Steven H. Emerson, CPA, CGFM, CGAP, CFE, CITP, CGMA

simpleluncheonManagement

Nov 10, 2013 (3 years and 11 months ago)

114 views

AGA Montgomery Chapter CGFM Exam Review

Presented By

Steven H. Emerson, CPA, CGFM, CGAP, CFE, CITP, CGMA


Information System


Organized collection, processing, transmission and
dissemination of information in accordance with
defined procedures, whether automated or manual.


Financial System


Information system, comprised of one or more
applications, that is used for any of the following:


Collecting, processing, maintaining, transmitting and
reporting data about financial events


Supporting financial planning or budgeting activities


Accumulating and reporting cost information


Supporting the preparation of financial statements


Information system that supports both financial and
nonfinancial functions.

The financial systems and the financial portions of
mixed systems necessary to support financial
management.


The Financial Systems Integration Office (FSIO) is the
successor to the Joint Financial Management Improvement
Program of the Federal Government (JFMIP).


The FSIO financial management system requirements


Collect accurate, timely, complete, reliable and consistent
information


Provide for adequate agency management reporting


Support policy decisions


Support the preparation and execution of agency budgets


Facilitate the preparation of financial statements, and other
financial reports in accordance with accounting and reporting
standards


Provide information for budgeting, analysis and reporting,
including consolidated financial statements


Provide a complete audit trail to facilitate audits


Maintaining the chart of accounts of the entity


Maintaining the integrity of the accounting and reporting
systems


Accounting for all financial transactions of the entity


Accounts payable


Travel reimbursement


Reporting on the financial results and the financial
condition of the entity


Monitoring budget execution


Monitoring operating performance


Managing financial assets, especially cash


Maintaining financial controls


Budget formulation


Payroll


Credit management


Debt collection


Cost analysis


Performance measurement


Financial system development and operation


Overall system management, consisting of accounting classification
management and transaction control


General ledger management, consisting of general ledger account
definition, accruals, closing and consolidation, general ledger analysis
and reconciliation


Funds management, consisting of budget preparation, funds
allocation, budget execution and funds control


Receivables management, consisting of customer information
maintenance, receivable establishment, debt management and
collections and offsets


Payables management, consisting of payee information maintenance,
payment warehousing, execution, confirmation and follow
-
up


Cost management, consisting of cost setup and accumulation, cost
recognition, cost distribution and working capital revolving fund


Reporting, consisting of general reporting, external reporting, internal
reporting and ad hoc query


An existing system may rely on computing technology
or software that is no longer supported by its producer


The organization may have outgrown its existing
system(s) either in volume of transactions or in
number of activities


New requirements may be imposed on the
organization that require different processes


The organization may conclude that newer
applications will be more cost effective than older ones


Gain an understanding both within and outside the
financial management organization that it (finance) is
the user of the system and what that entails


Develop and strengthen the interface between the
system developer and the user activities


Define user requirements


Communicate and monitor user requirements


It is vital that the financial manager communicate to
the software developer the needs of a financial
management software system. Items such as:


Chart of accounts requirements


Budgetary control


Encumbrance


Commitment


Obligation


Voucher


Ideally, both the requirements group and the
development group need to be made up of accounting
and IT personnel.


The same as in developing financial management
systems.


Gaining an understanding both within and outside the
financial management organization that it (finance) is
the user of the system and what that entails


Developing and strengthening the interface among the
IT department, the purchasing function and other user
activities


Defining user requirements


Communicating and monitoring user requirements



No COTS product will exactly meet all of the identified
requirements of a government


Any COTS designed for the level of government of
interest will support the accomplishment of the
financial manager’s high
-
level objectives


COTS will be successful only if the financial manager
adapts to the COTS system, which may require process
redesign or reengineering.

