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Chapter 3 Responsibilities of Financial Management

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Chapter 3 Responsibilities of Financial Management

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    TABLE OF CONTENTS - CHAPTER 3

    I. CHAPTER 3 RESPONSIBILITIES OF FINANCIAL MANAGEMENT ....... 1 II. PERTINENT POLICIES ........................................................................ 1 III. INTERNAL CONTROL .......................................................................... 2 A. Overview of Internal Control ................................................................... 2 B. On-The-Job Application of Internal Controls .............................................. 3

    1. Records Management .................................................................................. 3

    2. Source Documents: Organization and Filing .................................................... 4

    3. Develop Departmental Procedures for Each Financial Process ............................. 7

    4. Detailed Procedures for Cash Handling ........................................................... 9

    5. Perform a Series of Daily, Weekly, Monthly, and Quarterly Tasks ........................ 9

    6. Provide Regular Reporting to Management .................................................... 13

    7. Know Pertinent Campus Policies, Procedures, Regulations and Resources .......... 14

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    I. CHAPTER 3 RESPONSIBILITIES OF FINANCIAL

    MANAGEMENT

    The purpose of this chapter of The Guide is to provide information about administering departmental finances. This section notes significant policies and

    procedures, provides an overview of internal control, gives suggestions for getting

    organized and ready to work, and provides a check list of periodic tasks to

    complete.

    II. PERTINENT POLICIES

    As noted in Chapter 2 of The Guide, departmental financial management must be done in accordance with University of Colorado and Boulder campus policies.

    Three policies of critical importance are Fiscal Roles and Responsibilities,

    Program Management and Fiscal Control, and Fiscal Code of Ethics. These

    policies are available on the Web as follows:

    ? Fiscal Roles and Responsibilities

    ? Program Management and Fiscal Control

    ? Fiscal Code of Ethics

    The Fiscal Roles and Responsibilities Policy establishes the duties associated with key levels of management personnel, so that the fiscal impact of University

    operations is planned, controlled, and accurately accounted for in the University’s

    financial records. The Program Management and Fiscal Control Responsibility

    Policy places authority for both programmatic activity and fiscal control on

    program managers. The Fiscal Code of Ethics discusses the fiduciary responsibility

    of every University employee to fulfill its overall mission in compliance with

    applicable policies, laws, regulations and rules, and contracts, grants and donor

    restrictions

In practice, however, the program manager often delegates responsibility for the

    transaction processing, record keeping, and financial monitoring to a different

    employee within the unit. This individual is frequently an administrative assistant,

    program assistant, or office manger. Since the minimum qualifications for these job

    classes do not include accounting or budgeting, staff that are asked to assume

    responsibility for a unit’s finances often have little or no formal education and/or

    professional experience in these areas. Therefore, this section of The Guide

    addresses the activities and responsibilities associated with a position having

    financial duties.

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    III. INTERNAL CONTROL

    Internal control is defined as a process, or group of processes, effected by an

    entity’s board of directors, management and other personnel, designed to provide

    reasonable assurance regarding the achievement of objectives in the following

    categories:

    1. Effectiveness and efficiency of operations

    2. Reliability of financial reporting, and i3. Compliance with applicable laws and regulations.

A. Overview of Internal Control

    The University of Colorado System’s Administrative Policy Statement on

    Fiscal Roles and Responsibilities, referenced in the Pertinent Policies section

    in this chapter of The Guide, explains that, “Rule 1-8 of the State of Colorado

    Fiscal Rules requires the university to implement internal accounting and

    administrative controls which reasonably assure financial transactions are

    accurate, reliable and conform to State Fiscal Rules.”

Therefore, an essential function of every finance-related job on the campus is

    to safeguard the assets of the university through the development and

    implementation of a solid structure of internal control. Such a structure

    consists of policies and procedures designed to provide reasonable assurance

    that specific departmental and university objectives will be achieved.

Without a set of internal controls, the university may fail to attain its objectives

    for reasons such as:

    ? Fraud and waste

    ? Losses resulting from fines and penalties due to non-compliance

    ? Inadequate resources resulting from inefficient processes

    ? Interruption of operations because of injury to personnel

    ? Ineffective communication that, in turn, results in misapplication of

    effort and resources.

