Guidelines Financial Management

Guidelines
for
Financial Management
(Revised 2/02)
Guidelines for Financial Management Principles and Responsibilities
Office of the Controller rev. 2/02
Table of Contents
Part I: Principles and Responsibilities

Accountability ..........................................................................................................1
Conflict of Interest ...................................................................................................5
Data Integrity ............................................................................................................7
Financial Management...........................................................................................13
Principles of Regulatory Compliance...................................................................19
Part II: Internal Control and COSO

What is Internal Control?.......................................................................................27
Control Principles ..................................................................................................28
Components of Internal Control ...........................................................................29
Common Audit Findings........................................................................................31
Part III: Guidelines for Financial Processes

Accounts Payable ..................................................................................................33
Business Travel & Moving Expenses ...................................................................37
Cash Receipts ........................................................................................................43
Entertainment .........................................................................................................47
Equipment Management........................................................................................51
Honoraria ................................................................................................................57
Payroll .....................................................................................................................61
Purchasing..............................................................................................................65
Systems ..................................................................................................................69
Part IV: References

References..............................................................................................................73
Part V: Index
Index........................................................................................................................78
Table of Contents
Accountability
Accountability for financial control purposes is the delegation of authority to qualified

persons to initiate, approve, process, and review business transactions and the
holding of those persons responsible for the validity, correctness, and
appropriateness of their actions.
Each department has the responsibility and is accountable for managing the
resources it administers on behalf of the University.
The department head may delegate the overall financial management responsibility
to the Business Officer. Delegating authority does not relieve the department head
of accountability for activities under his/her direction. The Business Officer is
responsible for developing an appropriate structure for handling the department’s
financial resources. This will involve delegating a variety of tasks to employees
within the unit.
Each department head shall be responsible for developing an accountability

structure that adheres to the following Principles and Responsibilities.
I. Principles
A. A person cannot delegate greater accountability than they have been

delegated.
B. Individuals who delegate authority are responsible for ensuring the

employees to whom they delegate are qualified and are properly fulfilling
their responsibilities. Qualified individuals:
1. are actively involved in the tasks being performed,
2. have the appropriate knowledge and technical skills to perform those

tasks, including knowledge of relevant regulations and policies, and
3. have been provided sufficient authority to fulfill their responsibilities

without being subject to disciplinary action.
C. A person who delegates tasks must keep a secure, up-to-date record of

those delegations as well as modifications to them. A Department
Security Administrator (DSA) should be designated to maintain this record.
D. A second person shall be assigned to review each financial transaction on

a timely basis to ensure that the Preparer has properly fulfilled his/her
responsibilities.
Accountability I-1
E. The department head is responsible for reviewing the effectiveness of the

accountability structure.
II. Responsibilities
The accountability structure and delegations must maintain appropriate

internal financial controls. This includes maintaining separation of duties
when preparing and reviewing budgetary or financial transactions. It is
recommended that both a Preparer and a Reviewer are involved in each
budgetary or financial transaction.
A. A Primary Preparer must understand all relevant regulatory

requirements, UCSB policies and procedures, as well as the purpose of
each transaction in order to:
1. enter accurate data into all fields on a transaction document,
2. record an accurate and thorough explanation of each transaction,
3. comply with basic policy and other requirements, and
4. forward the completed transaction, with any supporting documents, to

a Reviewer.
B. A Mandatory Reviewer must:
1. review all transactions on a timely basis,
2. inspect each transaction to ensure the Preparer properly fulfilled their

responsibilities,
3. ensure that each transaction complies with policy and other

requirements, and
4. resolve all questions that arise with a transaction.
C. A Back-up Preparer/Reviewer is the trained substitute. Having a back-

up Preparer and Reviewer is important not only to cover absences of the
Primary Preparer or Mandatory Reviewer, but also to prevent someone
from changing or updating his/her own record.
Accountability I-2
REFERENCES
Accounting Services and Controls
(805) 893-8593
http://www.accounting.ucsb.edu
Audit Services
(805) 893-2829
http://www.audit.ucsb.edu
UCSB Policy 5101, Accountability and Internal Control

http://www.policy.ucsb.edu/vcas/accounting/accounting-policies.html
Accountability I-3
This Page Intentionally Left Blank
Accountability I-4
Conflict of Interest
The University’s overall policy on conflict of interest specifies that none of its faculty,
staff, managers, and officials shall engage in any activities which place them in a
conflict of interest between their official activities and any other interest or obligation.
It requires that all University employees disqualify themselves from participating in a
University decision when a financial conflict of interest is present.
University officials are responsible for ensuring the University’s teaching, research,
and service is conducted with integrity in an open, uncompromised environment.
I. Principles
A. Teaching, research, and public service performed by UCSB employees

are to be conducted in an atmosphere that is free of conflicts of interest.
B. Outside activities should be closely reviewed by an independent party to

assure the integrity and objectivity of all employees in performance of their
University obligations are protected.
C. Each unit must maintain a reasonable balance between competing

interests and providing a mechanism to help maintain research integrity,
protect student interests, and foster an open academic environment.
D. The reporting of financial interests and the withdrawal from decision making
shall be consistent with the University’s Conflict of Interest Code and the
State of California’s Political Reform Act of 1974. (See UCOP Information
Practices and Conflict of Interest and the Political Reform Act
Disqualification Requirements brochure published by UCOP, July 1, 1999.)
A. Designated officials, by definition hold positions the University or the Fair

Political Practices Commission (FFPC) has identified as having the
potential for decision making that could give rise to financial conflict of
interest. In addition to being subject to the Act’s disqualification
requirements, a designated official must file as public documents, financial
disclosure statements upon assuming or leaving a designated position
and annually while holding the position. (See the “Fair Political Practices
Commission Form 700 - Statement of Economic Interest.”)
Conflict of Interest I-5

B. All employees should not purchase, lease, and/or contract for goods and
services from any University employee or near relatives unless the
Purchasing department has determined that goods or services are not
available from any other readily available sources.
C. If an employee has an interest in a contract (an investment or interest in

real property, or the rendering of goods or services totaling $1,000 or
more) the employee must disqualify him/herself from making or
participating in the making of a decision that may affect the interest.
Please note:
Conflict of Interest as it relates to Sponsored Projects and research is not included in
the above material. For research related Conflict of Interest, please contact the
Coordinator for Academic Conflict of Interest in the Office of Research.
REFERENCES – Research Related Conflict of Interest
UC Regents Standing Order 103.1b, Service Obligations

http://www.ucop.edu/regents/bylaws/so1031.html
Circular No. D.1., Policy on Disclosure of Financial Interests Related to Sponsored

Projects
http://research.ucsb.edu/policy/policy1.shtml
REFERENCES
Administrative Services, Coordinator for general Conflict of Interest
(805) 893-2770
UCSB Policy 5005, Conflict of Interest

http://www.policy.ucsb.edu/vcas/admin-serv/5005_conflict_of_interest.html
UCSB Policy 5005, Conflict of Interest: Attachment A - Compendium

http://www.policy.ucsb.edu/vcas/admin-serv/5005_attach_a.html
UCOP Information Practices and Conflict of Interest and the Political Reform Act
Disqualification Requirements brochure published by UCOP, 7/1/99
http://www.ucop.edu/ogc/coi/econinterest.html
Conflict of Interest I-6

Data Integrity
Financial management decisions affect every aspect of the University. Accurate

data is critical to the decision making process. Consequently, each department
must establish and implement a system to ensure data integrity. This system must
provide reasonable assurance that transactions are in accordance with
management’s authorization and are recorded in the University records in an
accurate and timely manner.
Each department head shall be responsible for developing a system that adheres to
the following Principles and Responsibilities.
I. Principles
A. An adequate data control system including independent checks and

balances must exist within and between operating units.
B. All employees engaged in financial management activities must ensure

that adequate data controls are being employed. If they are not, all
employees must take an active role in developing and implementing
appropriate corrective actions.
C. Each unit must ensure that recorded assets match actual existing assets.
A mechanism must be in place to spot discrepancies and to ensure that
corrective actions are taken.
D. Each unit must ensure that all financial transactions are recorded
correctly. Correct transactions must:
1. reflect the actual values involved,
2. contain sufficient detail for proper identification and classification,
3. be posted on a timely basis in the proper accounting period,
4. be stored securely,
5. be readily retrievable for inquiry or reporting, and
6. be safeguarded against improper alteration.
E. All systems that affect or are used to report financial data must be secure,
reliable, and accessible. These systems must be designed, documented,
and maintained according to accepted development and implementation
standards. They should be built upon sound data models and employ
technology that allows data to be shared appropriately.
Data Integrity I-7
F. All financial systems should meet the users’ needs. In addition, all
interfaces affecting any financial system must contain controls to ensure
the data is synchronized and reconciled.
G. All technical networks, including electronic mail, through which

departmental users access University financial data must be reliable,
stable, and secure.
A. Establishing and Monitoring Data Integrity Controls
A system of integrity:
1. allows no one individual complete control over all key processing

functions for any financial transactions. Such functions include:
a. recording transactions into the Financial System directly or through

an interfacing system,
b. authorizing transactions,
c. receiving or disbursing funds,
d. reconciling financial system transactions, and
e. recording corrections or adjustments.
If insufficient personnel within the unit requires that one person perform
all of these functions, the unit must assign a second person to review
the work for accuracy, timeliness, and honesty.
2. ensures that all employees who prepare financial transactions provide

adequate descriptions, explanations, and back-up documentation
sufficient to support post-authorization review and any internal or
external audit.
3. keeps “office of record” documents (both forms and new paperless

transactions) physically secure and readily retrievable. These
documents must be retained for the periods specified in the University
Records Disposition Schedules Manual. (See
http://www.abs.uci.edu/depts/mailrec/uci-ppm/procs/700/721-11a.html)
4. ensures that staff reconcile transactions appearing on the general

ledger on a monthly basis.
a. All transactions must be verified for:
1) amount,
Data Integrity I-8
2) account classification,
3) description, and
4) proper accounting period.
b. All reconciliations must be performed in a timely manner.
5. uses exception reporting, variance analysis, and other mechanisms to

monitor, review, and reconcile financial activity to ensure:
a. employees are adequately trained in preparing and processing

financial transactions,
b. transactions and balances that exceed control thresholds or are

exceptions to policies, regulations or laws, are questioned and
thoroughly analyzed, with corrections or adjustments fully
documented and processed in a timely manner,
c. locally generated reports do not distort or misrepresent the source

data used to prepare them. In particular, one must be able to
reconcile reports back to the original data, as it appears in the
Financial System,
d. all unit assets are properly described and accounted for in the
Financial System or other ‘official books of record,’ and
e. actual physical assets are compared to recorded assets in the

Financial System and discrepancies are resolved in a timely
manner.
6. encourages all employees to report any break down or compromise in

the unit’s data integrity without fear of reprisal.
B. Establishing and Maintaining a Reliable Financial Computing Environment
A reliable financial computing environment includes the following

components:
1. a long-term administrative computing plan following a thorough

assessment of all major business processing and data needs. The
plan defines the technical infrastructure and each of the system
projects required to meet the unit's needs for the next three years. The
plan should be updated annually.
2. a unit is staffed with enough experienced and well-trained technical

professionals to meet the unit’s computing needs.
3. the following steps in developing and initiating computing projects:
Data Integrity I-9

a. Project Initiation
1) gaining appropriate administrative approval
2) defining the nature, scope, benefits, risks, priorities, timing, and
most likely development and implementation method for the
project
3) identifying areas and individuals affected by the project
4) anticipating staffing, equipment, and other requirements
5) determining funding requirements and funding sources for the
project
b. Analysis and Design

