Navigate Up
Sign In
Click to show/hide contact information.

Financial Affairs

Loading...

Departmental Ledger Review Guide

The information provided in this guide will assist a departmental fund manager, or authorized designee, in properly reviewing departmental general ledger transactions. Reviewing general ledger transactions helps provide assurance that each transaction is valid, appropriate, reasonable, funded, recorded accurately, supportable, and accounted for in the appropriate time period.

Complying with these transaction control standards is critical to preparing financial statements that provide a fair picture of the campus’ and University’s financial position and performance to University benefactors, such as the state, federal government, donors, granting agencies, and lenders.

For questions, please contact accounting@ucsc.edu.​​

​​
​
Expand or contract all step headings
printer
printer
increase font size Decrease Font Size
 
 
 
 magnifying glassDelete Circle
  • Review objectives

    In combination with other controls in a financial transaction process, monthly review of the general ledger is meant to provide a reasonable level of assurance that transactions comply with the following seven transaction control standards:

    • Appropriate – directly related to achieving the mission of the University
    • Valid – allowed by policy, law, contractual agreement, and/or professional standards
    • Reasonable – fair amount paid for a good or service
    • Funded – sufficient funding exists to cover the transaction
    • Accurately recorded – Amount is consistent with value received, provided, or adjusted for; and is free from accounting coding or arithmetic error.
    • Supportable - Amount and good or service received or provided, or justification for adjustment is consistent with supporting documentation, standard, situation, or practice
    • Timely recorded – transaction date is accurate

    Different divisions or departments may choose to depend more or less on ledger transaction review as a key control depending on the relative strength of other process controls in place. Refer to the Seven Financial Control Standards for more information about the seven standards.


    Back to Top
  • Ledger reports

    Here are some ways transactions appearing in the UCSC general ledger are presented for review purposes:

    • Certified Business Objects reports
    • Custom-designed Business Objects reports
    • Web-based InfoView reports
    • Paper-based Financial Information System (FIS) reports

    To perform a proper review, a ledger report must, at a minimum, include the following data:

    • Reporting time period
    • Fund-Organization-Account-Program-Activity-Location (FOAPAL), with titles
    • Transaction date
    • Document code
    • Reference code
    • Transaction title/description
    • Budget amount
    • Expense (financial) amount
    • Lien (encumbrance) amount

    Back to Top
  • Accountability

    The person, commonly referred to as a “fund manager” or “fund custodian,” receives delegated authority to expend funds from a particular organization code. A fund manager is accountable for reviewing ledger transactions, and certifying proper fund usage and accounting consistent with the seven control standards described in Review Objectives segment.

    • A fund manager may delegate transaction review responsibilities to a qualified designee, such as a department manager or analyst
    • A delegation enables the designee to certify proper fund usage and accounting on behalf of the fund manager
    • Even with a delegation of review responsibility, the fund manager remains ultimately accountable for proper transaction funding and accounting

    Refer to Appendices for information about ledger reviewer proficiency requirements, as well as ledger review responsibility.


    Back to Top
  • Review strategy considerations

    Consider the following factors in developing a ledger review strategy:

    • The Seven Transaction Control Standards: The extent to which other key controls in a financial process provide reasonable assurance of compliance with some or all of the seven control standards should influence the relative level of importance placed on the ledger review function. (Other key controls may include such activities as purchase authorization, order review and approval, goods and services receipt verification, and payment review and approval.) Refer to the Appendices for more information about determining the level of reliance to place on ledger review as a key control.
    • Transaction Volume And Composition. Departments with a high volume of expenditures may want to focus ledger review efforts on high-value and high-risk transactions.
    • Risk Of A Material Error Or Misappropriation. Review is required of all high-risk transactions, including those particularly susceptible to error, or to policy, regulatory, professional standard, or contractual non-compliance. (Examples of high-risk transactions include entertainment, travel, relocation, contracts and grants-related, honoraria, consultant and contract services, non-employee gifts, and employee awards.)
    • Extramural Funds. Every contract and grant transaction must be reviewed because of the high level of scrutiny to which they are subjected. Refer to the Appendices for more information.

    Back to Top
  • Review approaches

    Successful ledger review depends on deploying an effective blend of approaches.

    • Large-Value Transactions: In units with large volumes of ledger transactions, review all transactions exceeding a minimum value in addition to reviewing a sampling of small-value transactions. Refer to the Appendices for more information about sampling.
    • Unusual Transactions: Review all transactions that appear unusual by virtue of amount, type of expense, seasonality, vendor, or payee.
    • High Risk Transactions: Review all transactions in certain account codes that are more likely to contain inappropriate or invalid transactions:
      • Contract and grant expenses
      • Travel and entertainment expense reimbursements
      • Relocation expense reimbursements
      • Honorarium payments
      • Consultant and contract services payments
      • Gifts
      • Non-cash awards to employees
    • FOAPAL-Level Balance Analysis: Examine the transactions in FOAPALs having the following attributes. Unusual differences may be an indicator of erroneous or invalid transactions
      • Budget deficits
      • Discrepancies between total expense and prorated pool budget account code balance
      • Compare growth rates in balances with separate calculations based on non-financial factors, like enrollment or staffing level growth rates
      • Compare balances with previous periods or with the same period from previous years

    Back to Top
  • Risk areas

    Be on the lookout for these things in reviewing ledger transactions.

