Purpose of this GuideDepartment of Finance - Flow Chart
DefinitionBudget DevelopmentObjectivesBudget MethodologySteps in DevelopmentKey ConsiderationsPossible Funding SourcesGeneral Expenditure ConsiderationsSalary Related ExpensesOther ExpensesImplementationDepartmental Carry forward FundsCarry-forward ProcessCalculationMonitoring/ForecastingMaking Adjustments
Capital PlanDefinitionObjectivesDevelopmentImplementationCarry-forward processMonitoring/ForecastingConference Academic
DefinitionMonitoringDevelopment and ImplementationOverspendingPolicy concerning Spending of Restricted Funds
Bank AccountsCash, Other Receipts and BankingIncoming Wire PaymentsDebit Card or Credit Card FacilityRecords Management for Cash and BankingPetty CashAccounts ReceivableInventories/SuppliesAccounts Payable and DisbursementsControl over Accounts PayableReimbursement of Expenses
When a Gift may be givenRestrictionsPre-approval requirement
This guide has been written with several objectives in mind:
|Director of Finance|
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|Accounts Payable||_|_||Accounts Receivable|
The Director of Finance reports to the Bursar.
The Controller is responsible for the day to day activities within the Department of Finance and is responsible for customer relationships within the University.
Victoria University manages its financial operational affairs within four funds as follows:
the Operating Fund (prefix 0)
the Ancillary Fund (prefix 2)
the Restricted Fund (prefix 1 and 3) and
the Student Awards Funds (prefix 4) See account structure below.
In addition the University maintains an Endowment fund (also prefix 4).
Fund accounting is a financial management tool to ensure that all similar purpose revenues and similar purpose expenses are grouped together in accordance with the intended purpose. The definitions of each fund are included in the budgeting section of this guide.
Each Fund tracks revenues, expenses, assets and liabilities. One of the principal tenets of generally accepted accounting principles (GAAP) is that financial statement elements should not be netted out against each other. In other words revenues must be deposited in revenue accounts and expenses must be paid from expense accounts.
Victoria uses an 11 digit account structure. For example,x-xxx-xxxx-xxx. The account is explained as follows
X the first digit is the Fund identifier i.e. 0 for the Operating Fund.
XXX the next three digits identify the owner of the account (e.g. 090 = Bursar)
XXXX the next four digits identify the Object of the account (e.g. 9100 = Bank charges)
XXX the final 3 digits identify a sub group within the Object (e.g. 030 = Master-card charges)
Therefore account 0-090-9100-030 indicates that this is an Operating Fund account held by the Bursar to account for Bank Charges in general and Master-card charges in particular.
Keeping the structure on this basis seems some what complicated but it is done not only to track expenses but to comply with external reporting requirements. This structure allows us to summarize the accounts in many different ways.
The Chart of Accounts is the official listing of all the accounts used by the University and is maintained by the Controller’s Office.New accounts will be added upon request.
The Operating Fund includes all general operating revenues and expenditures for the academic and administrative departments of the University. The main financial support for operations comes from:
The allocation of available operating funds across the different University departments is referred to as the budget process. This process has three distinct components: Budget Development, Budget Implementation, and Budget Management/Monitoring/Forecasting.
The budget for the Operating Fund is created through the annual budget process. Using a multi-year approach and an extensive review process involving both budget managers and the President, guidelines (i.e.spending parameters, budget cuts, etc.) are developed which are incorporated into the overall process. The budget process takes place during the months of November through February culminating in presentation to the Finance Committee of the Board of Regents at its meeting in late March. (See Appendix 1)
Victoria employs a rolling budget methodology whereby only the total cost of programs is addressed.Any new programs or services are “zero-based” where costs are constructed from the bottom up.
There are many factors that come into play when developing divisional/departmental budgets, a number of which are consistent throughout the University:
The University’s current practice is to allow, subject to approval by the President, a department to manage the spending of operating funds assigned to it and to carry forward any unspent funds to the next budget year. In a similar manner (subject to Presidential review), departments are required to carry net overspending forward to the next budget year such that the overspending will be recovered in the following year. These amounts are referred to as the departmental carry forward funds.
