REPORTING @ ANU

1. REPORTING @ ANU June 2008

2. Reporting @ ANU – this course covers: • Brief introduction to Accounting • The General Ledger Structure at ANU • Allocation of the Operating Grant in the ANU Ledger • University-wide Reporting and Local Area Reporting • The nVision Financial Management Reporting Statement • SPF Unspent Funds Report

3. Brief Introduction to Accounting • This will cover .. - The Accounting Cycle - Types of Financial Statements - Accrual Accounting - Reporting – Financial & Management Accounting

4. Brief Introduction to Accounting The Accounting Cycle The Accounting cycle that applies to all businesses and organisations who use accounting information to aid decision making includes the following steps: • recognise and record transactions • Journalise transactions • Post to accounts which are contained in ledgers • Prepare trial balance of general ledger • Prepare financial statements

5. Brief Introduction to Accounting contd. The Accounting Cycle contd. In the University context, our accounting cycle is example the same: • transactions are recognised and recorded by accounts processing staff; • Transactions are journalised and posted to accounts in the ledger through the use of ESP Financials; and • Staff at F&BS as well as College Finance Staff and local departmental administrators prepare financial statements. The information generated during this process is presented in different ways to enable users in decision-making.

6. Brief Introduction to Accounting contd. Types of Financial Statements The generic Financial Statements produced by most accounting systems are: • Balance Sheet • Income Statement • Cash Flow Statement The Balance Sheet and Income Statement are usually prepared on an Accrual basis. The Cash Flow Statement is prepared on a Cash basis – cash received and cash spent.

7. Brief Introduction to Accounting contd. Accrual Accounting What is accrual accounting? Revenue and expenses reported for an accounting period are the revenue earned and expenses matched to or incurred in generating that income – regardless of whether the income has actually been received or cash paid for the expenditure. For Example Where we have performed some work for a client and invoiced this client, we would include this revenue in our reporting for the period, regardless of whether we have actually received payment or not. On the expense side, we would include expenses such as electricity and gas consumed during the period even if the bill is not due for payment until the following period.

8. Brief Introduction to Accounting contd. So why are some reports cash and some accrual? It really depends on the needs of the users. Reporting Types There are two types of accounting or reporting: • Financial Accounting • Management Accounting

9. Brief Introduction to Accounting contd. Financial Accounting - usually deals with accounting/reporting for external users and is compliant with relevant accounting standards and legislation. An example would be the ANU Annual Financial Statements that are tabled in Parliament. Management Accounting - usually deals with accounting/reporting for internal users such as management, executive etc. There is a lot more flexibility and it can be accrual or cash-based depending on the needs of the users of the reports. Examples in the ANU context would be our SPF reports and our recurrent reports.

10. The General Ledger Structure at the ANU University Budget Units The University has implemented a College-based Structure to better align the interests and collaborations across academic units. The seven University Colleges are: ANU College of Arts and Social Sciences ANU College of Law ANU College of Medicine and Health Sciences ANU College of Asia and the Pacific ANU College of Science ANU College of Engineering and Computer Science ANU College of Business and Economics The University General Ledger operates on the Peoplesoft ESP Financials system.

11. The General Ledger Structure at the ANU For budgeting and planning purposes, the University is organised into budget units representing all sectors of the University structure including: • Institute of Advanced Studies • The Faculties • University Centres • Division of Information • Administrative Divisions • Academic Support • Property Costs • Other Central Activities Budget Unit delegates (Directors, Deans, Administrative Heads) are responsible to the Vice-Chancellor for setting the budget and subsequently accounting for performance against the budget. University Business Units and Full Fee paying programs are subject to their own budgeting process based on the nature of their trading activities.

