Overview and Purpose
Each campus division has financial reporting responsibilities. Monitoring and evaluation, or verification, of financial data is one of several types of financial reporting control activities identified in the Internal Control – Integrated Framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (see Internal Controls). It is an important internal control that provides assurance that financial transactions and results are complete, accurate and valid. The following are definitions of these three objectives:
- Completeness - Financial transactions that occur are recorded. For instance, vouchers for goods or services received are posted to the general ledger.
- Accuracy – Transactions are recorded at the correct amount in the right chartstring and on a timely basis (typically in the period in which the transaction occurred).
- Validity - Recorded transactions represent economic events that actually occurred and were executed according to prescribed policies and procedures.
In addition, monitoring financial data supports the annual campus financial reporting certification process. As part of the fiscal closing process, the University of California (UC) Office of the President requires that each campus’s central Finance Office obtain written confirmations from deans and other campus senior management regarding their responsibilities for the campus financial information which is incorporated into the annual audited UC financial statements. This is accomplished through the Fiscal Close Certification Letter. The periodic review and verification of key financial reports at a division level provides assurance to the Fiscal Close Certification Letter signers that material financial transactions were recorded properly in the campus general ledger to meet the objectives noted above. It may also help detect exceptions to policies or procedures or instances of fraud.
Monitoring of Key Reports
Monitoring of key reports consists of the following activities:
- Review: Examining two key management reports for perceived anomalies and errors of substance, based on the reviewer’s experience and knowledge of the unit’s operations. This activity is at a summarized or overview level. More detailed data only needs to be reviewed for anomalies. It is expected that someone familiar with the financial activities performs the review. Anomalies should be identified and explanations documented and saved.
- Acknowledgment: Attestation by reviewer that he/she reviewed the information, investigated anomalies, ensured the correction of errors, and can provide reasonable assurance of the propriety (completeness, accuracy, and validity) of the information.
Review and acknowledgment activities may be delegated and performed at a lower organization level, but the Division Finance Leader must review the designated key reports and provide acknowledgment for the division level to the Controller’s Office.
There are two categories of key financial reports to monitor:
Review of the key financial reports is encouraged, but not required, on a monthly basis since the passage of time may make it more difficult to detect and act upon erroneous reported financial results or transactions. All reviews must be done at least quarterly.
Acknowledgment of the reviews is required on a quarterly basis by the end of the month following the previous quarter close for Q1 to Q3. Q4 acknowledgment is due two weeks after actual data is loaded into the reporting systems. Acknowledgments of review of the key financial reports occur with submission to the Controller’s Office via Berkeley Box.
General Ledger (GL)
The first key financial report monitoring activity is to review actual financial results at a summarized level. This review involves analyzing results through variance analysis of revenues, operating transfers, and expenses by comparing the actual activity to budget and prior year actual results. The CalPlanning Reporting GL Summary – Monthly Comparative Actuals report was designed to provide activity at this summarized level.The reviewer should:
- Download and save an electronic copy of the report. Document review comments and explanations in the saved electronic report file. Additional information in obtaining the reports and documenting comments is available in the job aid - Quarterly Financial Comparative Reporting Review Procedures (PDF). Note that this report is now broken out in three tabs: Current Funds Excluding C&G, Contracts & Grants, and Agency Funds.
- Review the year-to-date (YTD) actuals versus budget and prior year actuals variances for each individual summary line. Based on the reviewer’s knowledge and expectations of the unit’s operations, validate that the current YTD actual results are reasonably complete, accurate and valid.
- Any unusual or unexpected variances for a particular summary line item should be investigated. Provide explanations for your unit's significant variances in the Comments section of each tab, and ensure corrective action is identified and taken on a timely basis, if applicable.
- Be mindful of areas in which activity significantly fluctuates during the year, and note these fluctuations when analyzing the data. Current year monthly actuals amounts are included in the report for this purpose.
- Drill down to obtain more detailed account data for any line item amounts with exceptional variances. (Note: Because UC financial statements are classified primarily based on the account classifications, the focus of this review is on that perspective.)
For some variances, it may be necessary to run the Cal Answers General Ledger Reporting Detail report to review and substantiate the actual detail transactions to determine the explanations. In reviewing the detail transactions in these instances, the reviewer should look for unusual, inaccurate or invalid transactions. The following guidelines provide some additional instruction of what to look for in the examination of detail transactions to explain variances:
- Unusual: One-time transactions, transactions related to new economic events or contractual agreements, or transactions related to agreements with significant rate or volume changes
- Inaccurate: Transactions that were incorrectly coded, with wrong amounts, or recorded in the wrong period (timing difference)
- Invalid: Transactions that did not relate to economic events that occurred or were not executed according to policies and procedures, including approval
The second key financial report monitoring activity is the review of the Cal Answers General Ledger Compensation by Accounting Period Report. Salaries and wages are the single largest line item of all campus revenues and expenses.
Therefore, salaries and wages expenses warrant more detailed management review. They need to be reviewed to ensure they are associated only with existing employees and that the amounts are accurate for employees’ services in the period. The Cal Answers General Ledger Compensation by Accounting Period Report provides a list of employees and payroll amounts by account by month.
The reviewer should:
- Download and save an electronic copy of the report. Document review comments and explanations in the saved electronic report file. Additional information in obtaining the reports is available under the Cal Answers Dashboard for General Ledger Reporting - Compensation By Accounting Period. For specific filters to use in obtaining the report please refer to the job aid - Quarterly Compensation Report Review Procedures (PDF).
- Scan the list of transactions paying specific attention to employee names. Ensure employees were valid for the period.
- Verify that new hires, terminations, merit increases, retroactive payments and overtime payments were recorded correctly.
- If amounts appear unfamiliar, unusual or incorrect, research the amounts in more detail by reviewing the employee detail payroll records.
- Ensure corrective actions are identified and taken on a timely basis, if applicable.
Submission and Storage of Division Key Financial Report
Berkeley Box is a cloud-based platform that allows DFLs to submit and securely store their verified key financial reports with the Controller’s Office.
Key features of Berkeley Box are as follows:
- Box file folders are established, monitored and maintained by the Controller’s Office.
- Each Division Finance Leader (DFL) is sent an email inviting him or her to click on the “Log in” button thereby creating a new account of which access is strictly allowed only to the assigned/invited DFL - Division’s Box file folder.
- DFLs are not granted access to other Divisions’ file folders and alternatively, DFLs may not grant access to their staff.
- These emails contain brief instructions explaining both the purpose of and why it is only the DFL is permitted access to these files.
Box may be accessed at https://berkeley.app.box.com/login and uses an individual’s network username and password to login.
- Following the completion of the General Ledger and Compensation report review as specified by the instructions, save the document and upload it to your respective Division’s file folder. When saving the document, please adhere to the Naming Convention:
- When saving your reports and labeling the file, please do so in the following fashion as this will allow for easier retrieval and uniform identification. At the end of the default file name insert:
- Division Node
- Specify which is applicable - Q1, Q2, Q3 or Q4
- Example – GL Summary - Monthly Comparative Actuals COCHM Q2
- Access Box through Google Chrome
- Viewer Uploader Access for DFLs available as reference guide