1. University of Virginia Fund Accounting & Internal Controls

2. 2 2 What is Fund Accounting? A method of segregating resources (i.e., funds) into categories to identify both the source of funds and the use of funds.

3. 3 3 Fund A segregation of resources used to: 1.Control and monitor financial activity, and 2.Help ensure and demonstrate compliance with legal and administrative requirements.

4. 4 Sources of Funds

5. 5 5 Two Basic Categories of Funds Current –Those funds expendable for carrying out the primary purpose of the University: instruction, research, and public service. Non-Current –Those funds that represent the University’s long term assets, because they are not used to support annual operating expenses.

6. 6 6 Examples of Current Funds FundSourceEntity that may impose restrictions State E&GApprop & TuitionVA State Legislature Grants and ContractsExternal SponsorsSponsor F&A Cost RecoverySponsor & UVA DistribUVA Administration GiftsPrivate DonorsDonor Sales & ServicesExternal RevenueFund Owner Auxiliary EnterprisesRevenue & Cost RecovFund Owner Endowment IncomePrivate DonorsDonor Quasi-endowment IncomeDept ReservesSource Fund Intellectual PropertyRoyalties, Licenses, etcFund Owner

7. 7 Examples of Non-Current Funds FundSourceEntity that may impose restrictions Loan Funds Financer Endowment & Similar Funds (principal) Donor Annuity & Life Income Funds (principal) Donor Plant Funds (Capital Projects) Multiple sources including Donor, F&A, Aux Dependent on source of funds Agency Funds (e.g. HSF) Agency

8. 8 Transaction Flow PTAEO – COADetail Summary INSTITUTIONAL REPORTS Expenditure Budget Revenue Budget Accounts Receivable

9. 9 GM Charging Instruction PTAEO

10. 10 GM to GL mapping GL Chart of Accounts (COA) GM PTAEO one to one to one many awards to one fund source many exp types to one object code Many awards to one entity

11. 11 Fund Source/Award Purpose Code Oracle uses the fund source in General Ledger module to meet the source of fund requirement of fund accounting Oracle uses the award purpose code in Grants Accounting module to meet the source of fund requirement of fund accounting

12. 12 How are Fund Sources identified in the Integrated System? FundSourceRestrictionIS Award Prefix State E&GApprop & TuitionLegislatureSG Sponsored PgmsExternal SponsorsSponsorG F&A Cost RecoverySponsor & UVA DistribUVA AdministrationFA GiftsPrivate DonorsDonorD Sales & ServicesExternal RevenueFund OwnerSS,LS Auxiliary EnterprisesRevenue & Cost RecovFund OwnerSA,LA EndowmentsPrivate DonorsDonorE Quasi-endowmentsDept Reserves & University reserves Source FundE Intellectual PropertyRoyalties, Licenses, etcFund OwnerIP AgencyExternal EntitiesEntity AgreementYY

13. 13 1.Expenditure Expenditure projects can be identified as projects linked to, and funded by an award. 2.Revenue Revenue projects provide and identify the funds that back up award installments. 3. Revenue & Expenditure Project provides and identifies the funds that back up the award installment that funds the same project for expenditures 3 Basic Types of Projects

14. 14 Expenditure Function Designates the use of funds Example: Research, Instruction, Community Service, etc.

15. 15 P1P1 GL GM Revenue Expenditures A ER00083 P 101395 FM Lewis Botanical Garden

16. 16 P 11797 SA – UCS Resume Marathon A DR01340 P 102003 GL GM Revenue Expenditures P 102003 P 107165 P 117976 P 107168 P 107173 SA – UCS Gifts SA – UCS Employer Svc SA – UCS CLAS Svs SA – UCS Library SA – UCS NYRA SA – UCS Gifts

17. 17 A SA00001 GL GM Revenue Expenditures P 100256 P 100262 P 100264 P 100257 P 100272 AT-State Rev Award AT-State Revenue AT-FootballAT-Men’s Basketball AT-Women’s Basketball AT-Men’s & Woman’s Track AT-Men’s & Women’s Swimming P 100254 P 100248 P 100245 AT-Ticket SalesAT-ConcessionsAT-Suite Lease RP 0028