Some governments decide to augment their COTS
system with additional software or interfaces. This
should be avoided due to:


Augmenting the COTS tends to increase the cost of
the project


COTS vendors will not provide support for the
augmented software or interfaces


Subsequent releases or updates to the software will
require updates to the augmented systems which will
add additional costs to the total project


Within the federal government certain agencies offer
“cross
-
servicing” to other agencies on a fee
-
for
-
service
basis


Private sector businesses offer processing services to
federal, state and local government agencies



Benefits include:


Avoidance of developmental and operational staff


Assurance that hardware and software will remain
current as technology changes



A concern is lack of flexibility


Purchasers must accept the product provided by the
vendor


Most cases do not have the ability to modify operations


Many companies implemented Business Process
Reengineering (BPR) in the 1990s due to a spate of
publications including an article in the Harvard
Business Review by Michael Hammer


BPR presents the concept that organizations should
eliminate functions that do not add value


BPR should be properly implemented by starting at a
clean slate


Organizations should not assume any process is
mandatory


Organizations should envision the most effective and
efficient way to achieve the organization’s goals


BPR lost some of its luster because critics accused it of
trying to increase productivity to maximum while
disregarding aspects such as work environment and
employee satisfaction


BPR was also accused of being a technique for
downsizing


Many very large organizations have adopted the
concepts of BPR, but they may not use the phrase
“BPR” in their organization


Account Cleanup and Data Conversion


Account Cleanup


Requires research and analysis of all accounts that have not
been active to determine if they should be discontinued


Balances of discontinued accounts should be transferred to
another account or written off


Non
-
valid accounts should not be carried into the new
system


Data Conversion


Re
-
formatting data from the old system to the new


A computer program can accomplish this


New attributes may have to be entered manually


Business Process Redesign


The replacement or major modification of financial
management systems offers the opportunity to re
-
think
and re
-
design business processes


In order to be successful, the redesigned business
processes must be implemented in parallel with system
changes


In simplest terms, business process redesign:


Mapping all activities in a process


Identifying activities that do not create value for elimination


Re
-
ordering of activities to a more logical stream


A computer may replace human intervention


Change Management


“Sometimes it’s easier to change
people

than it is to
change

people”


Changing staff is usually not an option and instead staff
must be made comfortable and productive in the new
environment


Include all affected parties in the decision process


People tend to buy into change in which they participate


People who do the work tend to know more about the work


Constant communication is important


Most people do not react well to surprises


Rejection at the worker level can undermine the best planned
and most expensive applications


Work Force Planning


Successful implementation of a new financial
management system will require a total rethinking of
what is required of the work force


Senior management must assess what skills will be
required, the number of people with those skills and
how the organization will get to implementation of the
new system


The U.S. Office of Personnel Management (OPM) has
developed a model that has components that may not be
appropriate to all organizations but provides a useful
checklist


OPM Model Checklist


Set strategic direction


Organize and mobilize strategic partners


Set vision/mission/values/objectives


Review organizational structure


Conduct business process reengineering


Set measures for organizational performance


Supply, demand and discrepancies


Analyze permanent work force demographics


Describe nonpermanent work force


Conduct skills assessment and analysis


OPM Model
Checklist


continued


Develop action plan


Design a work force restructuring plan


Develop ways to address skills gaps


Set specific goals


Implement action plan


Communicate the plan


Conduct recruitment and training


Implement retention strategies


Restructure where needed


Conduct organizational assessments


Monitor, evaluate and revise


Assess effectiveness


Adjust plan as needed


Address new work force and organizational issues


Verification and Validation


Verification that the system contains all of the processes
and outputs that are expected


Validation that the computations and outputs and reports
are accurate and correct


For small entities verification and validation would most
likely be done by the financial manager who is both the
sponsor of the project and the person responsible for the
outputs of the system


For large projects a third party may perform the verification
and validation and this may be referred to as “Independent
Verification and Validation”



Ownership of Systems


In very small and very large organizations the entire
financial management systems are likely to be within
the financial management organization and the
question of who “owns” the system does not come up


In many organizations the IT department owns the
hardware and provides a computing service to financial
management


The finance department believes it owns the software and can
make modifications at will


The IT department believes the software is its property


Ownership should be made clear in the IT policy of the
organization


Ownership of Data


If IT happens to own both the hardware and software, IT should never
own the financial data