1) identifying the functional, informational and technical
requirements of the proposed system
2) using data models or similar tools to ensure that the systems
will be developed separate from the data, data redundancy will
be minimized, and overall referential integrity will be satisfied
c. Acquiring Hardware and Software

This involves a written proposal when significant hardware and
software purchases are being requested. Such proposals should
always cross reference specific projects defined in the long-term
administrative computing plan.
d. Implementation
1) developing a detailed project plan that identifies all tasks that
need to be completed, who will do them and when they will be
done
2) ensuring that all aspects of the project will adhere to central
data administrative standards
3) testing to ensure the new system interfaces smoothly with other
systems, and that audits, controls, and checkpoints function
properly
4) naming a project coordinator, if the complexity of the project
warrants it
e. Post Audit
Once operational, the unit responsible for the new system must
ensure the level of service provided to the users is satisfactory and
that proper maintenance, backup and recovery systems are in
place.
4. Ensure that no completed system becomes operational unless an

appropriate level of service to its users is in place. The minimum
requirements include:
a. availability. The system must be available when the users need

it.
Data Integrity I - 10
b. data access. The system must provide access to data in ways

that are timely, compliment work flow processes, and are retained
as specified in the University Records Management Disposition
Schedules.
c. performance. The system must meet user’s performance needs.
d. support. Users must receive training and documentation and

have individuals to contact to help resolve problems.
e. maintenance. The system must provide reliable service, and

should be upgraded as technology or user needs change.
f. security. Access to the system must be protected by user IDs

and passwords. The system must also be protected from theft
and vandalism.
5. Ensure that technical considerations are fully addressed.
a. Connectivity. If several campus units use the new system, it should

operate through the campus backbone network. It should also
support the primary communication protocol for UCSB and UC
computing.
b. Hardware. Hardware purchases should be evaluated with several

criteria in mind, including:
1) connectivity,
2) performance,
3) reliability,
4) ease of maintenance,
5) efficiency, and
6) availability of software.
c. Software. Software purchases should also be evaluated with

several criteria in mind.
1) The choice of operating system should consider such issues as
connectivity, consistency of user interfaces, vendor support, and
ease of application interfaces.
2) UCSB administrative applications should be based on relational
databases.
3) The selection of a programming language should depend upon
code availability, performance, staff skills, development time,
interoperability, long-term vendor support, and how well the
programs will work with existing programs.
d. User Interface. Administrative applications should provide a

standard, consistent, and friendly user interface incorporating
screen appearance, navigation procedures, menu selections,

function keys, colors, messages, on-line help, and terminology.
REFERENCES
Information Systems and Computing
(805) 893-2261
http://www.isc.ucsb.edu/
Office of the Controller

(805) 893-7667
http://controller.ucsb.edu
UC Records Management Disposition Schedules

http://www.abs.uci.edu/depts/mailrec/uci-ppm/procs/700/721-11a.html
Financial Management
Each department on campus requires financial resources in order to perform its role
in the University’s mission of research, teaching, and public service.
Each department head is responsible for ensuring their department’s financial

resources are managed in an efficient and cost-effective manner consistent with the
intended purpose of the funds. As stewards of the University, department
management has a fiduciary responsibility to adhere to agency requirements and
donor intent.
Each department head shall adopt the following Principles and Responsibilities to
ensure sound financial management.
I. Principles
A. A budget must be established to provide a tool to:
1. measure current financial performance,
2. discover significant transaction errors, and
3. detect substantial changes in circumstances or business conditions.
B. A budget must be realistic, reasonable, and attainable.
C. A budget must be based on a thorough analysis, including:
1. an understanding of the budget’s purpose and how it relates to the

department’s mission, goals, and objectives,
2. a comprehensive assessment of the unit’s financial needs in order to

fulfill its goals, and
3. a plan to increase resources or modify goals and objectives, if current

resources fall short of meeting a unit’s needs.
D. Actual financial results must be compared to the budget on a regular

basis. This will:
1. detect changes in circumstances or the business environment,
2. discover transaction errors,
3. measure financial performance,
Financial Management I - 13
4. ensure unnecessary costs are being avoided,
5. ensure that expenditures are reasonable and necessary to accomplish

the unit’s goals, and
6. ensure transactions are adequately supported.
E. When actual financial results vary significantly from the budget, a

department manager must evaluate the activity and determine the cause,
and, if necessary, take corrective action.
F. Departments must not overspend their budget.
G. All expenditures must comply with all relevant policies, rules and
regulations, and contract and grant terms.
H. Each unit must evaluate the financial consequences before a new activity
is started or a current activity is changed or eliminated.
I. Each unit must ensure that the anticipated benefits are commensurate
with the costs for any planned or ongoing activities.
J. Each unit must provide adequate safeguards to protect against the loss or
unauthorized use of University assets.
A. Planning and Budgeting
1. All planning and budgeting must include:
a. a mission statement with goals and objectives for each unit. This
statement should be simple, attainable, and include measurable
goals. It must be specific enough to be integrated into the overall
planning and budgeting process.
b. a thorough process for identifying, implementing, and evaluating

activities required to achieve the unit’s goals which are based on
prudent and supportable projections which have taken into account
the needs and impact on certain key factors such as:
1) student enrollment,
2) supporting and auxiliary services required,
3) space, equipment and supplies requirements,
4) salaries and benefits,
5) anticipated revenues,
6) capital expenditures that are not included in the campus master
plan, and
7) interdependency among units.
c. consistent use of proven methods for gathering and analyzing data,
d. sufficient detail and descriptive narration to clearly portray how all

of the unit’s operations are being financed, including:
1) all funding sources,
2) revenue estimates,
3) major expenditures by category,
4) major assumptions and forecasting methods used,
5) significant changes in current activities, and
6) contingency plans.
e. a cash management plan to maximize the cash resources available

to the University, and
f. a thorough re-evaluation of all assumptions, analyses, plans and

budgets used in the previous year’s planning and budgeting
process. Since goals and objectives may change from year to
year, all data feeding into current plans and budgets must be
reevaluated each year to ensure that they reflect today’s
environment.
B. Monitoring and Evaluating Financial Data
All systems for monitoring and evaluating financial data must include:
1. monthly financial reports that are appropriate and accurate. These

reports must:
a. be clear, concise, and detailed,
b. detail all sources of revenue and expenditure,
c. provide budget versus actual comparisons,
d. clearly identify trends and special areas of concern, and
e. highlight exception items.
2. a method for reviewing revenue and expenses at the end of each

ledger cycle.
a. If such a review reveals problems or exceptions, appropriate action

must be taken before the next cycle ends.
b. If reporting exceptions continue to occur, control procedures must

be implemented to correct the situation.
3. A monthly sampling of financial transactions. The sampling must be

large enough to ensure:
a. posting to the proper full accounting units,
b. adherence to terms, conditions, and restrictions imposed by

University policy or external funding sources,
c. names appearing on salary and benefit transactions are valid and

appropriate,
d. salaries reconcile to time sheet records, and
e. other expenditures are appropriate and include adequate

supporting documentation.
4. For each significant deviation, an examination must be completed to

determine the cause. These include:
a. deviations from policies or regulations,
b. deliberate decisions to depart from the budget,
c. transaction errors, or
d. misuse of authority.
5. A method for taking corrective actions such as:
a. revising plans or budgets to reflect changed circumstances,
b. changing or eliminating activities,
c. obtaining additional funding,
d. modifying goals or objectives,
e. correcting transaction errors,
f. altering future budget assumptions,
g. implementing new control procedures, or
h. documenting managerial decisions that depart from the budget.
6. Documentation of the corrective actions to include:
a. how the budget was revised,
b. what accounts were affected,
c. when the actions were taken, and
d. who authorized the actions.
C. Analyzing Costs, Benefits, and Risks
Management must weigh the costs and risks before deciding to

significantly add, change, or eliminate activities. This analysis should
include a formal proposal identifying:
1. a clear statement of purpose,
2. a quantified statement of benefits to the unit, the University and any

outside interests,
3. references to previous similar proposals,
4. references to other related activities and to other units that will be

affected,
5. a thorough quantification of all direct and indirect costs, FTE counts,

space needs, and capital expenditures,
6. anticipated funding sources,
7. potential problems,
8. significant underlying assumptions, and
9. identification and assessment of all financial, service and

organizational risks to the unit and to the University.
D. Safeguarding University Assets
University assets must be safeguarded from loss or unauthorized use.

Adequate safeguards include:
1. All cash, checks, or cash equivalents in excess of $500 are to be

deposited on the day they are received. If the cash, checks and
equivalents are not deposited on the same day, departments must
meet safe requirement standards as per Business and Finance Bulletin
BUS – 49, Policy for Handling Cash and Cash Equivalents. If safe
requirements are not met, departments must deposit cash in excess of

$500 immediately.
2. If a department receives cash and/or equivalents that cannot be readily

identified for a purpose, the department needs to contact Accounting
Services and Controls for direction.
3. All cash shortages and excesses must be promptly reported to a

supervisor who must investigate them immediately.
4. All petty cash and change funds must be authorized by Business

Services. Once established:
a. only one employee is charged with managing such funds, and
b. a second employee must monitor and review the fund to ensure

honest and accurate disbursement.
5. A physical inventory of all equipment must be conducted on an annual

basis. All discrepancies must be promptly reported and investigated.
6. Adjustments to asset records must be documented and approved.
7. Access to any forms or on-line systems that can be used to alter

financial balances must be restricted to only those employees requiring
such access to perform their University duties.
8. Delinquent account balances must be carefully examined and all

follow-up collection or write-off actions must be completed in a timely
manner.
REFERENCES
Accounting Services & Controls
(805) 893-8593
Audit Services
(805) 893-2829
Office of Budget & Planning

http://bap.ucsb.edu/
UC Business and Finance Bulletin BUS - 49, Policy for Handling Cash and Cash
Equivalents
http://www.ucop.edu/ucophome/policies/bfb/bus49toc.html
Principles of Regulatory Compliance
Every employee who conducts transactions affecting University funds must comply
with all applicable laws, regulations, and special restrictions.
Each department shall adopt the following Principles and Responsibilities.
I. Principles
A. Individuals conducting business transactions shall be personally

responsible and subject to punitive actions resulting from intentional
violations of laws or misuse of University resources.
B. Anyone who is aware of fraudulent or illegal business transactions

conducted in the name of the University shall report them immediately.
C. Each unit is responsible for the restitution of any disallowances due to

noncompliance with laws, regulations, or special restrictions.
D. Every employee conducting University business is responsible for

complying with applicable legal and regulatory requirements.
E. Legal and regulatory requirements, as well as any donor-imposed

restrictions, shall be maintained on record with the University and be
readily accessible.
A. Financial Reporting
Financial reporting in compliance with regulatory requirements requires:
1. following Generally Accepted Accounting Practices (GAAP), Financial

