13.4 CONTROL OF FINANCES

The institution exercises appropriate control over all its financial resources.

JUDGEMENT

Compliance Non-Compliance Partial Compliance

NARRATIVE

The personnel who are responsible for safeguarding the financial resources of the university are carefully screened before hiring by the Division of Human Resources. To ensure that qualified financial professionals staff these positions, the Division of Human Resources verifies that these individuals have the skills, training and education necessary to perform their jobs. A criminal background check is also performed as a part of the hiring process. All critical financial personnel have been found to have the requisite credentials to perform their jobs.

Internal Audits

The Office of Internal Audit (OIA) reports administratively to the Chancellor and functionally to the Board of Trustees Risk Management, Audit and Compliance Committee to ensure independence in carrying out its responsibility of promoting and supporting a culture of compliance and responsibility. Regular audits are conducted of key operating and financial areas, e.g., information technology, university operations, compliance, and other areas. Audit reports and related findings and recommendations are presented to the Committee quarterly. Follow-up regarding findings are reported to the Committee regularly until all recommendations are implemented. The university, under the guidance of the OIA conducts periodic risk assessments to determine areas of high risk or potential exposure. Examples of high-risk areas are cash handling, P Card account reconciliations, and employee vehicle registration revenue. Employees with signature authority over expenditures receive annual compliance training regarding effectively controlling risks. The Office also sponsors a third-party telephone hotline that enables university employees to anonymously report questionable or unethical practices. The reported incidences are then investigated by the OIA. To continually improve its services and professional abilities, the OIA staff members receive professional development annually.

External Audits

The NC Office of the State Auditor (OSA) fulfills the annual fiscal year-end audit requirement. The OSA provides audit services to North Carolina state agencies, including annual audits of state financial statements, and as a state agency N.C. A&T is included in those statewide audits. The fiscal year 2020 Audit Report is anticipated to be completed by December, 2020.

The University works diligently to address audit findings as soon as they become apparent, and an independent review procedure is in place that involves the university’s Internal Audit and Business and Finance staff members, a representative from the UNC System Office, and the State audit team to assure that findings are addressed in a timely manner.

Additionally, the university athletics department is required by the NCAA to have an annual procedures review performed. The department has contracted with an independent accounting firm, RSM McGladrey, to conduct this annual review. Over 40 operational and financial items are reviewed, and there have been no findings.

Financial Controls

Safeguarding Cash. By its very nature, cash handling is considered high risk. North Carolina law, Chapter 147-86.10 of the General Statutes, requires that "all agencies, institutions, departments, bureaus, boards, commissions and officers of the State... shall devise techniques and procedures for the receipt, deposit and disbursement of monies coming into their control and custody which are designed to maximize interest-bearing investment of cash and to minimize idle and nonproductive cash balances end.” The university documents its procedures for complying with this statute in its University Cash Management Plan reviewed and approved by the NC Office of the State Controller.

Key elements of the university’s cash management system are to assure that:

1. collections are properly identified, control totals are developed, and collections are promptly deposited intact;

2. bank accounts and cash on hand are subject to effective custodial accountability procedures and physical safeguards;

3. transactions are promptly and accurately recorded in adequate detail records and appropriate reports are issued; and

4. transactions are properly accumulated, correctly classified and summarized in the general ledger balances and are properly and timely reconciled with bank statement balances.

There are no exceptions allowed to the State’s Daily Deposit and Reporting Act. However, in the normal course of business, credit card transactions must be settled through a payment processor. After settlement, these funds are deposited into the depository account within forty-eight (48) hours. In such cases, the funds are reported to the State Treasurer once they are in the depository account. Monitoring takes place via internal audits and surprise cash counts by the Office of Internal Audit, annual State audits, and daily and month-end reconciliations by the University Treasurer and Director of Accounting. Daily bank deposits are made via a contracted armored car service.

Monitoring Expenditures. Controls over expenditures take various forms.

