Performance Based Management

Self-Assessment Report

October 2002

Finance/Accounting

Introduction/Background

 Introduction/Background 

Date of last assessment: October 2001

Departmental Overview

Laboratory Mission

The Stanford Linear Accelerator Center (SLAC) is dedicated to experimental and theoretical research in elementary particle physics and in those fields that make use of its synchrotron radiation facilities, including biology, chemistry, geology, material science and electrical engineering.  This includes the development of new techniques in particle acceleration and detection and of synchrotron radiation sources and associated instrumentation.  Stanford University operates the center as a national user facility for the Department of Energy.

Organizational Mission

• SLAC Accounting is part of the Business Services Division Finance Office.       

• The major responsibilities of the department are:

• General ledger maintenance and reconciliation and journal entry operations

• Work Order maintenance,

•  FIS/MARS, other DOE and Stanford University financial reporting,

• Cost reporting and cost data files,

• Accounts payable,

• Accounts receivable and collections and bank deposit operations and reconciliation,

• Payroll,

• Labor database maintenance,

•  Property accounting,

• Bank operations,

• Contract labor data maintenance and payments,

• Stores accounting and stores file maintenance,

• Requisition and purchase order commitment maintenance; Shop rate and vehicle charge-out maintenance

• Travel accounting

 Identification of Self-Assessment Report Staff

Names, titles, affiliations of participants

Marty Sorensen, Accounting Officer

 Discussion of Individual Performance Objectives

Performance Objective:         1.0       Financial Stewardship

Performance Criterion:          1.1

Accounts receivable delinquencies are minimized.

Performance Measure:         1.1.a                                                                                       

Reduce the amount of delinquent accounts receivable 90, 91-180, and over 180 days old.

Performance Assumption:

Accounts receivable percentages will be measured at the end of each fiscal year based on the delinquent accounts receivable balances 90, 91-180, and over 180 days old.  Eligible delinquent receivables greater than 180 days old must be transferred to OAK for referral to U.S. Treasury. Narrative explanation of special circumstances relating to outstanding accounts receivable balances may be considered for adjustment to the rating.

Finding: There are no accounts receivable more than 90 days old, an outstanding performance.

Performance Criterion:          1.2

Improvements are made to Accounting Processes.

 Performance Measure:         1.2.a                                                                                       

SLAC Accounting identifies areas needing improvement, formulates plans, and executes significant process improvements.

Performance Assumption:

SLAC Accounting identifies process improvements possible in travel reimbursement, written procedures, and MARS reporting.  Other areas are also possible as improvements are identified.

 Finding:

SLAC Accounting made significant improvements in four areas in 2002, an outstanding performance.

1.      Payroll:

A.     Deductions:

More control and better information on handling of certain deductions was achieved.

Garnishment and disability buyback (to buy back sick leave with disability money) calculations have been improved. Payroll staff created Excel spreadsheets that contain formulas. The spreadsheets replace calculations done manually.

B.     Medical vendor payments:

More control and better information on medical vendor payments. Another spreadsheet was created for this purpose, replacing manual calculations.

C.     Time and Effort Sheet Design:

• Entries to overdrawn “leaves” are no longer permitted.

• Pre-filled charge numbers using the charge numbers stated on the last pay period Time/Effort Sheet.

• Eliminated data entry for Time/Effort sheets with no changes as compared to the previous pay period.

• There is more information on available leaves, reducing queries to the Payroll Staff.

• Using preprinted numeric filing sequence has increased efficiency and has improved a time-consuming filing system.

D.    Long term disability payments:

Instead of manual preparation of individual vouchers for each employee for each pay period, employees are set up in the PeopleSoft system, so a single electronic file is loaded into PeopleSoft for the paychecks. This has eliminated the need for any manual activities and has decreased payment errors.

E.     Retirement payments:

Payments are wired directly to the vendors, eliminating Accounts Payable activities for this function. The wire template is setup on the computer, with only the amount needing to be changed.

F.      Leave Without Salary:

The leave accrual program has been modified to calculate and pro-rate leave accruals through the system for people who are on LWOS (while on LWOS, the employee does not earn leave accruals). This modification has eliminated manual calculation and correction of over-accrual by the Payroll System.

G.    Payroll and labor processing:

1. Preliminary payroll processing has expedited the search for missing timesheets;

2. Payroll finishes closer to 1pm instead of 4pm;
3. Labor then finishes closer to 3pm instead of 6pm;
4. Reduced staff overtime;
5. Budget Office has top-level numbers on day 2, instead of day 3.