12. The General Ledger Structure at ANU General Ledger Structure Within ESP Financials the General Ledger structure has three streams. The ledger structure for each stream is identical, however each has a distinct purpose. • Actuals Ledger The ledger through which cash transactions for the current reporting period are processed (where current refers to the current financial year). This ledger includes encumbrances, commitments for the current and future reporting periods, pending the actual transacting of this commitment. • Financials Ledger The ledger through which non-cash (or accrual) transactions for the current reporting period are processed (e.g.. Depreciation). • Std_Budget Ledger Establishes and maintains the budget for the university for each reporting period.

13. The General Ledger Structure at ANU Ledger Location Structure Account Fund Department Project/Grant NNNN A NNNNN XXXX The account structure comprises four main components: • Account • Fund • Department • Project

14. The General Ledger Structure at ANU Account This is the ‘natural account code’ and is a four-digit numeric field (it may have a fifth digit alpha for classification). There is a Chart of Accounts available on the Finance and Business Services web site. This can be found at: http://info.anu.edu.au/fbs/Publications/Chart_of_Accounts/index.asp There is also a download of Natural Account Codes in ESP, which provides information such as Account, Account Description, Budget Code etc. These downloads can be found by using the following navigation: Go, Define Business Rules, Design Chartfields, Report, Account Download More information is available at: http://info.anu.edu.au/fbs/Training_and_Support/__News_and_Tips/_2005/Acct_DL.pdf

15. The General Ledger Structure at ANU Fund This is the alpha ledger segment code, denoting fund source: R – Recurrent F – Fees S – Special Purpose Funds where funds are held contractually by the University for external parties Q – Special Purpose Funds where funds owned by the University E – Endowment T – University Business Units C – Capital # - Superannuation Reserve

16. The General Ledger Structure at ANU Department This is a five digit alpha-numeric field. College identifiers are: CA - College of Arts and Social Sciences CC - College of Business and Economics CE - College of Engineering and Computer Science CH - College of Medicine and Health CL - College of Law CP - College of Asia and the Pacific CS - College of Science Project This is a compulsory field for S, Q and E funds. The accepted norm is a two to four digit character and it can be alpha, numeric or a combination. The field is optional for other ledger segments.

17. The General Ledger Structure at ANU Relationships of the Account & Code Components Natural accounts and summary codes Natural accounts are rolled up to various summary codes that are used in the preparation of the University’s annual financial statements. These summary codes then roll up to the various budget class categories. Illustration: BC01 Salaries and Related Costs S3100 Academic Staff Salaries 5001 Salary Academic Continuing 5001V Salary Academic – Visiting Fellows 5003 Salary – Casual Sessional Academic 5003A Sal P/T Teach Savings Actual transactions cannot be processed against budget class accounts (with the exception of BC15 – Operating Grant – and BC20 – Prior Year Result). It is possible to drill down in the recurrent budget reports from budget class to summary code and then down to natural account code detail.

18. The General Ledger Structure at ANU Departments and Project Grants Project codes are related to a particular department. A department can have a number of different project codes sitting underneath it. Reports can be run at the Project level, at the Department level incorporating all Project under the department or with only departmental information. Illustration: Department F&BS R24100 – Admin Department R24103 – Printery R24600 – Chancelry Services Department (incorporating Project) F&BS R24100 – Admin Department R24100 01 – Ledgers R24100 02 - SPF

19. The General Ledger Structure at ANU Departments and Budget Units Department ranges within a Budget Unit are rolled up to the Budget Unit level. Budget Units are rolled up to Sectors. Reports can be obtained at the Budget Unit level, for every active department within that Budget Unit, and for every active project within each department. Illustration: ADMIN - Administrative Divisions (SECTOR) HR – Human Resources (Budget Unit) 22000-22ZZZ (Departments) F&S – Facilities & Services 23000-24ZZZ F&BS – Finance & Business Services 24000 – 24ZZZ

20. The General Ledger Structure at ANU Contd. • nVIsion reports can be run for an entire Budget Unit using the tree node with the budget unit description. E.g. – F&BS will provide a consolidated financial report for all valid departments and project within the recorded department range (e.g. 24000 – 24ZZZ) • The organisation tree structure was established to mirror the actual operational structure of the University as opposed to the formal academic structure of the University that is represented by Academic Organisational Unit (AOU) codes.

