290 DEPARTMENT RESPONSIBILITY IN MAINTAINING INTERNAL FINANCIAL RECORDS, FILES, AND DOCUMENTATION

APPENDIX II

 

SECTION J - ACCOUNTING OPERATIONS

  1. General

    This section sets forth the guidelines pertaining to accounting and related fiscal operations of the State. It is the institutions' responsibility to maintain the integrity of the funds for which it is chargeable and assure that these funds are used only for the purpose for which they are made available.

    The accounting and related fiscal operations, whether maintained by the institution or the State Extension Office or both, should provide:
bulletFull disclosure of the financial results of the State Extension Service activities.
bulletAdequate and current financial information to meet the needs of the Director, 1890 Administrator, and bribers concerned with administering the Extension program.
bulletEffective control over, and accountability for all funds, property, and other assets.
bulletReliable accounting information to serve as a basis for budgetary preparation, execution, and control.
  1. Deposit of Federal Funds

    Federal funds must be available at all times for disbursement in payment of expenses authorized by the Extension Director or the 1890 Administrator. The deposit of these funds in the State Treasury for safe keeping as a depository may be made without legal objection. Such deposit, however, does not imply any control whatsoever by the State Treasurer nor relieve the Extension Director or the 1890 Extension Administrator of responsibility for the budgeting, expenditure and proper accounting for the funds.

    Evidence of unauthorized use of Federal funds held in a consolidated deposit account may be considered sufficient justification for requiring modification of the accounting procedure to provide for their deposit in a separate account (see Exhibit 1, Section 3015.11 ).
  2. Internal Controls

    The system of internal control should be designed to fit the needs of the individual State. Basic elements for adequate internal control should include:
    bulletA carefully planned organization structure.
    bulletWell-defined operation policy and procedures.
    bulletClearly defined written authorizations, delegations, and limitations.
    bulletCompetent personnel.
    bulletAppropriate mechanical and procedural accounting controls.
  3. Assignment of Duties

    To the extent possible, no employee should be responsible for all elements of a financial transaction. For example:
    bulletEmployees collecting revenues should not maintain, or be in a position to adjust records in connection with accounts receivable.
    bulletAccounts receivable should be established by employees other than those rendering service or supplying the materials.
    bulletEmployees purchasing materials should not, under ordinary circumstances, receive or store such materials.
    bulletEmployees receiving property should not keep the related financial records or have the sole authority to approve the transfer, sale, or other disposition of materials or property.
    bulletWherever practicable, vendors' invoices and receiving reports should flow directly to the accounting office rather than through employees responsible for purchases.
    bulletEmployees who regularly handle materials or supplies should not be relied upon exclusively to take physical inventories for the purpose of reconciliation to the accounting records.
  4. Control of Expenditures

    Adequate control over expenditures should include factors such as: assurance that materials were actually received or that services were rendered and that quality, quantity, and price are in accordance with the provisions of purchase orders, contracts, or others authorizations consistent with applicable regulations. Such assurance can be achieved by providing, in addition to measures previously described, that expenditures are properly authorized and supported by the required documents, properly signed. Provisions for the effective voucher examination     prior to certification assure that the expenditures were in furtherance of State Extension programs and within any restrictions imposed by Congress and ES regulations.
  5. Accounts

    As a minimum, ES requires that a separate account be established for each fund source that is available to the State for extension work. For example, one account is required to record obligations of Smith-Lever 3(b) & (c) formula funds by the 1862 Institution and by the 1890 Institution to record obligations of Section 1444 funds. A State may incorporate as many sub-accounts as it determines necessary to manage the Extension program.

    Although ES requires that funds received under the 3(b) & (c) allocations for the Small Farm program and the Expanded 4-H program be identified on the budget, ES does not require separate accounts to record obligations against these programs.

    Separate accounts should be maintained for State and County-funds. These     accounts need not be separated between offset and non-offset. However, the States should be in a position to identify to the auditors or others specific vouchers or classes of expenditures (salaries, etc.) that are being used as offset/matching.

    Separate accounts are required for all special projects awarded to the States on the basis of submitted proposals whether a cooperative agreement, grant, or approval letter is used as the awarding instrument.

