Gail McGlashanUser Services ManagerDivision of AccountingDepartment of Finance
820 Silver Lake Blvd, Suite 220Dover, 19904
3 major components to know before beginning to spend
Internal Controls
Delaware’s Accounting Framework
Encumbrances
a process (means to an end, not the end itself)
effected by an organization’s oversight body (governance), management and other personnel
provides reasonable assurance of the achievement of the organization’s objectives:• effectiveness & efficiency of operations• reliability of reporting for both internal & external use• compliance with laws & regulations
Monitoring Activities
Information and Communication
Control Activities
Risk Assessment
Control Environment
GAO Green Book◦ Standards for Internal Control in the Federal
Government◦ www.gao.gov/greenbook
Chapter 2 of the State of Delaware Budget and Accounting Manual ◦ http://budget.delaware.gov/accounting-
manual/index.shtml
Division of Accounting CAFR/FARS Section◦ (302) 672-5500
Based on Generally Accepted Accounting Principles (GAAP)
Uses Appropriations and Funds to track and manage revenues and expenditures
GAAP standards used to establish measurement and classification for reporting
Cash basis of accounting for day-to-day operations
Method of segregating resources into categories identifying the source and use of monies
Delaware uses two budgetary Funds
◦ General Fund
◦ Special Fund
Used to finance and account for ordinary operations of governmental agencies
Appropriated by Legislature Accounts for all revenues and disbursements
not provided for in other funds Considered State monies Derived from taxes, fees, permits, licenses,
fines, forfeitures or any other sources or receipts unless specifically exempted◦ E.g. personal income taxes, various court fees/fines
Special Funds refer to all monies other than General Funds◦ Devoted to some special use with specific
regulations and restrictions◦ Usually created through statutory provisions to
provide certain activities with specific and continuing revenues◦ Used for the general operation of the restricted
and specified services◦ 4 major categories of Special Funds
Appropriated Special Funds (ASF)◦ Legislature chose to place under same budgetary
and financial controls as State’s General Funds◦ Annual budget requested and approved by
Legislature◦ Considered State monies◦ Encumbrances and expenditures may only be
made against actual cash receipts and may not exceed the appropriation limit authorized by the Legislature E.g. Fees collected by DNREC Parks and Recreation and used to
operate and maintain State parks for residents’ and visitors’ use
Non-appropriated Special Funds (NSF)◦ No Legislative spending limits◦ Any monies on hand may be encumbered and
expended◦ Encumbrances must be made against actual
receipts (cannot encumber against anticipated receipts)◦ Not considered State monies E.g. Donations, gifts, local school funds and various trust funds
Federal Funds◦ Spending authority for federal grants based on
actual grant awards ◦ May encumber and expend up to full amount of
federal funds awarded regardless of receipt Note most federal grants are “as-incurred”
(reimbursable). Some are pre-paid.◦ Not considered State funds◦ Spending rules or restrictions dictated by grant
program/federal grant sponsor◦ Any State matching funds are subject to State
accounting rules and restrictions
Bond Funds◦ Authorized annually by Legislature◦ Monies available immediately* for encumbrance
and expenditures
*as soon as First State Financials reopens at the beginning of FY
Created by Legislative authorization to spend◦ Annual Appropriations Act (Operating Budget)◦ Bond and Capital Improvements Act (Bond Bill)◦ Grants-in-Aid Act
Budgetary tool to control spending An allocation or set-aside of monies for
specific purposes Also used to segregate funds State also tracks by Appropriation Types
Expenditure tracking also uses appropriation types
General Funds
Special Funds
Delaware Code
Chapter 3 of the State of Delaware Budget and Accounting Manual◦ http://budget.delaware.gov/accounting-
manual/index.shtml
Purpose of Encumbrances Requisitions Purchase Orders: When Required and When Not? Purchasing Process Funding Out Clause, Next Fiscal Year Change Orders Security Reporting Training & Additional References
Governor
Division of Revenue
Division of Accounting
First State Financials
Purchasing Module
eProcurement
Purchasing
Procurement Card
State Lottery Office
Department of Finance
Agencies may not enter into any agreement or contract, or incur any expenses, which will result in an obligation in excess of the agency’s budgetary appropriations (Delaware Code)
Commitment to acquire goods or services from a vendor
Guards against over-committing available funds Used for budgetary control Reporting provides a detailed list of obligations
Optional to the Organization (not the end user)
Requisition created in eProcurement Module◦ Approved through Workflow◦ Budget Checked◦ Sourced to a PO (purchase order) in an automated
overnight process◦ No redundant approvals◦ Dispatched the following day by the DE_BUYER
All General and Appropriated Special Funds (ASF)
Purchases > $5,000.00◦ Any single or aggregate purchase during a fiscal
year from a single vendor◦ Not based on unit cost(s)◦ Fragmenting = illegal
PO may still be used if not required
Section 7.3 Direct Claims* Purchases less than $5,000.00 Petty Cash Funds Federal Funds Freight Late Payment Charges School District Local Funds Salaries, OEC, etc.
