Welcome to Expenditure Guide Chapter 5 Accountability

Welcome to the “Expenditure Guide”, one of several courses about financial management and business transactions at the University of Oregon (UO.)As administrators at the UO, one of the most important decisions you will make is to commit funds for expenditures of goods and services. This responsibility requires that you become informed of requirements and act ethically. You are the steward of dollars that flow to the UO from a variety of sources. The Expenditure Guide has been developed to assist you in exercising stewardship, in achieving department and UO objectives, and in effectively using resources to those ends.

In Chapter 5, Accountability, you will gain an understanding of the concept of accountability and how accountability is demonstrated in making expenditures at the UO. If you choose, you may test your understanding of this chapter by taking the online quiz. You will receive immediate feedback on your answers, and learn where to find additional related information.

Thank you for your interest in learning about good decisions relating to expenditures at the UO.

Accountability

The business model at the UO is one where authority to expend monies rests with the departments, schools and colleges. We have distributed the authority for these kinds of decisions because we believe this model to be more effective and efficient. With authority also comes the responsibility to do and not do certain things. Decision-makers at the UO are held accountable to our customers for decisions made and actions taken. Our customers include past, present and future students who seek an education, citizens, vendors with whom we contract for goods and services, university supporters and contributors, and our employees.

Accountability is achieved by taking actions and/or implementing processes to meet fiduciary responsibilities.  While trust is an important value in the UO community, as decision makers we are obligated to be accountable in a public manner.  It is not enough to simply have controls in place, we are required to show that the controls are in place and are being applied.

A. Implementing Effective Internal Controls

We achieve accountability through the internal controls we have in place.  Internal controls are processes used by an organization to ensure effective and efficient operations, reliable financial reporting, and compliance with applicable laws, regulations, policies and procedures. There are five components of internal controls: control environment, risk assessment, control activities, information and communication, and monitoring. For more information and background on the components of internal controls see the Auditing Guide (under development).

1. Control Environment

The control environment is the tone, or culture, we set within our organization as to the importance of conducting business in an ethical manner. At the University of Oregon all levels of administration, staff and faculty are responsible for establishing such a tone.

Unit Administrators at the UO have a fiduciary responsibility to act ethically and/or legally as a “caretaker” of the assets of the university. Those who make decisions or give approval for expenditures must ensure that funds are expended responsibly, reasonably, and in compliance with the intentions, rules, law and concerns of the provider of the funds. When we make or approve expenditures that are not allowed or do not further the mission of the university, we weaken our control environment. Unit Administrators contribute to creating a strong internal control environment by staying within the limits of applicable policies, regulations, rules, directives, or procedures and stating the importance of doing so to those in their department. See also Chapter 3 Authority and Limits.

2. Information and Communication

To establish a strong control environment employees must have adequate training and education about the institution’s policies and procedures. This guide is an example of how employees can become informed about making expenditure decisions at the UO. Other training and education opportunities provided by the Business Office are listed at http://baowww.uoregon.edu/Training.asp.

3. Risk Assessment

Risks can be defined as anything that may jeopardize the institution’s ability to meet its commitments. Risk is assessed at the institution level when establishing policies and procedures. However, departments are also responsible for identifying risks within their units. In terms of making or approving expenditures, Unit Administrators must be able to identify the risks of making, or not making, a decision before proceeding. See Chapter 4 Key Processes for a more detailed discussion or identifying risks in expenditure decisions.

4. Control Activities

Control activities are processes and procedures we put in place to avoid risks.

Excessive controls may lead to increased bureaucracy, reduced productivity, increased complexity and may add little or no value. On the other hand, excessive risks may lead to a loss of assets, poor business decisions, increased instances of non-compliance, increased regulations or loss of public confidence. Establishing control activities then becomes a balancing act between the level control that is needed with the level of risk. Even in our decentralized model, many of our control activities are established and monitored centrally.

a) Pre-Approvals

In general, approval means that the approver has reviewed the supporting documentation and is satisfied that the expenditure is appropriate. Pre-approvals are meant to happen before the transaction actually takes place. Requiring pre-approvals can become burdensome and slow down the payment process, however in some instances it is appropriate. In general, higher dollar, higher risk expenditures are more likely to warrant pre-approval. Lower dollar, routine expenditures are less likely to warrant pre-approval. For an in-depth discussion of required pre-approvals at the UO see the Purchasing Guide Chapter 5 Accountability.

b) Post Transaction Reviews

At the UO we rely heavily on post transaction reviews. This means that although departments may require pre-approval within their units, many transactions are not subject to pre-approval at the central level. Following are some examples of post transaction reviews done at the UO.

Quality Assurance

The UO Quality Assurance Consulting Services team (QUACS) exists to work with Unit Administrators to ensure unit and institution objectives are accomplished efficiently, with a minimum exposure to unintended business, financial and accounting risks. The QUACS team engages in regular review of administrative units, and provides feedback to executives about the manner in which management is meeting our fiduciary responsibilities.