Each department must create and maintain a structure of internal controls.

    Internal controls may vary from one department to the next because the

    specific control structure implemented for a given entity within the university

    will depend upon its size, the nature and complexity of its operations, and

    whether or not it is subject to requirements imposed by legislative or

    regulatory bodies.

After the internal control structure has been put into place, it is imperative that

    those doing the work monitor the controls and offer suggestions for changes as

    appropriate. Internal controls exist in a dynamic environment. Employees retire,

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    computer systems are upgraded, and circumstances arise which may necessitate

    modifications to internal controls. Through routine monitoring of its internal

    control structure, the university can react quickly and appropriately to

    changing conditions.

Some Final Thoughts about Internal Control

    Internal controls are more than a set of policies and procedures. Internal

    controls provide reasonable assurance to the leaders of the university against

    risk in operations, financial reporting, and compliance with regulations. At the

    heart of the internal control structure, and across all levels of the university, is

    the staff. Every employee interfaces with internal controls during the course of

    his/her work and, therefore, plays a critical role in mitigating risk for the

    university, safeguarding the university’s assets, and ensuring that the university has every opportunity to successfully achieve its objectives.

If you are the person responsible for departmental finances, then you play

    a key role in making sure that your departmental operations and finances are

    guided by a sound set of internal controls.

Contact your area accountant for assistance in developing or evaluating the

    internal control structure of your department. The listing of area accountants is

    available on the ABS website at

    http://abs.colorado.edu/ABS_WEB/WEB_2003/ABS_General_Accounting.htm.

     Every department on campus must develop and implement internal controls.

    B. On-The-Job Application of Internal Controls

    Internal control is not just one action, but a series of actions designed to

    safeguard the assets of the university. This section of The Guide describes

    internal control activities that should be present within every department on the

    Boulder campus.

1. Records Management

    Records management at CU-Boulder follows guidelines and schedules

    articulated by the State Controller, Colorado State Archives, and directives

    issued by various agencies of the federal government. Information about

    the management of financial records at CU-Boulder is contained in the

    Retention of University Records APS and accompanying Records

    Retention Schedule.

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    These two documents follow the State of Colorado, State Archives Records Management Manual, which provides uniform disposition

    standards for records common to all state agencies. Specifically, the CU-

    Boulder retention practices are guided by Schedule 7, Financial Records,

    of the Records Management Manual. This schedule can be viewed on the

    Web at the http://www.colorado.gov/dpa/doit/archives/rm/rmman/sch7.htm.

With respect to financial records associated with sponsored projects that

    receive federal funds, the CU-Boulder records management practices

    adhere to the following:

    ? Office of Management and Budget Circular A-110, Uniform

    Administrative Requirements for Grants and Agreements With

    Institutions of Higher Education, Hospitals and Other Non-Profit

    Organizations. A-110 can be found on the Web at

    http://www.whitehouse.gov/omb/circulars/a110/a110.html

    ? Department of Health and Human Services CFR Title 45, Part 74,

    Uniform Administrative Requirements, Subpart C: Post-Award

    Requirements, 74.53, Retention and access requirements for

    records, and 74.48 Contract provisions

    ? NIH Grants Policy Statement Record Retention and Access

    ? Public Health Service Grants Policy Statement Record Retention

    and Access

    ? Federal Acquisition Regulations, CFR Title 48, Section 52.215-2,

    Audit and Records Negotiation

    ? Federal Acquisition Regulations CFR, Title 4, Section 4.705-1,

    Financial and cost accounting records.

A word of caution about records: According to the Colorado State

    Archives Records Management Manual, NO RECORD SHALL BE

    DESTROYED SO LONG AS IT PERTAINS TO ANY PENDING

    LEGAL CASE, CLAIM, ACTION, OR AUDIT.

Contact your area accountant if you have any questions about the retention

    and disposition of finance records.