At the end of each fiscal year the budget manager advises the President of any unspent funds that he/she wishes to carry into the forthcoming fiscal year. The President determines how much to permit the manager to carry forward. Any such amount will show as a one time only (OTO) amount in the accounting system.Departments will spend as normal and make charges against the expense lines normally charged. The OTO amount will contribute on a bottom line basis only.
The idea of showing departmental carry forward funds as an OTO amount is to make it clear that the intent is not to have excess funds built up over time. Each year the President will decide where the current priorities are and how they will be funded. Maintaining the carry forward funds in this fashion allows for maximum overall budget flexibility.
At the end of April, the divisional carry-forward amount for each Operating Fund Centre is calculated as the net of:
The operating budgets, which are now in departmental accounts as a result of implementation of the annual budget process, reflect detailed allocations of the Operating Fund.As such they represent spending limits.
It is important for budget managers to monitor, on a monthly basis, the actual results against the approved budget in order to identify expected variances and take appropriate action:
The Finance Department prepares the overall year end forecast for the University from input provided by the budget managers at 6 months and 9 months. This information not only signals possible overspending problems but also provides input to cash flow analysis which is critical to forecasting investment income.
The departmental financial reports provided by the Finance Department, referred to as “Responsibility Statements” are the starting point for monitoring monthly expenditures and for forecasting results to the end of the fiscal period. They reflect current budgets, actual revenues and expenditures to-date. In arriving at a forecast, future expenses, and unplanned revenue not yet reflected, must be taken into account. Each budget manager or business officer must reconcile her/his department’s accounts with the University’s financial system on a monthly basis. The Finance Department is always on hand to assist you in understanding your financial statements.
One option for dealing with forecasted variances is to reallocate budget from one account to another where appropriate, and where allowable. This would only be done in a multi-department situation.
The Ancillary Fund includes all revenues and expenditures of the residence, food service parking and conference operations of the University. All ancillary revenue and expenses are recorded in this fund. The Ancillary fund is kept separate for management and reporting purposes because these operations are intended to be self funding and do not draw on other University resources.
The budget for the Ancillary Fund is created through the annual budget process. Using a multi-year approach and through an extensive review process involving the managers of the ancillary departments (i.e. Food Services, Housekeeping, Physical Plant, and Conference Services), the Dean of Students, VUSAC, the Residence Presidents and the Bursar, guidelines are developed which are incorporated into the overall process. The budget process takes place during the months of October through January for presentation to the Finance Committee at its meeting in late January.
Once the Ancillary Budget is approved, budget managers are notified and then asked to submit line-by-line details for entry into the accounting system using the following guidelines:
The ancillary budgets, which are now in departmental accounts as a result of implementation of the annual budget process, reflect detailed allocations of the Ancillary Fund.As such they represent revenue targets and spending limits.
It is important for budget managers to monitor the actual results against the approved budget in order to identify expected variances and take appropriate action such as:
The Finance department prepares the overall forecast for the Ancillary Fund from input provided by the budget managers. This information not only signals possible overspending problems but also provides input to cashflow analysis which is critical to forecasting investment income.
The departmental financial/responsibility statement is the starting point for forecasting results to the end of the fiscal period. It reflects current budgets, actual revenues and expenditures to-date. In arriving at a forecast, future expenses not yet reflected in the account must be taken into account. Each budget manager or business officer must reconcile her/his department’s accounts with the University’s financial system on a monthly basis.
The Ancillary operation breaks easily into its conference and academic operations. The former being made up primarily of business ancillaries (e.g. conference and hotel business) and the latter being made up primarily of service ancillaries (e.g.students in residence). Within these two very different types of operations it is also important to ensure that there is no cross subsidy. The Finance department facilitates the performance of this analysis and works with budget managers to ensure an accurate assignment of revenue and expenses.