1. Budget. In fiscal year 2007-08, under the direction of the Vice Chancellor for Business and Finance, the university established the Budget Advisory Committee (BAC) that meets annually. Lead by the Associate Vice Chancellor for Budget & Planning, the BAC reviews university school and college recommendations and constructs a preliminary budget. The preliminary allocation is published for review and comment prior to the committee making the final recommendations to the Chancellor. The Chancellor makes the final decision about the budget allocation and approves the budget. The final budget is then approved by the UNC Board of Governors

The university’s Office of Budget and Planning regularly monitors its State budgets and provides the campus with a Basic Spending Guidelines Manual. Monthly, university budget reports must be submitted to the NC Offices of the State Controller and Budget and Management. Semi-annually, the Office of Budget and Planning provides an update to the Board of Trustees. The Offices of Contracts and Grants and Campus Enterprises monitor grants and auxiliary enterprise budgets, and various Business and Finance offices monitor financial transactions to ensure compliance with policies and procedures. The financial status of funds is available to all account managers, with appropriate security access, on the institution’s Banner Finance System. Training on the financial system is available on the Internet and via periodic classroom training conducted by Business and Finance staff. Monthly procurement card account reconciliations are required to ensure the propriety of expenditure. Campus Enterprises holds a financial statements and budget review meeting quarterly that includes the Vice Chancellors for Business and Finance and Student Affairs to examine the operations and budgets of all auxiliary enterprise operations.

2. Procurement: Departmental purchase requesters are trained in purchasing policies and procedures via classroom training conducted by the Procurement Office Staff. The university complies with all State of North Carolina Department of Administration’s Division of Purchase and Contract rules and regulations. Additional training and monitoring is conducted by the Comptroller’s Office to ensure appropriate controls over the university's purchasing card (p-card) program. New purchasing cardholders are provided training and a review of the Procurement Card Users Guide prior to receiving their cards, and additional training is given throughout the year. Procurement card transactions are reconciled monthly by the cardholder, reviewed and approved by a person of higher authority, and audited by the procurement card compliance officer within the university’s Accounting Office. The p-card administrator monitors the p-card program and activities through various reports available from the card provider.

3. Contracts: The Chancellor and his designee, the Vice Chancellor for Business and Finance (VCB&F) sign contracts for the university. (The only exception is made for sponsored program contracts that may be signed by the Vice Chancellor for the Division of Research and Economic Development.) Contracts must adhere to the University Contract Policy and Procedures. Vendors must sign a contract prior to the VCB&F’s approval. Department heads/deans must initial contracts for their department approval. Contracts are reviewed by the Purchasing Department and Office of Legal Affairs prior to approval by the VCB&F. Any unauthorized person who signs a contract and sends it to a vendor subjects themselves to being personally liable for the contract, including payment of any and all fees. However, it has never been necessary impose this sanction.

4. Endowments and Investments: N.C. A&T follows the endowment policies and procedures set forth in the UNC Policy Manual Section 600.2.1.2 as provided by N.C. General Statute 116-36, as well as University bylaws approved by its Board of Trustees. The Board of Trustees of the Endowment Fund of North Carolina A&T State University assumes the responsibility for approving investments and liquidations, regularly monitoring the performance of fund managers, and directing the overall investment strategy of the endowment fund. The university’s Investments Committee, housed within the Division of Business and Finance, holds the responsibility for making suggestions to and acting upon operational requests from the Endowment Board.

The Investments Committee meets regularly throughout the year to monitor the status of endowments and related policies and procedures. Investments and expenditure allocations for scholarships, professorships, department chairmanships, etc. are guided by the Spending Policy and Guidelines for Investment of the Endowment Portfolio. Annually, the Investments Committee meets to allocate earnings per the policy, with unallocated income remaining invested in a quasi-endowment to protect the endowment corpus. Upon donor request, or annually, a report is distributed to keep donors abreast of their endowment balance and the use of funds.

