Financial Monitoring Procedure

Purpose

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.

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 Council by the Financial Services Division.

Content

Reporting Systems

The monthly reports are the main basis of financial control, enabling departments to monitor their income and expenditure and budgets.

Reports Available

Each month the Financial Services Division produce and distribute the financial reports.

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.
• General Ledger Transaction Listing. This report lists all the transactions within income and expense dissections (accounts) for each Activity Centre showing the reference, a brief description and the amount.
Cost Centre by Dissection Report. This report shows all the income and expenditure in a Cost Centre.
• Cost Centre by Reporting Type. This report shows the net results for the Cost Centre. Is in Management Reporting format, which is the format Financial Services require Divisional monthly narrative reports in.

Should a department have any special requirements for their reports the Financial Services Division may be able to develop a special purpose report designed for individual needs. Contact your Financial Analyst.

Project Ledger reports are also sent to Cost Centres. These generally follow the same format as the General Ledger Reports.

Trust Reports. These 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.

Detailed financial information is also available from Finance One.

Report Format

All reports, with the exception of the Trust reports, have the same format:

• Income
• less Expenses
• equals Surplus (Deficit)

Report Analysis

Reports are produced and emailed to divisions between the 4th and the 19th of the month, depending on holidays and the timing of meetings of Finance & Budget Committee.

When the reports arrive in the Cost Centre what should happen?

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. This reporting mechanism is important because it reinforces the staff members accountability for their budget.

What to look for in the reports?

All financial performance is measured against the budget (University Policy). However the budget is a forecast of the future and it is inevitable that there will be variances on a line by line basis.

The key result is the bottom line of the expenditure budget and it should not be exceeded unless approval is given by the Divisional Head. (Please note that an exception is the charge for depreciation which should be excluded from the bottom line and the calculations of the variance from budget).

Look for trends. In most cases it is easy to see if any Activity Centre is starting to trend adversely.

A common reason for variances 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 all too common practice of simply dividing the budget total by twelve.

Try forecasting the year end position. If a problem is highlighted then seek assistance from either your Divisional Office or your Financial Analyst.

It is strongly recommended that early help is sought if a budget problem is becoming evident. Don't ignore it and hope it will come right. The first contact should be your Financial Analyst who will confirm the analysis of the problem. Should the analysis be confirmed as correct then the departmental or divisional head should be advised so that action can be taken.

Errors?

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 your Financial Analyst.

Where errors are found, correcting journals should be prepared and submitted to the Assistant Accountant, Financial Services Division, along with sufficient supporting documentation to enable the correction to be confirmed and processed.

Annual Reports

Public Annual Report

The Education Act does not in itself set out any specific requirements for financial reporting but s14 of the Education Amendment Act 1993 makes every tertiary institution a Crown entity for the purposes of the Public Finance Act 1989. Section 41 of this Act requires that Crown entities prepare financial statements.

The main statutory requirement in respect of the form of these statements is that they be prepared in accordance with "Generally Accepted Accounting Practice" (GAAP). GAAP is defined in the Financial Reporting Act 1993.

Reporting must be in accordance with "applicable financial reporting standards" or, if none exist and there are no statutory rules applicable, those standards which are "appropriate to the circumstances of the reporting entity" and have "authoritative support" within the accounting profession in New Zealand.

The University is required to prepare and submit to Parliament an Annual Report detailing the operations of the University during the year for each of its outputs as determined by the University Council.

The Annual Report includes:

• Financial statements presented in accordance with s203 of the Education Act 1989 which refers to the provisions of s41(2) of the Public Finance Act 1989. The accounts are prepared in accordance with generally accepted accounting practice as defined in the Financial Reporting Act 1993.
• 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 Council and presented to the Ministry of Education.
• 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
Tel +64 3 470 4638