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


LBNL Financial Management General Overview, Core Principles, Key Concepts, and Best Lab Practices Presented by Doug Goodman, OCFO Field Operations Manager – PowerPoint PPT presentation

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

LBNL Financial ManagementGeneral Overview, Core
Principles, Key Concepts, and Best Lab Practices
  • Presented by
  • Doug Goodman, OCFO Field Operations Manager

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
  • Accounting Concepts and Processes 47
  • Procurement Property Management Concepts and
    Processes 63
  • Financial Information Systems Concepts 68
  • Travel and Conference Services Key
    Information 70

Training Objectives
  • Provide an overview of Berkeley Lab financial
  • 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

OCFO Organization
OCFO - Lead Organizational Contacts
  • The OCFOs senior leadership team is comprised
  • Jeffrey Fernandez, Chief Financial Officer, ext
  • Cynthia Jones, CFO Administrator, ext 4242,
  • Anil More, Operations Manager, ext 5254,
  • Linda Wuy, Business Manager, ext 7418,
  • Minh Agon Huebner, Budget Officer, ext 5293,
  • Jeanne Kissel, Controller, ext 5957,
  • Derrol Hammer, Procurement Property Mgr, ext
  • Jeff Weiner, Sponsored Projects Officer, ext
  • Chuck Axthelm, Business Systems Analysis Mgr,
    ext- 4461,
  • Doug Goodman, Field Operations Manager, ext
  • The CFOs website is http//

OCFO Financial Policies and Procedures
  • The Labs website for its financial policies and
    procedures manual can be found at
  • 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
  • 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//

  • 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
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.

The Labs 10 Financial Commandments (Contd)
  • Maintain consistency in cost distribution over
  • 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)

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

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

What is an Indirect Budget?
  • An Indirect Budget is a means of allocating costs
    which benefit multiple projects, examples
  • 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)

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

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

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)

Cost of Labor Is More Than Salary
  • Indirect allocations are added to an employees
  • 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//
  • Rate Handbook also contains various labor
    price-outs based on type of funding (e.g., DOE,
    WFO) used

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,

Passage of an Appropriations Bill in Pictures
Conference Committee
In a perfect world enactment on Oct 1
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!
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)

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

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
  • Gifts
  • Licensing agreements (Royalties)
  • Contracting Supported Research (CSR)

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

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)

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

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

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

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

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.

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

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

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
  • Compliant with UC Contract 31, sound business
    practices, applicable laws and regulations

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

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

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

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?

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
  • Requesting or accepting materials or services
    from a vendor when a purchase order has not been

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
  • Accurate and timely reporting of Project costs
  • Ensures employees are paid correctly accurate
    leave taken
  • Employees report certify their own time and
  • Supervisors approve their employees time
  • Senior management is responsible for ensuring
    that time and effort reporting in their Division
    is properly managed

Signature Authority at LBNL Roles and
  • 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)

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)

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

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

Funds Control Best Practices
  • What We Need to Communicate/Monitor
  • Financial summaries details throughout the
    entire budget development and execution
  • 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

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

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
  • Financial Accounting Standards Boards (FASB)
  • Federal Accounting Standards Advisory Board
  • Governmental Accounting Standards Board (GASB)

What is a Balance Sheet?
  • Statement of financial position at a specific
  • Contains three major sections
  • Assets, Liabilities, and Equity
  • The accounting equation
  • Assets Liability Equity

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

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

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

CWIP Process
PACE Plant Capital Equipment
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

Major Steps in the Accounting Cycle
  • Analyze transactions   
  • Prepare journal entries
  • Post to general ledger 
  • Compile financial statements

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

Accounting Structures LBNL vs. DOE
Balance Sheet Code Fund Type BR (Budget
Standard General Ledger Fund Code Program
General Ledger Accounts Fund Type BR (Budget
LBNL General Accounting must ensure accuracy
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).

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

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

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

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

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

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

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
  • Please feel free to contact our Liaisons for
    assistance (http//

What do we mean by Property?
  • Personal Property at LBNL
  • is property of any kind
  • Real estate (land, buildings equipment
    permanently affixed to buildings)
  • Records

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

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

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
  • Events Data Base (spring 2008)

  • 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,
  • Foreign travel approvals DOE and State
  • Receipts required lodging, airfare, rental car,
    registration fees, gt75 other
  • Submission of expense reports within 30 days of
  • PeopleSoft Travel Expense System
  • Ease of use with all electronic reimbursement
  • Reduce expense/reimbursement cycle time
  • The Labs Travel Manager is Jaime Reyna, and he
    can be contacted at ext 6012 or at
  • Goal Improve Customer Service and Travel

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
  • 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
  • Laurie OBrien, and she be contacted at ext
    7046 or