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THE UNIVERSITY OF IOWA

FINANCIAL SUB-CERTIFICATION WORKSHOP SESSION #5

Non-Cash Assets Management

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Today’s Presenters

Jan BoresiProperty Management Office

Selina MartinController’s Office

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Introduction

• Financial Sub-certification websitehttp://www.uiowa.edu/budgetofficers/subcertification

• Objective of today’s training– Review sub-certification questions #15 & #9– Review major points of underlying policies – Identify related control document which indicate

compliance– Identify the resources available to learn more – Understand risks & consequences of non-compliance

• Relevance to sub-certification

• What should you do after this workshop?

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Sub-certification Question #15…. Does the college/unit have

processing and monitoring activities in place to ensure effective custody over non-cash assets, including maintenance of accurate equipment inventory records, measures to prevent loss/theft of items, and compliance with University surplus/disposal policies?

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as·set    Pronunciation[as-et]

– Noun. An item of ownership having exchange value and could be convertible into cash; total resources of a person or business.

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University Non-cash Assets

• Supplies Inventory

…goods purchased for resale or future consumption

• Accounts Receivable

• Capitalized assets (>$5,000)

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Supplies Inventory – Account 1300

Examples of areas that carry balances…

• Facilities Mgmt Stores Inventory• General Stores• Bookstore• HawkShop• ITS Telecom & Network Services• UI Hospitals & Clinics• College of Dentistry• College of Medicine

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Quiz

What was UI’s average balance in Supplies Inventory last year?

a. $30 - $40 million

b. $50 - $70 million

c. $80 - $90 million

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• Adhere to UI Purchasing policies & best practices

• Establish written procedures on inventory management & responsibility

• Conduct physical inventory count • Accurately value inventory• Reconcile to General Ledger

Guidelines for Best Practice – Supplies Inventory

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• Adhere to UI Purchasing policies & best practices– Abide by competitive bid thresholds– Employee-Vendor Relations (Conflict of Interest)– Promote preferred suppliers

• Establish written procedures on inventory management & responsibility– Establish segregation of duties in ordering/receiving

• Conduct physical inventory count – Handle obsolete and/or damaged items appropriately– UIHC has established Supplies Physical Inventory Procedures

• Accurately value inventory– Accurately value inventory in a consistent manner– Determine appropriate inventory adjustments/write-off and

obtain approval of management/Department head• Reconcile to General Ledger

http://www.uiowa.edu/~fuscntrl/balancesheetreconpolicy.pdf

Summary of Best Practice – Supplies Inventory

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Accounts Receivable Other – Primarily 1100 & 1120

Examples of common areas that carry balances…

• Hospital • Colleges - Medicine, Dentistry, Pharmacy,

Education, etc.• Athletics• Student Services - Hancher, IMU, University

Housing• Hygienic Lab• Office of Study Abroad

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Quiz

What was our average balance in Accounts Receivable last year? (not billed through MARS)

a. $100 - $200 million

b. $300- $400 million

c. $500 - $600 million

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Summary of Best Practice – Accounts Receivable

• Establish written procedures for accounts receivable and collection activities (consistent with approved cash handling procedures)

• Keep accurate records of receivables transactions

• Charge for goods & services based on approved rates

• Generate bills in a timely manner & include payment terms

• Deposit collections on accounts receivable in a timely manner (consistent with Cash Handling Policy)

• Review credit balances before issuing a refund check

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Summary of Best Practice – Accounts Receivable

(continued)

• Monitor payment performance and understand historical trends

• Develop & review receivables aging schedule in a timely manner

• Estimate doubtful or uncollectible accounts based on reasonable assumptions and document methodology

• Obtain approval of all valuation adjustments from department head

• Complete quarterly balance sheet reconciliation in accordance with written policy (GL balance = subsidiary system balance)

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Quiz

At the end of last fiscal year, what was the value of our net capital assets (after accumulated depreciation)?

a. Below $500 million

b. Between $500 - $800 million

c. About $2 billion

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Operations Manual Policy

1. Equipment & Personal Property Policy

http://www.uiowa.edu/~our/opmanual/v/12.htm

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Property Management Office – Our Mission

To maintain accountability for all capitalized assets and provide timely reports and data to all levels of University management, Federal agencies and State agencies.

