Department of Accounts FOCUS Update David A. Von Moll State Comptroller

1. Department of Accounts FOCUS Update David A. Von Moll State Comptroller

2. Internal Control Initiatives • Mandatory Fiscal Officer Training • April 26-27 (completed) • May 25-26 • June 13-14 • August 30-31 • September 19-20 • Internal Control Directive • Risk and Internal Control Assessment Tools FOCUS Question – Provide an update on DOA’s Internal Control Initiatives such as mandatory fiscal officer training, agency risk assessment tools, and internal control checklists as mentioned in the February 17, 2005 memorandum.

3. COSO Enterprise Risk Management Framework • Internal Environment – Tone at the top and throughout • Objective Setting – Strategic planning • Event Identification – Risks and opportunities • Risk Assessment – Likelihood and impact of events • Risk Response – Avoid, reduce, share, accept • Control Activities – Policies and procedures • Information and Communication – Relevant and timely • Monitoring – Assessing whether controls exist and function

4. Systems Projects • Reportline – phase one complete – May 11, 2005 • 819 users statewide • 3.3 million print pages avoided annually • LAS on web – to be implemented July 1, 2005 • Exception Register on web – implemented • FINDS Replacement – data warehouse conceptual design to be developed • PMIS/CIPPS Interface – CIPPS data entry reduction conceptual design under development • W-2s on Web – Payline enhancement conceptual design under development

5. Implementing GASBS No. 40, Deposits and Investment Risk Disclosures • Amends GASBS No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements • Enhances deposit and investment risk disclosures: • Updates custodial risk disclosure requirements of GASBS 3 • Addresses other common risks including concentrations of credit risk and foreign currency risk FOCUS Question – Comments on implementing GASB 40 (Investments) for FY05.

6. GASBS No. 40 – Directive Attachment HE-10A • Requires balance of cash not held by the Treasurer of Virginia categorized by: • Total bank balance insured by FDIC • Total bank balance collateralized in accordance with Security for Public Deposits Act • Total bank balance, if any, uncollateralized and/or collateralized with the securities of the financial institution • Cash equivalents and investments not held by the Treasurer of Virginia – risk disclosures • Due Date – September 29, 2005

7. GASBS No. 40 – Risk Types • Credit Risk – risk of loss due to the issuer or counterparty inability to fulfill obligation • Directive – Credit Quality Ratings and rating agency must be listed for all debt securities. No disclosure required for investments issued or guaranteed by the U.S. government • Interest Rate Risk – change in interest rates could adversely affect investment’s fair value • Directive – COV using Segmented time distribution method – investments grouped by cash flows in sequential time periods • Custodial Credit Risk – risk of loss of deposits or collateral securities due to failure of counterparty (category 3 from GASBS 3) • Directive – List amounts uninsured, not registered in name of government, held by counterparty

8. GASBS No. 40 – Risk Types, continued • Concentration of Credit Risk – risk of loss as more investments are acquired from one issuer • Directive – Only the type of cash equivalent or investment was required previously. For FY 2005: • Type – issuer – issue • Ticker symbol – CUSIP number (to determine whether more than 5% invested in any one issuer for all of Higher Education) • Foreign Exchange Risk – change in foreign currency exchange rates could adversely affect investment’s fair value • Directive – List amounts at risk

9. Financial Reporting Issues • Accounts Receivable Reporting Enhancements • More in-depth analysis – trends • Collection strategies, approach and practices • Faster CAFR Feasibility Study • National trends • Barriers in Virginia Focus Question – At a previous FOCUS session, there was talk of sending out the year end directive earlier than June. We'd like to know if DOA still plans to do this, and if so, how much earlier than June? • The FY 2005 Higher Education Financial Reporting Directive was issued May 4, 2005.

10. Travel Charge Card Program • Cardholder training posted 4/20 • Travel Program Administrator training posted 4/29 • TPA Delegation of Authority – submit by 5/16 • Inactive card (12 months) purge – provide reasons not to cancel or inactive cards will be cancelled centrally • CAPP 20336 issued 5/16 Focus Question – Update on the status of the new online training courses for Agency Travel Card Program Administrator (TPA) and cardholders.  The April 5, 2005 memorandum stated that the courses would be available by the end of April.  Provide another relevant comments concerning the April 5, 2005 memorandum on travel card changes.