18. 18 GL GM Revenue Expenditures Ticket Sales Concessions Suite Lease AT- Women’s Basketball AT-State Rev Award AT-State Revenue A SA00001 P 100256 P 100262 P 100286 P 100257 P 100272 AT- Football AT-Men’s Basketball AT-Men’s & Woman’s Track AT- Women’s Rowing P 100254 P 100248 P 100245 RP 0028 A DR00127 P 100309 Restricted General Gifts AT-General Gifts

19. 19 GL GM Revenue Expenditures A SG00007 P 101134 P 999814 P 103491 P 103529 RP 0001 A SG00001 A SG00010 FI-State Gen Funds FI-State Non-ed S&S Revenue FI-Gen Fund Appr FI-State Gen Funds FI-State Non-ed S&S Revenue FI-Gen Fund Appr P 101135 P 100087 P 100088 P 100146 P 100147

20. 20 How is your award funded? Event Based Billing –Sponsor invoiced based on a particular event (eg, time period, specific event such as a conducting a clinical trial, etc) Cost Based Billing –Sponsor invoiced at the end of each period based on actual costs incurred during the preceding period.

21. 21 Award PrefixCashBudget G NoYes SG/LGNoYes LCNoYes SRNoYes EI/DINoYes EU/ERYesOptimal DU/DRYesOptimal FA/IP/YYYesOptimal SA/LAYes LS/SSYesOptimal Managing to Cash vs Budget Managing to Cash vs Budget

22. 22 Questions

23. 23 Internal Controls Questionnaire Ensuring your department is in compliance

24. 24 What is the ICQ? Annual questionnaire conducted by the Asst VP for Finance and University Comptroller as part of annual certification to the State Comptroller Individuals typically at the Dean, Department Head or similar type of position are asked to certify that their organization(s) are in compliance with University Internal Control policies and procedures

25. 25 Internal Controls Safeguard assets of the University Verify the accuracy and reliability of accounting data and other management information Promote operational efficiency Ensure adherence to prescribed policies and compliance with federal and state regulations

26. 26 Responsibility to Safeguard Assets Assets are all property owned by the University including buildings, equipment, inventory, accounts receivable and cash. Extreme care must be exercised in safeguarding cash and items easily converted to cash such as accounts receivable. Individuals who receive and deposit payments must NOT have the responsibility for recording payments in the accounts receivable records.

27. 27 Deposits Financial Policy II.E.4 All cash receipts must be deposited to a University bank account within 24 hours if they are greater than $200 If the deposit is less than $200 it must be deposited weekly Oracle entries for deposits that are taken directly to the bank must be recorded the same day as the deposit

28. 28 Deposits Continued Financial Procedure 5-8 - All checks received by the departments must be restrictively addressed immediately after receipt All employees assigned to the departments fiscal and administrative duties must have access to a secure cash storage container and know that any un-deposited cash items must be properly secured and stored prior to deposit

29. 29 Deposits Continued Accountability over all cash receipts is ensured by using at least one of the following: check logs, cash registers or pre-numbered receipts –If receipts are used in departmental cash transactions, voided receipts are maintained and reviewed by someone other than the person collecting cash Accountability over cash transactions is ensured by having at least two persons involved in performing the duties of cash collection, accounts receivable record keeping, and account reconciliation, unless an explanation of special circumstances is attached for review and approval by the University Comptroller

30. 30 Credit Card Receipts If the department accepts credit cards (over the web or through a terminal), the activity has been approved and a unique merchant number has been issued by Revenue and Collections for each web or terminal application Oracle entries for credit card receipts must be recorded no later than a day after the credit card batch transmission

31. 31 Petty Cash Financial Policy II.E.2 All petty cash accounts must be approved and established by Revenue and Collections (924-4362) Revenue and Collections must approve all departmental checking accounts Petty cash funds are used ONLY for University transactions

32. 32 Petty Cash continued Petty cash funds (cash and checking accounts) must be reconciled at least monthly Change funds (cash drawers) are reconciled at the end of the day by two different people Petty cash funds (cash or checking account) are reimbursed at least every 30 days if expenditures are greater than $50.00 or at least every three months if less than $50.00, and at fiscal year-end

33. 33 Gifts Financial Policy IX.A.2 Employees assigned to the department's fiscal and administrative duties must promptly notify the Office of University Development when gifts are received Employees assigned to the department's fiscal and administrative duties must promptly notify the Office of University Development and the University Investment Management Company (UVIMCO) when gifts of securities are received