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What is a capital asset?

• • An asset that is recorded on a balance sheet as capital

• Tangible or Intangible / Used in carrying out University business

• Useful life of more than one year• Minimum cost of $5,000 All

University New!

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Unique Capital Assets

• • Library books• Art objects• Antiques• Fabrication & Modifications• Buildings & Improvements• Land

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Interesting Facts….

• Total COST of assets on our books?

– $2.0B $3.0B $4.0B

• Total & net cost recorded for Equip & SW?– $480M/$220M $560M/$240M

$610M/$270M

• Annual transactions?– 6,000 9,000 12,000 Over 12,000

• # “Active” Assets on books?– 50,000 70,000 100,000 125,000

• Longest-lived asset(s) – outside of land?

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Capital Asset Quiz

• #1

Item: Diagnostics ThromboScreen 1000

Description: Coagulation analyzer for small-to-medium-sized laboratories

Used by: University and UIHC laboratories

Price: $19,966

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Capital Asset Quiz

• #3

Item: Apple MacBook Pro

Description: 17-inch: 2.4Ghz

Used by: University and UIHC

Price: $2,799

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Capital Asset Quiz

• #4

Item: Pacemaker

Description: Single Chamber battery-powered implantable device

Used by: UIHC implants in patient’s chest during surgery for ongoing use by patient

Price: $5,400

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Purchase Requisitions

• Key:– MFK– Description/Location/Custodian– Quantities– Trade-ins

• What are the consequences of incomplete or incorrect information?

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Vouchers

• Key:– Location Change?– Serial Numbers

• What are the consequences of incomplete or incorrect information?

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Asset Tagging

• • Why is this critical?• What are the consequences of not

tagging an asset?

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Change Vouchers

• Key:– Users request changes to or from

6730/6740, provide voucher or PO #, MFK, and amount.

– Users may change MFK as long as no change in Iact

• Why does PMO make Institutional Account changes?

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Biennial Capital Asset Inventory

• Why do we conduct a biennial inventory?

• What is the process and your department’s responsibility?

• What were consequences of past inaccurate inventory results?

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Biennial Capital Asset Inventory - CertificationWhat does it mean when you sign this

form? 1. Accurate & complete inventory conducted2. All necessary forms have been completed

to appropriately update inventory records3. In FY09: certification of total # and % of

write-offs• Reasonable?• Appropriate?• Are controls in place to safeguard assets?

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Managing Federal Capital Assets

• • Federally funded versus federally titled

• How is the management of federal capital assets unique?

• Federal ONR audit

• Consequences of mismanagement of federal capital assets

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Unique Transactions

• Donated capital assets• Trade-in’s • Transfers • Retirement • Surplus & Sale

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Forms Available Website

• Additions Request • Deductions Request • Internal Transfer • Title Transfer of University

Equipment (external)

• Off-Campus Use of Property • Surplus Removal Request• UIHC specific forms

http://www.uiowa.edu/~fusprop/forms.htm

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Computer Data & Media Disposal PolicyScope - applies to all computers and storage devices with licensed software and/or institutional data

Devices must be…1. reliably erased and/or destroyed before being

transferred out of University control 2. transferred through University Surplus3. transferred in accordance with the UI

Equipment policy4. erased before being transferred between

departmentsDepartments are approved to erase computers and storage media for transfers within the University by completing Media Disposal training offered by the University IT Security Office

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Electronic Reports

Web Query Tools & Reports (Access via Self-Service)

– Asset Detail Search (when would you use this?)

– Active Asset Look-up (when would you use this?)

– Asset Management Report (when would you use this?)

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Our message to you…

• Complete information at purchase• Manage/monitor capital assets in

your care• Communicate

– Questions– Changes– Feedback

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Sub-certification Question #9….

Does the college/unit

perform reconciliations of non-cash assets and liabilities to supporting detail?