    2. Source Documents: Organization and Filing

    Getting source documents organized and placed into files serves as the

    foundation for staying in control of departmental finances. With a good

    filing system in place, answering questions such as, “How much money is

    available to spend on travel in a certain FOPPS?” or, “When will that

    equipment be delivered?” become a breeze.

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    The first step in getting organized is to set up a system that will provide

    convenient access to essential information. Source documents, invoices,

    receipts, and financial statements should each have a place to call home.

a) Set up an “IN” basket.

    Designate ONE spot in the work area for departmental folks to deposit

    all materials related to their purchasing and financial activities. Make it

    clear that all requests for INs (Interdepartmental Invoices) and other

    purchasing documents, all packing slips, all invoices, all receipts, etc.,

    should be placed into this "IN" basket. Explain to departmental staff

    that, by depositing all paperwork into the "IN" basket, it facilitates

    processing timeliness and effectiveness.

b) Organize all source documents.

    The list that follows offers suggestions for getting organized.

    i) Create a set of two files for each departmental FOPPS.

    Think of the first file as a parent file, which will serve as a folder

    for holding two child files. Now, create two child files: one for

    source documents that are still outstanding or pending, and the

    other for source documents that have cleared the monthly Detail

    statement.

    ii) Organize the paperwork in the each of the child files

    Arrange the materials by type of document, e.g., clip all cash

    receipts together, clip all INs together, clip all journal entries

    together, etc. Or, sort the source documents according to account,

    e.g., clip together all paperwork with an operating expense account,

    then clip together all source materials with a travel expense account,

    etc.

    iii) In the child file containing the cleared source documents

    (organized either by type of document or by account

    classification), make sure to also group the paperwork by

    month.

    For example, clip together all July paperwork, i.e., the source

    documents associated with the transactions that cleared the

    statement in July. Do the same for the paperwork for August

    transactions, September transactions, etc.

c) Organize the monthly financial statements.

    The list that follows offers suggestions for organizing and filing

    monthly financial statements.

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    i) Get some three-ring binder notebooks and divider tabs.

    On each divider tab, write the FOPP number and its name.

    ii) Insert the FOPPS divider tabs into the binders

    Some departments have one notebook for each organization within

    the department, and file all FOPPS for that particular organization

    in the same notebook. Other departments may choose to organize

    their statement binders according to fund. Thus, all General Fund

    FOPPS will be filed in one notebook; all Auxiliary Fund FOPPS

    will be filed in a different notebook, etc. No matter which approach

    is selected, the divider tabs should be inserted into the notebook in

    numerical order.

(a) Place the monthly financial statements behind the divider for

    the respective FOPPS.

    (i) For General Fund FOPPS (FOPPS that begin with 10 or 11)

    two or three statements will be available online each month:

    (a) Revenue and Expense Statement Detail - by Program

    (b) Revenue and Expense Statement Summary - by

    Program

    (c) Outstanding Encumbrances - by Program.

    (ii) For Auxiliary Fund FOPPS (FOPPS beginning with 20, 26,

    28, 29) and Plant Fund Renewal & Replacement FOPPS

    (FOPPS beginning with 72, 78) three or four statements will

    be available online each month:

    (a) Balance Sheet Detail also called the Statement of Net

    Assets Transactions

    (b) Revenue and Expense Statement Detail - by Program

    (c) Revenue and Expense Statement Summary - by

    Program

    (d) Outstanding Encumbrances - by Program

(b) Make sure to file the statements in the SAME ORDER each

    month.

    For example,

    1. Locate the Balance Sheet statement immediately behind

    the divider sheet,

    2. Place the Summary statement behind the Balance Sheet

    statement, and

    3. Put the Detail statement behind the last page of the

    Summary statement.

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    4. If the FOPPS has outstanding encumbrances, and you

    have received the Outstanding Encumbrance report,

    place this report behind the Detail statement.

    3. Develop Departmental Procedures for Each Financial

    Process

    The financial processes with which a department is typically involved

    include cash handing, journal entry preparation, and budget journal

    preparation. Procedures should be developed to administer each of these

    processes so that the assets of the university are safeguarded, and

    reasonable assurance is provided that the university's objectives will be

    achieved. At a minimum, each procedure should incorporate the elements

    of proper authorization, segregation of duties, and maintenance of

    documents and records.