The University does not maintain a separate Capital Fund. Capital Fund Assets, which are normally defined to include all land, building, furnishings, computers etc.,are coming led within the Operating and Ancillary Funds. The University does however have an extensive process for developing its Capital Plans.
The Capital Plan includes all building, renovations, general repairs and maintenance of academic, ancillary and revenue generating properties.
The Plan for Capital is created as part of the annual budget process. Using a multi-year approach and through an extensive review process involving the Director of Physical Plant, VUSAC, Dean of Students, the Bursar and the President, the Plan is developed. Development of the Plan takes place during the months of October through January for presentation to the Campus Life Committee, the Property Committee and then the Finance Committee at their meetings in late January.
Once the Capital Plan is approved, the Director of Physical Plant is notified and then asked to submit line-by-line details for entry into the accounting system.
It is often difficult to have large projects completed by the fiscal year end. Any unspent funds, with the approval of the President, are carried into the next year. This approach means that a new allocation will not have to be sought for the remainder of the project.
The Director of Physical Plant prepares a quarterly up date of spending for each approved project along with a forecast to the end of the fiscal year. He works closely with the Finance department to maintain records appropriate to this task.
To facilitate this process the Finance department assigns a separate general ledger account for each approved project. All expenses are recorded in these accounts, which remain active until the Director of Physical Plant informs the Finance department that the project has been completed.
Capital assets, comprising tangible properties such as land,buildings and equipment, are identifiable assets that meet all of the following criteria:
At Victoria University, all purchases that meet the above criteria and have a life expectancy greater than one year and a value of $5,000 or more (excluding related costs, e.g. freight and taxes) are considered capital assets. This definition is applicable regardless of whether the purchase is funded by Operating, Ancillary, Capital or Restricted Funds.
Departments are required to keep track of all capital assets and be prepared to produce receipts in the case of an insurance claim. At a minimum, capital asset records should identify the cost and location of all assets owned by the University.
See Victoria University Purchasing Policy (See Appendix 2)
Disposals refer to capital assets where title/ownership has been transferred to a party outside the University by way of sale, trade in or gift, or removed from service due to obsolescence, scrapping or dismantling.Departments play a key role in ensuring that all disposals are reflected in the University’s annual financial statements.
The following are general requirements with regard to the disposal of capital assets:
Any items falling under the above should be reported to the Finance department.
Restricted funds are those funds that are held for a specific purpose and are not combined with other funds of the University. The source of funds can be either external or internal. External include for example,specific purpose grants and other amounts from outside agencies and donors.Internal include for example, carry-forward funds and other amounts designated by the President or the Board of Regents.
Restricted Funds are always identified with a particular Department, and as such, the account activity is reported through the accounting system each month.
Restricted funds are not budgeted per se as the source and timing of expenditures is often left to the individual in charge of the account. When funds are received it is the responsibility of the Budget Manager to contact the accounting office and discuss which accounts are most appropriate under the circumstances.
Restricted funds are not allowed to fall into a deficit balance. If they do it is the responsibility of the Budget Manager to contact the accounting office with a plan for putting the account back into good standing.
RESTRICTED FUNDS (See the Victoria University Policy concerning Spending of Restricted Funds (See Appendix 4)
Monies are placed into Restricted Funds as a way limiting their use for any other purpose. Doing so allows the University to ensure that funds entrusted to the University by sponsors and donors are used for their designated purpose. Funds in this fund can be restricted either internally or externally.
The Department Head ensures that:
The University is pleased to accept donations from its benefactors to support its members and operations.Frequently, the use to which these donations and the income from them, where they have been endowed and invested, may be directed is prescribed by terms created by the donor (externally restricted funds) or, failing that, by the Board of Regents (internally restricted funds).
Under normal circumstances, spending of these monies does not exceed the funding available. But, from time to time,situations arise in which overspending occurs and may be appropriate. Thus, the following guidelines have been established to give direction to and control of the spending of restricted funds and income from the investment of such funds.
