Implementing Shadow Accounting Systems NCURA February 26, 2008 Tim Quigg, Associate Chair for Administration and Finance Department of Computer Science, UNC-Chapel Hill Arguing with an Auditor is Like Wrestling with a Pig in Mud... After a while, you realize the pig ENJOYS it! The Importance of Financial Planning at the Departmental Level Cannot be Overstated! Question 1: Where are we now? Question 2: Where are we going? Financial Planning Question 1: Where are we now? Critical need for accurate, detailed and current view of financial status (by project, lab and department) • • If central institutional accounting records provide this – fine! If not, you need a departmental system (“shadow accounting”). Financial Planning Question 2: Where are we going? Projecting expenditures/revenue into the future (for fiscal and project year) • • • Special attention to personnel – Plan to cover soft money people for year – Note institutional policy for “layoffs” Special attention to fixed expenses, e.g., equipment, rent, software, service contracts If central institutional system doesn’t help, perhaps you need a departmental system! Are Central Accounting Systems Adequate? “Relying upon poor data from a central system to manage the financial affairs of your department is like relying upon the tide to steer your ship.” It Just Doesn’t Make Sense! Shadow Accounting Systems “A shadow accounting system is a set of records maintained at a local level independent of the official records” • • • Have existed in some form (probably forever) PIs keeping account balances in lab books Personal computers fostered an explosion of shadow systems Central Accounting Systems: Remember, central systems are first designed to meet institutional needs Department needs are secondary (or nonexistent) Central systems often don’t provide everything that is needed to “run a department”, for example: • • Give you the flexibility to produce the reports that you need ENCUMBER SALARIES THROUGH BUDGET PERIOD When To Implement A Shadow Accounting System? When central system • • • • Does not provide enough detailed information, The information is not readily available in a usable form, When there is too much lag time between incurring an obligation and it being posted to the central records, and If the benefits (dollars and time) out weigh the costs! Additional Advantages Tracking Extra Information on Transactions • • Purpose of expense, e.g., graduate student education fund, faculty recruiting Category of expense, e.g., supplies for particular class Maintaining sub-accounts internally for a single central account • • Departmental “earmarks” for gift or institutional accounts May be easier to keep in one account (less institutional hassle and paperwork) “Dos” Do be sure to enter transactions into your system before they “leave your office” (paper or electronic) Do be sure that your records are secure and stored in a safe form and location Do perform a regular, thorough reconciliation to official records using a reconciliation worksheet Do print and store reports in a form that are useful in audit situations Do train more than one person on the proper use of the system. “Don’ts” Don’t assume that magnetic files will always be available for printing the report the auditor is going to request! Don’t assume that just because you recorded the transaction correctly in YOUR system, that it got posted correctly in THEIR system! Don’t assume that the person who uses the system today will ALWAYS be around tomorrow! Financial Reconciliation Process Goal Manual or Electronic System Financial Reconciliation Process Step 1 Obtain central data (financial reports and transaction data) in