Accounting Standards Board (FASB) Statements, Governmental
Accounting Standard Board (GASB) Statements, and Cost Accounting
Standards Board (CASB) Statements.
The following are basic requirements of these standards applicable to

UCSB:
a. sources and uses of funds must be aggregated by the type of

activity they support, and in accordance with any restrictions
imposed on their use
b. revenue is reported when earned, and expenditures are reported

when goods or services are received
Principles of Regulatory Compliance I - 19
1) In general, revenue is earned when the University provides

goods or services; for example, on a cost-reimbursement
research grant, revenue is earned as the costs are incurred for
the conduct of the research.
2) Likewise, expenses are incurred as the University uses goods
or services; for example, when laboratory supplies are received,
the University incurs the expense.
c. accounting principles must be applied consistently, both within

fiscal years and between fiscal years. Accounting Services and
Controls is charged with promoting the consistent, University-wide
application of these accounting principles.
d. transactions must be classified and recorded consistently.
e. revenue and expenses must be recorded in the proper accounting

period
2. reporting to sponsoring entities according to the specific reporting

requirements. In general, most sponsoring entities require adherence
to GAAP. Additionally, federal agencies and entities which serve as
conduits for federal funds require adherence to either Office of
Management and Budget Circulars (OMB) and/or Federal Acquisition
Regulations (FAR). Two primary circulars are:
a. OMB Circular A-21, which provides the cost principles for

educational institutions. These principles define allowable costs as
those which are reasonable, allocable, consistently treated, and in
conformance with any special limitations. Circular A-21 also
defines direct versus indirect costs, and provides guidelines for
calculating indirect costs.
b. OMB Circular A-110, which provides uniform administrative

requirements for grants and other agreements with institutions of
higher education, including financial reporting requirements.
3. making all financial reporting systems open to regular internal and

external audits. The annual financial and A-133 audit is coordinated by
the Controller; all other external audits are coordinated by the Director
of Audit Services.

B. Records Retention
1. Administrative records are the property of the Regents and may not be
permanently removed from the University or destroyed except in
accordance with disposition schedules established by the Records
Management Committee.
2. Please refer to the Records Management Disposition Schedules for

guidance in administering the retention or disposition of records.
C. Cash Management Requirements
1. Excess balances of federal funds shall not be maintained.
2. Any interest earned on federal cash balances must be remitted to the

Federal Government by Accounting Services and Controls.
3. Approval for new bank accounts must be obtained from the UC

Treasurer’s Office, through Accounting Services & Controls.
D. Expenditures
Regulatory requirements specify:
1. all employees behave ethically when conducting University business.
2. the use of vendors which are small businesses and businesses owned
by women, minorities, and disabled veterans is encouraged.
3. federal restrictions are followed, including:
a. federal funds cannot be used to support political activities of any

kind,
b. no person shall be excluded from or discriminated against because

of race, color, national origin, sex, age or physical impairment,
c. no officer, employee or agent shall be involved in a contract where

s/he or their immediate family or partner has a vested interest, and
d. accepting bribes to secure contracts is prohibited.
4. all University Human Resource policies and regulations are followed.

5. When purchasing goods and services for the University, the following
additional requirements apply:
a. Only the Purchasing Manager, authorized buyers, or specified

University employees with a formal delegation may execute
agreements or contracts. For example:
1) real estate and construction projects,
2) the services of independent consultants,
3) legal services,
4) debt service, or
5) any purchase where payment terms exceed seven years.
b. The authority to purchase goods and services with a value under

$2,500 does not provide the authority to issue, approve or execute
contracts and licenses.
c. Any person who makes unauthorized purchases may be

responsible for the payment of all charges incurred.
d. Departments have low value authorization limits between $500 and

$2,500. Purchases exceeding those limits, or any equipment
purchase, must be conducted through the Purchasing department.
The Purchasing department must maintain documentation of
solicitations made to vendors, vendor responses, sole source
justifications, and the contracts awarded.
e. Goods and services for individuals or for non-University activities

shall not be made using University credit, purchasing power or
facilities. If purchased items appear to be of a personal nature,
they must be properly documented.
f. When pooled purchase orders or commodity agreements exist,

goods and services shall not be purchased from other sources,
unless special delivery dates or unusual specifications preclude the
use of these sources.
g. Purchases cannot restrict fair trade practices.
h. Contractors must pay laborers and mechanics employed by them at

wages no less than the prevailing wage rate, as defined by the
Secretary of Labor.
i. Unnecessary or redundant purchases must be avoided.
6. Equipment purchased with funds from federal awards involves the

following additional requirements as specified in OMB Circular A-110:

a. a description of such assets be maintained in the University’s

equipment inventory records,
b. a physical inventory be conducted at least once every two years,
c. property owned by the federal government be identified as such,
d. people responsible for federally-owned equipment know the basic

requirements for the use and disposition of such equipment, and
e. a department inventory report must be reviewed and submitted

annually.
E. Tax Laws and Regulations.
To comply with tax regulations, appropriate personnel must be informed of

the various taxing authority requirements applicable to their operations. In
general, taxes applicable to University operations include:
1. Income tax on income producing activities which constitute a regularly

carried on trade or business that is not related to promoting
educational activities. Consequently, employees who are engaged in
such activities must:
a. maintain information that supports whether or not a particular

activity is subject to income tax,
b. notify Accounting Services and Controls of any income taxable

activities and complete the various questionnaires and worksheets
prescribed by Accounting Services and Controls, and
c. account for all taxable unrelated business income earned and

report to Accounting Services and Controls.
2. Sales and use tax on certain sale and purchase transactions as

required by the California State Board of Equalization. Purchases
made for resale are generally exempt in cases where the seller obtains
evidence from the purchaser such as a certificate of resale.
Otherwise:
a. units that conduct sales activities must charge sales tax and
properly account for sales tax collected by coding related deposits
against sales tax payable account numbers designated by
Accounting Services and Controls, and
b. units making purchases must include a provision for such taxes

when making orders. Further, they must ensure these payments
have been included on their invoice payments or through other

charging methods used by the Accounting Services and Controls
which is responsible for the actual filing and remitting of sales and
use tax payments.
3. Federal and State income taxes assessed on University employee

base salary and wages, supplemental pay, undocumented
reimbursements, and various allowances (such as car and housing) in
accordance with the Internal Revenue Code and California Revenue
and Taxation Code. In this process:
a. Accounting Services & Controls, Payroll unit is responsible for

withholding taxes on compensation based upon the individual W-4
Federal and State Withholding Allowance Certificates on file. They
are also responsible for remitting the actual tax payments to the
Federal and State governments, completing the required quarterly
tax returns, and for distributing W-2 Wage and Tax Statements to
employees, and
b. units on campus are responsible for submitting accurate and timely

data to the Payroll unit for the completion of these forms, and the
determination of whether individuals are to be considered
employees or contractors for tax purposes.
4. Other important tax considerations:
a. Income paid to payees outside the University (such as payment of

fees, commission, rents, and royalties) or University employees
(such as payment of prizes and awards) must be accumulated and
reported as taxable income. In this process:
1. units must provide tax identification numbers when processing

these types of payment transactions, and
2. Accounting Services & Controls is responsible for reporting this

information to the payees via annual reporting forms such as the
1099, W-2, or 1042S.
b. The University is generally exempt from paying property taxes.

When necessary, Accounting Services & Controls will file the
exemption reports and claims to receive refunds of such taxes paid
on leased property.
F. Reporting Fraudulent or Illegal Acts
1. Individuals conducting business on behalf of the University are

personally responsible for the consequences of any violations of laws
or misuse of University resources.
2. Individuals conducting business on behalf of the University must do so

for the benefit of the University. Where a potential for personal gain
exists, potential conflicts of interest must be reported immediately to
Administrative Services or the Office of Research, and be carefully
evaluated before any financial transactions occur.
3. Individuals conducting business on behalf of the University must not

benefit financially in any way from the conduct or course of that
business. This includes any personal benefit accruing to a close
relative.
4. Any person who suspects that fraud or illegal activities are taking place
in their unit must report that suspicion immediately to their supervisor.
If the employee believes that this supervisor is involved, or is otherwise
uncomfortable reporting in this manner, they must immediately notify
Audit Services. Supervisors to whom such reports are made must
review them, and if they have merit, report them to the next level of
management or to Audit Services. Please refer to UCSB Policy 5700,
Procedure for Reporting and Reviewing Defalcations.
G. Response and Resolution of Internal and External Audit Findings

The Controller coordinates the response for the annual financial and A-
133 audit. The Director of Audit Services coordinates the responses for all
other external audits.
1. The Director of Audit Services must be notified prior to commencement

of any audit or review.
2. A full investigation of the facts must be conducted to ensure accuracy

of any findings.
a. If a finding is in error, full documentation must be sent immediately

to the Director of Audit Services.
b. If a finding is valid, corrective action must be taken immediately to

correct the deficiency and ensure the situation does not recur.
c. Where findings result in disallowances, units must fund the

disallowances with other fund sources. If a unit does not take
prompt action, Accounting Services & Controls will take action.
Where findings result in extrapolated disallowances, Campus

administration will review the circumstances and decide upon an
appropriate allocation of the disallowance.

REFERENCES
(805) 893-8593
Audit Services
(805) 893-2829
UC Accounting Manual - Credit and Debit Card Program

http://www.ucop.edu/ucophome/policies/acctman/c-173-85.pdf

http://www.abs.uci.edu/depts/mailrec/uci-ppm/procs/700/721-11a.html)

Guidelines for Financial Management Internal Control and COSO
What is Internal Control?
Internal Control refers to the processes and procedures designed to provide

reasonable assurance regarding the achievement of objectives in effectiveness and
efficiency of operations, reliability of financial reporting, compliance with applicable
laws and regulations, and safeguarding assets.
Internal Controls Are Everyone’s Responsibility
Managers and leaders at all levels of the University are responsible for ensuring that
an appropriate and effective control environment is in place in their areas of
responsibility. Although management is responsible for establishing specific internal
control policies and procedures, everyone at the University shares responsibility
for internal control.
All employees play an important role in the achievement of the University’s goals
and objectives. Everyone is responsible for implementing and maintaining control
practices to ensure achievement of these goals. It is impossible to eliminate all
negative consequences, which are an inherent part of setting and meeting
objectives. It is, however, possible and necessary to reduce the negative
consequences to an acceptable level by implementing control practices.
Any employee suspecting fraud or other improprieties involving University resources

must inform their supervisor or Audit Services. (See UCSB Policy 5700, Reporting
and Reviewing Defalcations, and/or Business and Finance Bulletin G-29,
Procedures for Investigating Misuse of University Resources.)
Other groups play important roles. Audit Services evaluates control systems for
effectiveness and efficiency. The Office of the Controller provides leadership in
designing and implementing systems to ensure an effective financial accountability
and control environment.
External auditors review control systems for the impact on financial reporting and
compliance with requirements of external agencies.
Fundamental Concepts
Maintaining internal controls is a continuing process. Internal control is effected not

only by policy manuals and forms, but by people functioning at every level of the
institution. Internal control can be expected to provide only reasonable assurance
regarding achievement of operational, financial reporting, and compliance
objectives.
What Is Internal Control II - 27

Control Principles
Authorization and Approval

Transactions are authorized by a person with delegated approval authority.
Documentation of Policies and Procedures