    When the special project requires matching, a separate account should be maintained for the matching portion of the project. If separate accounts are not maintained, then the State should be in a position to identify to the auditors or others specific vouchers or classes of expenditures (salaries, etc.) that are being used as matching. Funds for these accounts must be in addition to the amount certified for offset for the 3(b) & (c) allocation.
  6. Classification of Expenditures

    The proper classification of all expenditures is an aid in budgeting planning and control. The object classification becomes a basis for the preparation of reports and expense studies, and it is essential that there be conformity in the submissions of such information for the use of the Department.
    1. Object Classification Codes

      The object classification codes for reporting expenditures should be in accordance with the specific object classes. For internal purposes, additional subdivisions may be maintained. However, for Federal budgetary and financial reporting purposes, the four groupings prescribed below should be followed:

10 - Personal Services

20 - Travel

30 - Equipment

40 - All other expenses

  1. Definition of Object Classes

10 - Personal Services

Includes compensation for services of individuals, including terminal leave payments, costs of living and quarters allowances, and other compensation for special services rendered by consultants or others employed on a per diem or fee basis.

20 - Travel

Includes transportation of persons, their per diem or lodging and subsistence while in authorized travel status, and other expenses incident to travel which are to be paid, either directly or by reimbursing the traveler. It includes rental of passenger-carrying vehicles, even though they may be used incidentally for transportation of things.

30 - Equipment

Includes personal property of a more or less durable nature which may be expected to have a period of service of 1 year or more and an acquisition cost of $5,000 or more without material impairment of its physical condition. It excludes commodities which are converted in the process of construction or manufacture (inventory) or which are used to form a minor part of equipment or fixed property.

40 - All Other Expenses

Includes such items as transportation of things, communications, services, utility services and rents, printing and reproduction, repairs and replacements, employer's life and health insurance contributions, supplies and materials, employer retirement contributions, taxes and assessments. Employer retirement contributions, life and health insurance contributions, and any other fringe benefit costs may be included in personal services, if so desired.

  1. Voucher Requirements for Federal and Offset Funds
  1. Personal Service Vouchers

    (1) Name of the individual paid.

    (2) Period covered.

    (3) Gross amount due.

    (4) Amount of authorized deductions.

    (5) Amount paid.

    (6) Funds from which paid.

    (7) Object classification.

    (8)     Approval of the Director or the 1890 Administrator or their authorized representative.
  2. Travel Expense Vouchers

    Travel vouchers should contain information as to the purpose of the trip and its duration, identification of all expenses for which the traveler claims reimbursement, and the funds to be charged. Travel vouchers must be signed by the traveler and an official authorized to approve travel.
  3. Miscellaneous Vouchers
    1. Description and cost of good purchased or service rendered and the name of the vendor.
    2. Certification of receipt of goods or of service.
    3. Approval for payment by the Director, 1890 Administrator, or their authorized representative.
    4. Object classification.
    5. Fund to be charged.
  1. Uncashed Checks

    Stop payment procedure should be instituted for any checks drawn against ES funds that have not been cashed at the end of 2 years. The amount of the uncashed check should be added to the beginning unexpended balance of the current year. However, consistent with institution policy, lower limits may be set.
  2. Fiscal Year Determination

    Expenditures should be charged to the fiscal year in which the obligation occurred and should be paid from the fiscal year funds available in that year. This may require that the account remain open for a period of time after September 30 to liquidate obligations incurred in the prior year.
  3. Unobligated Balances

    Any unobligated balances may be combined with the allocation from the current year's appropriation if they qualify as carry-over funds. See Section I.
  4. Cancellations and Repayments

    Cancellations and repayments of disbursements and other debit and credit transactions involving Federal funds should be accounted for and shown in full in the Extension accounts of the Institution. Repayment should always be made to the Federal fund from which the original expenditure was made.
  5. County Offset Expenditures

    Vouchers covering county offset expenditures paid at the county level should be approved by an authorized county agent, and signed by a county official to show that payments have been made. The original voucher or a certified copy should be on file in the State Office to support county offset expenditures.
  6. Sale of Nonexpendable Property

    The disposition of nonexpendable property shall be handled in accordance with 7 CFR 3015, Subpart R. Title to nonexpendable property acquired with Federal funds shall be vested with the State Extension Service. When such equipment is no longer needed, the equipment shall be used on other approved Extension projects, if possible. Otherwise, the equipment must be used on other Federally sponsored projects.

    Before the piece of equipment is ultimately disposed, the State Extension Service shall inform the ES that the equipment is no longer useful and they wish to dispose of it. ES shall reply within 120 days with instructions regarding final disposition.

    In all cases property records shall be kept in accordance with 7 CFR 3015.169.
  7. Sale of Publications

    Publications paid with Federal or offset funds may be sold if State policy permits such sales and if the receipts are used in furtherance of approved Extension work.