a form that you can match with the shadow system (typically by account for a particular accounting period) UNC Central Report FBM090 - C2 ACCT: 5-31136 ATTRI 0-110-32761 SUB CODE 1001 1112 1113 1117 1212 1251 1411 1451 1800 1812 1813 1822 1831 1832 1833 1836 1872 1873 1876 1892 1920 2000 2311 3100 SUMMARY ACCOUNT STATEMENT FOR DIST# REPORT DISTRIB = 3276 INTERACTIVE GRAPHICS FOR MOLECULAR STUDIES & MICROSCOPY REPORT PAGE 2531 UNIVERSITY OF NORTH CAROLINA - CHAPEL HILL PROGRAM FINANCIAL RECORDS SYSTEMID FBM0929 08/31/00 ACCOUNT PAGE 1 TO: CB 3175, SITTERSON SPON:NAT CTR FOR RES RESR BUD PD:051500-051401 AWARD: $855,675.00 CON#:5-P41-RRO2170-17 CAN#: PRJ PD:050184-051401 FROE:OOOO FR:081201 PY:530846 SPON CODE:DHHS TR:081201 PRIME #:531136 OVHD-ON:H 4500 OFF: -------- BUDGETS -------- ----------------ACTUALS -----------------OPEN BALANCE DESCRIPTION ORIGINAL REVISED CURRENT MONTH FISCAL YEAR PROJECT YEAR COMMITMENTS AVAILABLE C/G PERSONNEL EPA NON-TEACH EPA NON-TEACH MO STU/OTHER NON EPA NON-TEACH SA SPA ON CAMPUS SPA SEVER WAGES SPA EMPLOYEE SAL NON-STUDENT WAGE STUDENT WAGE TEMP EMPLOYEE WA TOTAL PERSONNEL STAFF BENEFITS SOCIAL SECURITY SOC SECUR - HOSP STATE RETIREMENT MED INSURANCE OT MEDICAL INSURANC HMO/HEALTH PLANS MEDICAL INS GRAD TIAA RETIREMENT TIAA-HEALTH PLAN ORP FIDELITY COMPOSITE BENEFI STAFF BENEFITS PROF CONSULTING SUPPLIES & MATER EDUCATIONAL SUPP SUPPLIES / MATER TRAVEL 395,190.00 395,190.00 60,086.00 60,086.00 5,500.00 9,500.00 9,500.00 8,317.00 255,069.96 54,859.36 9 365.19 42:792.35 107,016.90 31,377.76 15.38 31,393.14 300.00 1,410.00 1,710.00 395,190.00 41,545.31 5,483.63 1,433.46 4,087.85 413.28 738.68 2,596.30 469.02 2,194.84 531.69 359.10 232.84 60,086.00 5,500.00 7,384.00 2,116.00 9,500.00 5.90- 255,069.96 21,120.22 2,369.00 15,888.63 39,377.85 2,420.16 4.84 2,425.00 300.00 468.75 768.75 42,571.60 35,799.04 4,034.78 25,264.44 65,098.26 4,791.55 9.58 4,801.13 300.00 915.00 1,215.00 71,114.39 54,859.36 9,365.19 42,792.35 107,016.90 7,694.83 15.38 7,710.21 300.00 1,410.00 1,710.00 116,437.11 1,410.22 406.44 759.83 118.00 128.25281.97 207.99 684.17 416.85 359.10 85.13 4,601.45 2,520.07 704.25 1,301.56 236.00 214.81 582.74 469.02 1,444.65 474.66 359.10 142.21 8,449.07 4,292.87 1,154.98 2,401.63 413.28 738.68 898.37 469.02 2,194.84 531.69 359.10 232.84 13,687.301, 1,190.76 278.48 1,686.22 1,644.24 1,644.24 1,753.67 1,753.67 1,809.66 1,809.66 306.34 306.34 23,682.93 23,682.93 23,682.93 255,069.96 41,545.31 1,697.93 4,853.39 41,545.31 5,500.00 7,384.00 7,384.00 5.90- UNC Central Report DATE RUN TIME RUN FBM091 09/08/00 11:09:05 UNIVERSITY OF NORTH CAROLINA - CHAPEL HILL FINANCIAL RECORDS SYSTEM REPORT OF TRANSACTIONS FOR 08/31/00 DIST# REPORT DISTRIB = 3276 INTERACTIVE GRAPHICS FOR MOLECULAR STUDIES & MICROSCOPY REPORT PAGE 2539 PROGRAM ID FBM092 ACCOUNT PAGE 5 FR04C/PCB-0890 ACCT: 5-31136 TO: DEPT: 3276 SUB CODE DESCRIPTION DATE 1876 J W Smith 08/31 J W Smith 08/31 J W Smith 08/31 1876 CM TOTAL ORP FIDELITY 1892 PAYROLL RESERVE (16) 08/11 PAYROLL RESERVE (16) 08/25 PAYROLL RESERVE (16) 08/31 1892 CM TOTAL COMPOSITE BENEFITS 1920 CNA 08/15 1920 CM TOTAL PROF CONSULTING FEES 2000 CNA 08/15 2000 CM TOTAL SUPPLIES & MATERIALS 2311 IEEE MAGAZINES 08/11 IEEE INC 08/18 TAPE RESOURCES INC 08/10 TAPE RESOURCES INC 08/17 DELL MARKETING LP 09/06 D Davis 08/14 D Davis 08/22 NEWARK ELECTRONICS 08/11 NEWARK ELECTRONICS 08/18 2311 CM TOTAL EDUCATIONAL SUPPLIES TC~ REF. 042 042 042 JE2412 042 042 042 2ND J.E. OFFSET REF. ACCOUNT M02 REG M02 119 B03 REG B04 REG M02 REG 020 2000509 5,500.00 5,500 00 020 2000509 9,500.00 050 048 050 048 050 050 048 050 048 K399887 K399887 K409250 K409250 K434469 K435666 K435666 K435730 