1

Cash and Investment Accounting for Year-End and GAAPPresented by Sherry Pickering and Lily Wang

April 16, 2007

2

Agenda

Background Interim Guideline Bank and Investment Reconciliation Investment Earnings and Earnings Distribution GAAP Impact

3

Background

Cash & Investments Prior to RMP– Campuses operated from the State Treasury

Revolving Fund Some chose to bring wires into an outside Trust

account to avoid complications with banking– For some transactions, this added steps to the

accounting.

– Investments managed by Wachovia (formerly MetWest) and controlled by campuses

4

Background

Initial RMP Plans– Campuses were to discontinue operations in the

State Treasury accounts and transition to a central bank (Wells Fargo Bank)

– Investments would be centralized into a pooled concept and managed by CO Finance & Treasury (SWIFT)

5

Background

Progress of RMP Implementation Systemwide– Wells Fargo Bank transition completed in April

2007

– SWIFT implementation postponed to July 1, 2007

6

Interim Guideline

Cash in State Treasury– Un-remitted Cash held in state treasury must be

recorded in object code 101001-General Cash.– Monthly balance in this object code should be

reconciled to the state treasury bank statement.– Prior day activity inquiry on this account is

available through the SCO terminal SCO instructions describing this tool available here

– Note: Remaining outstanding checks will continue Note: Remaining outstanding checks will continue to be honored, however campuses experiencing to be honored, however campuses experiencing lengthy deficits in this account may be charged lengthy deficits in this account may be charged bank fees.bank fees.

7

Interim Guideline

Wells Fargo Bank (WFB)– Per RMP interim guideline, all campuses must operate and

invest out of object code 108090-Investments Other, as of June 30, 2007.

– For those campuses currently operating out of 101006 and 108090, the recommended implementation of the guideline is to run a one-time allocation process at year-end to move the balance from 101006 to 108090. See attached below. Note: There are some setup changes involved, so workload

must be evaluated before proceeding. As an interim step, campuses may accomplish the reporting

requirement by changing the AAT key connected to the campus local Peoplesoft account established to represent WFB.

– Campus will still want to make a change later under this approach to eliminate training issues with systemwide materials and local chart of accounts.

Microsoft Word Document

8

Interim Guideline

Year-End Balance before Allocation Process

9

Interim Guideline

Year-End Balance after Allocation Process

10

Bank and Investment Reconciliation

Through 06/30/07 - Third party documentations used to perform the monthly reconciliation of object code 108090 include: WFB statements, monthly CMO report, and Wachovia statement.

Effective 07/01/07 - Third party documentations to perform the monthly reconciliation of object code 108090 include: WFB statements, and the monthly “Bank of CSU” report that recap SWIFT activities.

11

Sample Bank and Investment Reconciliation at 6/30/07

12

Sample Bank and Investment Reconciliation at 7/31/07

13

Investment Earnings and Earnings Distribution

Interim Guideline requires investment earnings in SCO fund 0948 to be recorded in CSU fund 499

14

Annual GAAP Adjustment

For GAAP reporting, the cash and outstanding checks within the investments-other object code 108090 must be reclassified.

This reclassification entry needs to be reversed in the following year.

To determine the amount and account to reclassify to, a calculation must be performed to find the net cash balance (cash less outstanding checks).

15

Annual GAAP Adjustment

If the net cash is positive, then – Debit Cash

– Credit Investments

To properly reclassify cash and restore the investment balance.

If the net cash is negative, then– Debit Investments

– Credit Accounts Payable (this is the net outstanding checks owed to WFB under the overdraft protection)

To reclassify net outstanding checks and restore the investment balance.

16

Annual GAAP Adjustment

GAAP Adjustment to Reclassify Net Cash

17

Excel File of Illustrations

To view the entire illustrations used in this presentation, click on the Excel file below.

Microsoft Office Excel Worksheet

For questions, please contact

Lily Wang at lwang@calstate.edu or 562-951-4628 orSherry Pickering at spickering@calstate.edu or 562-951-4519