The Journey to Budgetary Compliance

1. Governor’s Office of Planning and Budget The Journey to Budgetary Compliance March 5, 2008 Web Casts: Morning Session: 10 a.m. – 12 noon Afternoon Session: 2 – 4 p.m.

2. Governor’s Office of Planning and Budget The Journey to Budgetary Compliance March 5, 2008

3. Housekeeping • Please put cell phones on vibrate or turn them off • No food or drink in the auditorium • Restrooms are located off the lobby • Website address for additional support information: http://sao.georgia.gov • Under the ‘At Your Service’ heading: • FM Reconciliation TrainingPresentation • Accounting Procedures Manual • Check back often for additional courses and registration • Please hold questions for the Q&A segment

4. Agenda • Introductions • Budgetary Compliance Overview • 2007 Budgetary Compliance • 2008 Budgetary Compliance • Training and Support • Next Steps • Questions

5. Presenters Sonja Allen Office of Planning and Budget Don Barzyk State Accounting Office Governor’s Office of Planning and Budget I. Intro

6. Lynn Vellinga State Accounting Officer • Need for budgetary compliance • Need for clean report from DOAA • SAO is committed to helping agencies comply by: • Maintaining and improving PeopleSoft Financials • Issuing specific Policies and Procedures as needed • Revising State Accounting Procedures Manual • Developing training strategy to deliver ongoing training • Monitor budgetary and trial balance reports for compliance • Identify opportunities to assist agencies I. Intro

7. 2008 will be better • Reports have been fixed • Conversion Issues/Data Cleanup has been addressed • 2007 first full year with Program Chartfield I. Intro

8. Governor’s Office of Planning and Budget Trey Childress Director, Office of Planning and Budget • OPB has statutory responsibility to monitor budgets • Compliance with letter and intent of Appropriations Act • Budgets maintained at authorized levels • Allotments of State Funds within authorization • OPB is committed to helping agencies comply by: • Maintaining statewide BudgetNet applications • Providing annual training on systems and Appropriations Act • Issuing specific Policies & Procedures as needed • Monitoring expenditures quarterly I. Intro

9. The Journey to Compliance • Budgetary Compliance is the Destination • OPB and SAO are the Tour Guides • BudgetNet and PeopleSoft are the Vehicles • Business Processes, Policies and Procedures, and the Appropriations Act are the Maps Let’s begin our journey! II. Overview

10. Understanding Budgetary Compliance Destination • What is Program Based Budgeting (PBB)? • What is Budgetary Compliance? • Who are the participants and what are their roles in the process? • What tools are used? • What Processes and Policies Need to be Followed? Tour Guides Vehicles Maps II. Overview

11. The Journey to Budgetary Compliance Destination II. Overview

12. Program Budgeting Definitions* • Program – a discrete set of activities undertaken to carry out an agency’s core business • Budget – complete financial plan for the fiscal year as proposed in the budget report and modified and adopted by appropriation and revenue Acts • Budget Allotment – process of authorizing the withdrawal of state funds from the treasury based on a determination that the budget allotment request is consistent with an approved work plan *(O.C.G.A. 45-12-71)

13. What is Budgetary Compliance? Legal Level of Control – The level of detail identified in the appropriations act at which agencies are required to record and report revenue and expenditures. This level is currently Program, Purpose and Fund Sources within a program. Budgetary Compliance – The agency’s capability to demonstrate adherence to the Appropriations Act. Destination II. Overview

14. What is Budgetary Compliance? • Begins with the Appropriations Act (AOB) • Legal Level of Budgetary Control • Requires continuous monitoring of budgets, fund sources, and expenditures • Agencies are responsible for assuring compliance with the Appropriations Act Destination II. Overview

15. The Journey to Budgetary Compliance Tour Guides II. Overview

16. Who is Involved? State Level Office of Planning andBudget (OPB) State Accounting Office (SAO) Department of Audits Agencies ACCOUNTING FUNCTION BUDGET FUNCTION II. Overview

17. Office of Planning and Budget • Coordinates the fiscal affairs and procedures of the state to assure the carrying out of the financial plans and policies approved by the General Assembly, including administration of a system of annual operating budgets and amendments thereto and of expenditure control.(O.C.G.A. 45-12-73. (4)) • OPB is statutorily required to monitor budgetary compliance for every appropriated agency. II. Overview