34. 34 Asset Management The department's resources (personnel, space, and equipment both on and off grounds) may only be used to promote the University's primary mission, as stipulated in Financial and Administrative Policies XV.G.1 and XV.G.2. Assets belonging to the department are properly safeguarded, with access restricted only to those properly authorized, as stipulated in Financial and Administrative Policy I.A.1 Employees must notify the appropriate fixed asset management unit when equipment is obtained without using a purchase order, or equipment is transferred (e.g. location changes or employee departs), or equipment is disposed of or retired, as stipulated in Financial Policy X.A.1. Surplus property must be disposed of through Procurement Services, as specified in Financial and Administrative Policy S.F.1.

35. 35 IT Asset Management The department must dispose of surplus software and its documentation in accordance with the license agreement, as stipulated in Financial and Administrative Policy XV.F.9. (Note: software upgrades are an extension of the original license and must be treated accordingly.) The department must complete the process outlined in the University’s Information Technology Security Risk Management Program at least once every three years, when there are significant changes to departmental IT assets or when there are significant changes to the risk environment, as stipulated in University Policy IRM-003

36. 36 Decorative Art If the department owns or houses any fine or decorative art items (paintings, sculptures, antiques, etc.), employees assigned to the department's fiscal and administrative duties are aware of their responsibilities under Financial and Administrative Policy X.E.2. The department must keeps a current inventory listing of any fine or decorative art items and their location (building, floor, room) When gifts/donations of fine or decorative art items are received, a deed of gift is executed with the donor through the Development Office, as stipulated in Financial and Administrative Policy IX.A.4.

37. 37 Suspected Fraudulent Activity Policy GOV-002 If at any time you suspect fraudulent activity it is your responsibility to report it to BOTH the University Police (924-7166) and the University Audit Department (924- 4110)

38. 38 Insurance Losses Policy FIN-006 You must notify the Office of Risk Management (924-3055) when a loss occurs that could be filed as an insurance claim

39. 39 Responsibility to Verify the Accuracy and Reliability of Financial Data University’s Integrated System maintains a comprehensive record of all financial transactions. Departments are responsible for processing all transactions in a timely manner and to verify, promptly, the accuracy of transactions on their projects. All projects must have a comprehensive OGM and OGL reconciliation at least monthly.

40. 40 Responsibility to Safeguard Personal Financial Information Gramm-Leach-Bliley Act (2000) requires the security and confidentiality of all customer records including names, addresses, phone numbers, bank account and credit card numbers, income, credit histories, and social security numbers

41. 41 Credit Cards Financial Policy I.A.1 If the department accepts credit cards (in person or over the web), any credit card numbers collected are stored, protected and destroyed in accordance with Financial Policy and University Guidelines (contact Banking Services 924-4362).

42. 42 Responsibility to Review Projects and Reconcile Accounts Periodically All projects must be fully reconciled monthly by the 10 th working day of the month Projects must be reconciled for both OGM and OGL transactions The preparer of the reconciliations must sign and date them and an approver must also sign and date them each month

43. 43 Deposit and Credit Card Clearing Projects For departments making deposits or accepting credit cards, clearing account projects must be reconciled at least monthly to identify potential bank problems.

44. 44 Responsibility to Promote Operational Efficiency Through Organization and Training Operational efficiency is dependent on a proper organizational plan and sufficient training of employees Organizational plans must segregate duties so that no one employee controls all phases of a transaction New employees must be properly trained in their responsibilities

45. 45 Training Opportunities Includes Mandatory Oracle Responsibility training New mandatory training is coming soon in areas of –Fund Accounting/Internal Controls (this class) –Ethics - NEW –University Structure - NEW –Diversity- NEW –Risk Management - NEW –IT Security (already in place)

46. 46 Human Resource Management The duties of adding new employees to the payroll and of approving new hires must be assigned to different employees. The department must retain original payroll documents for classified and wage employees (OTM timesheets, timecards, etc.) as original evidence to support classified and wage employee payments and the accurate reporting of leave. Employees must be aware of policies regarding earning and using leave.

