Finance Demonstration Script

By June 21, 2015

The following scripts describe the elements of functionality that are desired for financial systems. Please refer to Section Finance ,Finance for more information regarding VU’s financial processes.
1.1 General Ledger (Financial Reporting)
The General Ledger (GL) application will record the results of accounting transactions and accurately report the fiscal status of the colleges/schools, divisions/centers, units/departments, and VU as a whole. The GL is composed of expenditure, revenue and balance sheet account records and is intended to accurately record all fiscal activity for each account with summarization at multiple organization levels of the chart of accounts. These may be program codes, subprogram codes, names of faculty, building codes, etc. GL information will be fully integrated with VU’s budget process. This allows the system to accept the final adopted budget amounts to be used for monitoring and reviewing financial activity.
VU is currently using a heavily customized version of Information Associates FAS. In this system the Account Number is eleven characters long, and divided into three segments. The first two pieces, the 1-character Ledger and the 1-character account number, provide little information about the account other than its fund group and its source of funding (State or Local). Otherwise, the account number itself is a somewhat random number. Its descriptive data is contained in Attribute Records, which are attached to the 3-segment account number.
1.1.1 General Features
As stated in the Strategic Direction Statements, the complexity of the accounting system and the Chart of Accounts should be hidden from end users. The interface and screens presented to users should be simple and intuitive. On-line help screens should be provided. Account creation, consolidation, and close out should all occur quickly and easily for all types of accounts (including grants and contracts). For example, account creation and close out for certain accounts should be automated at the department level. Users should have the ability to selectively “freeze” all accounts once current obligations have been transferred to other accounts.
The Chart of Accounts design and system should support the ability to assign unique user-created and defined attributes to account codes, orders, and revenue and expense transactions in order to support departmental accounting and management information needs.
1.1.1.1 Demonstrate the structure of your system’s GL and it’s Chart of Accounts, to include:
• The number of separate attributes or segments (e.g., Vice-Presidential / Provost unit, department, fiscal administrator, purchasing location code, program code, etc.) that are possible and any limitations, to include the maximum and minimum size of each.
• The number of alphanumeric characters available within each attribute, regardless of the number of attributes used.
• Demonstrate the process used to establish the core institutional attribute structure within your software and how this is performed for multiple business units.
• Show how to create a new department, Dept2.
• Show how Dept2 will be added to the organizational structure reporting to Dean.
• Demonstrate the mass maintenance feature that supports expanding an attribute within the account code structure by adding additional characters to the length of the segment. The GL software should be able to accommodate future expansion without significant data reconstruction, while maintaining relationships between past structures and the current structure.
• Show how the system tracks changes to the Chart of Accounts over time (e.g., reorganizations, reclassifications, restrictions, etc.) and restates the financial reports.
1.1.1.2 Show how Fisadmin can alter attributes (such as department, project, after an account has been in use for some time.
1.1.2 Create a New Object Code
A new Governor has been elected and would like to track expenses, statewide, for supplies purchased from a certain vendor. This vendor only sells one product so the creation of a unique object code would help VU track the expense.
1.1.2.1 Show how the person in Business who is responsible for creating all object codes can create this new object code in the integrated system.
1.1.3 Maintain Account Attributes
VU has allocated all departments three “free-form” attribute columns for their use in tracking expenses. The department has created a list of values for these three attributes.
1.1.3.1 Show how Fisadmin adds a new entry to the list with its value and description.
1.1.3.2 Show how to change the description of an existing entry in the list. Is this change automatically and immediately reflected in all tables, screens, reports, etc., across all systems? If not, what are the limitations? How long does it take to show up in the system? On the periodic reports?
1.1.4 Close and/or Freeze an Account
Due to a decrease in enrollment in Dept1, one of its operating accounts is to be closed at the end of the fiscal year (assume June 30, 1997). The budget and any remaining account balance will be moved into another account within Dept2.
INTEGRATION POINT WITH HR, PAYROLL AND STUDENT SYSTEMS:
1.1.4.1 Demonstrate the process for closing Dept1’s account and moving any residual budget and cash/fund balances into Dept2’s account (an existing account of the same type). Further show how the transfer of all balances and information to Dept2 also transfers the proper HR and Payroll data to Dept2 and the proper academic information to Dept2.
Faculty2 has over-committed funds from his account. Dept1 has the authority to freeze any or all of it’s accounts once all payroll and payables have been moved to other accounts.
1.1.4.2 Show how Fisadmin moves all encumbrances from Faculty2’s account to another account in the department.
1.1.4.3 Show how Fisadmin freezes Faculty2’s account such that it will be impossible for any expenses to be obligated from or charged to Faculty2’s account.
1.1.1 Journal Entry Processing
Journal entry processing is an important business function at VU and is the means by which:
• Departments and other units can move cash from one account to another.
• Transactions made against one account can be moved to another account.
Internal vendors, such as the telephone billing system, Facilities Management, and Printing Services currently bill their internal (VU) customers for goods and services. When used for internal billing purposes, journal entries are currently called IDTs (interdepartmental transfers).
Auxiliary serves as a retailer for many communication services at VU, as follows:
• Local telephone service
• Long distance service
• Maintenance charges
• Credit card charges
• System features
• Data lines
The monthly phone charges, excluding long distance, are assessed to each department based upon the number of phones in a given department. Those monthly phone charges which are assessed to Auxiliary from outside phone companies are charged to two separate Auxiliary accounts (residential and administrative) in order to enable Auxiliary to more effectively track and allocate phone charges.
