Internal sales reviews University of Minnesota Office of Rate by MikeJenny


Internal sales reviews University of Minnesota Office of Rate

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									          University of Minnesota
      Office of Internal\External Sales
                 ISO Meeting
              January 20, 2011

“The Internal Sales Review Process”
  Keith Jansen – Internal\External Sales Manager
        Mary Kosowski – Compliance Officer
         Jeff Kurland – Compliance Officer
        Session Objectives:

• Explain the process used for internal sales

• Identify what can be done to improve the
         About the Reviews
Scope does include:
  • Budget vs. Actuals vs. Rates
  • Rates for previous fiscal year ended
  • Resource utilization
  • Break-even analysis
  • Margin analysis
    “Which ISO’s will be reviewed?”

• Objective is to focus our review work on the
  areas of greatest risk
• Review all ISO’s every 2 years
• Identify the risks and review the controls over
  those risks
• Use information gathered during the annual
  budget and certification process
     Reviews Process Objective
• Objective is to determine if the rate
  development methodology, accounting, and
  rate charging practices are compliant with
  OMB-21 requirements, federal cost
  accounting standards, and University of
  Minnesota policy.
              Prior to the Review
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

• Generally ask for these materials to be
  returned in 10-14 days to Internal Sales
• Electronic submission required
• Information is used during review
    Prior to the Review (continued)
• Before the review work has been started
• Typically the RRC Manager & main financial
• Provides a chance to discuss the general
  review process
• Gives input to ISO activities that will be
       Review Process (continued)

• Use an internal sales rate review checklist
  and memo to document rate review
• Review any ISO’s that are identified by
  Internal Audit as high risk
       Review Process (continued)
Information sources:
• Download UMReports from EFS to aid in
  determining revenue and cost recognition
• Fixed Asset report from Inventory Services
• The request for information is sent to
  management describing what questions to
  be asked and information requested
      Review Process (continued)
• Activities reviewed:
  •   Unallowable and allowable costs
  •   Transfer codes
  •   Segregation of revenue and costs
  •   Rate volumes
  •   Depreciation
  •   Operating Margin
  •   Inclusion of all costs
  •   Impact of External Sales
  •   Budget vs. Actuals and Rates
  •   Customer base and rate type
  •   Annual Requirements
    The Review Process (continued)
• 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
            Reviews (continued)
What to expect during the review?
  •   Length of time
  •   Transaction documentation
  •   Follow-up questions
  •   Communication of results-resolution-conclusion
             Reviews (continued)
How do the results affect you?
  • Awareness of policies/processes/best practices
  • Changes needed to enhance compliance or
  • Update rate development

• Internal review of work performed
• Compliance memo and checklist
• Timelines for Management Action Plan
  response and final report
          After the Review
• No Significant or Essential findings:
  – the review is closed
• Significant or Essential findings:
  – require a Management Action Plan
     After the Review (continued)
• What is in the compliance memo?
 o Description of the unit and the activity
 o Summary of findings
 o Recommendations
 o Ratings of findings
 o Management action plan response
   requirement to each item
            After the review (continued)
                                       Internal Sales Recommendation
                                                Rating System

This review incorporates a rating system that has been developed to enable the reader to determine the
relative importance of the recommendations made. The rating for each recommendation is shown directly
after the recommendation. Recommendations are rated as follows:

Level                    Description
Essential                Resolution would help avoid a potentially critical negative impact involving loss of
                         material assets, reputation, critical financial information, or ability to comply with
                         the most important laws, policies, or procedures.

Significant              Resolution would help avoid a potentially significant negative impact on the unit's
                         assets, financial information, or ability to comply with important laws, policies, or

Useful                   Resolution would help improve controls and avoid problems in the unit's
                         operations. These issues are handled verbally with the unit audited.

The Office of Internal Sales will do a follow-up on all "essential" recommendations to determine the progress
made on implementation.
   Common Compliance Issues
• ISO 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
• Not segregating revenues and expenses for ISO
  and ESO
• Purchasing equipment directly to a ISO account
  rather than a ISO plant fund
• ISO set up with incorrect fund and accounts
• Not managing surplus or deficits
Who sees the Compliance Memo?
•   Department Head/Dean/Director
•   Business Manager
•   RRC Manager
•   Budget Office
•   Controllers Office
•   Department of Audits
•   Internal/External Sales Manager
      Periodic Follow-up Process
How to be prepared for follow-up?
  • Review report findings, recommendations,
    and management action plan
  • Retain documentation to support efforts
    towards implementation
  • Communicate with internal/External sales
    on ongoing progress
  • Self-assess progress toward expected
    implementation date
             Memo Response
• Management Action Plan is due 1 month from
  the date of the memo
• Essential findings must be corrected within
  three months of date of memo
• Significant finding must to corrected during
  next budget cycle
• Surpluses greater than 15% must be paid
  back three months of date of memo
• Deficits that will not be included in future rates
  must be paid before fiscal year end
Periodic Follow-up Process (continued)
Letter to Internal/External Sales prior requesting:
     • Update on current status
     • Progress made since report or last follow-
     • Obstacles preventing or delaying
Periodic Follow-up Process (continued)
Actual follow-up by Internal/External sales
  • Documentation to support status as
  • Limited review to confirm
  • Summary report and assessment of
How to improve the review process
Prompt responses to Internal/External sales.
  •   Requested Materials
  •   Documentation
  •   Request for response
  •   Requests for meetings
  • Availability of key staff
  • Completion of requests
  • Concerns / Explanations
 How to improve the review process
Take action
  •   Implement agreed-upon management action plan
  •   Do self assessment before review
  •   Communicate progress
  •   Retain documentation
Tips on how to prepare/stay prepared
         for the next review
• Adjust operations to ensure compliance with
  changes in state/federal legislation, University
  policies and business processes
• Keep items asked for during planning current
• Downsizing, restructuring, merging of functions can
  impact internal sales rates; take a look to ensure
  rates are still proper
• Use U-wide systems and processes in lieu of
  developing in-house processes

    Resources: Office of Internal Sales website

•     This presentation is posted on the site.

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