Finance and Accounting - Cash Flow
Effectiveness and efficiency of operations
A. Cash forecasts are used to maximize short-term investment income and to avoid cash shortfalls.
- Have cash management policies and procedures been defined and communicated to treasury professionals? Include in these policies and procedures credit and collections policies that are responsive to existing economic situations and business plans and also specific policies and defined limits of authority and risk that provide a foundation for controlling and monitoring trading activities.
- Is management authorization required for transfers of investments to external parties? (For example, is written authorization required from at least two designated officials before securities can be withdrawn from depository banks or other third parties for safekeeping, use as collateral, or consummation of a business transaction?)
- Are information systems used to identify all cash sources as well as cash collection or due dates? (Such cash sources include accounts receivable collections, customer deposits, sales of assets, and loan proceeds.)
- Are various sources of short-term financing considered? (For example, trade credit, bank loans, lines of credit, bankers' acceptances, finance company loans, commercial paper, receivables financing, and inventory financing).
B. Performance audits are used as tools to evaluate cost-effectiveness of cash management systems.
- Is it required that detailed questionnaires be completed by the employees responsible for the areas being audited at each location or unit? Are all surveys analyzed, and key areas for further evaluation identified?
- Have areas for improvement been identified? (For example, receivables/payment float, customer/supplier pricing, and banking costs.) Is a description provided showing how the improved process will work, what the specifications of the new process will be, and how improvements will be implemented?
Reliability of financial reporting
A. Investment transactions are properly authorized.
- Does the University's formally documented investment policy include the following provisions: management's primary objectives, expected returns on marketable securities and investment transactions, acceptable levels and limits of risk, diversification requirements, portfolio concentration, approval requirements, and personnel responsible for managing according to the policy?
B. Recorded investment balances are substantiated.
- Are subsidiary records maintained for investments? Are the following included in the records: specific descriptions and certificate serial numbers, names in which investments are registered, and the cost or selling prices?
- Is it required that an employee not responsible for custodial responsibilities review investment subsidiary records for completeness and accuracy? Is this done by directly confirming investments held by banks and other third parties and by reviewing certificates for investments held directly by the organization?
C. All income from investments is accurately recorded.
- Are documented cut-off and period-end close procedures adhered to regarding investment income and losses? For example, are calculations of the accrued interest income for the period based on approved policies and procedures?
D. Debt transactions are properly authorized.
- Are policies and procedures documented for acceptable cost of capital, legal restrictions, and preferred sources of funds, liquidity requirements, acceptable financing alternatives, acceptable debt covenants, and authorization and approval requirements?
E. Debt transactions are accurately processed and recorded.
- Are documented cut-off and period-end close procedures regarding debt transactions adhered to? (For example, are calculations of the accrued interest expense for the period based on approved policies and procedures?)
F. Recorded debt balances are substantiated.
- Are detailed records of outstanding loan obligations maintained? Are these records
reconciled with confirmed debt balances periodically to
determine that all University entries have been properly recorded?