Expenditure Control ForumExpenditure Control ForumJanuary 2007January 2007

Presented by the

Office of University Controller

AgendaAgenda

• Who, What, Why, When, How

• Finance Procedure Statement (FPS)– Key Concepts, Processes, Finance System

Enhancements, Responsibilities

• Examples

• Reporting and Monitoring

• Wrap Up

WhoWho

• Expenditure Control is being implemented at the direction of President Brown

• Assisted by – University Controller – Campus controllers

• Finance staff• Budget staff• Sponsored program/project staff

WhatWhat

• Comprehensive approach to promoting sound fiscal management by addressing the problem of deficit spending– Deficit spending occurs when expenditures

exceed available resources

WhyWhy

• Approximately 5,200 SpeedTypes are “overdrawn” at the end of a typical fiscal year

• Deficit spending strains organizational unit functionality and puts university operations at risk

WhenWhen

• Expenditure Control will be phased in, by fund type, over the next five years– Funds 26, 72, 78, 80: 3rd Quarter FY2007– Funds 10 (General Fund) and 34 (Gift Fund): October

2007 – Funds 2x (Auxiliary) and Self-Funded Funds (except

Fund 26): October 2008 – Remaining Funds other than Funds 30, 31 (i.e., Plant,

Loan, Endowment): October 2009 – Funds 30, 31 (Sponsored Project Funds): October

2010

HowHow• New Finance Procedural Statement (FPS)

– Articulates key concepts, processes, responsibilities, appropriate actions

• Enhancements to the Finance System – Prevent deficit spending at certain process

points

• Targeted training• Documentation

– Approved Subsystem List, Allowable Accounts List, Resource Check Matrix, JE Flow Chart

• Monitoring and Reporting

FPS - Key ConceptsFPS - Key Concepts

• Expenditure Control Rule (ECR)

• Available Resource Basis (ARB)

FPS - Expenditure Control RuleFPS - Expenditure Control Rule

• Tells the Finance System how to aggregate information– Org,* Program/Project, or SpeedType

(Subclass)– All Expenses or Expenses by Budget Pool

• An ECR was assigned to every Phase I Fund SpeedType in late summer/early fall– Process varied by campus

* Expenditure Control at Org level must be approved by campus controller

FPS - ECR AttributesFPS - ECR Attributes

• Attached to the Program/Project– PA Budget by Program/Project, All Exp– DA Budget by Org, All Expenses– DB Budget by Org, Budget Pool– PB Budget by Program/Project, Budget Pool– SA Budget by SpeedType (Subclass), All Exp– SB Budget by SpeedType (Subclass),

Budget Pool

• ECR is an attribute on the Program/Project ChartField

FPS - ECR Attributes FPS - ECR Attributes Screen ShotScreen Shot

FPS - Available Resource FPS - Available Resource BasisBasis

• Tells Finance System whether the SpeedType will use Budget or Net Assets to determine available resources– BL Budget (BL = Budget Ledgers)

• Sum of all four budget ledgers

– NA Net Assets• Prior Year Rollforward + Current Year Revenues

• Available Resource Basis is an attribute on the SpeedType ChartField

FPS – ARB Screen ShotFPS – ARB Screen Shot

FPS – ProcessFPS – Process

• Assign Expenditure Control Rule and Available Resource Basis– Documented in the Finance System– Can only be changed at the start of each fiscal year

• Control will be turned off each July (July 1 – July 31) to ensure budgets have been loaded and net assets have been rolled forward– When Expenditure Control is turned back on in August,

all July transactions will be checked against the assigned Available Resource Basis

FPS – ProcessFPS – ProcessFinance System EnhancementsFinance System Enhancements

• Transaction types that will NOT post if a deficit results– Journal Entries (actual, budget, encumbrance)– Purchasing and Accounts Payable

• DPO approval• PO/SPO Requisition approval and sourcing• Vouchers

– Subsystems not approved by the Associate Vice President and University Controller

FPS – ProcessFPS – ProcessFinance System EnhancementsFinance System Enhancements

• Transaction types that WILL post even if a deficit results– Payroll (including PETs)– Procurement Card – Subsystems approved by the Associate Vice

President and University Controller (e.g., BRS, Facilities, Mailing Services, Telecom )

• Complete list is available at https://www.cusys.edu/controller/documents/Approved_Subsystems.xls

FPS – ProcessFPS – ProcessFinance System EnhancementsFinance System Enhancements

• Allowable Accounts– Lists accounts that are allowable/unallowable

for use in the following circumstances• On a purchase order• To process a payment• To calculate available resources for Expenditure

Control

– Complete list is available at https://www.cusys.edu/controller/documents/EC_new_appo_attributes.xls

