinary and necessary to conduct Lab business
• Does not exceed what would be incurred by a
  prudent person in the conduct of competitive
  business
• Compliant with UC Contract 31, sound business
  practices, applicable laws and regulations

35
Cost Allowability Key Concepts

• Allocability
• Cost incurred specific to the cost objective
• Benefits both the Project and other work, and
  cost can be distributed to them in a reasonable
  proportion to the benefits received
• Is necessary to overall operation of Lab business

36
Allowability Isnt Always Clear Cut

• There is no complete list in UC Contract 31
• There may be grey areas that require analysis and
  interpretation ask for help when in doubt
• Lab resources for guidance and assistance
• Financial Policy and Training Office
• Office of Contract Assurance
• Budget Office
• Controllers Office

37
What is an Unallowable Cost?

• Item or type of cost specifically identified or
  determined to be unallowable under an applicable
  law, regulation, or UC Contract 31
• Unallowable costs can result in financial and/or
  criminal liabilities
• Examples include alcohol, contributions,
  entertainment, gifts, interest, lobbying,
  souvenirs, and food in most instances

38
How To Avoid Unallowable Costs
Take the cost allowability test

1. Reasonable ordinary and necessary to conduct
   Lab business, does not exceed what would be
   incurred by a prudent person in the conduct of
   competitive business, and compliant with UC
   Contract 31?
2. Allocable charged to the correct project or
   cost pool?
3. Within dollar limits of UC Contract 31?
4. Compliant with UC Contract 31 terms?
5. Consistent with good business practices?

39
What is an Unauthorized Commitment?

• Contractual agreement or commitment, written or
  oral, made by an individual who lacks sufficient
  authority to enter into them on behalf of the Lab
  
• Examples of unauthorized commitments include
• Authorizing a vendor/subcontractor to perform
  work without written, delegated authority
• Authorizing work that exceeds the total allowable
  cost or extends beyond the current term of a
  subcontract
• Requesting or accepting materials or services
  from a vendor when a purchase order has not been
  awarded

40
Time and Effort Reporting

• Its a high Lab priority to report time and
  effort in a timely, accurate, and complete manner
• Compliance with Federal Law, Fair Labor Standards
  Act
• Accurate and timely reporting of Project costs
• Ensures employees are paid correctly accurate
  leave taken
• Employees report certify their own time and
  effort
• Supervisors approve their employees time
  effort
• Senior management is responsible for ensuring
  that time and effort reporting in their Division
  is properly managed

41
Signature Authority at LBNL Roles and
Responsibilities

• The Lab Director has ultimate responsibility
• Per Standing Order of the Regents 100.4 UC
  Delegation of Authority
• In order for an employee to obtain signature
  authority (e.g., for financial transactions),
  approval from one of the following must be on
  file in OCFO
• Laboratory Director
• Deputy Director
• Associate Laboratory Director
• Chief Financial Officer
• Division Director
• Department Head
• Business Manager (or designee)

42
What Does Your Signature Ensure?

• Understanding of transaction and your approval
• Information, supporting documentation is complete
  and accurate
• Allowable, reasonable, and justified
• Allocable to project(s) being charged
• Adequate funds at hand to cover expense
• Awareness of your authority level ( limit)
• ETHICS and ACCOUNTABILITY

43
Funds Control - Best Practices
44
Funds Control Success The Team

• Funds Control depends on a cohesive division
  team
• Division Director
• Department Head
• Principal Investigator
• Project Manager
• Group Lead
• Business Manager
• Resource Manager
• Resource Analyst
• Field Operations Manager (provides advice
  consultation services)

45
Funds Control Best Practices

• What are the Critical Success Factors?
• Communication
• Effective, explicit, and continuous
• Financial Reporting
• Timely, accurate, and complete
• Division review and monitoring
• Timely accruals of costs
• Proactive corrective action(s) taken
• Sufficient checks balances and internal controls