K435730 519.30 921540 7.29 920163 2.65 1.644.24 R M Hall F P Albright C Wall C Wall CM TOTAL OUT/STATE 08/24 08/16 08/23 08/28 TRANS-AIR R M Hall F P Albright CM Total OUT/STATE R M Hall F P Albright C Wall CM TOTAL OUT/STATE 08/24 048 T012732 923835 08/16 T012747 915818 TRAN-GROUN 08/24 048 T012732 923835 048 T012747 915818 08/16 048 T012751 922967 SUB-LODGIN 3122 3124 3124 CGOL99 00081 916738 3121 3122 CB 3175, SITTERSON BATCH COMMITMENTS REF. DATE 179.55 APRM02 00083 8.55 APRM02 00083 171.00 APRM02 00083 359.10 2.91 APRB03 00081 3.47 APRB04 00082 78.75 APRM02 00083 85.13 CGOL99 00081 1,115.OO CNA CM TOTAL TRAVEL 08/15 020 2000509 048 048 048 050 CURRENT REV/EXP 920261 3100 3100 3121 BUDGET ENTRIES T012732 923834 T012747 915818 T012751 922967 T012751 1,115.00 1,115.00519.30 519.30306.34 7.73 7.732.65 2.65306.34 8,317.00 8,317.00 CGLLL APC419 CGLLL APC415 DP5003 CGLLL APC425 CGLLL APC419 00081 00081 00081 00081 00090 00081 00082 00081 00081 CGOL99 00081 210.00 349.79 206.00 765.79 63.85 87.75 151.60 570.55 692.65 232.77 10495.97 996.00349.79206.00474.002.025.79- APC430 APC413 APC428 ENC912 00082 00081 00082 00082 APC430 00082 APC413 00081 APC430 00082 APC413 00081 APC428 00082 Financial Reconciliation Process Step 2 Prepare shadow data (financial reports and transaction data) in the same format as the central data. Computer Science Department Report Selection Criteria: Account=5-00000 Account Budget Report Report Run On: 10/10/00 11:00:47JAM Account 5-00000 PI Name Donald Duck Current Budget Period 5/15/00 5/14/01 NIH - GRIP – PRIME Budget Code Description 1000 1800 1900 2000 3100 3130 3200 3400 3800 3900 4400 5000 6500 8900 8982 I Personnel Faculty/Staff Benefits Con sultants/Temporaries Supplies & Materials Travel Foreign Travel Communication Printing/Binding Computer Services Miscellaneous Maintenance Contracts Equipment Educational Grants Indirect Costs Restricted Funds Total for Account: 5-00000 Budget Encumbered Expensed Balance 395,190.00 60,086.00 5,500.00 9,500.00 8,317.00 2,900.00 500.00 30,192.39 4,621.33 116,437.11 13,687.30 3,345.28 4,542.90 49,858.00 600.00 10,000.00 38,000.00 13,153.00 243,764.00 18,307.00 9,399.48 1,809.66 5,317.90 756.43 45.92 24.72 6,356.34 463.25 178,559.62 18,307.00 248,560.50 41,777.37 5,500.00 4,345.06 (1,543.80) 2,143.57 437.80 (24.72) 34,102. 1 8 136.75 393.28 38,000.00 13,153.00 0.00 0.00 855,675.00 258,591.00 16.28 9,606.72 65,204.38 210,103.01 386,980. Selection Criteria: Object Code=231 1, Object Set=UNC, Account=5-31136 Account Account Breakdown Report 5-31136 Report Run On:10/11/00 2:16:50PM NIH - GRIP - PRIME Budget Code 2000 Supplies & Materials 5/12/00 6/30/00 VISA CARD CHARGES 5/19/00 8131/00 GUTHOLD - IEEE REPRINTS NONE JET VISA04 NONE 1,862.90 55.99 K399887 NONE 1,115.00 5/31/00 8/31/00 TAPES/FUJI/SONY/PANASONIC TAPERESC HARRISC K409250 NONE 519.30 6/29/00 7131/00 INV# 1747678 NEWARK HARRIS( K422113 NONE 28.30 6/29/00 7/31/00 INV# 1775603 NEWARK HARRIS( K422137 NONE 29.30 6/29/00 7/31/00 INV# 1798294 NEWARK HARRIS( K422144 NONE 4.20 6/29/00 7/31/00 INV# 1753606 NEWARK HARRISC K422145 NONE 47.63 HDA APPLE K430340 NONE 286.20 INV# 387776 INV# 410860217 REIMBURSE FOR REFRESHMENTS FOR NIH SITE VISIT YELLOW LED'S/K411941NEWARK MINI-CIRCUITS INV# 792054 MINI-CIRCUITS INV# 796875 INV# P49056420103MICROWA MARKERT HARRIS( K431865 DELL STONEM k434469 FREEDM, K435666 NONE NONE NONE 246.91 306.34 0.44 HARRIS( K435730 BRUMBA K440673 K440683 K451954 NONE NONE NONE NONE 457.88 170.70 149.00 NONE NONE 7/18/00 7/20/00 7/26/00 7/31/00 8/31/00 8131/00 7/31/00 8/9/00 8/9/00 8/30/00 8/31/00 9/22/00 VISA CARD CHARGES Total for Budget Code 2000 Balance Available for Budget Code 2000 NONE VISA03 