    The State Extension Service should have adequate internal control regarding the sale of publications. The internal control should cover such areas, as inventories of publications to be sold, shipments to counties, and the billings and processing of receipts.

    Each State Extension Service will determine its own pricing policy. It is anticipated, however, that each State will continue, to the extent feasible, to furnish the public with copies of available publications without charge. In cases where States find it necessary to charge for publications, the price should include cost of printing, postage, and a charge for handling.

    Publications offered for sale are not eligible for mailing under the penalty mail privilege to the general public. Publications for which a charge is made should be mailed under prepaid postage.
  8. Users Fees

    7 CFR 3015, Subpart F, allows for recipients of assistance to charge user fees that then will be counted toward program income. However, the imposition of user fees for core Extension educational programs is inconsistent with the statutory purposes of the Smith-Lever Act. Therefore, users fees may not be charged for educational services especially if the proceeds are to be used to augment the operational cost of the Cooperative Extension Services in substitution of Stare appropriations for that purpose. However, it is permissible to charge fees for incidental costs if the proceeds are used in furtherance of Extension work. For example, recovery of costs related to the printing, mailing, and handling of
    Extension publications is permitted, provided fees received are returned to the Extension program. In addition, fees may be charged for services which are considered non-educational in nature such as soil and water testing, forage testing, and farm record analysis.

    Registration fees may be charged for Extension-sponsored workshops for incremental costs associated with the cost of conducting the workshop. It is imperative that the fee charged cover only the cost incurred and that the Extension clientele understand the nature and purpose of fees charged.
  9. Retention of Records

    Subpart D of CFR 3015 sets forth record retention requirements. The financial records and supporting documents shall be retained for a period of 3 years with certain qualifications. The retention period starts from the date of the submission of the annual financial report (see Exhibit 1).
  10. Audits

    The Office of Management and Budget has established policies to coordinate audits of grants and contracts at educational institutions. These policies provide for the assignment of one Federal agency to audit all Federal funds at a single institution. This agency is known as the Cognizant Audit Agency. For Land-Grant Universities, this agency is usually the Department of Health and Human Services (HHS). The USDA Office of Inspector General (OIG), on occasion, will also conduct program reviews of the State's Extension Service operations. OMB Circular A-133, "Audits of Institutions of Higher Education and Other Nonprofit Institutions," as implemented by USDA in 7 CFR Part 3051 (58 Fed. Reg. 41,410 (August 3, 1993)), sets forth the applicable audit requirements.

    Section 307 of the, Supplemental Appropriations and Rescission Act of 1980 Public Law 96-514, requires that all audits be resolved within 6 months after the final report is issued. An audit is considered resolved for purpose of meeting the legislatively mandated 6 months deadline when ES and the OIG have reached a management decision and agreed on the validity of the findings and the need for and nature of corrective action, and the State Extension Service is so informed by a Letter of Determination. In case of monetary findings, this Letter of Determination must contain a request for payment of the disallowance. In the case of management-type findings, this Letter of Determination must specify the action to be taken and the respective time frames action is to begin and/or end.

    The implementation of Public Law 100-504, Inspector General Act Amendments of 1988, significantly changed the audit resolution, follow-up and reporting process. As a result, the USDA Office of Finance and Management (OFM) is now responsible for reporting directly to the Congress on management decisions and final actions regarding audit recommendations.

    This Act was designed to provide increased independence for Federal audit and investigative operations to make them more efficient and effective, and to provide incentive for corrective action by requiring the OIG to include additional information in their semiannual reports.

    An audit is closed by the OIG when a management decision has been reached on all findings and non-monetary corrective action has been completed. In the case of monetary findings, claims must be established and recorded in the ES accounting records. Establishment of an accounts receivable satisfies the closing requirements, as far as the OIG is concerned. However, closure of an audit by the OIG/OFM does not relieve ES of follow-up responsibilities until final collection, compromise, or waiver have been achieved. These activities are subject to periodic monitoring by OFM.

    In effecting audit resolution, the OIG deals with four specific dates.
  1. Date of audit report - Date from which other dates are calculated.
  2. 60 days from audit report date - Date that response showing corrective action taken or planned on audit recommendations is due.
  3. 120 days from audit report date - Date that the audit file is referred to OFM for follow-up assistance when management decisions have not been reached.
  4. 180 days from audit report date - Legislative mandate for reaching a management decision and fully resolving audit reports.

 

 

 

Revised May 1994