Explanation of the OSU Accounting and Payroll System
(For Proposal Development)
ACCOUNTING SYSTEM.OSU has an approved accounting system and was audited June 30, 2005 as required by Government Auditing Standards and OMB circular A-133. An extract of the certificate of compliance is presented at Attachment 1. Within the administrative area of the Vice President for Administration and Finance and Controller, the Associate Vice President for Administration and Finance and Controller is assigned the responsibility of developing and maintaining a record and reporting system to meet the requirements of the state, the OSU A&M Board of Regents, administration and staff, and other cooperating, regulatory, sponsoring, or public service agencies. The Office of the Associate Vice President for Administration and Finance and Controller cooperates with external auditors in their examination of University records and in the preparation of the Annual Financial Report; cooperates, advises, and works with the Department of Internal Audits in developing, coordinating, and maintaining proper internal control procedures; and prepares yearly accrual and closing entries in preparation for year-end fiscal reports.
OSU Accounting System Structure.The basic general ledger system software was purchased from SCT in 1998. The former system, referred to as the Financial Accounting System (FAS), was implemented July 1, 1980 and was subsequently migrated in the current Financial Reporting System (FRS). FRS is able to accommodate college’s and University’s unique accounting and reporting needs. Several changes and enhancements have been made to the basic package to meet requirements of the State of Oklahoma cash and allotment system. The system is an integrated general and subsidiary (or management reporting) ledger record keeping and reporting system. This system is designed to provide the complementary features of a budgetary control system and a fund accounting system from the same set of input transactions. FRS utilizes an account code structure of 12 digits, which includes the agency, ledger, department, and revenue/expense codes or account controls. Additional information about each account is included in the attributes portion of the account record. Attributes are descriptive data elements such as name, responsible person, address, revenue function, expenditure function, etc. The attribute descriptions are stored in the system dictionary. Ledger groups are defined in the FRS as follows:
The General Ledger is the trial balance of the University and contains the assets, liabilities, equities, funds additions, funds deductions, revenue controls, and expenditure controls broken down by individual fund groups. The ledger code will be zero for all general ledger accounts.
The Subsidiary Ledger is subdivided into revenue and expenditure accounts which are used to provide managerial details and to support the revenue and expenditure summary controls in the General Ledger. Data shown in these accounts are budgets, revenues, expenditures, encumbrances, and balance of budget available.
A new account is established for each contract awarded to OSU. Accounts are set up primarily on that basis of source and use of funds. Monies deposited into an account must agree with the source characteristics of that account; likewise, expenditures made from that account must agree with the functional expenditure classification of the account.
Accounting errors are corrected upon receipt of a memo explaining the error and the correction needed. This memo is signed by the same person(s) who signed the original document being corrected.
Documentation of Payroll Costs.Final responsibility for preparation of University payrolls is assigned to Payroll Services. It is the objective of Payroll Services, as a service function of the University, to provide payment for services rendered to each employee when payment is due. As required by federal and state law, the University is responsible and held accountable to ensure compliance with the laws relating to income tax, unemployment compensation, workers’ compensation, social security, and minimum wage. Payroll actions involving full-time tenure or tenure track faculty and administrative and professional personnel at or above the director level must be submitted to the OSU Board of Regents for approval. In order to fulfill the University’s obligation with respect to federal and state law, all payments for services rendered shall be made on payroll, except honoraria for individuals who are neither an employee of the University nor an employee of any other state agency.
Effective March 1, 1983, the University adopted one of the acceptable methods of documenting payroll costs under the revised Circular A-21. This method is entitled “Plan-Confirmation Method” and involves the distribution of salaries and wages based upon a projection or plan of work activity which will be updated to reflect any significant changes in time allocation. The accuracy of the predetermined cost allocations is substantiated by after-the-fact confirmation by someone having first-hand knowledge of the employee’s work efforts. The biweekly wage payroll pays employees on the basis of time reports submitted after the work period has ended. Time reports list each element of cost distribution and must be verified by supervisors. Confirmation requirements are met before costs are charged to respective functions and accounts and no further steps are required to substantiate wage payroll costs. The monthly salary payroll system utilizes budgeted cost distributions and is based on planned work assignments to distribute costs to functions and accounts. Although budgeted cost distributions are updated by departments when significant changes occur in planned work activities, actual cost distributions must be substantiated by means of confirmation on an after-the-fact basis. This task is accomplished by completing the Monthly Time and Effort Confirmation Report.
The Monthly Time and Effort Confirmation Report is produced monthly and includes the paid cost distributions for each employee paid on the monthly payroll. The purpose of the report is to provide assurance that the salary costs, as charged, are representative of the actual time and effort expended by employees during the month.
A column is provided on the report to record a positive confirmation for each employee’s cost distribution records.
The Field Manager/Director, who has first-hand knowledge of each employee’s time and effort, is required to confirm that the cost distributions are reasonable representation of the work performed for the period.
Analysis and Correction of Cost Variances.There will be basic cost accounts established for this proposal effort: one for the Field Office operation and one for each Special Task should that contract line item (CLIN) be exercised. These accounts will be the reported subitems on the Cost/Schedule Status Report (CDRL A005) and Contract Funds Status Report (CDRL A007). Monthly and annual budget projections will provide monthly target costs for each CLIN. Negative cost variances (overruns) are triggers for management review of the subaccounts to discover the source of the unbudgeted cost. Small monthly negative variances are tolerable and typically the result of a concentrated or surge effort. Periodic management reviews will discover trends, identify causes, and initiate corrective factors if negative cost variances are predicted to persist. Again, these cost management practices have proven effective in assuring mission/task accomplishment at least cost to the government on the current as well as past contracts. OSU provides the government with the highest possible reliable, ethical and controlled reporting.