    • Unusual Transaction: Expenditures that appear to be out of line with the norm or payments made to an unknown or inappropriate vendor
    • Duplicate or Erroneous Payments: Transactions involving the same vendor and/or payment amount.
    • Unusual Fund - Organization - Account - Program - Activity - Location Codes (FOAPAL) Combinations: Transactions recorded to incorrect or inappropriate fund, organization, account, or activity code combinations.
    • Incompatible Purchases: Purchases of goods or services that seem incompatible with the activities normally associated with an organization code. (For example, the purchase of garden maintenance supplies by a unit other than Physical Plant or the purchase of food or beverages on federal contracts which are usually prohibited.)
    • Risky Transactions: High-risk payments, such as those involving contracts and grants, travel and entertainment, relocation, etc.
    • Deficit Balances: Unfunded transactions may indicate
      • A transaction is coded to the wrong FOAPAL
      • An incorrect or invalid lien
      • A missing budgetary entry
      • A budgetary issue requiring corrective action
    • Accruals: For financial report preparation purposes, take into consideration any accrual entries for such things as accounts receivable or unpaid, unencumbered expenses.

    Back to Top
  • Post-review procedure

    Follow these steps if you identify a questionable transaction.

    1. Investigate to determine if the transaction is proper.
      • Examine the documentation supporting the transaction to evaluate its validity, accuracy, reasonableness, and appropriateness.
      • As appropriate, confer with those involved in initiating and approving the transaction to gain an understanding of the transaction.
    2. Depending on the results of the investigation, act accordingly.
      • Erroneous transaction - initiate the process to correct the error. (Corrections must be recorded in the ledger within 120 days of the transaction date of the originating transaction.
      • Unfunded transaction – review the budget to determine if a transfer of funds or transfer of expense is needed.
      • Invalid or inappropriate transaction – confer with either the transaction initiator or an appropriate supervisor or manager to:
        • Make a correction
        • Cancel the transaction
        • Obtain a reimbursement or refund
        • Refer the matter to a higher authority (e.g. suspected fraud or embezzlement)
      • Incorrect transaction recording date – Especially applicable to the time around the June 30 fiscal year-end closing date or other period end financial reporting date. (A good or service received by a campus department prior to June 30 of the current fiscal year must be recorded as an expense in the current fiscal year even if the related invoice is received or payment is made in the following fiscal year.) Process a journal entry to accrue the expense or revenue.

    Back to Top
  • Documentation

    Upon successful completion of a monthly ledger review, the fund manager or designee, certifies the validity, accuracy, appropriateness, and timely recording of each transaction appearing in the ledger. This is documented in one of the following ways.

    • Manually-Maintained Documentation
      • Signature and date maintained in a review log
      • Signature and date on paper ledger report reviewed.
      • Email message from designee to fund manager indicating completion of transaction review.
    • System-Maintained Documentation

    InfoView System: The ledger reviewer’s user identification and review date recorded by the system when a ledger report is accessed may constitute adequate documentation provided that a formal written agreement is obtained. In the agreement, the reviewer attests that the presence of his or her user identification and date stamp confirms the following.

    • The review was conducted in a manner consistent with the approach adopted by the department.
    • Ledger transactions were reviewed for compliance with the seven transaction control standards.
    • Any questionable transactions identified have been or are in the process of being investigated and corrected as necessary.
    • Ledger transactions, with the exception of those identified as questionable, comply with the seven transaction control standards.

    Back to Top
  • Common oversights

    Avoid these oversights in devising a ledger review strategy:

    • Not being familiar with relevant policies
    • Having duties that conflict with reviewing the ledger, such as approving payments
    • Not having the authority to investigate and resolve issues resulting from a ledger review
    • Ineffectively using ledger transaction review as part of the overall process control strategy to ensure each transaction complies with the seven transaction control standards

    Avoid these oversights in reviewing ledger transactions:

    • Forgetting to review ledger in time to make any adjustments prior to the 120-day deadline
    • Forgetting to investigate transactions that appear unusual or in error
    • Forgetting to make a correction
    • Forgetting to report errors or suspicious transactions to the appropriate person
    • Forgetting to document the ledger review in your review log

    Back to Top
  • Where to get help

    Assistance is available for your general ledger review questions from the Campus Controller’s Office.


    Back to Top
  • Relevant Appendices


    Back to Top
There are no results.
University of California
UC Santa Cruz, 1156 High Street, Santa Cruz, Ca 95064
©2023 Regents of the University of California. All Rights Reserved.
Site Feedback
finaff-tech@ucsc.edu