2.      Labor:

The labor process has been simplified to eliminate manually running many single steps in the Human Resources/Payroll side of PeopleSoft.  The new process has expedited the generation and editing of the journal to post labor to the general ledger and practically eliminating the need for any manual intervention. The process is also run on Unix, instead of a personal computer, which also contributes to freeing up accountant time during the short period of month end closing.

3.      Commitments:

The handling of commitments has been improved by enhancing our PeopleSoft code so that completed purchase orders are now labeled as “closed” by the system, thus eliminating the frequent maintenance (and related high volume of communications) of a large spreadsheet. This enhancement has contributed to a more efficient monthly process of closing the books, and producing MARS and internal reports. It has also increased system reliability and robustness.

4.      Allocations:

Allocations are now in PeopleSoft, instead of third-party software. This has greatly accelerated the closing process, and given our accountants greater control over the elements of allocation (reducing dependency on programmers to make changes), thus speeding up and simplifying the process of maintaining our allocation structure.

Performance Objective:         3.0       Financial Stewardship

Effective Internal Controls and Audit Findings Follow‑up. 

Performance Criterion:          3.1

Provide for effective internal controls and ensure timely and effective resolution and/or follow‑up on external and internal review group findings of a financial nature.

Performance Measure:         3.1.a                                                                                        

Financial findings are prioritized to achieve timely resolution within the metric guidelines.

Performance Assumption:

SLAC will partner with OAK in prioritizing finding to achieve maximum resolution response by SLAC.  SLAC will produce reports showing the delta between labs scheduled resolution dates and the actual resolution dates.

Review of SLAC Purchase Card Program (August 26, 2002)

·        Please refer to Procurement section of the report.

Review of the SLAC Payment Process for Contractors’ Invoices (August 8, 2002)

·        Please refer to the Procurement section of the report.

Agreed Upon Procedures Performed at SLAC for FY2001 in Accordance with OMB Circular A-133 (May 7, 2002)

Recommendation:  There were no observations of material noncompliance with applicable federal laws and regulation observed by the Auditors.

SLAC Audit of Allowable Costs for FY2001 (April 24, 2002)

Recommendation:  The auditors’ review of testing procedures resulted in no observations requiring corrective action by SLAC Management.

SLAC Review of Financial Year-End Assets and Liabilities Reconciliation and Cost Transfers (April 18)

1          Properly review all entries and supporting documentation for reasonableness and accuracy before submission to the University.

Recommendation: 

1.1        The SLAC Accounting Officer and the Assistant Accounting Officer should document procedures and provide cross training to staff in preparing the reports that support the amounts on the journal entry included in the University’s financial statement.

1.2        The SLAC Accounting Officer should review the reports that support the amounts for the August 31 entry for reasonableness and accuracy before submission to the University.

Response:

The SLAC Accounting Office has placed procedures online (appendix I).  Please refer to SLAC Financial Reports to Stanford Controller for fiscal year 2002.  Content approved by SLAC Accounting (please see http://www-bis.slac.stanford.edu/su/fin2002/).  The Accounting Officer formally signed off on the yearend financial information transmitted to Stanford.

2          Record expenses in the proper accounting period.

Recommendation: 

2.1        The SLAC Accounting Officer should review the 12 invoices and record the expenses of $1,249,199 in the proper accounting period.

2.2        The SLAC Accounting Officer should enhance the year-end expenses accrual procedures to include communicating to all SLAC personnel with approval authority the importance of recording expenses in the proper accounting period at year-end.

Response:

2.1        SLAC reviewed the 12 payments for which the expenses were recorded in FY2001.  Changes to procedures in order to enhance the expenditure accrual process were made.

         SLAC feels that the current practices of recording Purchase Card transactions in the subsequent month should not be changed.  Purchase Card statements are not available until after the 5^th day of the following month.  With the tight mandated year-end closing schedule, SLAC would not be able to get information in time to accrue costs to the final cost objectives.

         Regarding the remaining 11 invoices, DOE/OAK does not consider the $760K to be material to warrant prior year adjustment.

2.2        A year-end calendar (appendix II) has been created for the Accounting and Purchasing staff to review invoices.  The calendar can be found at: https://www-internal.slac.stanford.edu/accounting/2002Table%20Detailed%20Calendar%20for%20Yearend.htm

Review of SLAC Stores Inventory Reconciliation

February 20, 2002

·        Please refer to the Procurement section of the report.

78% of all audits with a specific completion date (not including those with a future completion date) were completed on or before the designated completion date.  The rating for this performance measure is “Good”.

Performance Measure:         3.1.b                                                                (Weight: 4%)

Adequate internal controls are in place to ensure that travel costs reported are accurate, complete, and have supporting documentation.