3. The Bursar will present are port annually to the Audit Committee and Finance Committee of the Board of Regents summarizing overspending of restricted funds for the previous year.Where overspending exceeds 10% of the annual income of any fund, details will be given of the circumstances surrounding the overspending and the actions planned to rectify the situation.
Although in some cases authorization to approve transactions can be delegated, the responsibility cannot be delegated.Accordingly:
According to NSERC and SSHRC regulations and as outlined in the Award Holder’s Guide, a student holding an NSERCCGS-D/PGS-D Scholarship or a SSHRC CGS/Doctoral Fellowship is required to complete and submit an annual progress report in order to renew their multi-year award. The Awarding Council may cancel the award if the student's progress is not judged satisfactory. This document may be used to continue a scholarship for a maximum of three academic terms.
Document your annual progress report using the following form: Annual Progress Report
Student award funds include funds for scholarships,bursaries, prizes and loans and are designated for awarding to/or the benefit of either Victoria College or Emmanuel College students. The source for the bulk of these funds is the Endowment Fund, which is invested to generate income in perpetuity for the support of student awards.
Student awards funds are reported each month through an Excel report generated by the Finance department. Money available for spending identified as income; awards granted identified as expenses. This report is given to the Registrar’s office 15 working days after each month end.
Transfers of funds between student awards funds are limited to those that do not contravene donors’ terms and conditions, or are explicitly permitted by donors.
Student awards funds are not allowed to fall into a deficit balance. If they do it is the responsibility of the Budget Manager to contact the Finance department with a plan for putting the account back into goodstanding.
The Bursar and Registrar review the balance of awards spending accounts at the end of the year and determine whether any of the unspent funds should be returned to the Endowment Fund.
All bank accounts for Victoria University must be authorized by the Controller’s Office. All bank accounts must be reconciled monthly.
Deposits are discussed in the next section.
Controls over cheques:
Access to cheques is restricted.
Cheques require more than one signature.
Cheques are not pre-signed.
Payments must be supported by original invoices or receipts. Payments to individuals must receive payroll department authorization prior to payment.
(includes currency, cheques, credit cards, etc.)
Certain departments have made arrangements with the Financial Services Department to deposit funds directly with the University’s bank. Generally, these arrangements have been made where the department receives significant amounts of cash.
Departments that do not direct deposit are required to deposit their funds with the Controller’s office. Cash receipts received by departments should be brought to the Controller’s Office for deposit either weekly or when receipts amount to at least$500 or more. Receipts should be deposited intact and not used to finance expenditures or for any other purpose. Cash must be kept in a secure location while it is being accumulated.
Departments should advise their customers that cheques should be made payable to Victoria University. Cheques will be restrictively endorsed immediately upon receipt stating “For Deposit Only, to the Credit of Victoria University” by the Controller’s office.
Wire payments should be coordinated with the Controller’s Office. This is important so that the customer is given the correct deposit information and that the Department is given due credit for all funds received in the University’s bank account.
The Controller’s Office will provide guidance and assistance to any department wishing to set up a Debit Card or Credit Card Facility, which would allow the department to accept payments in addition to cash and cheques.
Departments, regardless of whether they deposit direct or through the Controller’s Office should issue receipts for all cash received.The receipt should identify the date, the amount and the payee.
A log book should be kept in the department to record all receipts and subsequent deposits.
Petty cash floats must be arranged through the Controller’s Office.
Controls over petty cash:
Petty cash should be stored in a locked, metal cash box, which should be kept in a locked desk, cupboard or safe, and should have a custodian assigned within the department.
Petty cash should not be mixed with revenues or deposits.
The custodian should count petty cash periodically, balance the count and request a reimbursement. Reimbursements should be processed in time to record expenses within the fiscal period in which they were incurred.
Individual petty cash expenditures should not exceed $50.00
Petty cash may not be used for loans, cashing personal cheques or payments for services, except for personal services that are very small, non-recurring and where the recipient will not receive more than $500 from the University in the calendar year.
