Expenditure Control Forum January 2007

1. Expenditure Control ForumJanuary 2007 Presented by the Office of University Controller

2. Agenda • Who, What, Why, When, How • Finance Procedure Statement (FPS) • Key Concepts, Processes, Finance System Enhancements, Responsibilities • Examples • Reporting and Monitoring • Wrap Up

3. Who • 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

4. What • Comprehensive approach to promoting sound fiscal management by addressing the problem of deficit spending • Deficit spending occurs when expenditures exceed available resources

5. Why • 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

6. When • 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

7. How • 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

8. FPS - Key Concepts • Expenditure Control Rule (ECR) • Available Resource Basis (ARB)

9. FPS - 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

10. FPS - 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

11. FPS - ECR Attributes Screen Shot

12. FPS - Available Resource Basis • 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

13. FPS – ARB Screen Shot

14. FPS – 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

15. FPS – ProcessFinance 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

16. FPS – ProcessFinance 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

17. FPS – ProcessFinance 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

18. FPS – ProcessResource 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

19. FPS – ProcessResource 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

20. FPS 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

21. FPS Responsibilities – Campus 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

22. FPS Responsibilities – Organizational 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

23. Finance 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

24. FPS Responsibilities – Appropriate 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

25. Examples • Keep in mind • Available Resource Basis • Approved Subsystems • Resource Check Matrix • We’ll also look at Journal Entry processing in some of these examples

26. Example 1 – Adequate Budget APPO • Budget in SpeedType $5,000 • Voucher $4,500 • Amount available to spend $500

27. Example 2 – Adequate Budget APPO • 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

28. Example 3 – Adequate Budget APPO • 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

29. Example 4 – Inadequate Budget APPO • 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.

30. Example 5 – Adequate Budget Payroll • 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

31. Example 6 – Inadequate Budget Payroll • 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

32. Example 7 – Adequate Budget 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

33. Example 8 – Inadequate Budget 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

34. Example 9 – Inadequate Budget 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

35. Example 10 – Adequate Net Assets APPO • Net Assets in SpeedType $5,000 • Voucher $4,500 • Amount available to spend $500

36. Example 11 – Adequate Net Assets, 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

37. Example 12 – Adequate Net Assets, 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

38. Journal Entry Processing Prepare journal Edit check JE. This will include a “preliminary resource check” Fails edit check Journal can be changed or deleted Change JE Delete JE Passes edit check Approve thejournal 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 If no other action is taken, journal recycles thru the resource check process through-out the month On recycle Passes resource check Delete JE If in error status at month end, then deleted (unless user marks as incomplete) Journal can be edited/changed or deleted Change JE On Recycle, Fails resource check then appropriate action should be taken Flow chart preparation assisted by Barry Northrop, UCB ABS

39. Example 13 – Inadequate Net Assets 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

40. Example 14 –Net Assets APPO & 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

41. 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

42. Reporting and Monitoring • Monthly financial reports • Upcoming Simple SpeedType query • Campus-based deficit monitoring

43. Wrap 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