21. The General Ledger Structure at ANU Contd. Use of ‘Budget Class’ (BC) Accounts Account codes roll up into various Income and Expenditure Budget Classes. For example, all the salary and oncost account codes, such as 5001 through to 5097, roll up into BC01. Budget Class Codes Expenditure BC01 Salaries and Related Costs BC02 Equipment BC03 Scholars Expenses BC04 Other Expenses BC05 Travel, Field and Survey BC06 Equipment – Non-Capital BC07 Expendable Research Materials BC08 Transfers to Other BC09 Contingency

22. The General Ledger Structure at ANU Contd. Budget Class Codes contd. Income BC10 Student Fees BC11 Other Income BC12 Internal Sales BC13 Transfers from Other BC14 Internal Allocations BC15 Operating Grant (RTB) BC16 Investment Income Current Year Operating Result BC19 Operating Result Prior Year Result BC20 Prior Year Result

23. University Wide and Local Area Reporting Recurrent budget reporting is performed on a cash basis in the ACTUALS ledger, while the University’s annual financial statements are prepared on an accrual basis. The main difference between the two types of reporting at the University is that transactions in the FINANCIALS ledger appear in the annual financial statements and do not appear in recurrent budget reporting. Financial transactions include, but are not limited to, depreciation, provisions (doubtful debts, long service leave, recreation leave etc) and other ‘year end’ entries such as prepaid and accrued expenditure and accrued revenue. The financial transactions are recorded at the local Budget Unit level (in the financials ledger), however, areas are not required to manage these costs as part of their budget responsibilities. The transactions will not show on any recurrent nVision financial reports and as such do not affect the cash position. Some reports allow for the optional inclusion of these transactions.

24. University Wide and Local Area Reporting Financial activity of all budget units impacts on the University’s annual financial statements (Income Statement, Balance Sheet and Statement of Cash Flows), but reports on recurrent budget expenditure are not presented in these formats. The Financial Management Report (FMR) is a ‘hybrid’ report, taking on some concepts from the Income Statement (cash income and expenditure), Balance Sheet (cash carry forward – almost like accumulated results + capital expenditure) and encumbrances (cash accruals). Recent University Recurrent Budget reports can be found at: http://info.anu.edu.au/fbs/Finance_Functions/__Financial_Reporting/__Recurrent_Budget_Reports/Index.asp

25. University Wide and Local Area Reporting Usefulness of reports All reports produced from the ESP Financials system contain information that is in the system at the time the reports are run. The usefulness of reports containing budget information depends on how budgets are entered and updated. It is therefore important to enter accurate and meaningful information into the budget ledger. If inaccurate or unachievable figures are entered then the reports produced will be ineffective in highlighting variances or identifying budget trends as well as supplying a misleading picture of the budget unit. Often individual budget units have different levels of reporting requirements. Some budget units need to report down to a project level whereas other areas need only report down to the department level. The budgets entered into the system need to reflect these differences. If the project level of reporting is required then budgets (both income and expenditure) must be allocated down to the project level.

26. University Wide and Local Area Reporting Encumbrances/Commitments and the effect on reports and budgets Encumbrances are a useful way of formally recording, in the ledger, commitments an area has against a budget for future expenditure. Encumbrances in the financial system show what future expenditure is expected to be made against a particular expense line, and reduces available funds accordingly. The most significant encumbrance for many budget units is that generated by the ESP Human Resources (ESP HR) payroll system. ESP HR will automatically generate salary encumbrances for full-time staff and permanent part-time staff. The salary encumbrance will calculate the remaining salary cost until the end of a year. As actual expenditure is incurred, the ESP HR system automatically recalculates the encumbrance each pay period so as not to duplicate expenditure. In respect of casual staff, budget units need to discuss their options with the ESP HR team for encumbrance creation. Encumbrances created through purchase orders are automatically reversed by linking the payment voucher to the purchase order (i.e. using PO Vouchers). Manual encumbrance journals must either have the auto reverse option selected or be reversed manually, once the costs have been incurred. It is important to ensure that once costs have been incurred, they are not also reflected in the encumbrances.