Credit is extended from time to time to customers or other related organizations. It is the responsibility of the department granting the credit to keep the average collection period as short as possible by ensuring that no credit is allowed where there is a high risk of non-payment and by ensuring that billings are issued promptly and accurately. Departments must obtain assurance that adequate credit checks are carried out on prospective customers, and that invoices for goods and services reflect the full cost of services or goods delivered.
Reports from the Controller’s Office identifying overdue accounts and other billing issues must be dealt with promptly. All write offs and allowances for doubtful accounts must be discussed with the Controller’s Office.
The Department granting credit must obtain assurance that no goods or services will be committed or delivered without adequate assurance that the full invoice price of delivery will be collected in a reasonable time.
All legal and binding contracts must be approved by the Bursar.
Stocks of supplies and equipment are fairly easily converted to cash and often subject to theft, losses and pilferage. Thus, they represent assets that need to be protected. Since they also represent funds tied up, quantities should not be any larger than absolutely necessary and inventories should not remain on hand for so long that they become obsolete.
Supplies should be kept in a safe location and the department head should ensure that they are adequately safeguarded from theft and abuse.
Office supplies may be purchased through the use of Grand and Toy Account cards. When supplies are purchased in this manner, the purchaser will be provided with an invoice that is to be coded and sent to the Controller’s Office for payment.
When paying bills it is important to have evidence that the goods or services have actually been received or carried out by the vendor. If there is any dispute, the Controller’s Office should be informed immediately in order to withhold payment. Under the present arrangements, all invoices, once approved should be forwarded to the Controller’s Office for payment. The Controller’s Office produces cheques twice weekly and mails them directly to the payee.
The Controller’s Office maintains an authorization form (See Appendix 3) detailing who may sign for invoices and for what amounts. It is up to each department to ensure the form is up to date.
The University pays HST on all invoices but receives a rebate for two thirds of the amount paid.The Department is credited with the amount refunded. The Controller’s Office will provide Departments with a stamp that assists with the calculation. Departments must calculate the amount of there fund.
- The Department Head should approve all charges to departmental accounts.
- An appropriate segregation of duties should be maintained, as far as possible. (e.g.the person who approves the invoice for payment should not be the person who actually receives the goods or services).
- Where authority to approve payments has been delegated, the Department Head must ensure that appropriate parameters and instructions are provided.
- Where purchase orders have been used, the Department Head should match the charges in the accounts to the purchase order and goods receipt or packing slip(s).
- Where purchase orders have not been used, the Department Head should review the supplier’s invoice in detail to ensure that charges are appropriate, and should ensure that the monthly statement of account has been charged accordingly.
(See Victoria University Travel Policy, and Victoria University Hospitality Policy Appendix 5)
University faculty, staff and visitors may incur expenses which are eligible for reimbursement by the University. The objective is to ensure that prompt reimbursement is made for eligible expenses which are documented and which have been approved by one level of signing authority higher than the claimant.
The Department Head is responsible for ensuring that funds entrusted to the faculty member/department are used only for purposes consistent with the conduct of the University’s academic and research programs and activities in a cost effective manner. This equally applies to disbursements made to reimburse faculty, staff and visitors for out-of-pocket expenses incurred to meet the approved objectives.
The Department Head should ensure that there is a need for the expense prior to authorization and of the subsequent request fo reimbursement prior to approval.
The majority of expenses for which reimbursement is required relate to travel. It is recommended that all travel arrangements be pre-approved prior to making travel arrangements. Considerations in providing approval for:
For all other out-of-pocket expenses the Department Head should ensure that:
The Department Head must personally approve all expense reports within the department. This responsibility cannot be delegated.
Expense reimbursements should be filed on the prescribed form (See Appendix 6)
Victoria University follows the University of Toronto policy on Moving Expenses (See University of Toronto Policy on Moving Expenses).
When the Department Head determines that the amount of the request is reasonable and that it is clearly not feasible to apply a more cost effective method such as use of a personal credit card, he/she may arrange for an accountable advance. This will be done through the prescribed form (See Appendix 7). Please note that where receipts are not filed in support of the accountable advance, the amount therein will be considered taxable income and will be added to the person’s T4 slip at the end of the year.