University and departmental level policies and operating procedures are formalized
and communicated to employees. Documenting policies and procedures and
making them accessible to employees helps provide day to day guidance to staff
and will promote continuity of activities in the event of prolonged employee absences
or turnover.
Physical Security
Equipment, inventories, cash, and other property are secured physically, counted
periodically, and compared with amounts shown on control records.
Proper Management of Costs and Expenses

Costs and expenses are monitored and controlled. Comparisons of actual expenses
to budgeted amounts are performed on a regular basis, and all significant variances
are researched.
Review and Reconciliation

Routine examination and reconciliation of transaction records to official University
records is required to verify the accuracy of the records, the appropriateness of the
transactions, and their compliance with policy.
Separation of Duties
Financial responsibilities are divided between different people to assure a single
person does not perform every aspect of a financial transaction. Segregating
responsibilities can reduce errors and prevent or detect inappropriate transactions.
Training and Supervision

Employees receive appropriate training and guidance to ensure they have the
knowledge necessary to carry out their job duties. Employees are provided with an
appropriate level of direction and supervision and are aware of the proper channels
for reporting suspected improprieties.
Control Principles II - 28
Components of Internal Control
There are five interrelated components that make up an organization’s internal

controls. The Committee of Sponsoring Organizations (COSO) model, depicted
above in a pyramid form, is recognized throughout the world as a significant
standard for discussing internal control. There is a direct relationship between
institutional objectives and the components of internal control. For example, to
achieve the objective of compliance with laws and regulations, all five components
are necessary.
Control Environment
The control environment, as established by the organization’s administration, sets
the tone of an institution and influences the “control consciousness” of its people.
Likewise, leaders of each department establish a local control environment. This is
the foundation for all other components of internal control. Control environment
factors include: integrity and ethical values, competence, leadership philosophy and
operating style, and the way management assigns authority and responsibility.
Risk Assessment
The UC campuses must be aware of and address the risks they face. They must
establish objectives. Risk assessment is the identification and analysis of relevant
risks to achievement of the objectives. This forms the basis for determining how the
risks should be managed.
Components of Internal Control II - 29

Control Activities
Control activities are the policies and procedures that help ensure management
directives are carried out. Control activities occur throughout the institution, at all
levels and in all functions. They include such activities as approvals, reconciliations
of budget to actual, segregation of duties, and security of assets.
Information and Communication

Communication systems enable the organization’s people to capture and exchange
the appropriate information needed to manage its operations responsibly.
Monitoring
Monitoring is a process that assesses the quality of the system’s performance over
time. It is accomplished through ongoing activities such as review of operating and
financial reports, comparison of data to physical assets, separation of duties, and
authorization procedures. Monitoring can also be accomplished through separate
evaluations such as internal and external audits.
Components of Internal Control II - 30

Common Audit Findings
• Lack of separation of duties. One staff employee is responsible for all aspects of
specific types of financial activity such as payroll, purchasing, cash receiving, and
recording.
• Expenditures and commitments of funds not tracked and compared to budgets

on a timely basis. Budget status reports not prepared and provided to
department head or principal investigator on a timely basis.
• Cash receipts from revenue generating activities or gifts not promptly endorsed,
recorded, safeguarded, deposited, and reconciled.
• Cash receipts not deposited. Used to fund petty cash type purchases.
• Vendor invoices not approved prior to payment.
• Purchases of materials or services from University employees and not submitting

the request in advance to campus Purchasing for conflict of interest review.
• Equipment records not maintained. Equipment not tagged with UC property

numbers. Equipment inventory counts not taken and documented. Equipment
items not found.
• Recharge billings for on campus services not reviewed for validity and
correctness.
• Employee overtime not properly authorized, recorded, and compensated.
• Employee attendance records not reviewed and approved by supervisor.
• Staff performance evaluations not prepared on a timely basis. Staff job

descriptions out of date.
• Accounts payable payments to individuals which should have been handled

through the payroll system due to an employer/employee relationship.
• Administrative staff not cross trained to provide coverage during extended

absences. Over reliance on one individual for computer programming and
network support.
• Federally unallowable charges not properly object coded to exclude from campus
overhead rate calculation.
Common Audit Findings II - 31

• Cost transfers involving a federal fund are not properly explained, approved, and
processed on a timely basis.
• Administrative policies, procedures, and practices not documented.
• Access to campus and departmental computer systems not properly controlled.
• Computer databases and data files not backed up on a regular basis. Electronic
backup media not stored in a safe location remote from the original data.
• Computer applications developed without adequate technical or user

documentation.
• Signature authorizations not up to date.
REFERENCES
Audit Services
(805) 893-2829

(805) 893-7667
UCSB Policy 5700, Reporting and Reviewing Defalcations

http://www.policy.ucsb.edu/vcas/internal-audit/5700_defalcations.html
UC Business and Finance Bulletin G-29, Procedures for Investigating Misuse of

University Resources
http://www.ucop.edu/ucophome/policies/bfb/g29.html
Common Audit Findings II - 32

Guidelines for Financial Management Guidelines for Financial Processes
Accounts Payable
Accounts Payable and disbursements involves preparing payments to suppliers and

disbursing funds owed for goods and services purchased.
This section is organized into three main activities:

1. Separation of Duties
2. Authorization and Approval
3. Review and Reconciliation
Standard
• Accounts payable duties and responsibilities are adequately segregated.
Potential Consequences
• Erroneous or fraudulent payments may occur.
• Payments may be made to unauthorized or non-existent vendors.
Recommended Practices
• To the extent possible, different individuals should be assigned responsibility
for:
1. approving purchase requisitions and orders,
2. receiving ordered materials,
3. approving invoices for payment, and
4. reviewing and reconciling the monthly general ledger.
Standard
• Departments should avoid requesting that checks be held by Accounting for
pick up by the department, vendor, or employee.
• Erroneous or fraudulent payments may occur.
• Checks could be altered.
• Checks should be mailed directly to payee (i.e. vendor, employee, or
student).
Standard
• Vendor invoices are reviewed for accuracy and matched to purchase orders,
contract terms, and receiving documents prior to approving payment.
Accounts Payable III - 33

• Purchases may occur which are unauthorized, fraudulent, or unnecessary.
• Vendors may make claims for payment of unauthorized work performed.
• Erroneous payments may be made.
• Improper charges may be made to account/funds resulting in
misappropriation of funds.
• Prior to approving payment, vendor’s invoice, receipt information, and
purchase order are reviewed for: receipt of materials/services and accuracy of
price, prior payment, quantity, and account/fund information. Absence or
discrepancies of any of the above is resolved before payment is made.
• Purchases, invoices, and Check Requests should be approved only by
persons with delegated authority.
• Signature Authorization forms should be up to date and on file in Accounting
Services & Controls, Extramural Funds unit.
Standard
• Payments to consultants and for personal services shall be made only when a
signed agreement exists which has been reviewed and authorized by
Business Services. (See Business and Finance Bulletin BUS - 34, Securing
the Services of Independent Consultants.)
• Payments may be made which are unauthorized, fraudulent or unnecessary.
• An employer-employee relationship may exist, which would require following
the normal employment process.
• A conflict of interest may exist.
• Goods or services may be available from the University’s own facilities.
• The University may be subjected to undue insurance liability.
• Prior to obtaining the services of a consultant, or entering into a personal
service agreement, the agreement must be reviewed and authorized by
Business Services.
• Authorization for payments shall be a copy of the properly executed
agreement.
• Payment may not be made for services rendered prior to the contract period
unless proper approval has been obtained from Business Services and the
invoice(s) meets contract terms.
Standard
• Aged invoices, purchase orders, and receiving transactions are reviewed,
investigated and resolved.

• Payment may not be made for goods already ordered and received.
• Late payment may result in loss of supplier discount.
• Invoices sent for approval are monitored for payment.
• Ledgers are reconciled and reviewed monthly for accuracy and timeliness of
expenses.
REFERENCES
Accounting Services & Controls, Accounts Payable

Manager, Asger Pedersen
(805) 893-3919
http://www.accounting.ucsb.edu/disbursement/
Accounting Services & Controls, Extramural Funds

Manager, Connie Feeley
(805) 893-3068
http://www.accounting.ucsb.edu/emf/
Business Services
(805) 893-4440
http://www.busserv.ucsb.edu/
UC Business and Finance Bulletin BUS - 34, Securing the Services of Independent
Consultants
http://www.ucop.edu/ucophome/policies/bfb/bus34.html


Business Travel & Moving Expenses
All University travel shall be properly authorized, reported, and reimbursed in

accordance with Business and Finance Bulletin G-28, Policies and Regulations
Governing Travel. Expenses for personal travel must not be charged or temporarily
funded by the University. Reimbursement for moving expenses and relocation
allowances for non-exclusively represented staff employees must be in accordance
with Business and Finance Bulletin G-13, Policy & Regulations Governing Moving &
Relocation. Academic appointments must be in accordance with Academic
Personnel Manual 550, Moving Expenses for Intercampus Transfer.

1. Segregation of Duties
Standard
• Individuals with delegated approval authority for travel expenses shall not
approve their own travel.
• Travel reimbursements may occur which are unauthorized, fraudulent, or
unnecessary.
• Excessive costs may be incurred.
• Reimbursement could be made for personal or non-business related travel
• All reimbursements for travel expenses must be in accordance with BUS
G–28.
• Individuals with delegated approval authority must obtain approval for their
own travel from their supervisor or other higher level individual.
Standard
• Responsibility for preparing and approving/releasing a Travel Expense
Voucher is assigned to separate individuals. Adequate internal controls are
maintained in approval and payment process.
unnecessary.
Business Travel & Moving Expenses III - 37


• Reimbursement could be made for personal or non-business related travel.
• Loss of future funding.
• All relevant documentation should be attached to the payment request.
• The approver/releaser of a Travel Expense Voucher should be someone
other than the preparer.
• Reimbursement of travel expenses shall be delivered directly to the payee.
• Payments shall not be delivered to any of the individuals involved in the
approval or payment preparation process.
Standard
• All official University travel must be authorized by persons delegated such
authority. (Please contact your control point or Department Head to identify
who has such authority.)
• Reimbursement could be made for personal or non-business related travel.
• Damaged public image.
• Excessive costs may be incurred due to inappropriate practices or fraud.
• A Travel Expense Voucher must be approved for payment by the traveler’s
department head or by a person delegated such authority.
• Approval from the delegated authority must be in writing.
• Current signature authorization forms must be on file with Accounting
• A Travel Expense Voucher should not be approved by a person who reports
directly to the traveler unless prior approval has been obtained.
• Travel expenditures should be cost effective and in accordance with the best
use of public funds.
Standard
• All travel expense reimbursements must be allowable, reasonable, and
substantiated in accordance with BUS G-28.
unnecessary.