1.1.1.1 Demonstrate the journal entry to allocate the charges from these two accounts to Dept 1 and 2. There are a total of 1 lines and the total cost is $1,000 per month. Show how your system uses statistical accounts to maintain telephone statistics for each department and uses this information in the calculation of the allocation.
1.1.1.2 For the example above, demonstrate the entire on-line, real-time journal entry process whereby:
• Editing, validation and balancing are performed by the system’s edit process;
• Invalid or erroneous journal entries are revised;
• The receiver side is notified and prompted for approval when a journal entry has been created;
• The receiver approves the bill prior to the final approval process;
• The initiator of the transaction posts receiver’s entry if the receiver does not respond within an allowed amount of time;
• Transactions are approved by reference number and moved automatically to an approved status or file;
• Journal entries are finally approved and posted on-line.
1.1.1.3 For the example above, discuss what happens when, during the account validation process, the available balance in Dept 1’s overhead account is discovered to be only $100. What happens to Auxiliary’s monthly billing to Dept 1? Since there are insufficient funds, does the bill go to a “suspense” file? Or, does Dept 1 get billed irrespective of the availability of money in their overhead account?
1.1.1.4 Show how the administration in Dept 1 can assign (and subsequently change) the following attributes to each of these services provided by Auxiliary to Faculty 1 and 2:
• Name of faculty member
• Room #
• Primary phone # to which all other charges are linked
• Account code
• Program code
1.1.1.1 Demonstrate how the system supports table-driven, user-defined validation rules for journal entries including:
• Cash and Fund Balance effects on individual accounts
• Valid account numbers
• Valid transaction type
• Effective date
• Approval levels
• Status (hold, pending, approved, etc.)
• Valid combinations of account code structure
• Process edits during entry or after entering whole journal entry.
Auxiliary’s and Dept 1’s local accounts always maintain positive cash balances. At the end of each quarter, based on the average daily cash balance in each account, distribute 2.1% as an investment earnings distribution to each of the two entities. These amounts are $100 for Auxiliary and $200 for Dept1.
1.1.1.6 Demonstrate how Business can create a journal entry template for their quarterly distributions so that the account number, the name of the unit receiving the interest, the description of the transaction, etc. does not have to be manually entered each quarter (assume the journal entry is keyed in manually).
1.1.1.7 Demonstrate how your system would handle a recurring journal entry that is stopped for a user defined period and then restarted.
At the beginning of the fourth quarter Business noticed that they had made a mistake during each of the prior 3 quarters’ distributions.
1.1.1.8 Demonstrate the capability of reversing the prior three quarters’ transactions of investment earnings as a mass correction journal entry and recording the updated information.
Mechanical Entry: Dept 1 has a sponsored grant account (fund). This account automatically incurs indirect costs at 10% of actual expenses. Each time a direct expenditure occurs against the account, a related indirect cost expenditure journal entry must be generated as a percentage of actual, i.e., 10%. This indirect cost JE should debit the account for indirect cost expense, and credit multiple accounts to record the overhead revenue for VU based upon a user defined distribution schedule.
1.1.1.9 Demonstrate how this indirect cost entry would occur in the system and reduce the cash balance of the account.
Adjusting/Reversing Entries: The VU pay cycle runs from the 21th of one month to the 24th of the next month. However, for internal reporting purposes, it would like to accrue monthly salaries through the end of each payroll period, and then reverse the accrual during the following month.
1.1.1.10 Demonstrate how the above would be done.
Cash and Fund Balance Effects on Individual Accounts: VU is a public institution of higher education. As such, it operates under fund accounting principles for public higher education. Each “fund” in the system should be self-balancing, meaning that the system could produce a Balance Sheet and P&L statement. Given this, assume that a journal entry is submitted to the system. The debit side of the transaction records a $1,000 expenditure against the debit account. The resulting balance sheet effects would decrease both the account’s cash and fund balance by $1,000.
1.1.1.11 Demonstrate how the balance sheet effects would enter the system. In general, explain how the system would stay in balance, in terms of the Balance Sheet.
1.1.6 University-Wide Financial Inquiry and Analysis
1.1.6.1 Demonstrate the ability for Business to query journal entry information by journal entry number, account number, a range of dates and accounts, and by the name of the receiver in order to identify the accounts affected by the error.
1.1.6.2 Demonstrate how Fisadmin can drill down from a journal entry to the detail in the Purchasing and A/P systems.
1.1.7 Fiscal Year-end or Period-end Processing
1.1.7.1 Simultaneous/Multi-year Processing for Account Adjustments: VU must produce accrual basis financial statements in support of FASB17 as well as GASB regulations for June 30, its fiscal year-end, by October 11 (3 1/2 months later). Various adjusting and accrual entries are made to the system during the period July 1 to October 11 in order to transform the balances into statements acceptable to the audit staff. At the same time, regular processing for the new fiscal year (beginning July 1) must commence in early July.
1.1.7.2 Demonstrate how processing for the two fiscal years can occur simultaneously, such that balances in year 1 have been changed for accruals and other adjustments, while the processing of revenues and expenditures can occur for year 2.
Effective Dating: VU frequently has the need to make retroactive transactions within a fiscal year and, at times, into a prior/”closed” fiscal year. These transactions would effect both the cash and fund balances of an account. Assume that a prior year error of $100 has been discovered in the current year.
1.1.7.3 Demonstrate the $100 error being corrected as a prior period adjustment of the beginning balances.