Financial Monitoring Procedure

Purpose

This procedure provides detail pertaining to the financial monitoring and reporting expectations within the University.

Organisational Scope

This procedure applies to delegated managers of all reporting units as well as support staff who assist these delegated managers with the financial monitoring and reporting of their units.

Definitions

Cost Centre Approved departments within the University.

Activity Centre A unit within a department which performs a specific activity.

Content

1. Introduction

1. Accountability is a key feature of the financial systems. The budget is the financial plan for the year. It is essential to monitor actual progress against this plan to ensure that the desired fiscal result will be achieved. The University has a monthly reporting and monitoring programme to facilitate this. The monthly reports are the main tool of financial control enabling cost centres to monitor income and expenditure against budget. More frequent monitoring can be performed by performing enquiries within Finance One.
2. On a corporate basis, monthly accounts are prepared which are similar in almost all respects to the annual accounts except that more detail is provided. These accounts, together with an analysis of the University's financial performance, are provided to the Vice Chancellor, Finance and Budget Committee, and the University Council by the Financial Services Division.

2. Reporting Systems

1. Monthly reports are the primary mechanism used for financial control as they enable departments to monitor their income and expenditure and budgets.
2. Reports Available:
   1. Each month the Financial Services Division produce and distribute the financial reports.
   2. Cost Centres will typically get the following General Ledger reports each month:
      • Activity Centre by Dissection Report. This Report shows all the income and expenditure in each Activity Centre within a Cost Centre. This is the base-level report, and one is produced for every Cost Centre.
      • Cost Centre by RCM Summary Report. This Report shows the net results for the Cost Centre and variance analysis is prepared to explain performance against budget.
   3. Should a department require a General Ledger Transaction Listing Report, please contact Finance Advisory. The General Ledger Transaction Listing Report lists all the transactions within income and expense dissections (accounts) and includes the reference, a brief description, and the amount.
   4. Custom designed Project Ledger Reports are provided monthly to Principal Investigators.
   5. Trust Reports are held in the Trust Ledger (TL) in Finance One. All income and expenditure is held in the one account with the unspent balance being carried forward from one year to the next. These accounts are not permitted to go into a negative.
   6. Detailed financial information is also available from Finance One.
3. Report Format:
   • Income
   • less Expenses
   • equals Surplus (Deficit)

3. Report Analysis

1. Monthly Financial Reports are produced the 4^th and 10^th working days of the month and are distributed to Cost Centre managers and Principal Investigators for feedback.
2. When the Reports arrive in the Cost Centre what should happen?
   1. After being distributed to the persons responsible, the Cost Centre head should ask for a report back from the Activity Centre as soon as possible giving a brief reason for the variance and the action, if any being taken to correct. The reporting mechanism is important because it reinforces the staff members’ accountability for their budget.
3. What to look for in Reports?
   1. All financial performance is measured against the budget (University Policy). However, the budget is a forecast of the future prepared the previous year, and it is inevitable that there will be variances on a line-by-line basis.
   2. The key result is the contribution margin result. Cost Centres should match or exceed the budgeted contribution. If a Division is not going to meet the contribution margin, this must be discussed and pre-approved by the Vice-Chancellor.
   3. Look for trends. In most cases it is easy to see if any Activity Centre is starting to trend adversely.
   4. A common reason for variance is timing differences between actual events and the budget. It is accepted that timing can be difficult to predict. However, it is recommended that departments endeavour to apply some methodology to monthly budget splits rather than adopting the practice of simply dividing the budget total by twelve.
   5. Forecasting the year end position is required and Finance Advisory staff will support Cost Centre heads in preparing this.
   6. It is strongly recommended that early help is sought if a budget problem is becoming evident. Do not ignore it and hope it will come right. The first contact should be your Finance Advisory staff, who will confirm the analysis of the problem. Should the analysis be confirmed as correct, the departmental or divisional head should be advised so that action can be taken.
4. Errors?
   1. Where unexpected transactions appear in the reports, they should be followed up to ensure they are correct and properly authorised. Advice can be sought from the Finance Advisory team.
   2. Where errors are found, embedded Finance Advisory staff will assist with correcting journals which will include appropriate and relevant supporting documentation.

4. Annual Reports

1. The Education and Training Act 2020 (s 305) deems all tertiary institutions to be crown entities in terms of the Public Finance Act 1989 (PFA) . Section 43 of the PFA requires that crown entities prepare financial statements. The form of these statements must comply with Generally Accepting Accounting Practice (GAAP) which in turn is defined in the Financial Reporting Act 2013. GAAP is defined by reference to approved accounting standards with authoritative support within the New Zealand accounting profession.
2. The University is required to prepare and submit to Parliament an audited Annual Report detailing the operations of the University during the year for each of its outputs as determined by the University Council.
3. The Annual Report includes:
   • Financial statements including a Statement of Financial Performance, Statement of Financial Position, Statement of Cash Flows and Statement of Accounting Policies.
   • Non-financial statements (called a Statement of Service Performance) reporting on the achievement of the targets per output outlined in the Statement of Objectives approved by the University Council and presented to the Tertiary Education Commission.
   • A report from the Vice-Chancellor.

Related policies, procedures and forms

• Carry Forward Balances Policy
• Financial Monitoring & Control Policy

Contact for further information

For further information, contact the:

Financial Controller  
Email financial.controller@otago.ac.nz