(See Victoria University Income Tax Policy and Guidelines [See Appendix 8 (a)-(c)])
Salary and benefit costs represent the largest element of the University’s budget and it is important to ensure that payments to individuals providing services to the University are made accurately, on a timely basis, are properly authorized and comply with legislative requirements,University policies and collective agreements.
All employees’ information must be processed through the Human Resources (HR) Office prior to the employee being paid through the payroll system. Once duly processed through HR the information will be set up in the University’s HR/Payroll system and employees will be paid according to their relevant pay schedules.
Department Heads should send newly hired staff directly tothe Payroll Office to fill out the new hire paper work such as TD1, Bank Information, and benefit forms. Please note that non-Canadian citizens will be required to complete forms specific to their circumstances.
The Department Head will ensure that:
Purchasing is covered under the Victoria University Procurement Policy (See Appendix 2). Payments to Vendors are covered under the Section on Accounts Payable and Disbursements.
Purchasing cards are provided to certain departments based on approval of the Bursar. The following rules apply to University issued purchasing cards:
a) The reason for giving the gift supports the mission of the University; and
b) It is permitted under the terms and conditions of the funding source
a) A token of appreciation for participation in an event;
b) A token of appreciation for participation in an event;
c) A non-cash award for winning a competition orcontest
d) A non-cash prize for attending an event;
e) Expressions of sympathy;
f) Retirement; and
Gifts will be approved in advance by an Authorized Approver and the reason for the gift purchase must be explained in detail and justified.
The actual payment must be supported by an original receipt. The recipient of the gift must also be identified.
Items of small or trivial value will not be considered a taxable benefit. These items are not included when calculating the total value of gifts and awards given in the year in order to apply the threshold.
Examples of items of small and trivial value include:
Victoria University Purchasing Policy
|1||Monies available from restricted funds will be expended only for the purposes described in the terms of the gift or as determined by the Board of Regents. |
|2||The amount of funding to be spent from a restricted fund will not exceed the amount available (i.e. the free balance) in any given year, unless one of the following conditions apply: |
|3||The Bursar will present a report annually to the Audit Committee and Finance Committee of the Board of Regents summarizing overspending of restricted funds for the previous year. Where overspending exceeds 10% of the annual income of any fund, details will be given of the circumstances surrounding the overspending and the actions planned to rectify the situation.|
|1||Control Test - Who decides on the content, product or service to be provided? How is the work done? When is it done? Who will do the work? If it is the University then an employment relationship most likely exists.|
|2||Resources Test – Who owns the facilities, tools and necessary support services to complete the task. This includes the provision of space, administrative support, supplies and equipment. If it is the University, then an employment relationship most likely exists.|
|3||Risk of Economic Loss Test – Who has the opportunity for profit or bears the risk of loss? The absence of chance of profit and/or risk of loss may indicate an employee relationship, e.g. individual receives a fixed salary and is reimbursed for expenses incurred related to the services provided no matter what the outcome.|
|4||Integration Test – The University’s principal businesses are teaching and research. This test examines if the services being provided are consistent with these activities. If so, the individual is most likely an employee.|
|-||What is the legal form of the payment recipient – individual, unincorporated sole proprietorship, partnership or corporation?|
|-||What is the nature of the service provided and how does it fit with the principal business of the University?|
|-||Courses which are part of degree, diploma & certificate Programs|
|-||Continuing Education courses which are not part of a diploma or certificate program|
|-||Short courses and seminars which are part of degree, diploma or certificate programs|
|-||Short courses and seminars which are not part of degree, diploma or certificate programs|
|-||Non-resident without tax waiver|
|-||Non-resident with tax waiver|
|-||Full time appointed faculty and staff|
|-||Consultants – defined as practising members of professions offering their expertise to complete an assigned task, typically in such fields as: practice of law, medicine, engineering, architecture or accounting, human resources consulting, computer consulting or management consulting|