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Related Policy

1. Quarterly Balance Sheet Reconciliation Policy

http://www.uiowa.edu/~fuscntrl/balancesheetreconpolicy.pdf

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Balance Sheet Reconciliations

http://www.uiowa.edu/~fuscntrl/balancesheetreconpolicy.pdf

• Reconciliation is the process of… comparing information that exists in two

locations analyzing differences making corrections so that the information is

accurate, complete and consistent in both locations

• Ensures consistency between the department's records and the university’s general ledger and resulting financial reports.

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Quarterly Balance Sheet Reconciliation Policy

• Effective July 1, 2008• Central administration

reconciliations• Departmental reconciliations• Accounting Services will contact

departments that need to submit reconciliations.

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Departmental Responsibility

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Responsibilities of Account Owner

Designate a Reconciler Ensure that reconciliations are done in a timely

manner Review for reconciliation for reasonableness Determine if valuation adjustments are necessary

(receivables write-off, inventory adjustments, etc.)

Obtain approval of valuation adjustments from department head.

Contact Accounting Services if adjustments are required.

Ensure that corrective actions have been taken including communications with superiors as necessary.

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Responsibilities of Reconciler

• Verify that prior months errors have been corrected

• Compare the ending balance per the GL and the sub-system

• Identify, research, resolve and document variances

• Complete reconciliation spreadsheet • Take action to resolve errors/discrepancies by

collaborating with Account Owner as necessary.• Document that the reconciliation is complete and

communicate all issues to the Account Owner.

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Control Documents

• General Ledger Balance Sheet report

• Supporting documentation (sub-system reports, analysis, correspondence, etc.)

• Balance Sheet Account Reconciliations and documentation of review (notes, annotations, etc.).

• Documented communication with Account Owner (email)

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Resources to Learn More

• Accounting Services http://www.uiowa.edu/~fusas/

• Grant Accounting http://www.uiowa.edu/~fusga/

• Other - SkillSoft courses

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What control documents indicate compliance?

• Established process and assignments of responsibility for security/access of work areas

• Documentation of biennial inventory of capital assets

• All capital assets forms completed and approved• Supply Inventory process documentation• Regular supply inventory counts• Receivables aging schedules• Documented methodology for receivables

valuation • Quarterly balance sheet reconciliation

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Risks & Consequences • Expensive write-offs (capital assets, supplies

inventory, receivables)• Cash flow issues (ineffective receivables

management)• Additional unwanted oversight & scrutiny

(ineffective capital asset management)• Fraud or misuse of university resources• Audit findings & resulting audit opinion

(financial audit & ONR audit)• Loss of funding for capital assets (federal)• Compromise/loss of sensitive data• Fines & penalties (due to litigation)• Reputation & public disclosure

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What resources are available to learn more?

• Other Related Policies1. Lost or Stolen Property

http://www.uiowa.edu/~our/opmanual/v/20.htm

2. Computer Data & Media Disposal Policy http://cio.uiowa.edu/policy/ComputerEquipmentDisposal.shtml

3. Balance Sheet Reconciliation Policyhttp://www.uiowa.edu/~fuscntrl/balancesheetreconpolicy.pdf

• Property Management Procedureshttp://www.uiowa.edu/~fusprop/proc.htm

• Training - PMO Overview: Accounting For & Managing Capitalized Assets

http://www.uiowa.edu/~fusstfdv/catalog/leadmgt/382.html

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Financial Sub-certification FocusOur internal controls should reasonably

assure….

1. Compliance with laws, regulations & contracts

2. Prevention & detection of fraud3. Proper recording, classification &

valuation (and safeguarding) of assets & liabilities

4. Adequate documentation & disclosure

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Remember….

• Financial sub-certifications will be completed in fall 2009 for the fiscal year 2009.

• Accurate responses will help us to help you to strengthen internal controls.

• Progress will be made over time as we identify areas of opportunities to improve controls.

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What are your next steps?

• Understand your role in the sub-certification process

• Understand the general & specific policies relevant to your roles & responsibilities

• Share information with your staff & colleagues

• Attend targeted training • Review control documents checklist • Provide feedback to central

administration

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Thank you!