• Individuals must be eligible for travel expense reimbursement. Foreign
visitors must have a proper Visa (J1, B1-B2, WB-WT, F1, or H1). Please
contact the Accounting Services & Controls, Travel unit for further
information.
• A Travel Expense Voucher must be submitted to Accounting Services and
Controls within 21 days of the completion of the trip.
• All transportation expenses must be reimbursed based on the most
economical mode of transportation and the most usually traveled route.
• Coach class or any discounted class shall be used.
• Only U.S. carriers shall be used for travel reimbursed from Federal grants and
contracts.
• The use of University-owned automobiles shall be in accordance with
Business and Finance Bulletin BUS - 46, Use of University Vehicles.
• Allowable meal and incidental expense rates must be used. (Please see BUS
G – 28.)
• For meals and incidentals, reimbursement should be made for actual costs
only.
Standard
• A Travel Expense Voucher shall be used to account for all travel expenses
incurred in connection with official University travel.
unnecessary.
• Appropriate and necessary approval may not be obtained.
• The Travel Expense Voucher must be completed in accordance with BUS G -
28.
• Original receipts must be attached.
• When receipts are lost or cannot be obtained, a statement describing the
reason for the unavailability must be included as part of the documentation
submitted with the Travel Expense Voucher.
• The Travel Expense Voucher must be signed by the traveler certifying that
the amounts are true. If the traveler cannot sign, a reason must be indicated.
• The Travel Expense Voucher must be approved by the department head or
equivalent authority.
• The Travel Expense Voucher should be reviewed to ensure all expenses are
reasonable, allowable, and properly supported.
Standard
• Travel expenses incurred by non-University personnel shall not be
reimbursed unless the travel has been approved in advance by the delegated
authority.
unnecessary.
Recommendations
• Individual with delegated approval authority must authorize the
reimbursement of travel for prospective appointees before any commitment
for reimbursement is made.
• A Travel Expense Voucher must be completed in accordance with BUS G -
28.
Standard
• Travel to conventions, conferences, or business meetings must be
reimbursed in accordance with BUS G - 28.
unnecessary.
• Travel expenses incurred for attending conventions, conferences, or business
meetings are allowed when approved by a department head or equivalent
authority.
• Expenses which can be reimbursed include registration fees, transportation,
subsistence, and some miscellaneous expenses.
• Reimbursement for any portion of the registration fee related to optional
entertainment is not allowed.
Standard
• Departments should exercise minimal use of travel advances.

• Unused advances may not be reimbursed promptly and collection may
become a problem.
• Loss of STIP for the University.
• Accounting for expenses becomes more difficult and requires additional
processes.
• Amount requested on the Travel Advance Request Form could exceed
estimated expenses.
• Trip could be cancelled or postponed.
• Failure by the employee to return unused travel advances within 120 days
requires the University to consider the advance amount as income to the
employee under IRS regulations.
• Eligible travelers should request a corporate card.
• Travel advances may only be issued under the following circumstances:
1. the traveler is not eligible to participate in the corporate travel card
program,
2. the traveler has incurred credit card expenses which must be paid before
the trip is completed, or
3. the travel requires special handling, such as group travel.
• Cash advances should not be authorized for any person who is 30 days
delinquent in submitting a Travel Expense Voucher for a prior trip.
• The traveler must account for the total amount of all expenses and advances
pertaining to a trip by submitting a Travel Expense Voucher within 21 days of
the completion of the trip. Original receipts must be retained for submission
with the Travel Expense Voucher.
• Advances must be refunded immediately if an authorized trip is cancelled or
indefinitely postponed.
Moving Expenses
Standard
• Reimbursement of moving expenses must be authorized by persons
delegated such authority. (Please contact your control point or Department
Director to identify who has such authority).
• The employee or new appointee may not have met the eligibility requirements
for reimbursement of his/her moving expenses.
• The employee or new appointee’s taxable income may be miscalculated.
• Request for reimbursement of nontaxable moving expenses must be

submitted to Accounting Services & Controls, Travel unit, on a Travel
Expense Voucher.
• The Travel Expense Voucher must be approved by the employee’s
department head or equivalent authority.
• Claims for moving expense reimbursement must be supported by original
receipts and invoices.
• Current signature authorization forms must be on file in the Accounting
Standard
• Periodic reviews are performed to ensure travel expenditures are accurate
and appropriate.
• Expenses may be charged to the wrong account/fund.
• Financial reports could be misstated.
• Departments should review the general ledger on a monthly basis to ensure
travel expenses are properly classified, recorded, and accurate.
• Departments should review contract and grant terms and other fund
restrictions to ensure expense is allowable and appropriate.
REFERENCES
Accounting Services and Controls, Travel
Manager, Dale Pearson
(805) 893-7226
http://www.accounting.ucsb.edu/travel/
UC Academic Personnel Manual Policy 550, Moving Expenses for Intercampus

Transfer
http://www.ucop.edu/acadadv/acadpers/apm/apm-550.pdf
UC Business and Finance Bulletin G-13: Policy and Regulations Governing Moving
and Relocation
http://www.ucop.edu/ucophome/policies/bfb/g13toc.html
UC Business and Finance Bulletin G-28: Policy and Regulations Governing Travel
UC Business and Finance Bulletin BUS – 46, Use of University Vehicles


Cash Receipts
The term “cash” includes currency, coin, checks, money orders, and credit card
receipts. Receipts and deposits involve collecting, safeguarding, and depositing
funds received.
This section is organized into four main activities:

3. Custodial and Security Arrangements
Standard
• Responsibilities for receiving and depositing cash/checks are assigned to
separate individuals whose duties are adequately segregated from other
activities.
• Cash receipts may be lost, stolen, or misappropriated.
• Cash received may be lost or inaccurately applied to accounts.
for:
1. receiving and depositing cash,
2. recording cash payments to receivable records,
3. reconciling cash receipts to deposits and the general ledger,
4. billing for goods and services,
5. following up on collection of returned checks, and
6. distributing payroll or other checks
• Incoming cash is handled by the least possible number of people, and
designated individuals are responsible for safeguarding funds until deposited.
Standard
• Individual accountability for all cash, including cash receipts, change funds
and petty cash funds should be maintained at all times.
• Cash receipts may be lost, stolen or misappropriated.
Cash Receipts III - 43

• An accounting record for cash should be established immediately upon
receipt.
• Access to cash should be restricted at all times to the person (the custodian)
accountable for the funds. This person should be provided a locked, secure
storage facility to which only he/she has access. This could be a lockable
cash drawer, safe, safe compartment, or filing cabinet. The degree of
security facility should be commensurate with the amounts being stored.
(See Business and Finance Bulletin, BUS-49, for safe requirements.)
• All transfers of cash accountability should be documented. Documentation
should include amount transferred, date, and signatures of both persons
involved in the transfer. The documentation should be kept in a location
separate from the cash funds.
• A supervisor should verify cash deposits, cash overages and shortages.
• A supervisor should sign and approve any voids or refunds.
Standard
• Receipts are recorded accurately, completely, and on a timely basis.
• Financial records and financial statements may be misstated.
• Cash and other cash-related accounts may be misstated.
• Cash received may be lost or inaccurately applied to department accounts.
• Cash receipts may be recorded in the wrong accounting period.
• Cash flow may not be maximized.
• All cash should be immediately recorded upon receipt. The recordings may
be made on a cash register, a computer system data entry terminal, by
means of pre-numbered receipt forms, or on a hand written log. Each
individual cash receipt should be identified and controlled by a unique
transaction number, such as a cash register ring number or cash receipt
number. The cash receipt records should provide the following information:
• Name of department receiving cash.
• Name of person or organization cash was received from.
• Amount received and cash, check, or credit card indicator.
• Check amount and check number.
• Date.
• Identification of person receiving cash. When receipt forms are used, they
should include signature of the person receiving cash. An equivalent
identification should be provided for when receipts are recorded on a cash
register, computer terminal or hand written log.
• Transaction number, cash register ring number, or receipt form number.
• Checks should be made payable to UC Regents and should be
restrictively endorsed to the UC Regents immediately upon receipt.
• The accounting record of cash receipts should be stored separately from

the cash after business hours.
• All cash, checks, or cash equivalents in excess of $500.00 are deposited
on the day they are received. Cash equivalents totaling less than $500.00
may be deposited weekly if departments meet safe requirement standards
as per Business and Finance Bulletin BUS - 49, Policy for Handling Cash
and Cash Equivalents. If safe requirements are not met, Accounting
Services & Controls recommends departments deposit cash in excess of
$500 immediately.
• Cash receipts should be deposited intact. Receipts should not be used for
petty cash, disbursements, check cashing, or other purposes.
Standard
• Undeposited cash receipts should be kept locked at all times.
• Cash receipts may be lost or stolen.
• Funds held overnight should be minimized. Cash should be kept in a locked
safe or other secure storage facility. The degree of security provided should
be commensurate with the amounts stored. (See Business and Finance
Bulletin, BUS-49, for safe requirements.)
• Combinations or keys to safes and other cash storage facilities should be
restricted to the custodian of the cash and a designated backup.
• Combinations or locks must be changed annually and whenever a person
with the combination or key leaves the department. A log must be maintained
of these changes.
• Combinations should be kept in a sealed, signed envelope, in a secure
location in the event access to the safe is needed and the custodian is
unavailable.
• Persons responsible for cash should be instructed to maintain confidentiality
of safe combinations.
• Appropriate precautions should be taken when transporting cash from
departments to the Cashiers Office. Cash should not be sent through the
campus mail. When large amounts are involved, or when cash must be
transported after dark, a campus police escort is advised.
Standard
• Receipts, deposits, and bank account balances are reconciled monthly.
• Lost, incorrectly recorded, or misappropriated cash receipts may not be
identified and corrected.

• Discrepancies between bank records and campus/department ledgers may

not be detected.
• The following reconciliation procedures should be performed or reviewed by a
supervisor not directly involved in receiving and recording cash:
• Cash receipts should be counted and balanced to the cash recorded at
the end of each business day.
• A receipt for each cash deposit should be obtained from the Cashier’s
Office and compared with the department’s record of the deposit amount.
• The cash deposits listed in monthly general ledger reports should be
reconciled to the department’s records of cash receipts. Any differences
should be investigated and explained.
• A dated and signed record of the reconciliations should be prepared and
retained.
• Cash receipts are recorded on the day received.
REFERENCES
Accounting Services & Controls
(805) 893-8953
Campus Cash Handling Coordinator

Trenna Hunter
Business Services
(805) 893-2570
http://www.busserv.ucsb.edu/
UC Business and Finance Bulletin - 49, Policy for Handling Cash and Cash
Equivalents

Entertainment
Entertainment applies to all activities and expenses associated with University

sponsored events such as receptions, conferences, meetings, hosting official
guests, and commencement. Whenever University funds are expended for an event
that has an entertainment component, the entire event should be considered subject
to entertainment policy approval.
Departments organizing and managing sponsored events should consider risks and
exposure. Early planning should include consultation with control points, Business
Services, Purchasing and/or Accounting Services & Controls, whichever is
appropriate in obtaining approvals, services and supplies.