47. 47 Human Resource Management Continued Employees must be aware of policies governing hours of work, overtime hours, FLSA and compensatory leave. Employees assigned to the department's fiscal and administrative duties must closely monitor their workers and record hourly and overtime hours in accordance with published schedules, so as to produce an accurate payroll. Payroll encumbrance reports must be reviewed monthly to ensure salary and overtime rates are correct in accordance with Financial and Administrative Policies I.A.1 and II.B.2

48. 48 Human Resource Management Continued Transactions placed in Labor Suspense must be redistributed to the correct PTA combination at least monthly. Employees assigned to the department's fiscal and administrative duties must be aware of their responsibility to authorize appropriate access privileges to employees, contractors and others working under their direction or sponsorship and to modify or revoke those privileges when individuals transfer to another job within UVa, terminate from UVa, or otherwise no longer need these privileges, as stipulated in Human Resources Policies and Procedures.

49. 49 Adherence to University Policies and Procedures Primary means of internal controls All individuals who deal with financial and administrative matters must be familiar with and adhere to these policies and procedures Failure to adhere to the University’s policies and procedures may be considered misconduct

50. 50 WEBSITES FOR UNIVERSITY POLICY http://www,virginia.edu/uvapolicies Policies related to –Finance and Administration www.virginia.edu/finance/polproc/index.html www.virginia.edu/finance/polproc/index.html –Human Resources www.hrs.virginia.edu/policies.htmlwww.hrs.virginia.edu/policies.html –Faculty www.virginia.edu/provost/policies.htmlwww.virginia.edu/provost/policies.html –Computing www.itc.virginia.edu/policywww.itc.virginia.edu/policy –Information Security www.itc.virginia.edu/securitywww.itc.virginia.edu/security

51. 51 Procurement All expenditures of University funds must be reasonable, necessary, directly related to the goals and mission of the University, and in compliance with applicable state, federal, University, and where applicable, donor regulations as specified in Financial Policies VI.F.1 and, and VI.F.2 For all non-contract purchases on an LPO or P-card the department must obtain at least one quote from a DMBE-Certified Minority- or Woman-owned (DMBE M/W) vendor, unless one cannot be found. Employees must work closely with Procurement Services when purchasing special items such as multi-colored printing or research equipment as specified in Financial Policy VII.C.2.

52. 52 Procurement Continued The same person approving the purchase cannot also process the receiver, unless under special circumstances outlined in a separate letter/memo attached explaining the situation, as specified Financial Policy VI.H.1. Receiving information must be recorded in the University’s Integrated System, in a timely manner, for the amount of the goods/services actually received, as stipulated in Financial Policy VI.H.1. The department must maintain sufficient documentation to support charges to its projects as stipulated in Financial Policy II.B.2.

53. 53 Procurement Continued Vendor refunds and other credits in the form of a check received in the department must be taken to the University Cashier’s Office to be processed as an Expenditure Credit, as stipulated in Financial Policy V.B.3. Documentation on the assignment of designees for signing purchasing transactions must be prepared and forwarded to Procurement Services.

54. 54 Procurement Continued Vendor-paid travel (or other vendor-paid benefits/services) must be approved through Procurement before it can be accepted, as stipulated in Financial Procedure 6-101. Someone with knowledge of, and responsibility for, approving University sponsored travel must sign off on all travel reimbursements.

55. 55 OTPS Suspense Transactions placed in OTPS Suspense must be redistributed to the correct PTA combination on a monthly basis. http://www.procurement.virginia.edu/main/ departments/ProblemInvoices.html#Suspe nsePTAEO http://www.procurement.virginia.edu/main/ departments/ProblemInvoices.html#Suspe nsePTAEO

56. 56 University Procurement Card Financial Policy VII.C.3 If the department uses the University Procurement Card a log must be kept as an auditable record of purchases made and the card's statements must be reconciled monthly If the department uses the University Procurement Card the supervisors of all UVA purchasing cardholders must conduct an annual review of cardholder limits and document the analysis, in writing for audit review, and provide any necessary changes in limits to the UVA Purchasing Card Administrator.

57. 57 University Travel Card Financial Policy VI.G.1 Travelers must be notified that frequent flier coupons/points received while traveling at University expense must be used to offset other department travel expenses, Personal expenses MAY NOT be charged to the American Express UVA Travel Card.