    Note: Sound procedures, characterized by strong elements of internal control, should also be developed for all procurement and human resources

    processes within the department.

a) Proper Authorization

    In the current operating environment, the campus has moved away

    from paper documentation and hard-copy signatures to online approval.

    Authorization resides within the Finance System itself. Each end user of

    the Finance System has been assigned an Operator ID. The Operator

    ID has, in turn, been given a specific security profile that details the

    degree of system access available to the end user.

     The Operator ID and Password Combination MUST BE KEPT CONFIDENTIALDO NOT SHARE THIS INFORMATION

b) Segregation of Duties

    Departmental procedures for administering financial processes should

    be designed so that the duties of one employee provide a crosscheck on

    the work of one or more other employees. Such procedures can

    prevent errors and provide prompt detection of irregularities in the

    performance of assigned tasks. For example, the responsibilities of

    executing a transaction, recording a transaction, and maintaining

    custody of the assets resulting from the transaction, should be assigned

    to different individuals.

c) Maintenance of Documents

    Documents, whether in electronic or paper format, provide evidence of

    the occurrence of the transaction and the conditions associated with the

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    transaction. Documents detail the date, price, terms, and description of

    the transaction. When properly authorized, documents also provide a

    basis for establishing responsibility for the execution and recording of

    transactions. For more information about records retention, refer to the

    Records Management in an earlier section of this chapter.

    d) Sample Procedure

    The flow chart below outlines a sample procedure for administering a

    financial process within a department. This particular example outlines

    a procedure for preparing an online Budget Journal Entry. It

    incorporates internal control elements of proper authorization,

    segregation of duties, and maintenance of documents.

    SAMPLE PROCEDURE - BUDGET JOURNAL ENTRY PROCESS

    Determine budget change is needed. Obtain approvals required by .

     departmental/ college/division policies and

    Off-line Process procedures.

     Off-line Process

PBA Budget Services staff pull up, on a daily An employee with the proper authorization

    basis, outstanding BJEs in VALID status for uses the Finance System to enter the Online review and approval. BJEs in Edit Req'd Budget Journal Entry (BJE). Online BJE status or Error status are not processed. process should be completed through the

     Validate process.

    Online Process Online Process

    Does the BJE pass Department prints a file

    approval? copy of the BJE if needed.

    Online Process Online Process

    NO YES

    Budget staff contacts Budget staff posts

    department to the BJE.

    resolve problem.

    Off-line Process Online Process

If not resolved, delete Department verifies

    the BJE. budget transaction

     on Revenue and

     Expense Statement Online Process Detail.

     Off-line Process

    Note: This flow chart can be used as an example by departments when developing

     procedures for administering financial, procurement, and human resource processes.

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

    UNIVERSITY OF COLORADO AT BOULDER

    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE

     RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT

    4. Detailed Procedures for Cash Handling

    Due to the sensitive nature of working with cash, this topic is the focus of

    an entire chapter - Chapter 10 - Cash Control, in The Guide.

    5. Perform a Series of Daily, Weekly, Monthly, and Quarterly

    Tasks

a) Daily Tasks

    i) Look through your ―IN‖ basket.

    (a) Separate the paperwork into two piles:

    ? Those documents which need to be filed

    ? Those documents which need to be

    processed

    For documents in the “to be filed” pile, file

    them in the appropriate folder.

    For documents in the “to be processed

    pile” check due dates and deadlines, and sort

    them in priority order. Begin working on the

    most important paperwork first.

    ?When deciding which items are “high” priority

     and which are “low” priority, keep in mind

    ? Process deadlines, e.g., What is the

    deadline for completing an online journal

    entry or budget journal if it needs to post

    this month? and

    ? Turn around time required by certain

    university processes, e.g., How much

    lead-time does the PSC need to generate

    a vendor check?

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    CHAPTER 3: RESPONSIBILITIES ASSOCIATED WITH FINANCIAL MANAGEMENT 10/09

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