*State Budget and Accounting Manual
Open Order POs◦ Uses the OPENORDER Vendor ID Requires concurrent approval of the OMB Director and
the Secretary of Finance Emergency POs After-the-Fact POs◦ PO created after a purchase was made that requires
a PO Cabinet Secretary submits request OMB Director Approval Secretary of Finance Approval
Agreements/Contracts should coincide with the State’s Fiscal Year
Agreements/Contracts that span multiple fiscal years must contain a ‘funding out clause”
Budget Safeguard◦ Prevents obligating State funds that may not be
available over multiple fiscal years.
No Obligation of Funds Prior to July 1◦ 29 Delaware Code Chapter 65 Budget and Fiscal
Regulations for State Agencies
Exceptions:◦ School Districts/Colleges after March 1 29 Delaware Code § 6519 (b) Once zero dollar budgets are loaded to FSF◦ No payments (Vouchers) processed against the POs
until after July 1◦ POs require a funding out clause
General Fund (type 01 becomes type 04)◦ Funds encumbered automatically roll forward to the
following year◦ No third year (type 04)
Appropriated Special Funds◦ Automatically roll forward for up to two years◦ No activity in third year, PO will be closed
Change coding (only if you have not vouchered against the line already)
Add, Close, Cancel, Increase or Decrease Line amounts and/or quantities
Cannot Change the Vendor – must Close PO and recreate with desired Vendor
Role Level Security◦ Security granted through permissions to pages
defined by role(s) DE_REQUESTER (Requisition pages) DE_BUYER (Purchase Order pages)
Row Level Security ◦ Security applied to User IDs based on department
IDs and/or operating unit(s)
Schedule of Encumbrances Reports◦ DPO002 runs weekly in the Friday night Schedule◦ DPO004 runs monthly and is used for the Monthly
Reconciliation process.◦ Both reports: Post to Document Direct (not available on-demand) Close POs with a $0.00 balance AFTER verifying via Commit
Control (KK) the exact PO line status KK provides real-time data on-demand
PO Budgetary Activity (DPO017) ◦ On-line, ad-hoc only
Requisition Budgetary Activity (DPO016) ◦ On-line, ad-hoc only
Requisitions – PO110 – optional by Org Purchase Orders - PO120 Receiving - PO130 – required for Capital
Assets; Optional if don’t have Cap Assets Req/PO Reconciliation - PO160 Workflow - APO400 Other coursework on the Extranet:
http://extranet.fsf.state.de.us/
Delaware Code, Title 29 § 65 “Budget and Fiscal Regulations for State Agencies
Budget & Accounting Manual◦ www.state.de.us/budget◦ Chapter 7, “Purchasing and Disbursements”
Accounting Memos:◦ http://accounting.delaware.gov/memoranda.shtml◦ http://accounting.delaware.gov/
True or False:◦ Another name for Internal Control is “Looking Over Your
Shoulder”
◦ Delaware uses a cash basis of accounting for day-to-day operations
◦ Appropriated Special Funds are not considered State monies
◦ Appropriations: Authorized by the Legislature Segregate funds for specific purposes Cannot be used to control budget spending
Encumbrance Accounting
◦ A. Guards against over committing available funds
◦ B. Used for Budgetary Control
◦ C. Provides detailed account of obligations
◦ D. All of the above
True or False?
◦ A formal encumbrance is required for purchases greater than $5,000.00
◦ It’s OK to make two $3,000 purchases from the same vendor in the same fiscal year using General Funds
◦ Funding Out Clause is required when agreements/contracts span over multiple fiscal years
◦ Open Order Purchase Orders are issued to one specific vendor
An After-the-Fact Purchase Order requires:
◦ A. Written request for a waiver from the Cabinet Secretary or School Superintendent containing an explanation of the failure to adhere to purchasing procedures
◦ B. Approval of the OMB Director
◦ C. Approval of the Secretary of Finance
◦ D. All of the above
A PO is not required when:
◦ A. Purchase is $5,000.00 or less
◦ B. Federal Funds
◦ C. Payments between two state agencies
◦ D. Salaries
◦ E. All of the above
Gail McGlashan672-5000Service Desk526-5600