CONTROL ENVIRONMENT

Controllers Conference

May 20, 2005

 

 

Definition:     Policies, Procedures, and Facilities to ensure that the resources of the University are properly safeguarded and used exclusively for authorized purposes, and employees and students are appropriately protected.

 

BYU-Idaho policies and procedures are based primarily upon the principle of Stewardship. The school provides a frame work of policies and procedures within which the department and account stewards should function. The school also must comply with governmental regulations and generally accepted accounting principles.

 

Stewardship is based upon two principles: (1) No one working here has any ownership in the facilities, money, prestige, or area of the university, and (2) Each one is accountable to the Lord and his representatives for assigned area of responsibility, which is facilitated with accurate management reports and annual reviews.

 

Remember, stewardship cannot be delegated to another.

 

Unwritten responsibilities include the protection of the integrity of employees and students, including the teaching of principles. This includes (1) helping the honest (and not so honest) to remain honest, and (2) protect the reputation of employees from unfounded accusations or perceptions.

 

How and What:        Different areas or departments will require different procedures, depending upon functions and goals and needs. For example: Cashiers Office, Academic Department, Food Services, various performances and events, labs, etc.

 

1.         Control of Physical Environment, usually from outside people.

 

– Cashiers Office: Safe, cameras, restrictive windows, locked door, emergency button, etc

– Campus Police

            – Locks and Keys for entire campus

            – Controlled access to events: Admission tickets, ushers

 

2.         Accountability Controls, for employees, students, and visitors.

 

            – Cash Registers to record sales

            – Hand written receipts, pre-numbered

            – Deposit of money at Cashiers or at the Bank.

            – Review of documents and reports by 2nd person and/or supervisor.

– Limited access to records and programs. For example, financial records, student records and transcripts, net-ID or user name and password, limiting of authorization.

            – Controlled access to money, and processing of data.

 

3.         In addition to the guidelines from the school, does each steward have written guidelines which specifically apply to your environment? Does each employee have access to these and the school guidelines? Do employees understand them the guidelines?

 

4.         Can there be excessive control? Yes. How do we determine if the controls in our areas are excessive, too lax, or good?

 

– Cost Benefit Analysis – are the costs of the controls greater than the benefits, including monetary and non-monetary benefits?

– Do the controls interfere with the goals of the department or mission?

– Is there another way of achieving the desired control?

– Are we doing things just because they have always been done this way?

– Do the perceived excess controls from the school justify ignoring them?

 

5.         Why do we have controls here in this special environment where all must be certified as being temple worthy???

 

– Some may not be above temptation. Environment must help the honest to remain honest.

– Protect the integrity of employees and students.

– Protect the reputation of employees and students.

 

Example — the ward procedures in recording and depositing donations:

 

– Donations only given to a member of the bishopric.

– Envelopes opened and counted with two people present, one of which is a member of the bishopric.

– Money in each envelope is compared to donation slip.

– Each donation is entered into the computer, and then the totals compared to total money to be deposited.

            – Two people must accompany the deposit to the bank.

 

            Why these tight controls?

 

            – To protect the assets of the Church (stewardship)

– To protect those who receive the donations for the Church.

 

 

7.         Basic Physical Controls:

 

– Secure money and sensitive records, under lock when person not available.

– Restricted access to outside individuals.

 

8.         Basic Accountability procedures:

 

– Record transactions when they take place.

– Ensure that all money received is recorded; i.e., receipt to customer, cash register, etc.

– Second independent verification, ensuring that money equals sales, etc.

– Segregation of duties: (1) collecting and recording money does not reconcile the sales, and (2) one preparing checks does not have access to the check when printed.

– Deposit of money regularly.

 

Disbursement (payment of bills and purchases) of funds by Accounting Office. First person requests the payment; second person enters the request, third person reconciles and submits for printing of checks, fourth person secures the printed checks and places in mail or the Cashiers Office for pick up.

 

9.         Authorization to spend school funds. The custodian decides who he wants to disburse funds and how much on or off campus.

 

10.       Who checks up on the Steward? Partially done by the Accounting Office in the processing procedures, but the validity of the expenditure is checked by the supervisor. There is also the annual budgetary review.

