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Internal sales reviews University of Minnesota Office of Rate
Internal sales reviews University of Minnesota Office of Rate
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 reviews • Identify what can be done to improve the process 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 (continued) • 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) Meeting • Before the review work has been started • Typically the RRC Manager & main financial person • Provides a chance to discuss the general review process • Gives input to ISO activities that will be reviewed Review Process (continued) • Use an internal sales rate review checklist and memo to document rate review compliance • 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 efficiencies • Update rate development Reporting • 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 procedures. 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- up • Obstacles preventing or delaying implementation Periodic Follow-up Process (continued) Actual follow-up by Internal/External sales • Documentation to support status as reported • Limited review to confirm • Summary report and assessment of progress How to improve the review process Prompt responses to Internal/External sales. • Requested Materials • Documentation • Request for response • Requests for meetings Communicate • Availability of key staff • Completion of requests • Concerns / Explanations How to improve the review process (continued) 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 Questions? Resources: Office of Internal Sales website http://www.finsys.umn.edu/sales/iso.html • This presentation is posted on the site.
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