May 7 2008 Audit Committee EFS Impact on Internal Controls [Compatibility
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Impact oof f the Enterprise FFinancialinancial
System and New Auditing Standards
on the University’s Internal Control
Environment
Board of Regents Audit Committee
MayMay 7, 2008Summary
• The PeopleSoft Enterprise Financial
System (EFS) will have a long-term
positive impact on internal controls
• Implementation of the new auditing
standards will increase effectiveness of
internal control documentation
• These cchangeshanges will enhance thethe COSO
Framework of Internal ControlCOSO Framework of Internal Control
The five elements:
– Monitoring
– Information &
communication
– Control activities,
– Risk assessment
– Control environment (“Tone
at the top”)
EEtssentiial for:
– Effective and efficient
operations
– Reliable financial
reporting
– ComplianceCOSO Framework of Internal Controls
EFS Impact
• EFS
– Enhanced monitoring
ofof financial activitiesactivities
and business
processes
– ImprovedImproved control
activities from
process design,
syygstem design and
configuration,
transaction executionFinancial Activities & Transactions
Heat Map
Contracts for Alternative
Professional Service Investments
Debt
Travel &
Oversight of
Hospitality
Cash
External Investment
Expenses
Reconciliations
Managers
Cash Sponsored Billings &
MtManagement AtAccounts RReceivabblle
Regulatory Cost
Non-Sponsored A/R
Accounting
Construction Affiliated
Transactions Organizations
Competent,Competent,
Financial Student
Qualified Staff
A/P
Systems & Finance
Technology
Fringe
Benefits
External Sales
Activities
External
Taxes
Financial
Reporting
Purchasing
Accounting
Equipment
Low
Moderate High
IMPACT
RI
S
K
H
H
ig
h
Lo
w
M
o
dera
teEFS Internal Control Impact
Highest Risk FFinancialinancial AActivitiesctivities
Activity Impact
Cash management Improved
Debt
Sponsored billings & accounts receivable IIdmproved
Travel & hospitality expenses Improved
Professional service purchase contracts Improved
Regulatory cost accounting Improved
Alternative investments No Impact
OOiversighhtt of investmentt mgrs NINo Impact
Affiliated organizations No ImpactEFS Internal Control Impact
Highest Risk Financial Activities
• Debt – more automation and integration of
cash, investments, debt & construction
accounting activity
• SSdponsored AA/R/R – more automatiifon of cash
receipts and bank-related activity
• Travel & EExpensesxpenses – strongstrong approvals and
workflow, and integration with payroll system
• Reguegulatory Cost Accounting – improved datadata
analysis capabilities for compliance
monitoring and grant accounting EFS Internal Control Impact
Moderate Risk FFinancialinancial AActivitiesctivities
Activity Impact
Cash reconciliations Improved
Construction activities Significantly improved
Non-sponsored accts receivable
Competent, qualified staff Improved
Fringe benefits No impact
Financial systems & technology Improved
Student finance No impact
External financial reporting ImprovedEFS Internal Control Impact
Moderate Risk Financial Activities
• Cash reconciliations – better integrationintegration oof f
systems and data to facilitate reconciling
• Construction aaccountingccounting – process wwill ill be
integrated in the new system and recorded on
the balance sheet
• Nonsponsored A/R – entirely new system and
processes replaces local shadow systems
• External financial rreportingeporting – integrated data;
improved data analysis and reporting tools EFS Internal Control Impact
Low Risk Financial Activities
Activity Impact
Purchasing Significantly improved
Accounts payable Significantly
Taxes NoNo impact
External sales No impact
General accountingpg & reporting Improved
Equipment accounting Improved