Standard
• Individuals with delegated approval authority for entertainment expenses shall
not approve their own entertainment.
• Entertainment reimbursements may occur which are unauthorized, fraudulent,
or unnecessary.
• Reimbursement could be made for personal or non-business related
entertainment.
• All reimbursements for entertainment expenses must adhere to Business and
Finance Bulletin, BUS-79, Entertainment.
• Individuals with delegated approval authority must obtain approval for their
own entertainment from their supervisor or other higher level individual.
Standard
• Adequate internal controls are maintained in the approval and payment
process.
Entertainment III - 47
or unnecessary.
• Reimbursement of entertainment expenses shall be delivered directly to the
payee.
• Payments shall not be delivered to any of the individuals involved in the
approval or payment preparation process.
• All relevant documentation should be attached to the payment request.
Standard
• Expenses for entertainment must be directly related to, or associated with
official University business.
• Reimbursement could be made for personal or non-business related
entertainment.
• Loss of funding.
• When a University employee acts as an official host, the occasion must serve
a clear University business purpose, with no personal benefit derived by the
official host or other University employees.
• Entertainment expenditures should be cost effective and in accordance with
the best use of public funds.
Standard
• All entertainment expenses must be approved by a department head or
equivalent authority.
or unnecessary.
• Department heads or equivalent authority must ensure entertainment
conforms to the requirements of BUS - 79.
• Department heads must ensure certification by official host.
• All claims submitted for payment or reimbursement must include appropriate
supporting documentation.
• All requests for reimbursements must be submitted on Form U5-8E,
“Payment Request: Business Meeting & Entertainment.”
• Department heads or equivalent authority must verify that expenses incurred
are appropriate to the fund source. Please refer to “Instructions for Business
Meeting and Entertainment Expense Reimbursement Using Forms U5-8E,
U5-8EA, and U5-EW; Appendix A” and/or BUS - 79 for a list of current fund
restrictions governing business meeting and entertainment expenses.
• Individuals with delegated approval authority shall not approve the
entertainment of a person to whom they directly report.
• Individuals with delegated approval authority shall not approve their own
entertainment.
• A signature authorization form must be on file in Accounting Services and
Controls, Extramural Funds unit for each individual to whom approval
authority has been delegated.
Standard
• Approval of exceptional entertainment expenses must be obtained at the
appropriate level.
or unnecessary.
• Approval of exceptional expenses must be obtained at the appropriate level.
• Request for reimbursement must include a written justification as to why the
higher costs were unavoidable and necessary to achieve a University
business purpose.
• Reimbursements of exceptional entertainment expenses shall be limited to
the actual costs incurred.
• Reimbursements of exceptional entertainment expenses must be completed
on Form U5-8EW, “Prior and Exceptional Approval Worksheet for
Entertainment.”
Standard
• Periodic reviews are performed to ensure entertainment expenditures are
accurate and appropriate.
expenses are properly classified, recorded, and accurate.
• Departments should review contract and grant terms, and other fund
restrictions to ensure expense is allowable and appropriate.
REFERENCES
UCSB Instructions for Business Meeting and Entertainment Expense
Reimbursement Using Forms U5-8E, U5-8EA, and U5-EW
http://www.accounting.ucsb.edu/forms/entertainment.shtml
UC Business and Finance Bulletin BUS – 79, Entertainment

Equipment Management
Equipment Management, as defined under Business and Finance Bulletin BUS - 29,
Management and Control of University Equipment, involves the management and
control of inventorial equipment (non-expendable – i.e., with a life expectancy of
more than 1 year, free-standing, and with an acquisition value of $1,500 or more)
owned by or in the custody of the University. Management and control includes the
approval of acquisitions, maintenance of records, and disposal of equipment.

Standard
• Key duties and responsibilities are segregated.
• Financial statements and equipment records could be misstated.
• Substantiation of account balances and verification of the related assets may
not be possible.
• Equipment location may be incorrect.
• Equipment may be lost, stolen or destroyed.
• An employee assigned to perform a physical inventory should not be the
person responsible for maintaining custody of the items.
• Equipment Inventory Modification Request (EIMR) forms should be approved
by someone not directly responsible for custody or disposal of equipment,
preferably department management.
A. Acquisition
Standard
• Asset acquisitions are authorized and approved.
• Unsuitable or unauthorized assets may be acquired.
• Required approval may be circumvented resulting in unauthorized
expenditures.
Equipment Management III - 51

• Assets may be acquired for personal use.
• Purchase requisitions should be approved by a person delegated approval
authority.
• A person delegated approval authority should approve either the invoice
for the purchase or the purchase requisition, but not both.
• Items should be inspected for condition prior to approving invoice
payment.
• Adjustments to inventorial records for returned, missing, damaged and
changed items should be approved by departmental management, and
processed via a change order request which advises Purchasing,
Equipment Management, and Accounting Services & Controls.
B. Transfer and Disposal
Standard
• The transfer or disposal of assets is authorized and approved.
• Assets may be sold, scrapped, retired, stolen, revalued, or converted to
personal use without management’s knowledge.
• Equipment records could be inaccurate due to transfers, losses and
disposals made without management’s knowledge.
• Departmental and Materiel (Equipment) Management approval should be
obtained prior to the physical removal, sale, scrapping, loan, or transfer of
any assets. (See UCSB Policies 5360 and 5363.)
• Adjustments to inventory records for sold, scrapped, loaned, transferred,
missing or stolen assets should be processed and recorded by means of
an Equipment Inventory Modification Request (EIMR) and, in the case of
stolen assets, completion of a Police Department theft report.
A. Custodial Arrangements
Standard
• Off-campus business use of University equipment should be permitted
only according to University policy.
• University equipment could be lost, stolen or misappropriated.
• Financial statements and equipment records may be misstated.
• The University could be liable for accidents at off-site locations.

• Off-campus use of University equipment should be allowed for University
business purposes only and should be approved by the department head.
• An EIMR should be approved by the department and submitted to
Equipment Management to record the relocation of the equipment to an
off-campus location.
• Concerns about insurance requirements should be directed to Business
Services.
B. Security Arrangements
Standard
• Standard University security procedures should be followed regarding key
control and theft prevention.
• University equipment could be lost or stolen.
• University could be liable for accidents.
• Decrease in departmental productivity.
• The number of employees having access to equipment and inventories
should be held to a minimum.
• Locks should be rekeyed or changed whenever significant personnel
turnover or theft of keys occurs.
• If in doubt, departments should obtain assistance from the campus Police
Department regarding the establishment and maintenance of proper
security procedures.
A. Establishment of Equipment Records
Standard
• Assets are accurately and promptly classified, recorded, and valued.
• Acquisitions may be incorrectly capitalized or expensed.
• Assets may be incorrectly valued.

• Acquisition documents such as purchase orders should be routed by the
Purchasing Department through Equipment Management for classification
as inventorial or non-inventorial.
• All inventorial equipment should be identified, promptly recorded upon
receipt, and affixed with the correct property tag.
• All University equipment should be adequately insured. (Please see
Business and Finance Bulletin BUS - 28, Property Self - Insurance
Program.)
B. On-Going Maintenance of Equipment Records
Standard
• Detailed equipment records are established to maintain accounting control
and physical accountability of assets.
• Substantiation of account balances and verification of the related assets
may not be possible.
• Assets may be lost, stolen, destroyed, or temporarily diverted.
• Asset location may be incorrect.
• Detailed equipment records should be maintained.
• Assets should be tagged for ease of identification and accountability.
• The movement of assets (e.g. between departments) should be
documented, and the detailed property records accordingly updated, by
means of an EIMR which should be approved and submitted to Equipment
Management.
• Periodic reviews should be performed to identify assets that are surplus or
idle. Obsolete, inactive or damaged items should be removed from
inventory, by means of an EIMR which should be approved and submitted
to Equipment Management.
• Departments should adequately insure equipment and consider
applicability of “buy-down” insurance.
C. Annual Updating of Equipment Records (Physical Inventory)
Standard
• Periodic reviews are performed to ensure the accuracy of equipment
records and recorded asset balances.
• Lost, stolen, scrapped, transferred, or sold assets may not be correctly
identified and the detailed equipment records may not be updated.
• Assets may be incorrectly valued.
• Physical counts of equipment should be taken annually as part of the
Physical Inventory Report (EQ920) process. Equipment inventory results
should be compared to the detailed property records with discrepancies
resolved in a timely manner.
• Properly annotated and signed Physical Inventories should be returned to
Equipment Management by departments. Changes are recorded in the
central campus inventory database.
REFERENCES
Business Services
(805) 893-4440
http://www.busserv.ucsb.edu
Equipment Management
(805) 893-2389
http://www.busserv.ucsb.edu/equipmentmanagement/index.htm
Purchasing
(805) 893 – 2555
http://www.busserv.ucsb.edu/contractsprocurement/purchasing.htm
UCSB Policy 5360, Equipment Management and Inventory Control

http://www.policy.ucsb.edu/vcas/purchasing/5360_equip_manage_invntry.html
UCSB Policy 5363, Property Inventory Control

http://www.policy.ucsb.edu/vcas/purchasing/5363_inventory_control.html
UC Business and Finance Bulletin BUS - 28, Property Self -Insurance Program
UC Business and Finance Bulletin BUS - 29, Management and Control of University
Equipment Section A – General
http://www.ucop.edu/ucophome/policies/bfb/bus29a.html


Honoraria
In most cases, honorarium is compensation to an academic individual for a particular

service (such as guest speaking, lecturing, or conducting a workshop) and
expenditures associated with such service.

1. Method of Payment
1. Method of Payment
Standard
• Depending upon the individual’s status, (i.e. employee, non-employee,
nonresident alien) the correct method of payment must be used.
• Individual may not be eligible for honoraria payment.
• Potential tax liability may exist for both the University and the individual.
• Payments may occur which are unauthorized or unnecessary.
• Non-University employees are paid through Accounts Payable via a Form 5
(Request for Issuance of Check). Please contact Accounting Services &
Controls, Accounts Payable unit for further information.
• University employees are not eligible for honoraria payment. Payment is
made via the payroll process. Per diem and travel expenses are reimbursed
with a Travel Expense Voucher. Appropriate receipts must be attached to the
Travel Expense Voucher.
• Nonresident aliens who are holders of B-1/B-2 visas are not eligible for
honoraria payment. For further information, please contact the Immigration
Counselor in International Students & Scholars Office.
2. Approval and Authorization
Standard
• Requests for honoraria payments are appropriately approved.
Honoraria III - 57
• Payments may occur which are unauthorized or unnecessary.
• Excessive costs may occur.
• Honoraria of $500 or less must be approved by the department chairperson
or principal investigator.
• Honoraria of $501 to $2,000 must be approved by the appropriate Provost,
Dean or Vice Chancellor.
• Honoraria exceeding $2,000 must be approved by the Chancellor or the Vice
Chancellor and the supporting documentation should include a curriculum vita
and a statement of purpose.
Standard
• Periodic reviews are performed to ensure honoraria payments are accurate
and appropriate.
honoraria payments are properly classified, recorded, and accurate.
• Departments should review contract and grant terms, and other fund
restrictions to ensure the expense is allowable and appropriate.
REFERENCES
Accounting Services and Controls, Accounts Payable
(805) 893-3919
Office of International Students & Scholars

(805) 893-2929
http://www.oiss.ucsb.edu
UCSB Policy 5120, Payment of Honoraria

http://www.policy.ucsb.edu/vcas/accounting/5120_honoraria_payment_of.html
Honoraria III - 58
REFERENCES (cont’d)
UCSB Policy 5145, Payments to Aliens

http://www.policy.ucsb.edu/vcas/accounting/5145_payment_to_aliens.html
UCSB Policy 5260, Use of Independent Consultants

http://www.policy.ucsb.edu/vcas/business-serv/5260_ind_consult.html
UCSB Policy 5265, Securing the Services of Independent Consultants

http://www.policy.ucsb.edu/vcas/business-serv/5265_ind_consultants.html
Honoraria III - 59
Honoraria III - 60
Payroll
Payroll involves preparing and approving personnel actions including those for
hiring, changes in employment and separation; accounting for payroll costs,
deductions, benefits, sick leave, and vacation accrual; distributing checks to
employees; and ensuring the confidentiality and security of payroll information.
The control standards below are presented in terms of the most desirable operating
conditions. There may be situations when optimum conditions are not attainable or
when existing conditions may provide adequate control within the intent of the
standards. In such situations, variance from these control standards, and the
reasoning, must be documented and have the written approval of the Department
Head.

