One of the standard requirements of grant accounting is monthly reconciliation.  This process requires validating that all accounting transactions for the grant have gone through the general ledger system properly.  Reconciliation can be difficult when there are delays between the dates when a purchase is initiated and when its transactions are posted to the general ledger.  This delay creates “intransient transactions” that exist only on paper or in another purchasing or accounts payable system, (but not yet the general ledger).  Two of the problems created by “intransient transactions” include:  one, the transactions themselves are more apt to be lost; and two, the current balance of the grant is not up to date which can easily result in overspending.

A solution to this problem is to use what is often referred to as a shadow system or parallel system.  This system works a lot like a checkbook record* and is a component of many grant management software packages.  As purchasing transactions occur, they are immediately recorded in your shadow accounting system (usually as an encumbrance).  This puts all your “intransient transactions” in one place where they can be easily located.  Later, when you receive your bank statement, which in this case will be a monthly statement from your general ledger or University accounting system, they will be reconciled.

The reconciliation process becomes a comparison of the general ledger statements to the information in your shadow accounting system.  During reconciliation, transactions may be discovered on the general ledger statements that are not in your shadow accounting system.  If they are valid, they can be entered into the shadow system at that time.  If not, they can be investigated and a correction to the general ledger can be initiated.  This way you can track all transactions, those that have posted to the general ledger, and those intransient.  At first glance, it may appear that a shadow system carries a burden in that extra manpower is required to double enter transactions.   However, a good shadow accounting system includes procedures such as reports, specialized search mechanisms, and electronic interfaces to the general ledger for aiding in the reconciliation process.  We will talk more on these and other benefits of a shadow system in a later article.

*A shadow system differs from a checkbook however, in that by supplementing the general ledger, it is much more informational, and also, it doesn’t actually cut checks.

Posted by Linda Lejnar September 21, 2008 blogger@itworks-inc.comm

Our first series of articles is aimed at departmental administrators, particularly those managing a significant amount of funding. We recognize that while the official financial records for universities are centrally controlled, the day to day financial, HR, and grant management is controlled at the departmental level. And most of department level management decisions are based on the directives of the department chairman. This keeps the department administrator balancing the needs of their chairman with the regulations of the university controller. As a result, department administrators have a unique set of needs that are often ignored by the central administration of their university.

Over the next few weeks we are going to look at possible solutions to the following three problems common to many department administrators:

1. Monthly account and project reconciliation
2. Tracking internally funded commitments
3. Tracking internal budgets

With twenty years of university management experience, Linda Lejnar, our Senior Technical Sales Executive, will be writing these three.

Posted by Jim Wrenn blogger@itworks-inc.com September 11, 2008

A common problem faced by department administrators is trying to track and report on numerous financial commitments made to faculty by their Department Chair. Examples of commitments include start-up funds and other allocations such as internally sponsored research or travel allowances. Commitments are typically made for a specific dollar amount over a specific time period. The complicating factor in tracking this money is that most department administrators are unable to create new funding sources in their university general ledger for this purpose. And, in many cases, the administrator will not even determine the exact source of the money until individual purchase requests are made by faculty.

So, many administrators use spreadsheets in an attempt to manage this problem. This is not a bad choice for managing a few, small commitments. But, when the numbers get large, that is, the numbers of commitments, dollar volume, and financial transactions, as well when the commitment periods are extended, this approach breaks down. *

A better approach is to utilize a cost accounting system. This may be implemented inside your general ledger system or through an external or supplemental system, such as a parallel system or shadow accounting system. Cost accounting systems involve defining a unique code for each special commitment and assigning it to each purchasing transaction (in addition to your standard general ledger account structure). Assigning the cost accounting code to the individual general ledger or shadow system transaction is the key to simplifying the tracking process, especially commitment balancing and reconciliation. When such a system is implemented, each purchasing transaction is assigned two codes, one to define the appropriate general ledger funding source and account structure and a second to define the commitment cost accounting code. By tracking expenses this way, not only are you able to reconcile to the GL by its account structure, but are able to easily track the expenses (and balance) in each financial commitment. And, the reconciliation process itself is made easier because only a single transaction is cleared.

And, if you want to take this a step further, you can assign attributes to your cost accounting codes in order to create grouping systems. You can then use the grouping systems to answer questions like how much money have I committed to not just one, but to my entire faculty. Or, if you are making more than one commitment to a faculty member, what is the total amount committed to him or her. These attributes / grouping systems really come in handy when generating reports.

*I know of one administrator that uses crayons for this, but I wouldn’t recommend it.

Posted by Linda Lejnar September 29, 2008 blogger@itworks-inc.com

Today we are addressing a budget issue common to grant accounting. It occurs when one has a rather large and complex grant in which they would like to track the detailed budget (as built internally) rather than just tracking at the GL Account or Object level as budgeted by the University.

Often times when a grant budget is built internally, it includes many details such as individuals to be paid, and specific equipment to be purchased, as well as lump sum categories for supply and travel. When a grant budget is submitted to and approved by an agency, and later set up in the University GL accounting system; the budget is defined at a much higher level (such as GL Account or Object code) and the detail is no longer apparent. With a large, complex grant, it is important to be able to track the detailed budget to find out if and how the expenses compare to the budget detail. This is very difficult using just the University accounting statements (i.e. if you are paying 20 individuals and the salary budget/expense is showing a variance, you need to track down which individual(s) are off).

An effective way to address this issue is to use what are frequently referred to as sub-accounts, cost centers, or cost accounting codes for each line item in your budget detail, while still maintaining the higher level budget for reporting to the agency and reconciling to the general ledger. This allows the manager or grant accountant to maintain the original (and revised) budget detail plan and compare it to the actual expenses occurring. By doing so, a manager/accountant is able to tell much sooner and more easily, if the budget is truly in line. With large, complex grants using just the general ledger level of budgeting–a grant can have a number of expenditure problems that have occurred, but are not apparent until the general ledger system shows an overspent category – usually very late in the grant’s life.

Possible methods for implementing these sub-accounts, cost centers, and cost accounting codes were discussed last week in our article titled “Tracking Too Many Commitments”.

Posted by Linda Lejnar October 5, 2008 blogger@itworks-inc.com

Among the various tools that IT Works provides to consumers is state-of-the-art space planning software solutions.

Originally designed for the the planning office of a major medical university, our space planning software has since been integrated with human resources software, grants management software, and equipment inventory management software to provide consumers with an even more comprehensive space planning solution.

What to look for in space planning software

There are various types of space planning software programs available. However, what sets one space planning software apart from others typically depends on one or more of the following factors:

• Scaled drawings
• Template diversity
• Spatial dimensions (should be visible to the user)
• Shared space planning (i.e. sharing plans with other department managers, etc.)
• Easily insertable objects and photos

Space management software solutions that work

At IT Works, our space management software not only tracks space size, ownership and usage, but it also allows users to analyze data with regards to their own clinical, research and personnel needs.

Furthermore, the integration of the IT Works Grant and Personnel/HR Management modules allows administrators to analyze space planning and space management allocations with respect to staffing requirements and faculty research funding.

Contact IT Works for additional information or clarification on our space management software by calling 919.232.5332. You can also request information here.