46
Funds Control Best Practices

• What We Need to Communicate/Monitor
• Financial summaries details throughout the
  entire budget development and execution
  processes
• Appropriate cost elements and the level of
  resources needed
• A projects financial performance conforms with
  existing Funding/Spend Plan
• Identifying potential funds control problems and
  violations before they occur

47
What is Accounting?

• Process of recording, classifying, reporting, and
  interpreting the financial data of an
  organization
• Demonstrates financial position of organizations
  operations
• Must be objective, consistent, unbiased, and
  compliant with applicable regulations/laws

48
What is GAAP?

• Generally Accepted Accounting Principles
• A common set of accounting principles, standards,
  and procedures for financial accounting,
  recording and reporting
• Lab is required to follow GAAP and it shapes our
  accounting policies and procedures
• GAAP is recognized by authoritative bodies, such
  as
• Financial Accounting Standards Boards (FASB)
• Federal Accounting Standards Advisory Board
  (FASAB)
• Governmental Accounting Standards Board (GASB)

49
What is a Balance Sheet?

• Statement of financial position at a specific
  date
• Contains three major sections
• Assets, Liabilities, and Equity
• The accounting equation
• Assets Liability Equity

50
What is an Income Statement?

• Report showing revenue, expenses, and net income
  for a period of time
• Operating results for the accounting period are
  reflected in equity / net position on the balance
  sheet

51
What is a General Ledger?

• Group of accounts that are used to prepare
  financial statements for a business
• Usually grouped in the following order
• Assets 1000
• Liabilities 2000
• Equity 3000
• Revenues 5000
• Expenses 6000

52
What the Heck is C-W-I-P?

• CWIP Construction Work in Progress
• Holding account for property costs not yet ready
  to be placed in service
• Costs remain in CWIP until completion of
  activities, which then initiates the
  capitalization and depreciation process

53
CWIP Process
PACE Plant Capital Equipment
54
What is Accrual Accounting?

• Revenues are recognized in the period in which
  the service was performed, whether or not cash is
  actually received by the performer
• Expenses are recognized and matched with the
  related revenues of the period, whether actually
  paid or not

55
Major Steps in the Accounting Cycle

• Analyze transactions   
•       
• Prepare journal entries
• Post to general ledger 
• Compile financial statements

56
DOE Financial Reporting Systems

• MARS Management Analysis and Reporting
  System (a legacy system that is being phased out
  by DOE over time)
• STARS Standard Accounting Reporting
  System

57
Accounting Structures LBNL vs. DOE
DOE
LBNL
MARS
STARS
Balance Sheet Code Fund Type BR (Budget
Reporting)
Standard General Ledger Fund Code Program
General Ledger Accounts Fund Type BR (Budget
Reporting)
LBNL General Accounting must ensure accuracy
58
What does Color of Money Mean?

• Attribute of project funding that restricts its
  use to specific kinds of activities such as
  equipment purchases, capital construction,
  operating expenses
• Changing funding levels between Congressional
  color of money requires Congressional approval
  (reprogramming process)
• Changing funding levels among DOEs color of
  money for Operating funds only requires DOE
  approval (HQ program manager changes funding
  levels in WAS guidance letter).

59
Why is Color of Money Important?

• The Labs financial statements must be accurate
• Its a heavily audited activity by external
  entities
• Our funding must be used for its intended purpose
• To avoid violating the Anti-Deficiency Act and
  various federal appropriations laws

60
Recent Capitalization Changes

• Capital items/systems purchased or fabricated
  after October 1, 2005
• 50K is new dollar threshold full cost of the
  item/system, including all of its indirect costs
• Service life of item remains at 2 years or more
• 5K threshold for property accountability does
  not change
• Equipment purchased or fabricated before FY 2006
  with a value of less than 50K and was previously
  considered capital equipment will not be written
  off

61
Project Completion

• PI, Project Manager, Department Manager
  determines work scope is complete and financial
  close is requested
• Resource Analyst checks for outstanding financial
  transactions
• Labor
• Procurement/Travel
• Recharge
• Other including outstanding sponsor payments