FPS – ProcessFPS – ProcessResource CheckResource Check

• Finance System process that checks to see – If there are adequate resources to process a

transaction– If processing a transaction would create a deficit

FPS – ProcessFPS – ProcessResource Check MatrixResource Check Matrix

• Includes Actual/Budget/Encumbrance JEs, PO/SPO Requisitions, PO/SPO, Vouchers, PO Payment, SPO Payment

• Covers – When Resource Check runs– When, and to whom, notice is sent when the resource

check indicates insufficient resources– How often, and for how long, a transaction is re-checked

https://www.cusys.edu/controller/documents/budget_check_timing.doc

FPS Responsibilities - OUCFPS Responsibilities - OUC

• Review and approve subsystems that are permitted to post even if a deficit results

• Apply override for system-generated errors

• Provide tools for deficit monitoring

FPS Responsibilities – FPS Responsibilities – Campus Finance OfficeCampus Finance Office

• Work with organizational units to assign ECR and ARB attributes

• Review and approve Budget Journal Entries• Monitor deficits and work with organizational

units to develop deficit reduction/elimination plans

• Certain individuals within Finance Office have Expenditure Control override capability– Override use must be fully documented with

appropriate justification

FPS Responsibilities – FPS Responsibilities – Organizational UnitOrganizational Unit

• Provide reasonable assurance that adequate resources are available before processing a transaction– Resource Page in Finance System

• Monitor SpeedType, FOPPS for deficit spending

• Take appropriate action to resolve deficits

Finance System Resource PageFinance System Resource Page

Navigation: Report > GL N-Z > Resource Inquiry

or Net Assets:

Step by Step Guide https://www.cusys.edu/controller/documents/SBS-Available_Resource_Page.pdf

FPS Responsibilities – FPS Responsibilities – Appropriate ActionsAppropriate Actions

• Transfer the transaction (or an earlier transaction) to an appropriate funding source

• Demonstrate the need for - and reasonableness of - a budget adjustment to the campus finance office and process a BJE– Will work for ARB of BL only

• Contact campus Finance Office to request a financing plan (temporary or permanent)

• Contact OUC if you believe there is a system error that is causing the problem

ExamplesExamples

• Keep in mind– Available Resource Basis– Approved Subsystems– Resource Check Matrix

• We’ll also look at Journal Entry processing in some of these examples

Example 1 – Adequate Example 1 – Adequate BudgetBudget APPOAPPO

• Budget in SpeedType $5,000

• Voucher $4,500• Amount available to spend $500

Example 2 – Adequate Example 2 – Adequate BudgetBudget APPOAPPO

• Budget in SpeedType $5,000• Purchase Order Requisition $4,600 • Voucher $400 • Purchase Order (Encumbrance)

$4,600• Purchase Order Payment

$4,600• Amount available to spend $0

Example 3 – Adequate Example 3 – Adequate BudgetBudget APPOAPPO

• Budget in SpeedType $5,000

• Purchase Order Requisition $4,600 • Voucher $100 • Purchase Order (Encumbrance)

$4,600• Purchase Order Payment

$4,700• Amount available to spend $200

Example 4 – Inadequate Example 4 – Inadequate BudgetBudget APPOAPPO

• Budget in SpeedType $5,000

• Purchase Order Requisition $4,600 • Voucher $400 • Purchase Order (Encumbrance)

$4,600• Purchase Order Payment

$4,700*• Appropriate Action Required• Amount available to spend $0

*Use the Resource Check Matrix to see what happens when a transaction fails.

Example 5 – Adequate Example 5 – Adequate BudgetBudget PayrollPayroll

• Budget in SpeedType $5,000

• Payroll encumbrance (12 months) $4,800• Monthly Payroll charge $400• New Payroll encumbrance (11 mos)

$4,400• Amount available to spend $200

Example 6 – Inadequate Example 6 – Inadequate BudgetBudget PayrollPayroll

• Budget in SpeedType $5,000• Payroll encumbrance (12 months) $6,000

– This processed even though there was a DEFICIT

• Monthly Payroll charge $500• New Payroll encumbrance (11 mos)

$5,500• Amount available to spend $0

Example 7 – Adequate Example 7 – Adequate BudgetBudget APPO and Payroll APPO and Payroll

• Budget in SpeedType $10,000• Payroll encumbrance (12 months) $4,800• Purchase Order Requisition $5,000 • Voucher $200 • Purchase Order (Encumbrance) $5,000• Monthly Payroll charge $400• New Payroll encumbrance (11 mos) $4,400• Purchase Order Payment $5,000• Amount available to spend $0

Example 8 – Inadequate Example 8 – Inadequate BudgetBudget APPO and Payroll APPO and Payroll

