(M5) Finance
| Finance Management System Description | |
|---|---|
| Management System Owner: | Cindy Conger, Chief Financial Officer (CFO) |
| Revision and Date: | 5, July 25, 2012 |
1.0 Purpose
The Finance Management System under the FRA Contractor Assurance System is a set of interrelated elements that Fermilab uses to assure that financial management is executed in accordance with the Contract; and to improve how financial policies, objectives, processes, and procedures are established, implemented and monitored to provide such assurance.
2.0 Roles and Responsibilities
| Roles | Responsibilities |
|---|---|
| Director | Responsible for annual assurance to DOE that internal controls are in place and functioning, in accordance with DOE O413.1B. |
| CFO | Responsible for the development, execution, and control of all laboratory financial management assurance activities under the Contract. Position is identified to DOE as the A-123 Project Sponsor, and the A-123/FMFIA POC. |
| Chief Accounting Officer | Responsible for the development, execution, and control of all assurance activities within the scope of laboratory accounting activities under the contract. Position leads management’s internal control assessment in accordance with DOE’s A-123 requirements. Position is identified to DOE as the A-123 Project Manager. |
| Associate Director/CFO Group | Responsible for oversight of budget formulation and execution processes. |
| Division/Section/Center (DSC) Heads | Assure implementation in the line organizations under them. |
| Field Financial Managers | Assists CFO and line management in implementation of assurance activities as subject matter experts. |
| A-123 Process Owners | Responsible for annual update of process descriptions, risks, and key mitigating controls for A-123 assessment. |
3.0 Management System Operation
The objectives of the Finance Management System are to assure efficient, effective financial operations in support of the laboratory’s high energy physics program in accordance with all applicable laws, regulations, and DOE requirements as set forth in the Contract.
The primary assurance mechanism in the Finance Management System is the annual process controls assessment performed to assist DOE in meeting its obligations under OMB Circular A-123, Appendix A, Internal Control over Financial Reporting. The assessment is performed in accordance with guidance issued by the DOE Chief Financial Officer. The assessment involves process owners across the laboratory, including managers in Finance, Procurement, Property, Human Resources, Travel, ES&H, and IT. The Chief Accounting Officer leads the update, delegating day-to-day management of the process to an A-123 Manager. The assessment includes the documentation of processes by process owners; the identification and evaluation of risks within those processes (risks prescribed by DOE as well as locally-identified risks); the identification of key controls that mitigate those risks to a reasonable level; and the independent testing of the key controls on a risk-based cycle to assure they are functioning. Corrective action plans (CAPs) are developed for all deficiencies found in testing. Deficiencies are reported to DOE and to the FRA Board of Directors Audit Committee at each meeting. DOE and the Audit Committee track CAPs to resolution.
Annual independent audits and assessments are an integral part of the Finance Management System, most importantly the FRA Financial Statement audit, including the A-133 federal grants audit; and the Annual Cost Allowability Audit conducted by Internal Audit as part of the IG’s Cooperative Audit Strategy. Issues and findings from audits and assessments, and associated corrective action plans, are reported to the FRA Board of Directors Audit Committee at each meeting, and CARs are tracked to resolution.
Measures are an important element of the Finance Management System, particularly with respect to budget execution. Comparisons of budgets to actual results; budgets to funding available; and funding to actual results are performed monthly, reviewed with Associate Director/CFO group of senior managers, and exceptions analyzed and resolved. Funding, plans, and actual results, as well as contract status, are presented to the FRA Board of Directors Administration & Finance Committee at each meeting.
Continuous improvement is integrated into the finance operations. Errors are analyzed for root cause, and controls are developed or altered to prevent future errors, or to detect future errors on a timely basis if preventive controls are not practical, cost-effective, and/or efficient.
Internal controls over financial operations are executed in line organizations across the laboratory. Each organization has a Field Financial Manager (FFM) who is responsible for assisting the CFO in implementation of financial control activities labwide, with the support of their respective DSC Head. FFMs and their staff members meet with Budget, Accounting, and IT groups each month to discuss financial management issues. In addition, senior FFMs from the Divisions meet with the CFO, Budget Officer, and Chief Accounting Officer each month to address policy matters and other high-level issues.
The Finance Management System relies heavily on the operation of the IT Management System, the Business Operations Management System, the Performance Planning Management System, as well as the Corporate Governance Management System.
