This Accounting Resource Document is currently under revision. If you have any questions, please contact Tom Ewing (688-3113) or Sue Chizmar (292-6856).
Table of Contents
Effective controls provide deans, department chairpersons, college and academic- support unit fiscal officers, central offices, and the Board of Trustees with reasonable assurance that institutional objectives have been achieved through sound financial management.
Internal Audit is available to assist departments with financial/operational audits, information systems audits and compliance with established procedures and laws. Consult Internal Audit's "Internal Control Survey" form that provides a list of questions that can assist you in determining the strength of your department's internal controls.
Reason for the Policy
Because of the university's highly decentralized nature, responsibility for financial control and stewardship rests with each department. Each department manager or administrator is responsible, on a periodic basis, for reviewing the official record of who is accountable for the various financial functions, ensuring that each person assigned tasks that involve financial accountability is performing their duties with competence and honesty, and for monitoring the effectiveness of the accountability structure. Through effective controls, a department can
- Safeguard assets
- Prevent, detect, and correct errors and irregularities
- Ensure reliability of financial statements
- Ensure compliance with various regulations
Fundamentally, controls help to ensure that a department has not been defrauded and that the university's assets are being protected.
University policy requires both indirect and direct controls. Indirect controls include management integrity, communication of ethical values, and managerial compliance with existing policies. Direct controls are quite specific. They are listed in Basic Controls and Segregation of Duties.
- There should be an audit trail for each financial transaction. Documentation can be in either electronic or paper form.
- There should be at least one designated person in the department who is responsible for safeguarding assets including cash and cash equivalents and physical assets such as equipment, space, and supplies.
- Accounting data must be checked to ensure that it is accurate and reliable.
- All financial data must be checked against other documents such as receipts, billings, etc. For financial data to be validated, it must be reconciled. The external auditors recommended "documentation of the reconciliation process and timely resolution of any discrepancies found."
- During the reconciliation process, departments must ensure that only expenses related to their fund are recorded in that fund. The department must follow up on all inaccurate charges. Reconciliation is a critical step in ensuring that the university properly manages its resources.
- The department administrator or designee, at least monthly, must review financial records.
- All financial transactions should be complete; all financial data, e.g., organization, fund and account, which should be present, are present.
- According to state law, departments must encumber funds or set them aside for future spending to prevent overspending.
- All checks must be deposited when $200 has been accumulated or weekly, whichever comes first.
- All checks must be endorsed immediately upon receipt.
- All cash and checks designated for university purposes must be deposited within the university. External bank accounts are not permitted unless approved by the Office of the Treasurer.
- If you suspect fraud, contact university Internal Audit.
- Inventories of retail operations should be reconciled periodically to purchases of products and products sold.
- Gifts received directly by the department should be forwarded to the Development Fund for receipting and deposit.
Segregation of Duties
- Segregation of duties is critical. Segregation deters fraud or concealment or an error because another individual's cooperation (collusion) is needed to conceal wrongdoing.
- Two signatories are required on most financial transactions. Appropriate authorizations must be in place.
- Receipt of funds and recording of funds should be assigned to different employees.
- Authorization of expenditures and recording of expenditures should be segregated duties.
- All cash received should be recorded. Another person must reconcile this record to the amounts deposited.
- If a department is too small to have two or more employees who can segregate duties, then the department administrator (Chair, Dean, etc.) must frequently review departmental transactions, both personnel and non-personnel.
The purpose of the reconciliation process is to compare the transactions entered into the department's funds in the university general ledger to the department's input documents or other documents, either electronic or paper, and to determine which are complete, which are outstanding and which are in error and require correction. Reconciliation ensures consistency and accuracy between the department's records and the university financial reports. Reconciliation is a very important function.
Reason for the Guidelines
Monthly reconciliation of department financial statements to other documents and reports is a critical function that ensures sound financial management. Through a standard reconciliation process, the fund manager can determine the appropriateness of charges to their funds, both the amount that was charged and the ChartField combination to which it was charged.
- Reconciliation is the responsibility of each university department that manages one or more university funds.
- Each fund should be reconciled monthly.
- All financial transactions entered on-line by the department should be reconciled monthly to their internal source document or log.
- All financial transactions from all source systems - Human Resources, Procurement, Stores, service operations, billing units and other entities that provide financial data to the General Ledger should be reconciled to supporting documentation.
- Supporting documentation, either paper or electronic, must be adequate to support the financial transaction.
- Supporting documentation should be maintained in the department.
- Fund managers should understand the transaction information that appears on the university financial reports.
- Fund managers have the responsibility for identifying financial problems and resolving errors.
- The university Fund Exception Report (GPU11005) should be reviewed periodically to ensure that your org/fund combination has not been used inappropriately.
- Workflow should be set up appropriately to ensure that proper approvals occur for your department's financial transactions.
Revised: August 10, 2000