 

11.       When the steward discloses his Net ID and password to another, he:

– Disregards the control set up by the school; he becomes the exception to the control.

– Takes on the responsibility of the actions and decisions of another.

 

12.       Does the lack of planning which results in a panic, asking for exceptions to the rule, enhance or diminish the established controls?




CONTROL ENVIRONMENT

Controllers Conference

May 20, 2005

 

CASE STUDIES:       Any relation to any department on this campus is purely coincidental.

 

1.         Person in possession of change or petty cash fund needs gas money to get home. Calls it a temporary loan.

 

2.         An instructor has a neat idea of a new program which would really benefit the students. It will cost $20 per student. Too late to get it approved as a class fee, so he or his secretary will collect $20 from the students.

 

3.         Food Services places any money from the cashiers which exceed the sales shown on the Cash Register Tape into a box to be used when the cash is short. This way the sales always are reconciled to the very penny.

 

4.         Department makes limited number of sales for items of small value. They do not deposit the sales until they total $200. They if they feel the need for more change, they will keep part of the sales as a change fund.

 

5.         There is no locked, secured place to keep the cash box. The secretary takes it home at night so it will not be stolen.

 

6.         Money box is locked in a file cabinet with a key with the number 100 on it.

 

7.         The secretary in charge of the cash box is often too busy with students to be interrupted when someone wants change, petty cash reimbursement, or take some money to buy small item. So access to the box is given to members of the department .

 

8.         Sewing class decides that the students could make a little money and learn to sew at the same time. So the instructor collects the money with items are sold. They she gives the money to the students who made the items which were sold.

 

9.         Student at the information desk in the student center, late at night, puts the money in a cash box for each sale. Then at closing, she put the cash box in a secure place for the supervisor to have in the morning.

 

10.       Department chairman wants to authorize four faculty members to make expenditures out of a restricted donation account. He cannot understand why he is not allowed to do this.

 

 

COMMON ERRORS AND PROBLEMS

In Account Stewardship

 

 

 

1.         AUTHORIZATION TO EXPEND FUNDS:

 

a.          Check Requests, Departmental Hand Checks, and CPO’s (Campus Purchase Orders) are being signed by employees who are NOT authorized to spend funds out of the specific accounts.

 

Only employees who are authorized by the custodian of a specific account can spend University funds out of that account.  If the Department Chairman or custodian has not told an employee of this authorization, the employee should assume that he is not authorized. 

 

b.         Funds are being spent out of RESTRICTED Funds by employees other than the custodian of the account.

 

Only custodians are authorized to expend Restricted Funds.   The custodian is responsible to see that the stipulations of the donors are followed.  Other employees may be entered in the Authorization File to view financial reports, but not expend funds.

 

c.       Account custodians are NOT using the Authorization File to manage who is authorized to expend funds and who can review financial reports.

 

The Authorization File is accessed from the Monthly Financial Reports on the web.  Each custodian can add and delete employees in this file and restrict the access of each one on the file.  Only the Accounting Office can change the custodian.

 

2.         USE OF DEPARTMENT HAND CHECKS:

 

a.          Hand Checks are being used to reimburse individuals for purchases made with their own funds to buy items for the school.

 

Since there may be tax implications, school policy states that such reimbursements should be made with a Check Request and submitted to the Accounting Office.

 

b.         Yellow copies of Hand Checks are NOT being turned into the Accounting Office on time and sometimes only after a number of calls.

 

               The Hand Checks are a convenience to the employees.  If they are not properly safeguarded and processed in a timely manner, this privilege will be withdrawn.  Yellow copies of used Hand Checks should be in the Accounting Office by Thursday of each week and by noon of the first working day of each month.

 

3.         PURCHASE CARDS:

 

a.          The monthly statements sent by the card company to the user of each card are not being reviewed, signed, and submitted to the Accounting Office before the 15th of each month.

 

               The cardholder should verify all charges on his monthly statement.  He should indicate any change in the account numbers, sign the statement, obtain his supervisor’s signature, attach supporting receipts or documents, and submit to the Accounting Office by the 15th of each month.