4.0 References
- FRA Contract DE-AC02-07CH11359
- DOE Order 534.1B – Accounting
- DOE Order 130.1 – Budget Formulation
- DOE Order 522.1 – Pricing of Department Materials & Services
- DOE Order 412.1A – Work Authorization System
- DOE Order 413.1B – Internal Control Program
- http://finance.fnal.gov/FinPolicies.html
- A-123 Process Controls Evaluation 2011
- Entity Assessment 2011
5.0 Processes Supporting System
Processes supporting the Finance Management System fall into the following categories: Measures; Assessments; Issue Management and Corrective Actions; Continuous Improvement; and Communications.
Measures – Measuring processes support the assurance system in the following areas:
- Budget Execution and Monitoring – Each month budget-to-actual, budget-to-funding, and funding-to-actual reports are prepared and distributed to senior management, and at least monthly the CFO meets with senior management to address budget execution issues.
- Operational reporting and monitoring – On a periodic basis, various operational measures give managers information on operations, e.g. aged invoices, travel voucher backlog, erroneous payments.
- Deadlines (met or unmet) are a measure of on-time performance, which is critical to effective financial operations (e.g. payroll, month-end close).
Assessments –The backbone of the Finance Management System is the A-123 Process Controls Assessment performed by management, described in 3.0 above. Self-assessments are prepared by the managers of the respective areas and are reviewed by the CFO.
Issue Management and Corrective Actions – Financial findings may result from any of the reviews, audits, or reports noted in 6.0 below. Findings are assigned to a responsible person for resolution, which may require the development of a formal corrective action plan and the execution thereof. Management is responsible for providing resources necessary to resolve the finding. Financial findings are reported to the Audit Committee at every meeting along with the status of corrective actions. CAPs associated with OMB A-123 deficiencies are submitted to DOE, with quarterly status updates on CAP completion.
Continuous Improvement – Improvement processes are integrated into financial management operations. Every known error is followed up by management’s determining root cause and implementing cost-effective changes to prevent, or timely detect, future errors.
Communications – The following avenues of communication support the Finance Management System:
- Board Committee meetings 3 times per year
- Weekly meeting with FSO Manager and/or Deputy
- Biweekly meetings with FSO Finance POC/Contracting Officer
- Weekly teleconference with Director of DOE Office of High Energy Physics
- Weekly meetings of Director’s senior management team
- Weekly Scheduling Meeting
- Monthly Associate Director/CFO Meeting
- Biweekly COO Staff Meeting
- Monthly FFM Meeting
- Monthly meeting of CFO and Executive FFMs
6.0 Reviews, Audits and Reports
Annual FRA Financial Statement Audit
External GAAP-based audit of FRA’s financial statements which include Laboratory revenues and expenses under the Prime Contract with DOE. Auditors are engaged to express an opinion on the fair statement of the financials; and to issue a comment letter to management on internal control issues coming to their attention in the course of the audit.
Annual FRA A-133 Audit of Federal Grants
External audit on compliance with OMB Circular A-133 with respect to federal grant funding
Annual Cost Allowability Audit
Internal audit reviews for unallowable costs charged to the contract; audit program formulated as part of the Inspector General’s Cooperative Audit Strategy.
Annual 401(a) Benefit Plan Audit
External GAAP-based audit of the benefit plan related to FRA contributions to employee accounts. Required to accompany the filing of IRS Form 5500.
Annual 403(b) Benefit Plan Audit
External GAAP-based audit of the benefit plan related to employee contributions to employee accounts. Required to accompany the filing of IRS Form 5500.
Annual OMB A-123 Management Assessment
Management’s Assessment of Internal Control – Identification and evaluation of risks associated with all processes involving material financial statement activity. Includes identification of mitigating controls and the testing of the effectiveness of those controls on a risk-based cycle.
Annual Self-Assessment of Accounting
Accounting Department assessment of its operations throughout the previous year, including Status of Projects/Programs/Activities; Successes; Best Practices; Opportunities for Improvement; Corrective Action Plans.
Annual Self-Assessment of Budget
Budget Office assessment of its operations throughout the previous year, including Status of Projects/Programs/Activities; Successes; Best Practices; Opportunities for Improvement; Corrective Action Plans.
Annual Director's Budget Presentation
Management's self-assessment of program and financial plans by organization for the upcoming budget execution year.
Internal Audits
Targeted audit areas vary each year and are selected based on a formal risk assessment. CFO participates in risk assessment process with Manager of Internal Audit and DOE.
Inspector General Audits
Periodic audits in areas selected by the IG.