18. Office of Planning and Budget • OPB reviews and approves the AOB • OPB may request schedules and other supplementary information; the AOB is the financial plan for the agency • OPB reviews and approves Amendments • OPB may need authorized position/motor vehicle counts, implementation plans, object classes, and subprogram information to ensure conformity to both the letter and the intent of approved appropriations acts • OPB • Ensures allotments conform to the appropriations • Monitors fund expenditures by making sure they are within appropriated/budgeted amounts by program and fund source II. Overview

19. State Accounting Office • Provides statewide policies and procedures for financial accounting • Provides the tools for reporting, tracking and monitoring through the PeopleSoft systems • Prepares and publishes annual financial reports: • Comprehensive Annual Financial Report (CAFR) (GAAP) • Statewide Single Audit Report (Federal) • Budgetary Compliance Report (BCR) (Statutory) II. Overview

20. State Accounting Office • Budgetary Compliance Report: • Demonstrates compliance with the Appropriations Act for both revenue and expenditures • Shows budget to actual variance for all state organizations in the Appropriations Act II. Overview

21. Department of Audits and Accounts • Performs agreed-upon procedures to determine agencies’ compliance with the Appropriations Act • Reviews agency operations and SAO reports to determine if agencies are compliant with the Appropriations Act, following statewide policies, and maintaining adequate accounting records • Conducts performance audits to: • Determine if programs are meeting business objectives • Measure programs results and effectiveness • Evaluate the efficiency of resource allocations • Assess compliance with laws and regulations II. Overview

22. How Compliance is Evaluated Tour Guides II. Overview

23. The Journey to Budgetary Compliance Vehicles II. Overview

24. BudgetNet • All state agencies work in BudgetNet • AOB/Amendments/Allotments • Agencies not using SAO PeopleSoft Financials need to: • Develop a reconciliation process to ensure budgetary controls in the financial application are consistent and in sync with BudgetNet II. Overview

25. BudgetNet • Application of record for approved budgets • Initial load of AOB matches exactly the appropriation by Program and fund source • Used to submit and approve amendments to initial AOB • Used to submit and approve allotment requests for state funds II. Overview

26. Peoplesoft • Two trees are critical to program budgeting: • Program Tree • Funding Source Tree Ensures that financial data is presented correctly • Two Ledgers are critical to program budgeting: • Program Ledger • Allotment Ledger Allows for PeopleSoft & BudgetNet to interface II. Overview

27. Governor’s Office of Planning and Budget BudgetNet/PeopleSoft - The Vehicles Intersections OPB Approves Allotments & Comptroller Issues Warrant Intersections II. Overview

28. Program Budget Comparison Report • Referred to as the PBCR or Budgetary Comparison Report (Report No. GLS4008X) • Only report showing official Budget next to expenditures and revenues by program at the legal level of control • Should be monitored/reviewed at least quarterly • Should be submitted to OPB with quarterly allotment requests • Expenditures should be within budgets and revenues

29. The Journey to Budgetary Compliance Course Corrections - Reconciliations • Reconcile BudgetNet to PeopleSoft (or your financial application) • Reconcile Subsidiaries to General Ledger: • AR, AP, AM, PO, and Budgets • Run budgetary compliance report quarterly • By program and fund source look for: • Expenditures in excess of budget • Revenue booked by program and fund source On the road to Budgetary Compliance III. BC 2007

30. The Journey to Budgetary Compliance The Maps The Road to Budgetary Compliance III. BC 2007

31. 2007 Budgetary Compliance Preliminary Observations III. BC2007

32. Program Based BudgetingFY2007 HB94 • Preliminary Observations • Purpose Statement • Legal Level of Budgetary Control • Revenue Recognition • Cost Allocations • Journal Entry Documentation • Carry-Over State Fund Reserves • PeopleSoft Issues III. BC2007

33. Purpose Statement – HB94 • Indicates how funds should be spent • Expenditures not in agreement with the purpose statement = audit finding HB94 Purpose III. BC2007

34. Legal Level of Budgetary Control - HB94 • Fund Source within Program • State Funds are at the lowest level of detail in the Appropriations Act within the program HB94 Program Purpose Statements Legal Level of Budgetary Control Information Only Information Only Lowest Level of Detail Information Only III. BC2007

35. Revenue Recognition – HB94 • Revenue must be recognized at the legal level of budgetary control • By Program and Fund source within each program • The burden this creates for the agencies is acknowledged III. BC2007