Specific Post Transaction Reviews

For a description of post transaction reviews done relative to the purchase of goods and services see Purchasing Guide Chapter 5 Accountability.

For a description of post transaction reviews done relative to travel see Travel Guide Chapter 5 Accountability.

c) Segregation of Duties

Segregation of duties is a system of checks and balances that separates duties assigned to employees and is intended to safeguard assets and ensure the reliability of financial records.  Adequate segregation of duties ensures that one person does not have access to two different control functions. In the case of expenditures, individuals who provide approval or authorization of transactions should be separate from the individual who has inputting and record keeping responsibilities. In departments with a small staff size, adequately segregating duties can be difficult. In these instances it is important for Unit Administrators to review summary financial information and to compare actual to results to budget. Large or unusual items and or discrepancy from expected results should be investigated or followed up on.

d) Reporting

Unit Administrators should review which compare budget to actual and current to prior years to detect any problems or measure performance. Particular attention should be paid to any items that are high risk, sensitive in nature or where there some of the other control activities mentioned above are not in existence. It is also important for Unit Administrators to document that review in some manner.

5. Monitoring

Monitoring is the process of evaluating internal controls over time to determine if internal controls are adequately designed and operating effectively. At the UO we are committed to a process of continual evaluation and improvement of our business operations. Some of the ways in which we continually monitor and evaluate our internal controls are as follows:

Internal & External Audits

At the UO we embrace the internal and external audit process as an important opportunity to evaluate and improve our operations.

The internal audit function for Oregon University System is the responsibility of OUS Division of Internal Audit (OUS IAD).It is the responsibility of UO Unit Administrators to provide OUS IAD with the information necessary to complete their work.    For more information about OUS IAD see also: http://www.ous.edu/iad/

On an annual basis the UO, as a part of the OUS, undergoes both a financial and compliance audit by an independent audit firm. As a state agency, UO is subject to audit by the Secretary of State Audits Division.

For an update of audit activities currently underway at the UO and Tips for Conduct During an audit see the following website: http://baowww.uoregon.edu/auditcoord.htm

Follow-up, corrective action, quality improvements

We operate in a changing environment. External and internal factors effect our business operations, which in turn effect our risk assessment and the control activities that are appropriate. Our business model accepts the fact that there will sometimes be errors in human judgment. We are willing to accept a certain level of risk and if the cost of avoiding the risk is greater than the risk itself. Unit Administrators are often responsible for implementing new policy or procedure that is the result of a weakness that has been identified in our control activities.

Responsibility to adhere to existing policy and procedure rests with the department, schools and colleges as well. When instances of non-compliance are noted Unit Administrators are primarily responsible for taking appropriate corrective action and follow-up. In addition, part of the overall mission of the BAO is to ensure that UO business transactions are conducted in accordance with all applicable regulations, policies, procedures, generally accepted accounting principles, and sound business practices. Therefore, the Director of Business Affairs has the authority to evaluate and impose appropriate sanctions with regard to non-compliance. See BA02 General Sanctions Policy.

B. Providing Adequate Documentation

Demonstrating accountability requires that we document internal controls and the transactions that occur within our business function. At the UO departmental units are responsible for maintaining adequate documentation.

In general, expenditure documentation for goods and services should support the business purpose of the expenditure.  If the business purpose is not evident it should be clearly stated.  Appropriate documentation includes, but is not limited to:

• Original receipt or original invoice

• Amount of purchase

• Date of purchase

• Vendor name and address

• Description of goods and services

• Quantity

• Unit price

• Any required approval documents

• An explanation of business purpose if not clearly evident

For discussion of how to identify types of expenditures that may be sensitive in nature see Chapter 4 Key Processes. For a more specific discussion of documentation requirements see Purchasing Guide Chapter 5 Accountability. Unit Administrators should also ensure that appropriate staff within their department is familiar with the University Archives Record Retention Schedule at: http://libweb.uoregon.edu/speccoll/archives/schedule/index.html

Where Can You Get Help?

For guidance on specific types of expenditures that may need to be evaluated on a case-by-case basis see the Business Affairs Expenditure Quick Reference with illustrative examples and links to relative rules, regulations, policy and procedures. It is always good to seek advice and get second opinions from peers and/or technical experts. (Link out to actual experts and contacts – placeholder)

What Did You Learn?

Test your comprehension by taking the online quiz. It only takes a few minutes, and you will receive immediate feedback for “your eyes only.”

Where Do You Go Next?

This course is designed to be a stand-alone, self-directed tutorial. That means you are in the pilot seat as far as how much and in what order you explore the information. Review the list of chapters.  Thank you for your interest in making sound expenditure decisions at the University of Oregon!