Standard
• Key payroll duties and responsibilities are segregated.
• Payroll distributions may be made to unauthorized employees and remain
undetected.
• Improper changes may be made to payroll files or personnel documents
resulting in misappropriation of funds.
• Incorrect hours may be submitted for payment.
• Unauthorized issuance of payroll checks may occur.
• To properly control payroll activities, different employees should be
responsible for updating the on-line Payroll/Personnel System (PPS),
reviewing PPS actions (PAN notices), and reviewing the monthly Distribution
of Payroll Expense Reports.
• Payroll checks and Surepay statements should be distributed by an employee
not involved in updating the PPS, or preparing or approving payroll
documents.
Payroll III - 61
Standard
• Entries and adjustments to the payroll system are made by authorized
individuals.
• Employees may be erroneously or fraudulently paid for hours not worked, or
may not be paid for hours actually worked.
• Employees may be paid for unauthorized overtime.
• Payroll documents should be approved only by persons with delegated
authority.
• Current Signature Authorization forms should be on file in the Accounting
Services and Controls, Extramural Funds unit.
• Employees should not approve actions affecting their own pay.
• Attendance records are approved each month.
• Time recording and reporting modifications are approved each month.
Standard
• Payroll checks and Surepay statements are kept secure.
• Misappropriation of unclaimed checks, loss of checks, or misdirected deposits
may occur.
• Departments may request proof of identity prior to distribution of payroll
checks or Surepay statements.
• An attempt should be made to notify payees of unclaimed checks or Surepay
statements.
• Payroll checks or Surepay statements are returned to the Payroll unit after 2
weeks if unclaimed.
Standard
• Payroll charges in the General Ledger should be reviewed.
• Financial statements may be misstated.
• Inaccurate payroll information maybe recorded in the general ledger and may
not be detected.
• Detailed withholdings and payments may not agree to the recorded
withholdings and payments.
Payroll III - 62
• Departments should review and reconcile the Distribution of Payroll Expense
reports to the General Ledger on a monthly basis.
• Any questionable or irregular entries should be immediately investigated and
resolved.
• The reviewer should sign and date reports to signify that the review has been
satisfactorily completed.
• Actual payroll costs are compared to budgeted costs for reasonableness.
REFERENCES
Accounting Services & Controls, Payroll
Manager, Sona Baboolal
(805) 893-3259
http://www.accounting.ucsb.edu/payroll/
Payroll III - 63
Payroll III - 64
Purchasing
Purchasing involves the procurement of all goods and services used by all
departments at the University. Consideration may include price, quality, service,
delivery, and technology.
Definitions
Commodity Agreements: University wide agreements that are used to realize the
greatest economic advantage to the entire UC system. A list of the agreements may
be obtained from the Purchasing Department or at the following web site:
www.ucop.edu/matmgt.
Low-Value Items: Supplies, repairs and services which do not exceed the
authorized limit granted a department. (A limit of $500.00, including sales or use
tax, but excluding transportation, is automatically given to all departments. Upon
request to the Director of Materiel Management, and after completion of mandatory
training, a department may be granted an authorized limit of $2,500.00, including
sales and use tax but excluding transportation.)
Pool Purchases: A purchase transaction involving two or more campuses or

Laboratories which provides that definite or guaranteed minimum quantities of
specified items be purchased at fixed prices during a stated period. Pool purchases
normally are made on a regularly scheduled basis one or more times a year. The
campus Purchasing Department issues orders calling for specific deliveries of pool
purchase items.
Purchase Order: A purchase contract written on a University purchase order form

which becomes a contract either through execution by both parties, or execution by
the University or performance by the supplier.
Purchase Requisition: The document issued by the department to the Purchasing

Department requesting the purchase of materials and/or services except for those
items allowed under the low value purchase authorizations.
Vendor Blanket: A purchase order to a specific vendor for a specified period of time
that is used to facilitate the issue of repetitive orders by departments and is confined
to non-inventorial materials.
This section is organized into two main activities:

Purchasing III - 65
Standard
• Separation of purchasing related duties are established so that no one
employee has control over every aspect of a purchase transaction.
• Unauthorized or unnecessary purchases may occur.
• Purchases of goods and services for personal use could be made.
• Excessive costs may occur.
for:
1. approving purchase requisitions and orders,
2. receiving ordered materials,
3. approving invoices for payment, and
4. reviewing and reconciling the monthly general ledger.
Standard
• All purchase requests are documented in sufficient detail and approved by the
appropriate level of management before the purchase is made.
• Purchases may occur which are unauthorized, fraudulent or unnecessary.
• Vendors may make claims for payment of unauthorized work performed.
• Excessive costs may occur due to inefficient practices or fraud.
• Purchases, invoices, and Check Requests should be approved only by
persons with delegated authority.
• Signature Authorization forms should be up to date and on file in Accounting
• The receipt of goods and services should be verified prior to approving
invoices for payment.
• Verification should be made that invoiced amounts and all account coding is
accurate.
• Verification should be made that payment has not already occurred.
• Low-value purchasing policy requirements should be observed. (See UCSB
Policy 5342, Policy on Low-Value Purchases.)
Purchasing III - 66
• Orders for controlled substances are not to be placed directly with the vendor.
(See UCSB Policy 5333, Purchasing Materials and Services for UCSB.)
• Purchasing policy requirements including the use of Commodity Agreements,
pool purchases, conflict of interest and vendor blankets should be observed.
(See UCSB Policy 5333, Purchasing Materials and Services for UCSB, and
UCSB Policy 5005, Conflict of Interest.)
• Departments should review all invoices for clerical accuracy and
appropriateness of purchase prior to payment.
REFERENCES
Purchasing
(805) 893-2555
http://www.busserv.ucsb.edu/contractsprocurement/purchasing.htm

UCSB Policy 5333, Purchasing Materials and Services for UCSB

http://www.policy.ucsb.edu/vcas/purchasing/5333_purchasing_materials.html
UCSB Policy 5342, Policy on Low-Value Purchases

http://www.policy.ucsb.edu/vcas/purchasing/5342_low-value_purchase.html
Purchasing III - 67
Purchasing III - 68
Systems
Information Systems management and security involves the activities necessary to

ensure the confidentiality, availability, and integrity of computer processes,
application systems, and information processed by those systems. This includes
taking ownership of the systems and information, defining requirements, approving
changes, providing a secure physical environment for computer equipment, ensuring
sufficient security controls are implemented, authorizing and monitoring user access,
and ensuring the development of disaster recovery procedures.

1. Managing Systems
2. Systems Acquisitions, Development and Ongoing Maintenance
3. Security
4. Disaster Recovery
1. Managing Systems
Standard
• Each department has identified individual(s) responsible for approving system
or application design changes, ensuring adequate testing, assigning security
classifications, authorizing access to system data files, and handling all other
related management considerations.
• The University may be liable for misstatement of information.
• Systems may not be fully tested prior to running in production, resulting in
data integrity issues and poor management decisions.
• Access and/or changes to systems may not be properly authorized.
• Data loss, modification or theft may occur.
• A current list of system and application owners is maintained, updated, and
reviewed by a Department Security Administrator (DSA).
• New systems should be developed or acquired consistent with UC and
Campus policies, guidelines, and procedures. (See Business & Finance
Bulletins, Information Systems (IS) series.)
• Adequate testing is conducted for system changes to verify that requested
changes perform properly.
• Acceptance of new systems and system changes are properly authorized and
documented.
• Adherence to record retention requirements are maintained. (See UC
Records Management Disposition Schedules).
• Backup information is maintained at a secure, off-site location.
• Disaster recovery requirements are defined and developed.
Systems III - 69
2. Systems Acquisitions, Development and Ongoing Maintenance
Standard
• Departments adhere to policy, procedures, and standards governing the
development of new application systems, modifications or conversions to
existing systems, and acquisition of third-party software.
• Inconsistent methods may be applied or specific procedures bypassed, which
may compromise system integrity and reliability.
• System changes may not be implemented correctly.
• Problems uncovered during testing may not be adequately resolved.
• Data may be lost or altered.
• End users may not be adequately trained prior to implementation.
• New systems should be developed or acquired consistent with UC and
Campus policies, guidelines, and procedures. (See Business & Finance
Bulletins, Information Systems (IS) series.)
• New systems should be completely tested prior to putting them into operation.
• Systems should be fully documented to include operations, program, and
user instructions.
• Systems should include audit trails and edit routines.
• Contact the Office of the Controller to ensure adequate internal controls.
3. Security
Standard
• Employees should receive appropriate information on managing and
protecting confidentiality of passwords.
• Inappropriate information may be shared between employees, departments or
business units.
• Data loss, modification, or theft may occur.
• Erroneous management decisions may be made based on inaccurate data.
• Passwords are not displayed or stored in areas visible to others.
• All security features that are built into the system and software are utilized.
• Security awareness training is provided to employees, which includes defining
acceptable practices.
• User access is authorized, periodically reviewed, and removed when no
longer required.
Systems III - 70
• Employees must adhere to UCSB Policy 5612, Electronic Mail Policy

Implementing Guidelines.
Standard
• Equipment, software, and data files should be properly safeguarded against
theft, damage, natural disasters or application viruses.
• Equipment could be lost, stolen or damaged.
• Data loss, modification or theft may occur.
• Critical business activities may be suspended or discontinued resulting in
substantial financial, productivity, or data loss.
• Confidential information may be disclosed.
• The University may be subject to financial liability.
• Unauthorized individuals should not have access to University equipment or
applications.
• Physical security measures are taken to prevent theft of equipment.
• Procedures are in place to prevent virus replication and software from being
copied or implemented illegally.
• Security awareness training is provided to employees.
• Software installed on UC equipment should be authorized and used for UC
business purposes. Software use shall conform to copyright laws and
licenses.
• Systems, programs, databases, and data files should have logical access
security and be physically secure.
4. Disaster Recovery
Standard
• Departments should have backup and recovery processes to ensure
continuity of operations.
• Systems may not be recoverable.
• Excessive time may be required for recovery.
• Critical business activities may be suspended or discontinued resulting in
substantial financial or productivity loss.
• Loss of data.
• Loss of data integrity or accuracy may occur.
• Back-up media should be stored in a secure off-site location, remote from the
production files.
Systems III - 71
• Department heads should coordinate the development of a disaster recovery

plan for computer systems and applications for which they are responsible.
This plan should be periodically updated and tested.
• Departments should maintain software and hardware inventories.
• Backup and other retention services must comply with UC Policies regarding
data retention. (Please see UC Business and Finance Bulletin RMP Series-
Records Management).
REFERENCES
(805) 893-2261

