Gail McGlashanUser Services ManagerDivision of AccountingDepartment of Finance

820 Silver Lake Blvd, Suite 220Dover, 19904

672-5000gail.mcglashan@state.de.us

3 major components to know before beginning to spend

Internal Controls

Delaware’s Accounting Framework

Encumbrances

a process (means to an end, not the end itself)

effected by an organization’s oversight body (governance), management and other personnel

provides reasonable assurance of the achievement of the organization’s objectives:• effectiveness & efficiency of operations• reliability of reporting for both internal & external use• compliance with laws & regulations

Monitoring Activities

Information and Communication

Control Activities

Risk Assessment

Control Environment

GAO Green Book◦ Standards for Internal Control in the Federal

Government◦ www.gao.gov/greenbook

Chapter 2 of the State of Delaware Budget and Accounting Manual ◦ http://budget.delaware.gov/accounting-

manual/index.shtml

Division of Accounting CAFR/FARS Section◦ (302) 672-5500

Based on Generally Accepted Accounting Principles (GAAP)

Uses Appropriations and Funds to track and manage revenues and expenditures

GAAP standards used to establish measurement and classification for reporting

Cash basis of accounting for day-to-day operations

Method of segregating resources into categories identifying the source and use of monies

Delaware uses two budgetary Funds

◦ General Fund

◦ Special Fund

Used to finance and account for ordinary operations of governmental agencies

Appropriated by Legislature Accounts for all revenues and disbursements

not provided for in other funds Considered State monies Derived from taxes, fees, permits, licenses,

fines, forfeitures or any other sources or receipts unless specifically exempted◦ E.g. personal income taxes, various court fees/fines

Special Funds refer to all monies other than General Funds◦ Devoted to some special use with specific

regulations and restrictions◦ Usually created through statutory provisions to

provide certain activities with specific and continuing revenues◦ Used for the general operation of the restricted

and specified services◦ 4 major categories of Special Funds

Appropriated Special Funds (ASF)◦ Legislature chose to place under same budgetary

and financial controls as State’s General Funds◦ Annual budget requested and approved by

Legislature◦ Considered State monies◦ Encumbrances and expenditures may only be

made against actual cash receipts and may not exceed the appropriation limit authorized by the Legislature E.g. Fees collected by DNREC Parks and Recreation and used to

operate and maintain State parks for residents’ and visitors’ use

Non-appropriated Special Funds (NSF)◦ No Legislative spending limits◦ Any monies on hand may be encumbered and

expended◦ Encumbrances must be made against actual

receipts (cannot encumber against anticipated receipts)◦ Not considered State monies E.g. Donations, gifts, local school funds and various trust funds

Federal Funds◦ Spending authority for federal grants based on

actual grant awards ◦ May encumber and expend up to full amount of

federal funds awarded regardless of receipt Note most federal grants are “as-incurred”

(reimbursable). Some are pre-paid.◦ Not considered State funds◦ Spending rules or restrictions dictated by grant

program/federal grant sponsor◦ Any State matching funds are subject to State

accounting rules and restrictions

Bond Funds◦ Authorized annually by Legislature◦ Monies available immediately* for encumbrance

and expenditures

*as soon as First State Financials reopens at the beginning of FY

Created by Legislative authorization to spend◦ Annual Appropriations Act (Operating Budget)◦ Bond and Capital Improvements Act (Bond Bill)◦ Grants-in-Aid Act

Budgetary tool to control spending An allocation or set-aside of monies for

specific purposes Also used to segregate funds State also tracks by Appropriation Types

Expenditure tracking also uses appropriation types

General Funds

Special Funds

Delaware Code

Chapter 3 of the State of Delaware Budget and Accounting Manual◦ http://budget.delaware.gov/accounting-

manual/index.shtml

Purpose of Encumbrances Requisitions Purchase Orders: When Required and When Not? Purchasing Process Funding Out Clause, Next Fiscal Year Change Orders Security Reporting Training & Additional References

Governor

Division of Revenue

Division of Accounting

First State Financials

Purchasing Module

eProcurement

Purchasing

Procurement Card

State Lottery Office

Department of Finance

Agencies may not enter into any agreement or contract, or incur any expenses, which will result in an obligation in excess of the agency’s budgetary appropriations (Delaware Code)

Commitment to acquire goods or services from a vendor

Guards against over-committing available funds Used for budgetary control Reporting provides a detailed list of obligations

Optional to the Organization (not the end user)

Requisition created in eProcurement Module◦ Approved through Workflow◦ Budget Checked◦ Sourced to a PO (purchase order) in an automated

overnight process◦ No redundant approvals◦ Dispatched the following day by the DE_BUYER

All General and Appropriated Special Funds (ASF)

Purchases > $5,000.00◦ Any single or aggregate purchase during a fiscal

year from a single vendor◦ Not based on unit cost(s)◦ Fragmenting = illegal

PO may still be used if not required

Section 7.3 Direct Claims* Purchases less than $5,000.00 Petty Cash Funds Federal Funds Freight Late Payment Charges School District Local Funds Salaries, OEC, etc.

