Task force makes changes to financial SPGs

Updated 12:00 PM February 9, 2004

Task force makes changes to financial SPGs

By Katie Gazella

Even before the national spotlight was turned on financial scandals at corporations, the University began an effort to ensure that all employees are aware of their role in the fiscal well-being of the University.

"We always have a responsibility to spend the University's dollars wisely, but especially now, when budgets are tight." —Cheryl Soper

That undertaking by the Financial Controls Task Force, appointed in 1999, is wrapping up with sweeping changes to a majority of the business and financial services section (500 series) of the University's Standard Practice Guide (SPG).

The changes are designed to make the entries more clear and readable, and to answer questions such as: Do you know what your financial responsibilities are? Do you know what reports to look at? Do you know the basic techniques for detecting fraud in your area of responsibility?

"Our approach is to streamline and simplify, to move the decision-making closer to the source, to develop a more balanced framework, and to clarify the roles and responsibilities of people involved in financial decision-making," says Bill Elger, chair of the task force, and executive director for administration and chief financial officer at the Medical School. "We've tried to streamline our business practices wherever we can."

The additions, deletions and consolidations are being incorporated into the SPG throughout the next couple of months and will be available at http://spg.umich.edu. Questions can be sent to Financial.Controls.Framework.Task.Force@umich.edu.

Timothy Slottow, executive vice president and chief financial officer, notes that the task force has revamped nearly all of the University's business and financial services SPG sections, including those dealing with financial controls, travel and hosting reimbursement, purchasing practices, cash management, and property disposition.

Slottow says the changes are occurring within a climate of increased scrutiny on financial practices at businesses, corporations and organizations throughout the country, due in large part to the passage of the Sarbanes-Oxley Act—a federal law placing stricter controls on corporate governance practices. While not currently applicable to universities, Elger notes that U-M already complies with several requirements of the act.

One of the biggest changes to the SPG is in the area of fiscal responsibilities. The old SPG was titled "Fiscal responsibilities of a project director." The revised SPG will be much more far-reaching; it applies to all faculty and staff with delegated financial authority, including project directors and principal investigators, as well as those involved with executive and financial management. It notes that no one person should control a financial transaction from start to finish.

The revised policy emphasizes that people in executive management positions are responsible for the fiscal integrity of their units and must provide leadership, oversight and management philosophy to ensure that all funds are spent and managed properly. Those in financial management positions should ensure that chartfields are used consistently and accurately, that adequate internal controls are in place, and that financial activity is reconciled regularly to the central M-Pathways system.

Faculty and staff with delegated financial authority should clearly understand their budgets and level of authority to make spending decisions, as noted by the policy.

"We're reinforcing the notion that fiscal responsibilities apply to all faculty and staff," says Cheryl Soper, controller and director of financial operations, and a member of the task force.

Soper notes that while the new SPGs provide minimum requirements and guidelines, each department will need to determine the most appropriate distribution of duties and supervisory review. Some helpful information will be found in the appendix of the Fiscal Responsibilities SPG, which provides more detail about internal controls, management reports and more. For example, the appendix will link to a Michigan Administrative Information Service Management Report Web site, which details those reports that, at a minimum, should be reviewed regularly, including overtime and payroll analyses, travel hosting expenditures and vendor utilization.

Task force members are in the process of explaining the changes to executive officers, research administrators, deans, hospital units, budget administrators, unit liaisons and other groups, she says.

Soper notes that the new fiscal responsibilities SPG will emphasize the importance of both preventive and detective internal controls. Preventive controls are designed to discourage errors and irregularities through actions such as requiring supervisors to sign off before an item is purchased. Detective controls, such as reconciling financial statements to make sure all charges are appropriate, are designed to identify irregularities after they have occurred.

Another major SPG change went into effect a few years ago. It dealt with the travel and hosting policy, and the revision pushed the accountability for many decisions to the user and his or her immediate supervisor, Elger says. That way, people closer to the transaction are responsible for making decisions and can't "pass the buck" to others, he says.

This helps with accountability, and it also helps to ensure that the people who are most informed about a particular trip or event are deciding which expenses are acceptable, he says. If an employee goes on a trip, the employee and his or her immediate supervisor will determine which expenses make sense, as opposed to someone in another office who audits travel expenses and who probably isn't familiar with the details of the trip.

The new changes are occurring during a time when the state is making significant cuts in higher education spending.

"We always have a responsibility to spend the University's dollars wisely, but especially now, when budgets are tight," Soper says. "Every dollar counts."

Task force makes changes to financial SPGs

More Stories