(805) 893-4095
UCSB Policy 5612, Electronic Mail Policy Implementing Guidelines

http://www.policy.ucsb.edu/vcas/isc/InterimECImpGuide5612.pdf
UC Business and Finance Bulletin IS - 3, Electronic Information Security

http://www.ucop.edu/ucophome/policies/bfb/is3.pdf
UC Business and Finance Bulletin IS - 10, Systems Development and Maintenance

Standards
UC Business and Finance Bulletin RMP Series-Records Management

http://www.ucop.edu/ucophome/policies/bfb/bfbrmp.html
UC Electronic Mail Policy

http://www.ucop.edu/ucophome/policies/email
UC Records Management Dispositions Schedules

Systems III - 72
Guidelines for Financial Management References
References
Departments

(805) 893-8593
Accounting Services and Controls, Accounts Payable

(805) 893-3919
Accounting Services and Controls, Extramural Funds

Manager, Connie Feeley
(805) 893-3259
http://www.accounting.ucsb.edu/emf/
Accounting Services and Controls, Payroll

Manager, Sona Baboolal
(805) 893-3259
http://www.accounting.ucsb.edu/payroll/
Accounting Services and Controls, Travel

Manager, Dale Pearson
(805) 893-7226
http://www.accounting.ucsb.edu/travel/
Administrative Services, Coordinator for general Conflict of Interest

(805) 893-2770
http://www.vcadmin.ucsb.edu/
Audit Services
(805) 893-2829
Business Services
(805) 893-4440
http://www.busserv.ucsb.edu
Human Resources
(805) 893-3166
http://hr.ucsb.edu/
References IV - 73

(805) 893-2261
Office of Budget & Planning

http://bap.ucsb.edu/

(805) 893-7667
Office of Research
(805) 893-4188
http://research.ucsb.edu/
References IV - 74
Policies
UCSB Instructions for Business Meeting and Entertainment Expense

Reimbursement Using Forms U5-8E, U5-8EA, and U5-EW
http://www.accounting.ucsb.edu/forms/entertainment.shtml

UCSB Policy 5005, Conflict of Interest: Attachment A - Compendium

http://www.policy.ucsb.edu/vcas/admin-serv/5005_attach_a.html
UCSB Policy 5101, Accountability and Internal Control

http://www.policy.ucsb.edu/vcas/accounting/accountpolicy.pdf
UCSB Policy 5120, Payment of Honoraria

http://www.policy.ucsb.edu/vcas/accounting/5120_honoraria_payment_of.html
UCSB Policy 5145, Payments to Aliens

http://www.policy.ucsb.edu/vcas/accounting/5145_payment_to_aliens.html
UCSB Policy 5240, Campus Cashiering

http://www.policy.ucsb.edu/vcas/business-serv/5240_campus_cashier.html
UCSB Policy 5260, Use of Independent Consultants

http://www.policy.ucsb.edu/vcas/business-serv/5260_ind_consult.html
UCSB Policy 5265, Securing the Services of Independent Consultants

http://www.policy.ucsb.edu/vcas/business-serv/5265_ind_consultants.html
UCSB Policy 5333, Purchasing Materials and Services for UCSB

http://www.policy.ucsb.edu/vcas/purchasing/5333_purchasing_materials.html
UCSB Policy 5342, Policy on Low-Value Purchases

http://www.policy.ucsb.edu/vcas/purchasing/5342_low-value_purchase.html
UCSB Policy 5360, Equipment Management and Inventory Control

http://www.policy.ucsb.edu/vcas/purchasing/5360_equip_manage_invntry.html
UCSB Policy 5363, Property Inventory Control

http://www.policy.ucsb.edu/vcas/purchasing/5363_inventory_control.html
UCSB Policy 5612, Electronic Mail Policy Implementing Guidelines

http://www.policy.ucsb.edu/vcas/isc/InterimECImpGuide5612.pdf
UCSB Policy 5700, Reporting and Reviewing Defalcations

http://www.policy.ucsb.edu/vcas/internal-audit/5700_defalcations.html
References IV - 75
UC Academic Personnel Manual Policy 550, Moving Expenses for Intercampus

Transfer
http://www.ucop.edu/acadadv/acadpers/apm/apm-550.pdf
UC Accounting Manual - Credit and Debit Card Program

http://www.ucop.edu/ucophome/policies/acctman/c-173-85.pdf
UC Business and Finance Bulletin BUS – A54, Agency Accounts

http://www.ucop.edu/ucophome/policies/bfb/a54.html
UC Business and Finance Bulletin BUS - 28, Property Self-Insurance Program

UC Business and Finance Bulletin BUS - 29, Management and Control of University
Equipment
UC Business and Finance Bulletin BUS - 34, Securing the Services of Independent
Consultants
UC Business and Finance Bulletin BUS - 46, Use of University Vehicles

UC Business and Finance Bulletin BUS - 49, Policy for Handling Cash and Cash
Equivalents
UC Business and Finance Bulletin BUS – 79, Entertainment

UC Business and Finance Bulletin G – 13, Policy and Regulations Governing

Moving and Relocation
UC Business and Finance Bulletin G - 28, Policy and Regulations Governing Travel
UC Business and Finance Bulletin G - 29, Procedures for Investigating Misuse of

University Resources
http://www.ucop.edu/ucophome/policies/bfb/g29.html
UC Business and Finance Bulletin IS - 3, Electronic Information Security

UC Business and Finance Bulletin IS - 10, Systems Development and Maintenance

Standards
References IV - 76
UC Business and Finance Bulletin RMP Series - Records Management

http://www.ucop.edu/ucophome/policies/bfb/bfbrmp.html
UC Electronic Mail Policy

http://www.ucop.edu/ucophome/policies/email/
UC Information Practices and Conflict of Interest and the Political Reform Act
Disqualification Requirements brochure published by UCOP, 7/1/99
http://www.ucop.edu/ogc/coi/econinterest.html

References IV - 77
Guidelines for Financial Management Index
Index
A H
accountability 1 hardware 10, 11
accounts payable 31, 33, 61 Honoraria 60, 61
analysis 10
asset 17, 57
audit 25
I
implementation 10
B income tax 23
insurance 35, 57
benefits 17 Internal Control 27, 29
budget 13, 18, 31 inventory 18, 23, 31, 55, 57, 58
budgeting See budget
Business Services 35, 49
Business Travel & Moving Expenses 38
L
low value authorization 22, 69
C
cash 17, 28, 31, 45, 46, 47, 48
M
cash equivalents See cash mission 13
cash management 15, 21 monitoring 8, 15, 30
cash receipts 31, 45, 46, 47, 48 moving expenses 42
checks See cash
commodity agreement 22
Common Audit Findings 31 O
Computing Environment 9 Office of Management and Budget (OMB) 20
Conflict of Interest 5, 6
connectivity 11
contractors 22 P
control environment 27, 29
payroll 31, 60, 64, 65, 66, 67
Control Principles 28
post-authorization review 8
COSO 29
preparer 1, 2
project initiation 10
D purchase order 69
purchasing 6, 22, 49, 57, 69, 71
Data Integrity 7, 8
Department Security Administrator (DSA) 1
disallowances 19, 26 R
disbursements 33
reconciliation 8, 28, 33, 35, 43, 45, 47, 49, 53, 54,
documentation 28
56, 60, 61, 64, 66
record retention 21
E regulatory compliance 19
revenue 15, 20
EIMR 54, 55, 56, 57 reviewer 2
entertainment 41, 49, 51, 52, 53 risk assessment 29
equipment 23, 28, 31, 55, 56, 57, 58, 75 risks 17
expenses 20
S
F
safeguard 14
Fair Political Practices Commission Form 700 - sales tax 24
Statement of Economic Interest 5 sampling 16
financial management 7, 13 security 11, 28, 45, 46, 54, 55, 56, 64, 66, 73, 74,
financial reporting 19 75, 76
financial system 8 separation of duties 2, 28, 30, 31, 33, 45, 54, 64,
fraud 25, 27 69, 70
fraudulent See fraud signature authorization 32
software 10, 11
Statement of Economic Interest 5
Index V -78
Guidelines for Financial Management Index
steward 13 travel 38, 40, 42, 60

STIP 42
system 8, 10, 30, 31, 46, 65, 69, 73, 74, 75, 76
U
T University Records Management Disposition
Schedules 8, 11
tax identification 25 use tax 24
tax laws 23
Index V -79

Guidelines Financial Management

Uploaded by

Copyright:

Available Formats

Guidelines Financial Management

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Guidelines Financial Management

Uploaded by

Copyright:

Available Formats

Guidelines

Part I: Principles and Responsibilities

Part II: Internal Control and COSO

Part III: Guidelines for Financial Processes

Part IV: References

Accountability for financial control purposes is the delegation of authority to qualified

Each department head shall be responsible for developing an accountability

A. A person cannot delegate greater accountability than they have been

B. Individuals who delegate authority are responsible for ensuring the

1. are actively involved in the tasks being performed,

2. have the appropriate knowledge and technical skills to perform those

3. have been provided sufficient authority to fulfill their responsibilities

C. A person who delegates tasks must keep a secure, up-to-date record of

D. A second person shall be assigned to review each financial transaction on

E. The department head is responsible for reviewing the effectiveness of the

The accountability structure and delegations must maintain appropriate

A. A Primary Preparer must understand all relevant regulatory

1. enter accurate data into all fields on a transaction document,

2. record an accurate and thorough explanation of each transaction,

3. comply with basic policy and other requirements, and

4. forward the completed transaction, with any supporting documents, to

B. A Mandatory Reviewer must:

1. review all transactions on a timely basis,

2. inspect each transaction to ensure the Preparer properly fulfilled their

3. ensure that each transaction complies with policy and other

4. resolve all questions that arise with a transaction.

C. A Back-up Preparer/Reviewer is the trained substitute. Having a back-

UCSB Policy 5101, Accountability and Internal Control

This Page Intentionally Left Blank

A. Teaching, research, and public service performed by UCSB employees

B. Outside activities should be closely reviewed by an independent party to

C. Each unit must maintain a reasonable balance between competing

A. Designated officials, by definition hold positions the University or the Fair

Conflict of Interest I-5

C. If an employee has an interest in a contract (an investment or interest in

REFERENCES – Research Related Conflict of Interest

UC Regents Standing Order 103.1b, Service Obligations

Circular No. D.1., Policy on Disclosure of Financial Interests Related to Sponsored

UCSB Policy 5005, Conflict of Interest

UCSB Policy 5005, Conflict of Interest: Attachment A - Compendium

Conflict of Interest I-6

Financial management decisions affect every aspect of the University. Accurate

A. An adequate data control system including independent checks and

B. All employees engaged in financial management activities must ensure

1. reflect the actual values involved,

2. contain sufficient detail for proper identification and classification,

3. be posted on a timely basis in the proper accounting period,

5. be readily retrievable for inquiry or reporting, and

6. be safeguarded against improper alteration.

G. All technical networks, including electronic mail, through which

A. Establishing and Monitoring Data Integrity Controls

1. allows no one individual complete control over all key processing

a. recording transactions into the Financial System directly or through

c. receiving or disbursing funds,

d. reconciling financial system transactions, and

e. recording corrections or adjustments.

2. ensures that all employees who prepare financial transactions provide

3. keeps “office of record” documents (both forms and new paperless

4. ensures that staff reconcile transactions appearing on the general

b. All reconciliations must be performed in a timely manner.