*State Budget and Accounting Manual

Open Order POs◦ Uses the OPENORDER Vendor ID Requires concurrent approval of the OMB Director and

the Secretary of Finance Emergency POs After-the-Fact POs◦ PO created after a purchase was made that requires

a PO Cabinet Secretary submits request OMB Director Approval Secretary of Finance Approval

Agreements/Contracts should coincide with the State’s Fiscal Year

Agreements/Contracts that span multiple fiscal years must contain a ‘funding out clause”

Budget Safeguard◦ Prevents obligating State funds that may not be

available over multiple fiscal years.

No Obligation of Funds Prior to July 1◦ 29 Delaware Code Chapter 65 Budget and Fiscal

Regulations for State Agencies

Exceptions:◦ School Districts/Colleges after March 1 29 Delaware Code § 6519 (b) Once zero dollar budgets are loaded to FSF◦ No payments (Vouchers) processed against the POs

until after July 1◦ POs require a funding out clause

General Fund (type 01 becomes type 04)◦ Funds encumbered automatically roll forward to the

following year◦ No third year (type 04)

Appropriated Special Funds◦ Automatically roll forward for up to two years◦ No activity in third year, PO will be closed

Change coding (only if you have not vouchered against the line already)

Add, Close, Cancel, Increase or Decrease Line amounts and/or quantities

Cannot Change the Vendor – must Close PO and recreate with desired Vendor

Role Level Security◦ Security granted through permissions to pages

defined by role(s) DE_REQUESTER (Requisition pages) DE_BUYER (Purchase Order pages)

Row Level Security ◦ Security applied to User IDs based on department

IDs and/or operating unit(s)

Schedule of Encumbrances Reports◦ DPO002 runs weekly in the Friday night Schedule◦ DPO004 runs monthly and is used for the Monthly

Reconciliation process.◦ Both reports: Post to Document Direct (not available on-demand) Close POs with a $0.00 balance AFTER verifying via Commit

Control (KK) the exact PO line status KK provides real-time data on-demand

PO Budgetary Activity (DPO017) ◦ On-line, ad-hoc only

Requisition Budgetary Activity (DPO016) ◦ On-line, ad-hoc only

Requisitions – PO110 – optional by Org Purchase Orders - PO120 Receiving - PO130 – required for Capital

Assets; Optional if don’t have Cap Assets Req/PO Reconciliation - PO160 Workflow - APO400 Other coursework on the Extranet:

http://extranet.fsf.state.de.us/

Delaware Code, Title 29 § 65 “Budget and Fiscal Regulations for State Agencies

Budget & Accounting Manual◦ www.state.de.us/budget◦ Chapter 7, “Purchasing and Disbursements”

Accounting Memos:◦ http://accounting.delaware.gov/memoranda.shtml◦ http://accounting.delaware.gov/

True or False:◦ Another name for Internal Control is “Looking Over Your

Shoulder”

◦ Delaware uses a cash basis of accounting for day-to-day operations

◦ Appropriated Special Funds are not considered State monies

◦ Appropriations: Authorized by the Legislature Segregate funds for specific purposes Cannot be used to control budget spending

Encumbrance Accounting

◦ A. Guards against over committing available funds

◦ B. Used for Budgetary Control

◦ C. Provides detailed account of obligations

◦ D. All of the above

True or False?

◦ A formal encumbrance is required for purchases greater than $5,000.00

◦ It’s OK to make two $3,000 purchases from the same vendor in the same fiscal year using General Funds

◦ Funding Out Clause is required when agreements/contracts span over multiple fiscal years

◦ Open Order Purchase Orders are issued to one specific vendor

An After-the-Fact Purchase Order requires:

◦ A. Written request for a waiver from the Cabinet Secretary or School Superintendent containing an explanation of the failure to adhere to purchasing procedures

◦ B. Approval of the OMB Director

◦ C. Approval of the Secretary of Finance

◦ D. All of the above

A PO is not required when:

◦ A. Purchase is $5,000.00 or less

◦ B. Federal Funds

◦ C. Payments between two state agencies

◦ D. Salaries

◦ E. All of the above

Gail McGlashan672-5000Service Desk526-5600