STINE 7.29 2.65 116.58 0.00 3,596.95 3,596.95 1,809.66 (5,406.61) 1,809.66 Financial Reconciliation Process Step 3 Compare expenditures (or balances) by object code between central and departmental financial reports. Look for particular areas of discrepancy! Summary of Discrepancies Central Records Personnel Departmental Records Difference 255,069.96 248,560.50 6,509.46 Supplies 7,384.00 4,345.06 3,038.94 Travel 2,137.67 593.87 1,543.80 Financial Reconciliation Process Step 4 Best approach - compare all transactions for the period and “check off” those that match. Compromise approach (use in situations where volume is enormous and accounting staff resources are limited) - compare all transactions for the period in the object codes where discrepancies were noted. IMPORTANT Every discrepancy must be researched and explained! What Are Likely Explanations For These Discrepancies? Timing errors Posting errors Processing errors (the form is still sitting on your desk!) Reconciliation Confirm the timing items by inquiry to the central system. If you can’t find them, you will need to do more research. Confirm posting errors to the central system and get them fixed. Correct departmental processing errors. Keep a list of items that should be corrected in the next accounting cycle. Reconciliation Unmatched central items “got past you” and need to be recorded in the shadow system, or explained out in a reconciliation worksheet. Bonus System for planning, tracking and presenting salary source information! Accounting reports don’t get it Personnel Funding Chart Name Washington, G. Funding GRIP 24% Lincoln, A. DOE-F 15% GRIP 60% MIP 10% STC/Teleimmersion 15% Jefferson, T. DOE-F 12.5% I-FLOW 50% NANO 25% STC/Teleimmersion 12.5% DOE-F 50% STC/Teleimmersion 50% 100% Clinton, B. GRIP 100% Ford, G. DOE-F 20% STC/Teleimmersion 13% Eisenhower, D. MIP 100% Johnson, L. STC/Teleimmersion 100% Truman, H. GRIP 100% Reagan, R. MIP 100% Roosevelt, F. DOE-F 30% I-FLOW 20% NANO 10% MIP 10% STC/Teleimmersion 30% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 14th 14th 14th 14th Jun Personnel Funding Chart Name Larry Funding DOE-F 20% STC 8% MCNC 5% STC 28% MCNC 33% ITR-F 14% (NEW)DOE-F 14% ITR-Brown/Welch 5% ITR-F 38% (NEW)DOE-F 38% Curley TRUST 20% STC 60% STC 35% MCNC 5% GRIP 20% ONR-Bishop 20% ITR-F 20% (NEW)DOE-F 5% ITR-N 35% KECK-OVHD 35% ONR Bishop 10% ITR-F 40% (NEW)DOE-F 30% Moe TRUST 10% STC 72% MCNC 18% STC 32% DOE-M 100% ONR-Bishop 20% GRIP 23.5% (NEW)DOE-F 33% ITR-Brown/Welch 23.5% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Personnel Funding Chart Name Kiser, S. $150,000 Funding State (100%) Acct. # 2-32761 Lawrence, S. $15,586 State (100%) 2-32761 Quigg, T. $12,207 State (100%) 2-32761 Vrana, S. $150,000 State ( 69%) Salary 2-32761 Kenan Professor (6%)6-60024 CISMM (10%) 5-31865 CISMM (8%) 5-32690 IBR (7.5%) 5-37125 IBR (9.5%) 5-37125 ITR (7.5%) 5-47737 25% on grants Wdowik, M. $20,348 Vargas, A. $457,318 Federico Gil (18%) 33% on grants State (100%) Neurosurgery (3%) CS 51788 (2%) DARPA (10%) State (45%) NLM (6%) CS 55807 (2%) Livermore (14%) NLM (33%) CS 55807 (15%) State (5%) State (14%) NLM (37%) CS 55807 (16%) State (39%) NLM (20%) CS 55807 (8%) 2-32761 6-62301 5-51788 2-32761 5-35751 2-32761 5-55807 2-32761 5-42519 5-55807 2-32761 2-32761 2-32761 5-55807 2-32761 2-32761 5-55807 2-32761 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Burn Rate Maximum Award Amount 350,000 300,000 Incremental Funding 250,000 200,000 Project Budget Actual Expense 150,000 100,000 End Date 50,000 Jan-01 Feb-01 Mar-01 Apr-01 Incr Budget May-01 Cum Exp Jun-01 Jul-01 Proposal Budget Aug-01 Sep-01 Total Budget Oct-01 Nov-01 Cum + Proj Dec-01