Financial management must maintain stewardship over the data


Stewardship of the data includes:


Data integrity


the quality, timeliness and reliability of data in the system


Data collection synchronization


how data collection cycles are timed and
cutoff dates and times set so that necessary data
-
feeds between systems can
occur


Reduced data redundancy


eliminating multiple occurrences of the same data.
This is best accomplished by entering the data at the point where the transaction
is initiated


Data accessibility


ensuring that only authorized users can access the data


Data availability


managing the data that needs to be transferred or exchanged
between systems


Flexibility


ensuring that data collected by the system has enough inherent
flexibility so the system can adapt to change over time to meet new information
requirements and adopt new financial performance reporting measures


Ownership of
Data


continued


Stewardship functions fall into four categories


Data definition


defining what data requirements and
characteristics will be contained within the system


Data creation and capture


defining how the data will be
collected in the records and reports


Data usage


ensuring that data is being used in line with its
definition or that the definition is changed to reflect the
users’ needs through feedback to the data definition function


Data assurance


attesting to data integrity through feedback
to the data creation and capture function



Operational Issues


Most critical operational issues between finance and IT
are scheduling and priorities


Operational meetings should occur between finance
and IT to review and discuss past and future
performance


The finance department must clearly communicate its
schedule requirements and seek priority for use of
computing resources


Internal Controls


consist of five components


The control environment


organizational factors such as integrity, ethical values,
competence, management philosophy and operating style. Tone of the organization


Risk assessment


identification and analysis of relevant risks and risk factors to the
organization and its objectives


Control activities


general controls such as data center, software and access controls and
application controls such as authorization, approval and segregation of duties. These
controls will be commensurate with the inherent nature of the information, the possible
consequences of errors, needed degree of reliability, cost
-
benefit of the control and
vulnerability of agency assets to loss or misuse


Information and communication


capturing pertinent information, financial and
nonfinancial, from a variety of systems and other sources and communicating it to
management on a regular basis


Monitoring


process of consistent and continuous monitoring of internal control systems
by managers as well as separate evaluations by independent auditors and reviewers


The establishment of internal controls is the responsibility of management


Internal controls are subject to review by independent auditors


Internal controls are an integrated part of the overall management process to promote
efficiency, reduce risk of asset loss and ensure reliability of financial information



Evaluation


Organizations should conduct a cost
-
benefit analysis for
each financial management system to ensure:


Alignment of system with organization’s mission needs


Acceptability of information (internally and externally)


Accessibility of information (internally and externally)


Realization of projected benefits. Quantify improvements in
performance results through measurement of program
outputs


Evaluation


continued


Organizations should perform post
-
implementation
reviews and should address the following questions:


How effective is the system in supporting the meeting of
stated program objectives and performance targets?


How satisfied are the “customers” or “users” of the financial
system and its information


the needs assessment?


How efficiently does the system operate (in terms of
resources such as time, dollars and other resources) to
minimize resource consumption?


Does the system’s accomplishment of its objectives and
benefits outweigh cost and risk considerations?


How well does the system maintain its integrity throughout
the management cycle in terms of avoiding fraud and abuse?



Historically administrative support systems have been
developed or acquired separately and then attempted
to “bridge” these separate systems together


This “best of breed” approach has the advantage of
providing each component of the organization with
the best system for that component’s individual needs



Enterprise Resource Planning systems or ERPs have
recently been developed to offer large
-
scale integrated
administrative support systems


ERPs have the advantage of universal compatibility and
end
-
to
-
end processing


Flexibility is lacking and while the ERP will not fulfill
anybody’s wish list, the enterprise
-
wide benefits may
drive the separate components of the organization to
alter their business processes to accommodate the ERP



Steven H. Emerson, CPA, CGFM, CGAP, CFE, CITP, CGMA

P.O. Box 834

Helena, AL 35080

(205) 807
-
4466

(205) 449
-
8666 (Fax)

steve@shecpa.com

www.shecpa.com