11. “Ghost” small purchase charge card • Plastic-less, card/account embedded in eVA, only used for eVA purchases • eVA security authorization hierarchy is relied upon so all eVA users can use ghost account • Allows elimination of cardholder accounts (and related reconciliations) for cardholders who only use the SPCC through eVA • Allows reduction of purchase log/reconciliation volume for cardholders who purchase in eVA or outside of eVA • Allows consolidated reconciliation between eVA ghost card transaction reports and AMEX billing • Planned enhancement – automated eVA/SPCC (purchase/billing) reconciliation • 4 pilot agencies (includes 2 CCs and CNU) – March through June, 2005 • Wider implementation starting in July, 2005

12. Small Purchase Charge Card RFP • RFP Closed 4/28 – 9 proposals • Evaluation Committee Deliberations – June 8 • Orals by top 2-3 – June 20 • Notice of Award – July 18 • New contract – August 1 • Only if new vendor – new cards issued starting October 1 FOCUS Question – Status of RFP for agency procurement card.

13. Recovery Audit Program • Code § 2.2-1822.1, requires Department of Accounts to implement a recovery audit program. • Detect and recover duplicate payments, erroneous pricing, unclaimed discounts, sales tax, etc. • Recovery audit components: • Systematic data mining of CARS, SPCC and Decentralized University payment databases • On site invoice, purchase order, contract review • Audits yield cost recovery, process and system improvement opportunities • Phase One – Fiscal Years 2002, 2003, 2004 • RFP Issued – December, 2004 • 9 responses received, under review • Panel includes higher education representative

14. View Commonwealth agencies as multiple enterprises Agency-based systems Fill gaps between functionally limited central administrative systems and agency requirements: Billing, Receipts, Accounts Receivable Central systems lack functional integration. Ex. PMIS/BES, CIPPS, eVA, CARS, FAACS Interface and reconcile with central systems Model emphasizes functional integration between administrative and agency-specific applications View Commonwealth as a single enterprise ERP Functionally rich central system Functional integration between central system functions: Purchasing, Accounts Payable, Fixed Asset Billing, Receipts, Accounts Receivable Human Resources, Payroll Quality of functional integration between administrative functionality and agency-specific applications? Statewide Financial Systems

15. PPEA ERP Project • PPEA ERP severed from PPEA infrastructure – Secretaries of Finance and Administrative business owners • Scope – Administrative Management, Financial Management, Supply Chain Management, Human Resource Management, Information and Technology Management • Due Diligence Scope – executive branch, non-higher education • Due Diligence – foundation interviews, selected agency surveys/interviews Focus Question – Discuss the status of the PPEA for the potential replacement of the state’s accounting systems.

16. PPEA ERP Project - Timeline • Due Diligence – ends June 2005 • Vendors submit final detailed proposals – August 2005 • Detailed proposal review and decision – September 2005 • Comprehensive agreement negotiation, review, decision, approval - October 2005

17. Agency Fiscal Officer Designation • March 29, 2005 Memorandum • Direct management of accounting, financial reporting, internal controls and P&P compliance • Day-to-day DOA liaison FOCUS Question – Recently, many of the new initiatives by DOA have mandated that the Agency Fiscal Officer is required to perform some specified function, such as, attend internal control training or be an approver for online monthly CARS reconciliations.  For Virginia Tech, our agency fiscal officer is our Executive Vice President and Chief Fiscal Officer of the University.  We question if our EVP & COO should be required to perform some of the tasks mandated by DOA.  Can you provide incite for DOA’s position on these mandates for the agency fiscal officer?

18. Decentralized Disbursement Reviews • Re-authorize Memorandums of Understanding • Decentralization of Pre-audit and Financial Records • Decentralization of Disbursements – Accounts Payable and Payroll • Re-examine compliance review and reporting process FOCUS Question – Randy McCabe and Doug Page mentioned recently that DOA was considering changing the format of the Quarterly Report issued by the Comptroller.  They said that DOA was considering changing it to more of a Pass/Fail report rather than the current format.  Pease elaborate on this item. FOCUS Question – Any new ideas/modifications on tap for travel requirements?

19. Other Questions?