Sponsored Programs and Federal Awards Controls

The university maintains appropriate financial control over externally funded or sponsored research and programs. The Office of Contracts and Grants (C&G) is the primary unit within the Division of Research and Economic Development (DORED) responsible for ensuring internal control. C&G is responsible for ensuring that faculty act in accordance with their grants and contract awards and adhere to federal regulations and State of North Carolina compliance policies and N.C. A&T policies.

Contracts and Grants staff, other DORED staff and external experts provide training to principal investigators and administrators at N.C. A&T. This training was developed to ensure that those involved in sponsored research follow all current research and financial requirements. Frequent interactions with principal investigators and college research administrators are scheduled to maintain compliance. As a recipient of federal research funds, N.C. A&T certifies periodically the percentage of effort spent on research projects using its E-Certify system for recording, monitoring, and reporting time and effort certifications of salaried employees. Hourly employees are certified through time sheets.

C&G also provides post-award financial services including budgetary and financial controls, monitoring, and oversight to ensure the integrity and continued success of the research program. In cooperation with the Office of Sponsored Programs (OSP), the C&G Office assists in new award set-up, internal and external grant and contract monitoring, cost-sharing facilitation, effort-reporting coordination, billing, financial report development and submission, final award closeout, Facilities and Administrative (F&A) recovery reconciliation, reporting, audit coordination, and coordination of the federal F&A cost study.

Capital Assets and Debt Administration

The university is fiscally conservative in the administration of its debt and is prudent in controlling expenditures for capital projects that enhance the teaching/learning experience for its students, provide adequate space and equipment for its research, and maintain the quality of its physical plant. As a state university, N.C. A&T receives funding from the State budget, but because of limitations on that budget, the university also very thoughtfully and purposefully issues debt.

Recognizing the benefits of strategic debt issuance, the Board of Trustees approved a Debt Management Policy in 2018 that was developed to support the university’s efforts to manage its debt on a long-term, portfolio basis and in a manner consistent with its capital improvement plan, stated policies, objectives and core values.

Additionally, through a UNC system-wide contract with a financial advisor, the university annually conducts a debt capacity study that, in compliance with the debt management policy, analyzes key debt ratios and provides comparable data on UNC system and external peers. The peer comparison shows that N.C. A&T situates itself in an excellent position with respect to debt capacity.

Key Performance Indicators and Assessment of Internal Controls over Financial Reporting

Data for key performance indicators (KPI’s) are recorded and reviewed monthly by financial managers in the areas of financial aid, student accounts, accounting, contracts and grants, fixed assets, and human resources/payroll. The data are reviewed and submitted by the AVC for Finance to the UNC System Office where it is also reviewed and compiled into comparative system-wide quarterly reports for the Chancellor and VC for Business and Finance.

On an annual basis, the Comptroller’s Office conducts an assessment of internal controls over financial reporting (AICFR), a broad review of internal controls throughout the university’s financial spectrum. The 74 page review covers over 40 financial processing areas, including integrity and ethical values. The assessment committee includes a member of the internal audit staff, and both the Vice Chancellor for Business and Finance and the Chancellor certify the results to the Office of the State Controller. Weaknesses discovered are addressed in a timely manner.

The KPI’s and the AICFR provide additional controls over financial resources by highlighting weaknesses, requiring timely remedy, and communication to university leadership.

Supporting Documents

1. Division of Business & Finance Organization Chart

2. Office of Internal Audit Organizational Chart 2020

3. Board of Trustees Committees and Meetings 2019-20

4. Audit Reports

5. Internal Audit Surprise Cash Count Registrar 2019

6. Review of Internal Controls Over the University P-Card '18

7. Review of Internal Controls Over Employee Vehicle Registration Revenue '18

8. RSM “NCAA Agreed Upon Procedures Review of Athletics”

9. NC A&T Cash Management Plan

10. NC A&T Budget Advisory Committee

11. NC Daily Deposit and Reporting Act