FOCUS Department of Accounts Update May 9, 2006 David A. Von Moll State Comptroller

1. FOCUS Department of Accounts Update May 9, 2006 David A. Von Moll State Comptroller

2. Agenda • Accounting and Reporting • Service Area Structure • Payroll Operations • E-Commerce • Other Systems Initiatives • Internal Control Standards

3. Accounting and Reporting • GL Review • Central review of irregular balances • Petty Cash Reviews • Low turnover balances • Weak oversight • New Reconciliation Policies • Not enough to identify and correct differences between CARS and agency systems • Must ensure CARS is correct • Decentralization of Financial Records • Reauthorize Memorandums of Understanding (MOUs) • Disbursement Reviews

4. Accounting and Reporting • Cost Recovery Audit • $5.9 billion - annual spending subject to review – FY 2002-2004 • Duplicate/Erroneous CARS Payment File Review (data mining) • $257,000 – confirmed to-date by agency, vendor validation pending • $113,000 – collected to-date • Statement Letter Review (unclaimed credits) • $320,000 – confirmed to-date • $40,000 – collected to-date • Contract Review (price compliance) HE Decentralized for Accounts Payable • All data files received – some not yet scanned for duplicates • Statement letters – most pending • Contract review – pending

5. Accounting and Reporting Financial Statement Directive – to be issued May 15, 2006 • New FY 06 GASBS • No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries • Determine whether impairment has occurred • Environmental factors, technological changes, obsolescence • Decline in service utility outside normal life cycle • Report permanently impaired assets no longer in use at lower of carrying value or fair value with footnote disclosures • Recognize Impairment Loss net of insurance recoveries for assets permanently impaired during FY 2006 • Restate Beginning Net Assets for assets permanently impaired in prior years and not written down • Report Insurance Recoveries for prior year asset impairments (or other recoveries) as program revenue

6. Accounting and Reporting • New FY 06 GASBS, continued • No. 46, Net Assets Restricted by Enabling Legislation • Report portion of net assets that have limitations imposed by enabling legislation as restricted net assets • Enabling legislations is clarified to mean a restriction an external party such as citizens, public interest groups or the courts can compel the government to honor • No. 47, Accounting for Termination Benefits • Recognize liability and expense in accrual-based statements for: • Voluntary termination benefits when employees accept offer and amounts can be estimated • Involuntary termination benefits when a plan of termination has been approved by management, the plan has been communicated to employees and amounts can be estimated • New Audit Standards

7. Service Area Structure • Program/Subprogram/Element changing to Program/Service Area/Element for all FY 07 transactions in both CARS, FAACS and CIPPS • For CIPPS this means for the June 10-24 payroll, not before • Screen and report changes • Interface file layouts will not change other than to rename the Subprogram field • However, may want to test CARS interface if agency accounting systems change Payroll Contact – Cathy McGill cathy.mcgill@doa.virginia.gov or see related Payroll Bulletin for more details CARS Contact – Kim White kim.white@doa.virginia.gov

8. Payroll Operations • SSN Privacy • Plan to convert CIPPS Employee ID from SSN to PMIS/BES “person number” • PMIS/CIPPS Interface • Name, address, various salary and position information • Payroll Debit Card • Phased roll-out • Foreign Nationals • Failure to obtain proper documentation fines - $2,500 • Department of Homeland Security (DHS) increasing I-9 audits • I-9 training and assistance available: martha.laster@doa.virginia.gov • ORP Retirees Imputed Life • W-2 reporting

9. E-Commerce • Payroll Debit Card – 20 agency phased roll-out • American Express to GE Mastercard conversion – complete • 14,000 P-cards, 5,000 employee travel cards, 200 agency travel cards • Web-based training • Monthly teleconference PA meetings • New oversight tools • Eliminate inactive cards • Ensure timely payment • Monitor card usage • Rebate • Under-utilization Fee

10. Other Systems Initiatives • Reportline • Mandatory conversions complete • Remote Print conversion requests complete or scheduled • Lease Accounting System • W-2s on Payline • Web Site Standards • New-look DOA web site: www.doa.virginia.gov • Searchable CAPP • Web Accessibility Standards

11. Internal Control Standards Agencies and institutions are already required to develop and maintain a… • Sound agency internal control framework to ensure: • Resources are used efficiently and effectively • Commonwealth assets are safeguarded • Compliance with laws and regulations • Financial reporting is timely and accurate • Formal program to assess their agency control framework. • Agency heads must certify to both of these requirements each year.

12. Internal control initiatives are intended to… • Raise the level of internal control emphasis, resource dedication and proficiency among agencies to achieve best practices contemplated by: • Sarbanes-Oxley • OMB Circular A-123 • COSO/Treadway Commission • COSO – Committee of Sponsoring Organizations – Institute of Internal Auditors, AICPA, and others

13. Perspective • Standards – 26 pages • Implementation Tools – 44 pages • Sample Code of Ethics, facilitated workshop plan, risk maps, communications strategies, monitoring activities • Evaluation Tools – 87 pages • Sample self-assessment tools, control self-assessment techniques, surveys and questionnaires for every CAPP topic

14. Types of Issues Raised in ARMICS Feedback • Additional resources needed • Cost vs. benefits considerations • Documentation clarifications needed • Internal auditor independence • Achievable deadlines • Coordinate with related requirements of other central agencies (VITA, DPB, APA, others) • Scope and authority issues • Simplify and other implementation issues • Training and orientation sessions needed

15. What’s Next for ARMICS • Resolve scope and authority issues • Work with DPB to enhance strategic planning process – SWOT Analysis • Target initial implementation to fiscal programs

16. Questions? David A. Von Moll State Comptroller david.vonmoll@doa.virginia.gov 804.225.2109