• Budget in SpeedType $10,000

• Purchase Order Requisition $5,000 • Payroll encumbrance (12 months) $6,000

– This processed even though there was a DEFICIT

• Voucher $200 – Appropriate Action Required

• Purchase Order (Encumbrance) $5,000• Monthly Payroll charge $500 • New Payroll encumbrance (11 mos) $5,500 • Purchase Order Payment $5,000 • Amount available to spend $0

Example 9 – Inadequate Example 9 – Inadequate BudgetBudget APPO and Payroll APPO and Payroll

• Budget in SpeedType $10,000• Purchase Order Requisition $5,000 • Payroll encumbrance (12 months) $6,000

– This processed even though there was a DEFICIT• Voucher $200

– Appropriate Action Required• Purchase Order (Encumbrance) $5,000• Monthly Payroll charge $500 • New Payroll encumbrance (11 mos) $5,500• Purchase Order Payment $5,100

– Appropriate Action Required• Amount available to spend $0

Example 10 – Adequate Example 10 – Adequate Net Net AssetsAssets APPO APPO

• Net Assets in SpeedType $5,000

• Voucher $4,500• Amount available to spend $500

Example 11 – Adequate Example 11 – Adequate Net Net AssetsAssets, JE & APPO, JE & APPO

• Net Assets in SpeedType $5,000

• Purchase Order Requisition $4,500 • Journal Entry $500 • Purchase Order (Encumbrance) $4,500• Revenue $500 • Purchase Order Payment $4,600 • Amount available to spend $400

Example 12 – Adequate Example 12 – Adequate Net Net AssetsAssets, Journal Entry & APPO, Journal Entry & APPO

• Net Assets in SpeedType $5,000• Purchase Order Requisition $4,600 • Journal Entry $400 • Purchase Order (Encumbrance)

$4,600• Purchase Order Payment

$4,700• Appropriate Action Required• Revenue $500 • Purchase Order Reprocesses $4,700

• Amount available to spend $400

Journal Entry ProcessingJournal Entry Processing

Flow chart preparation assisted by Barry Northrop, UCB ABS

On Recycle, Fails resource check then appropriate action should be taken

Edit check JE. This will include a “preliminary resource check”

Journal can be changed or deleted

Fails edit check

Passes edit check

Approve the journal

Resource check occurs automatically after approval

Passes resource check

Journal cannot be changed or deleted

Journal posts If journal was incorrect, prepare and approve another journal to reverse it

Fails resource check and is put into budget error status

Prepare journal

Delete JE

Change JE

If no other action is taken, journal recycles thru the resource check process through-out the month

On recycle Passes resource check

Journal can be edited/changed or deleted

Delete JE

Change JE

If in error status at month end, then deleted (unless user marks as incomplete)

Example 13 – Inadequate Example 13 – Inadequate Net Net AssetsAssets APPO & Payroll APPO & Payroll

• Net Assets in SpeedType $10,000• Purchase Order Requisition $5,000

• Payroll encumbrance (12 months) $6,000

– This processed even though there was a DEFICIT

• Voucher $200 – Appropriate Action Required

• Purchase Order (Encumbrance) $5,000• Monthly Payroll charge $500• New Payroll encumbrance (11 mos) $5,500• Purchase Order Payment $5,000• Revenue $500 • Amount available to spend $0

Example 14 –Example 14 –Net AssetsNet Assets APPO & APPO & Payroll Payroll

• Net Assets in SpeedType $10,000• Purchase Order Requisition $5,000 • Payroll encumbrance (12 mos) $6,000

– This processed even though there was a DEFICIT

• Voucher $200 – Appropriate Action Required

• Purchase Order (Encumbrance) $5,000• Monthly Payroll charge $500• New Payroll encumbrance (11 mos) $5,500• Purchase Order Payment $5,000• Revenue $2,000 • Voucher Reprocesses $200 • Amount available to spend $800

Example Wrap-Up Example Wrap-Up

• Check resources before doing a transaction• Remember that some subsystems process

automatically, and thus can create deficits• Encumbered transactions will process and

post– Except when PO Tolerance exceeds the

available resources, the transaction won’t post• Know your Available Resource Basis

– Adding revenues to a SpeedType will not help if the ARB for the SpeedType is BL (Budget)

• Become familiar with Resource Check Matrix

Reporting and MonitoringReporting and Monitoring

• Monthly financial reports

• Upcoming Simple SpeedType query

• Campus-based deficit monitoring

Wrap UpWrap Up

• Questions and Answers• Expenditure Control Web Site

– https://www.cusys.edu/controller/Expenditure_Control.html

• Expenditure Control Resources– Finance Procedural Statement– Resource Check Matrix– Finance System Available Resource Page– Approved Subsystem List– APPO Account List