62
Fiscal Year End Close

• LBNL uses accrual based accounting
• Costs at fiscal year end represent all work,
  purchases, travel, etc. completed by September
  30th of the current year
• Different funding sources may have different year
  end reporting requirements/different fiscal year
  ends, however, the Labs is Sept 30th and we must
  accrue all costs for financial reporting purposes
  

63
Procurements Role at LBNL

• Support science 40 of the Lab budget becomes a
  procurement
• Compliance
• Public trust
• FAR/DEAR
• Prime Contract requirements
• Standard Practices (SPs)
• Good Business Practice
• Efficient processes to reduce transaction costs
• Adequate controls that withstand audits

64
Procurement Basics

• Three Types of Procurements at LBNL
• Purchase Order (Subcontracts, Blankets, IUTs,
  RD, Construction, AE, etc.)
• Procurement Card (PCard)
• eBuy

65
Procurement Liaisons

• Procurement Liaisons are available to assist
  Laboratory Divisions and staff with their
  procurement needs
• Assist Divisions with strategic planning of
  acquisition workload
• Develop contract strategies for critical and
  high-value procurements
• Help resolve project-related issues
• Answer questions on policies and procedures
• Resolve questions and problems regarding
  procedures and requirements related to subject
  matter
• Please feel free to contact our Liaisons for
  assistance (http//procurement.lbl.gov/liaisons.ht
  m)

66
What do we mean by Property?

• Personal Property at LBNL
• is property of any kind
• EXCEPT
• Real estate (land, buildings equipment
  permanently affixed to buildings)
• Records

67
Personal Property Classifications

• Controlled
• Materials and equipment valued at 5,000
• Sensitive
• Property that is highly portable, easily
  converted to personal use, and is more
  susceptible to theft than other equipment
• No minimum acquisition value. It includes
• Cameras (still, digital, video, TV, movie)
• Personal Computers peripherals
• Printers, Scanners, Projectors
• Recorders
• Telephones (cellular, mobile) 2-way Radios

68
LBNL Financial Information Systems

• Transaction processing
• PeopleSoft FMS is the Labs core financial system
  for GL, AP, Procurement, eBuy, AR, funds control,
  etc
• Other sub-systems for time-keeping, service
  center recharges, and property feed transactions
  to FMS
• Reports
• Super-user real time reports/queries available in
  FMS
• End user next day reports provided thru IRIS and
  the BLIS Reporting System (BRS)
• Goal Replace IRIS with the newer BRS

69
New Financial Info Systems Initiatives

• Travel Expense system (TREX) replaced GELCO
  (late spring 2008)
• Budget Planning Estimating System to replace
  Janus and Excel spreadsheets (late summer 2008)
• Additional eBuy vendors (on-going)
• New WFO proposal management system (est. 2009
  -2010)
• Events Data Base (spring 2008)

70
Travel

• The Labs travel agency for air and hotel
  bookings are done through Carlson Travel agent
  assisted or online reservation system (Cliqbook)
• Policy Compliance
• Federal per diem limits per city meals, lodging,
  mileage
• Foreign travel approvals DOE and State
  Department
• Receipts required lodging, airfare, rental car,
  registration fees, gt75 other
• Submission of expense reports within 30 days of
  travel
• PeopleSoft Travel Expense System
• Ease of use with all electronic reimbursement
  reporting
• Reduce expense/reimbursement cycle time
• The Labs Travel Manager is Jaime Reyna, and he
  can be contacted at ext 6012 or at
  JReyna_at_lbl.gov
• Goal Improve Customer Service and Travel
  Efficiency

71
Conference Services

• Provides a complete array of professional
  conference planning offerings and expertise
  designed to save time, effort, and money
• From budgeting and site selection to catered
  foods and entertainment, this office assists
  with
• Facilities and Service Planning
• Conference Information
• On-Line Registration Services
• Financial Administration
• Meeting Management
• The Labs Conference Services Planners are
• Jill Stark, and she can be contacted at ext
  5073 or JSStark_at_lbl.gov
• Laurie OBrien, and she be contacted at ext
  7046 or LJOBrien_at_lbl.gov