Operating activity is current-year revenue and expenses. The fund balance is the beginning period fund balance (object code 3190), plus revenue less expenses. The natural classification for expenses is a debit balance, for revenue it is a credit balance.
Sponsored (fund CG) and Federal Appropriation (fund AP, sub-fund APFEDL) must be monitored at least every other month (but preferably monthly) per the Account Monitoring Requirement section of University Policy 3.20, Cost Transfers on Sponsored Agreements. Other funds (DB, EO, GN, LN, OT, PL, RG, RV) that contain revenue/expense activity should be monitored no less than quarterly. Units may elect to monitor activity more frequently depending on the risk assigned. It is good internal control practice to have evidence that operating accounts have been monitored. It is up to each unit to create guidelines for monitoring operating accounts.
Unlike asset and liability object codes, the operating balance does not require a formal reconciliation (unless subsidiary system data is fed into KFS). Instead, operating activity should be monitored. Adjustments or errors should be corrected as soon as discovered and definitely before the close of the fiscal year.
What does monitoring mean?
Monitoring accounts requires a visual or analytic review of the activities on revenue and expense object codes.
To monitor an account, you must understand the purpose of the account, then visually or electronically scan the activity posted for reasonableness. If not reasonable, investigate the transaction to determine the appropriateness of the entry.
At least annually, as a process separate from effort certification, review the charges for your accounts in the labor ledger for reasonableness. For example, are the correct individuals and salary allocations appropriate?
When monitoring an account, ask yourself the following questions:
- What is the purpose of the account?
- What type of activity/transactions/object codes should I expect to see?
- Is the amount of the transactions reasonable compared to budget, based on your knowledge of the current or prior-year activity?
- Does the amount of the transactions or total monthly activity seem too large or too small?
- Does the object code have the correct natural balance? If not, did an entry post in reverse; did an e-doc post to the account in error; was there a duplicate entry?
- Was an object code used this year that had not been used in previous years? Is this appropriate, or did something post to an incorrect object code?
- Should salary and employee benefits post to this account?
- Did any procurement card transactions go auto?
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General guidelines
- Revenue object codes should have a credit balance and expenses should have a debit balance.
- Units are responsible for monitoring operating activity and ensuring corrections are processed in a timely manner.
- When monitoring restricted gift accounts, remember restricted dollars should be spent before unrestricted dollars. Restricted gift accounts should never have a negative balance, and this includes endowment income accounts.
- Operating accounts should not close in deficit at year-end.
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What is the best way to review operating accounts?
- Accounts in Deficit Report
- KFS Dashboard – University Fiscal Year End – Standard Reports
- Year End Accounts in Deficit. The report shows a list of accounts in deficit for operating activity fund groups: GN - General Funds, RG - Restricted Gifts, RV – Reserves, and sub-fund PLGIFT. It is highly recommended to run this report prior to and during the year-end closing process to ensure accounts do not close in deficit.
- High-level overview of to-date balances:
- KFS Dashboard – Financial Activity
- Balance by Org – Accounts
- Fund Balance by Organization - for accounts that operate on a Cornell fiscal year, not multi-year accounts which typically are contracts and grants.
- Budget Balance Available by Organization - Contract and grant accounts, contains inception to date balances.
- Revenue and expense object code review:
- KFS Dashboard – Financial Activity
- Object – filter to remove asset and liability object codes, contains To Date Actual Totals
- Transactions – detailed transactions
- Standard Reports – Budget vs Actual by Account and Object Code
- KFS Application: Access the General Ledger Balance Inquiry or Current Fund Balance on the KFS Main Menu tab, under Balance Inquiries.
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