36. Cost Allocations FY2007 • Cost allocations to programs: • No consistency among agencies • Little consistency in methodologies within agencies • Little consistency from year to year • What is needed: • Within agencies a consistent, documented methodology that is uniformly applied to programs and consistent from year to year • Statewide guidelines for agencies III. BC2007

37. Journal Entries – FY2007 • Agencies need to maintain adequate documentationfor all entries • If revenues or expenditures need to be moved to other programs or funding sources • Provide a detailed explanation and justification • Include hard copy substantiation from the original transaction (source documentation) as support III. BC2007

38. Carry-Over State Fund Reserves – FY2007 • Budgeted as Other Funds • Spent as State Funds • Must follow budget • New Policy being developed • SAO is developing new policy to address • Will have Prior Year fund source for each state fund source • Budget will be set up with these fund sources III. BC2007

39. PeopleSoft Issues – FY2007 • Data Integrity – remain encumbrances issues from the conversion that caused trial balances to be off • SAO has worked for the past 6 months to fix • Reports – key reports did not perform correctly • Program Budget Comparison Report (PBCR) • Trial Balance Report • SAO has fixed and tested reports (PBCR Now has a check box to differentiate budget years) III. BC2007

40. 2008 Budgetary ComplianceHB95(To be amended by HB989) IV. BC2008

41. Budget Management Cycle - FY2008 • CAFR Published • BCR Published • Provide any information needed for BCR & CAFR • July 2008 • Submit final cleanup amendments • Closeout Prior Year • Complete Reconciliations Quarterly Reconciliations You are here! IV. BC2008 Quarterly Reconciliations Quarterly Reconciliations

42. 2008 Budgetary Compliance - HB95 Appropriations Act: • Authorizes maximum expenditures by program and state fund source for specified purpose • Federal and other funds are estimated amounts • Federal funds are continually appropriated - agencies can amend in or out as required based on receipt or non-receipt of funds; should not be used to circumvent the Governor’s and Legislative intent. • Federal fund transfers are currently limited by budgetary control language in the back of the bill. HB 95 IV. BC2008

43. 2008 Budgetary Compliance – HB95 Section 55: Budgetary Control and Interpretation “The appropriations in this Act consist of the amount stated …for each line at the lowest level of detail for Total State Funds and Total Federal Funds …in each case as associated with the statement of Program Name and Program Purpose.” “The summary and lowest level of detail for Total Agency Funds and Total Intra-State Governmental Transfers are for informational purposes only.” “When an agency receives appropriations from the group of Total Federal Funds category for more than one program, …the program shall also be authorized an additional fifty percent (50%) of the stated amount…such that the stated total in appropriations from that fund source within the section is not exceeded.” IV. BC2008

44. 2008 Budgetary Compliance - Fund SourcesState Funds Legal Level of Budgetary Control Lowest Level of Detail HB 95 For each Program Legal Level of Control IV. BC2008

45. 2008 Budgetary Compliance - Fund SourcesFederal Funds Legal Level of Budgetary Control Lowest Level of Detail HB 95 For each Program Legal Level of Control IV. BC2008

46. 2008 Budgetary Compliance - Fund SourcesOther funds Legal Level of Budgetary Control Summary Level HB 95 Summary Amount IV. BC2008

47. 2008 Budgetary Compliance Responsibilities: • Agencies are responsible for assuring compliance with the Appropriations Act • OPB processes amendments to AOB, and allotments; and, monitors quarterly budgetary compliance reports • SAO assists agencies with compliance IV. BC2008

48. 2008 Agency Responsibility • Any organization with appropriated funds is subject to Budgetary Compliance • Agencies are responsible for assuring compliance with the Appropriations Act • Record revenues by program and fund source • Expenditures by program and fund source • Continually monitor fund sources and expenditures • Review budget comparison reports • Quarterly budget reviews and adjust as needed IV. BC2008

49. Training and SupportTour Guide Support andMore Maps V. Training

50. Support • Policies for Review • Carry Forward State Funds • Year - End Close • Budgeting Federal & Other Funds • De-amending Federal Funds • Adjustments to Budget Programs • Policies and Procedures – are being developed • Process for approval: • Draft • Agency comment period - 30 days • Revise • Approve • Distribution • Training as needed • Drafts of four specific policies will be distributed shortly for 30-day agency comment period • PeopleSoft Data Validation • PeopleSoft Report/Query functionality is being tested • SAO to review agencies’ reports • OPB Quarterly Reviews of Expenditures • Development of a long-term Training Strategy that includes SAO, OPB, and CVIOG V. Training