University of Minnesota Internal\External Sales
“The Internal Sales Review Process”An Overview of What Happens
During the Review
Session Objectives: Keith
• Explain the process used for internal sales reviews
• Identify what can be done to improve the process
About the Reviews Keith
Scope includes:
• Budget vs. Actuals vs. Rates
• Previous completed fiscal year
• Resource utilization
• Break-even analysis
• Margin analysis
• Identify the risks and the controls over those risks
“Which Internal Sales activities will be reviewed?”
Keith
• Objective is to focus our review work on the areas of greatest risk to mitigate that risk
• Review all Internal Sales every 2 years
• Review any Internal Sales identified with issues by Internal Audit
• Review sales generated in Internal Sales account 500101 that do not have approval or meet requirements
Reviews Process Objective Keith
• Objective is to determine if the rate development methodology, accounting, and rate charging practices are compliant with OMB A-21 requirements, federal cost accounting standards, and University of Minnesota policy and procedures.
• OMB Circular A-21 is the publication:
Cost Principles of Educational Institutions from the Office of Management & Budget
Prior to the Review Keith
Request for information is sent to management in advance of expected review
A request is made for review materials, including:• Rate development• Types of services and activity• Assigned Business Manager / point of contact• Transactional detail for selected vouchers• Volume basis• Fixed asset reconciliation/depreciation calculations• Account structure used for ISO and ESO activity
Prior to the Review (continued) Keith
• Materials to be returned in 10-14 days to Internal Sales
• Electronic submission required
• Information is used during review
Meeting
• Before the review work has started but after receiving the requested information
• Typically the RRC Manager & main financial person
• Provides a chance to discuss the general review process
• Gives input to Internal Sales activities that will be reviewed
Prior to the Review (continued) Keith
Review Process Keith
Information sources:
• UMReports “Account Status for Current Non-Sponsored Funds Report” for budget, revenue and expenditures.
• Fixed Asset report from Inventory Services
• The request for information is sent to management with questions and information requested
Review Process (continued) Keith
• Activities reviewed:• Unallowable and allowable costs
• Transfer codes
• Segregation of revenue and expenditures
• Rate volumes
• Depreciation
• Operating Margin
• Inclusion of all costs
• Impact of External Sales
• Budget vs. Actuals and Rate development
• Customer base and rate type
• Annual Requirements
• Monthly Invoicing
• Request for Materials
• Preparation of review checklist
• Request meeting to go over open items and resolve questions
• Draft compliance memo
• CC draft to Business Manger and RRC Manager for feedback / questions
• Issue final compliance memo
• Follow up of Plan implementation
Review Process (continued) Keith
Reviews Mary
What to expect during the review?• Length of time – 2 weeks after information received• Transaction documentation• Follow-up questions• Communication of results• Define solution to identified findings
Reviews (continued) Mary
How do the results affect you? • Awareness of policies / processes / best
practices• Changes needed to enhance compliance or
efficiencies• Update rate development• Adjustments to cover surplus & deficits
What is in the Compliance Memo? Mary
• Description of the unit and the activity• Summary of findings• Recommendations• Ratings of findings• Management action plan response
requirement• Policy or procedure statement that defines
requirement
Compliance Issue Examples Keith
• Expenses not included in rates or actuals
• Not charging all internal customers the same rate
• Depreciation rates not agreeing with Inventory
Services, actuals or rate development
• Unallowable expenses in rates
Compliance Issue Examples Keith
• Not segregating revenues and expenses for
Internal and External Sales
• Purchasing equipment directly to an Internal Sales
account rather than an Internal Sales plant fund
• Set up with incorrect fund and accounts
• Not managing surpluses or deficits
Review Findings Rating System Mary
• Refer to handout
• ESSENTIAL
• Resolution will help avoid a potentially critical negative impact:– Loss of material assets– Loss of reputation– Loss of critical financial information– Inability to comply with important laws, policies or
procedures
• SIGNIFICANT
• Resolution will help avoid a potentially significant negative impact:– Loss of material assets– Loss of financial information– Inability to comply with important laws, policies or
procedures
Review Findings Rating System (continued) Mary
• USEFUL
• Resolution will help improve controls and avoid problems in the unit’s operations
Review Findings Rating System (continued) Mary
How is the Rating System Used?
Mary
• Significant or Essential findings:– require a Management Action Plan
• No Significant or Essential findings:– the review is closed
• Useful findings:– Do not require a MAP but should be
implemented by department
Who sees the Compliance Memo? Mary
• Dean/Department Head/Director
• Business Manager
• RRC Manager
• Budget Office
• Controllers Office
• Department of Audits
• Internal/External Sales Manager
Compliance Memo Response Jeff
• Management Action Plan is due 1 month from the date of the final memo
• ESSENTIAL findings must be corrected within three months of date of final memo
• SIGNIFICANT findings must be corrected during next budget cycle
• Surpluses greater than 15% must be paid back within three months of date of memo
• Deficits that will not be included in future rates must be paid before fiscal year end
Follow-up by the Reviewed Unit Jeff
• Review report findings, recommendations, and management action plan
• Retain documentation to support efforts towards implementation
Follow-up by the Reviewed Unit (continued) Jeff
• Communicate with Internal/External sales on ongoing progress
• Self-assess progress toward expected implementation date
• Explain obstacles preventing or delaying implementation
Follow-up by Internal Sales Jeff
• Documentation to support status as reported
• Review to confirm
• Summary report and assessment of progress
How to improve the review process Jeff
Prompt responses
• Requested Materials
• Documentation
• Requests for information
• Requests for meetings
How to improve the review process (continued) Jeff
Communicate
• Availability of key staff
• Completion of requests
• Concerns
• Explanations
• Issues
Take action
• Implement agreed-upon management action plan
• Do a review before the formal review and during the year
• Communicate progress
How to improve the review process (continued) Jeff
Tips on how to prepare / stay prepared for the next review Jeff
• Adjust operations to ensure compliance • Update items that have been requested• Downsizing, restructuring, merging of functions can
impact internal sales rates; review rates to ensure they are still proper
• Use U-wide systems and processes in lieu of developing in-house processes
• Monitor surpluses or deficits• Training for key personnel• Discuss any issues or concerns with Internal Sales
Other Items Keith
• Register for the “Internal Sales Seminar” on February 17th”
• Brown Bag Seminar “External Sales Agreement” (Contracts) January 27th at 12:30.
• Internal Sales Training Courses at our website• Procedure “ Reviewing Internal Sales Activity
Annually”
Questions?
Resources: Office of Internal Sales website http://www.finsys.umn.edu/sales/iso.html
• This presentation is posted on the site.