58. 58 Long Distance Phone Bills Financial Policy VII.O.2 Long distance phone bills must be reviewed monthly by the owner of the Forced Authorization Code, and by their supervisor, to identify and resolve erroneous long distance charges

59. 59 Record Retention Policy and Procedure Supporting documentation must be retained in such a manner as to satisfy state and federal records retention requirements. State Retention Periods Payroll Records = 5 years + current fiscal year OTPS Records = 3 years + current fiscal year (or until the Institution has been audited) University record retention website: http://www.lib.virginia.edu/speccol/about/records_mgt.html For the Health Sciences Center record retention policy contact: John Redmond, Administrative Services: 982-3452 or Abraham Segres, Risk Management: 924-5595 Sponsored Program Retention Periods 7 years for Grants (or until audited by the Sponsor) Life for Contracts

60. 60 Contracts for the University Financial Policy VII.R.2 Valid signatures on behalf of the University are generally limited to the President, Executive Vice President and Chief Operating Officer and the University Comptroller All contracts must undergo legal review and verbal contracts are not authorized under any circumstances Contact the Office of the University Comptroller for assistance (924-4294)

61. 61 Requests for Information Administrative Policy XV.C.1 Upon receipt of a request for University records or information from an outside source, employees must notify the Office of University Relations (924-1400) and process the request in accordance with the policy

62. 62 Conflicts of Interest Financial Policy XV.A.1 Employees must report potential conflict of interest situations to the Assistant Vice President for Finance and University Comptroller (924-4294)

63. 63 Student Fund Raising Financial Policy I.H.1 All on-grounds student fund raising projects must be approved in writing by the respective dean, department head, or designee

64. 64 University Services Financial Policy XV.G.3 All services and activities offered on behalf of the University must be consistent with the mission of the University Must not compete unfairly with the private sector

65. 65 Revenue Generating Activities Financial Policy V.A.1 If the department engages in a revenue generating activity, the activity must be approved by the appropriate Dean or Vice President and then by the University Comptroller The rates charged to users are set at a level which will recover all allowable costs. Any over/under-recovery from prior years is factored into the rate calculation. The revenue generating activity operates on a breakeven basis over a two year period.

66. 66 Revenue Generating Activities continued All billable services must be properly documented and promptly billed at approved rates, as stipulated in Financial Policy VI.A.6. Procedures must be established for the timely billing of external customers and for collecting of slow –paying accounts as stipulated in Financial Policy II.E.4. All delinquent accounts must be referred to Student Financial Services or Revenue and Collections for collections efforts Financial Policy V.B.2

67. 67 Revenue Generating Activities continued Virginia Sales Tax is collected, reported and remitted when a sale is subject to the Virginia Sales Tax as described in Financial Policy V.A.3. If the revenue generating activity generates unrelated business income as described in Financial Policy XV.G.4, such income must be reported to Investment and Tax Services (243-5512).

68. 68 University Logo Financial Policy XV.G.5 Any item carrying the University trademarked logo that is offered for sale must conform to the guidelines and restrictions set forth in the policy

69. 69 Taxes Financial Policy IV.G.3 Employees awarding scholarships and fellowships must inform award recipients of possible tax implications related to those awards by completing the “Fellowship Disclosure Form/Questionnaire”,

70. 70 Monitoring of Internal Controls by the Audit Department Internal Audit monitors and evaluates internal controls as part of the internal audit plan Weaknesses in internal controls will be commented on by the Audit Department in its reports. Appropriate department or activity head must make a written response to any findings of inadequate internal controls and take prompt corrective action as recommended

71. 71 Documenting Departmental Business Operations Departments should document all unique business operations with internal policies and procedures Aids in consistency of efforts in department in periods of turnover and provides a training tool for new employees

72. 72 Business Continuity Plan All departments must have a current business continuity plan Plan should address issues such as fire, water damage, etc. Printed copy of the plan should be filed both in the department and a backup copy kept in an off-site location

73. 73 Maintenance of Internal Controls Internal Audit’s program of ongoing reviews Annual questionnaire to verify soundness of departmental internal controls Extensive questionnaire follow-up program with selective departments to ensure compliance At least an annual review with the Audit Committee of the Board of Visitors of the internal audit reports and the external auditor’s comments At least every 4 years ensure all financial systems have been reviewed by external auditors, internal auditors, or by management

74. 74 Questions