 

b.         Statements received in the Accounting Office are missing the cardholder’s signature, supervisor’s signature, or both. 

 

               The cardholder’s signature verifies the accuracy of the charges and the supervisor’s signature give final authorization to the expenditures.  Both are required.

 

c.          Purchase Cards are being used for travel expenses. 

 

               These cards should not be used for travel expenses.  For this and other restrictions, see the Policies and Procedures.

 

4.         INVOICES are received from vendors with no information of who placed the order, the name of the department, or which account to charge.

 

Most invoices have a Purchase Order or Purchase Release number on them.  When placing an order without going through the Purchasing Department, the authorized employee should give the vendor his name so the vendor can include it on the invoice.  A name is needed so the invoice can be sent to the employee placing the order.  Before invoices can be paid, the account number and an authorized signature must appear on the invoice and then it must be sent to the Accounting Office.

 

5.         The required receipts are not always attached to Check Requests, Departmental Hand Checks, and Travel Reimbursement Forms.

 

The required receipts must be attached to validate the purchase or expenditure.  If the request or check is for a reimbursement to an individual, the amount of the refund will have to be reported to the IRS unless the receipts are attached.

 

6.         Travel Authorization/Expenditures Reports are not being submitted to the Accounting Office within 5 days of returning from a trip.

 

The five days allowed is sufficient time to provide the proper reimbursement form and supporting documentation for travel expenses.  If an extension is need, please call the Disbursement Supervisor in the Accounting Office.

 

7.         CAMPUS PURCHASE ORDERS (CPO’s):

 

a.          Authorized signatures and valid account numbers are sometimes missing

 

CPO’s with missing information will be returned to the departments and will not be processed until proper approval and accounts numbers are provided.

 

a.          Three and four copies of CPO’s are sent to the Accounting Office, when only the white original copy should be.

 

Copies should be distributed as shown on the bottom of the forms.

 

b.         Supporting documentation is attached to CPO’s and submitted to the Accounting Office.

 

Only the white original copy should be submitted.  Any supporting documents should be kept in the buying and/or selling departments.

 

c.          When a CPO is used to share expenses between departments, the same category in the account number is not always used.

 

The sharing of expenses should not be recorded as revenue in one department and an expense in the other department.  The same expense category should be used in both the buying and selling departments, both the debit and the credit.

 

4.         INCORRECT CATEGORIES in the accounts are being used in an attempt to charge expenses to the category where the ‘budget’ money resides.

 

The proper category is the one which best describes the expenditure.  Remember, it is the bottom line that counts; the budget in one category can be overspent as long as another category is underspent.

 

5.         EQUIPMENT:   The correct equipment category is not always used.

 

a.          Category 8400 should be used if the piece of equipment is $2500.  This is in the name of the category.

 

b.         Category 8300 is for equipment between $500 - $2500 which could be easily stolen for use in the home.  It is also used for computers and monitors.  The name of the category specifies that it is used for inventory item.

 

c.          Equipment in categories 8400 and 8300 is tagged and placed on inventory records. 

 

d.         Category 8350 should be used to purchase other non-inventory equipment.   If account custodians wish to have a tag placed on these items, a tag will be provided by the Accounting Office upon request.

 

6.         Departments often fail to collect sales tax on items sold to students, employees, and church entities.

 

Generally, sales tax must be paid by the final consumer of a taxable product.  BYU-Idaho as an educational institution is exempt from sales tax on items purchased for use by University entities.  When a department of the University sells a taxable product to an individual or outside entity, sales tax must be collected and remitted to the state.  All sales of goods and admission tickets are taxable.  If you have any questions, contact the Accounting Office.

 

7.         Common Errors and Problems When Working with the Cashiers Office

 

            Departments do not always deposit funds received in a timely manner.

 

Checks received are not always endorsed as received.

 

Paperwork for travel advance is not filled out correctly.

 

Correct accounts are not always used for depositing funds.

 

Students are sent to pay before their accounts have been charged.

 

Petty cash vouchers are turned in without original receipts, proper signatures or correct account numbers.

 

Departments neglect to call before sending student helpers to pick up or cash checks for faculty.