27. University Wide and Local Area Reporting contd. Encumbrances should be entered into the ESP Financial system. They should NOT be added to reports manually ‘off-line’. Ifencumbrances are not formally recorded in the ESP Financials system, users who are examining information directly from the system will come to a different conclusion about the financial performance of an area compared to those users who have a report that has had encumbrances added off-line (i.e. after the report was run from the system).

28. The nVision Financial Management Reporting Statement or Recurrent Budgetary Report For a Budget Unit, nVision Financial Management Reporting Statements provide a standard Income and Expenditure Statement (for Budget, Actual and Encumbrance classifications) This report can be produced at varying levels ·        - For the Budget Unit as a total; ·        - For each Department within a budget unit; and ·        - For each Project within each Department. Recurrent Budgetary Reports can be found at: http://info.anu.edu.au/fbs/Finance_Functions/__Financial_Reporting/__Recurrent_Budget_Reports/Index.asp

29. The nVision Financial Management Reporting Statement or Recurrent Budgetary Report Contents of the nVision Financial Management Reporting Statement or Recurrent Budgetary Report The statement contains income and expenditure information for the following categories, displayed in rows: Income For the Current Year Expenditure For the Current Year Current Year Operating Result Income less Expenditure Prior Year Cash Result Actual Result from Prior Year Net Operating Position Current Year Operating Result +/- Prior Year Result

30. The nVision Financial Management Reporting Statement or Recurrent Budgetary Report contd. For each category, there are seven columns, which display numerical information: Column Details 1 Movement for Period Actual Transactions for most recent period only 2 Budget The budget information that has been loaded into the system (Final Scenario) 3 YTD Movement The total of actual transactions recorded so far in this accounting year 4 Outstanding Encumbrances/commitments that have either been system generated Encumbrances (e.g. from HR system) or input manually 5 Total – YTD Movement Actual transactions + encumbrances + Encumbrance 6 Variance The difference between Budget and YTD Movement and encumbrances This is the amount of available funds 7 % total to Budget – 5/2 Percentage received/expended compared to budget for full year

31. The nVision Financial Management Reporting Statement or Recurrent Budgetary Report contd. Inclusion of Salary Information The report can be produced with or without a payroll analysis. The payroll analysis comprises a payroll summary which identifies all the salary transactions for the period that make up the balance of ‘Salaries and Related Costs’ and ‘Scholars Expenses’ on the nVision report.

32. Special Purpose & Discretionary Fund Net and Overspent Balances Report Financial Management reports can also be run for Special Purpose Funds, although these are reported on a whole of life or life to date basis and not periodically. The Special Purpose & Discretionary Fund Net and Overspent Balances report can be found in Section P of the periodic Recurrent Budgetary Report. This report shows the overspent balances for Q and S funds by college. A more detailed report is also run by the Special Purpose Funds (SPF) Section of Finance & Business Services, which lists overspends for all projects. This report is distributed by SPF on a regular basis.

33. Further Training Finance & Business Services also run the following courses: • Budgeting @ ANU • Expenditure & Contracts @ ANU These are run for specific groups of staff in colleges or schools – please contact Mardi Savill (mardi.savill@anu.edu.au or 55587) for more information and to make a booking. Finance & Business Services Business Solutions Office can also provide training on ESP Financials. Further information can be found at: http://info.anu.edu.au/fbs/Training_and_Support/__Courses_and_Seminars/index.asp