Performance Assumption:

SLAC will partner with OAK in addressing issues related to travel costs to meet DOE requirements.  When requested by OAK, SLAC will provide documentation showing total travel costs of SLAC employees.  Travel costs exclude travel performed under work-for-other agreements, travel of subcontractors, travel of users to participate in experiments at DOE user facilities, relocation costs or costs of travel management centers.

Findings: SLAC’s performance on Measure 3.1.b was “Outstanding”. All our travel costs are accurate and satisfy DOE requirements. Each and every travel expense report reimbursed is supported by adequate documentation. There is 100% review of expense reports submitted by travelers to the Travel Reimbursement Office.

As required by DOE, travel costs reported to DOE excluded travel performed under work-for-other agreements, travel of subcontractors, travel of users to participate in experiments at DOE user facilities, relocation costs or costs of travel management.  Travel costs reported are complete, accurate, and are identified through general ledger codes.  Supporting documentation was provided promptly to DOE Oakland whenever requested.

GOAL #2:                   Effectiveness and Efficiency: Achieve cost effective and efficient Financial  Management operations by applying available resources to continuous improvement efforts.

Performance Objective:         1.0

Ensure accounting data is recorded accurately and timely in accordance with prescribed standards. 

Performance Criterion:          1.1

Financial data is recorded and reported consistently, accurately, and timely.

Performance Measures:        1.1.a                                                                                        

DOE required accounting reports are provided by the due date and meet content requirements.

Performance Assumption:

Annual self-assessment will address date and time of report submittals, error rates, and resubmittals required. Describe significant adverse events and steps taken to resolve or prevent recurrence.  Reports listed in the table, below, are addressed by this performance measure.

Finding:

Our performance has been Outstanding. All reporting to the DOE has been consistently on time and accurate. SLAC’s liaison accountant agreed that details of data and time of report submittal would not be needed in the annual self-assessment.  We have also made several improvements in our labor, commitments, and allocations processes, which have contributed to our ability to deliver our reports on time and accurately.

Performance Criterion:          1.2

FY 2002 Financial Statements hold up under audit by DOE/OIG or Stanford Internal Audit.

Performance Measures:        1.2.a                                                                                        

FY 2002 audited financial statements are prepared in accordance with DOE requirements.

Performance Assumption:

Results of financial statements review activities are analyzed for accuracy and completeness and appropriateness of supporting documentation.

Finding:

The SLAC financial statements were all prepared in accordance with DOE requirements. In addition, we have organized on the SLAC documents public directly, all our reports, both quarterly and annual, to the DOE (and the University as well). We have folders for Estimated Quantity and Usage, Financial Statement Analysis, Management Representation Letter, as well as the Statement of Costs Incurred and Claimed. This gives us a basis year in and year out to compare annual financial statements to make sure we are meeting requirements. In addition, we analyze our inventory in preparation for yearend, and prepare a special spreadsheet showing changes by Balance Sheet Code from the previous year to check for abnormal changes. Each month we review the Accounts Receivable balances, so that at yearend we do not have any surprises. Because of this preparation and analysis, and the fact that we have no audit findings relative to our financial statements, our performance has been Outstanding.

Performance Objective:         2.0

Construction projects are capitalized. 

Performance Criterion:          2.1

Construction projects are capitalized.

Performance Measures:        2.1.a                                                                                       

Construction projects are capitalized in accordance with DOE requirements.

Performance Assumption:

Construction projects are tracked and processes are established to ensure that projects are capitalized in accordance with DOE requirements.

Finding:

SLAC’s performance on the capitalization of construction projects was Outstanding. All construction projects were capitalized according to beneficial use, and other DOE requirements. This year, Accounting, the Budget Office, and Property Control instituted a new procedure.  The procedure involved setting up a coordinating meeting, convening during the annual closing schedule, to review all activities related to capitalizing construction projects. This review, as an addition to the yearend closing process, improved the communication among the participants in the capitalization process.

Performance Objective:         3.0

Effective and efficient indirect cost management. 

Performance Criterion:          3.1

SLAC manages its indirect rates.

Performance Measure:         3.1.a                                                                                        

Using 1998 as a baseline, track and trend FY 1999 through FY 2002 indirect costs.  Demonstrate that the costs are efficiently managed.

Performance Assumption:

SLAC will provide reports to DOE indicating the trend of indirect costs and an analysis of trend results.

Performance Measure 3.1.a:  Using 1998 as a baseline, track and trend FY 1999 through FY 2002 indirect costs.  Demonstrate that the costs are efficiently managed.

Process used to meet objectives/measures:  SLAC ensures efficient management of its indirect costs by treating them as “direct costs”.  Budgets for indirect functions are independently developed and justified and go through the same rigorous review and approval process along with direct programmatic function budgets.

Findings:  The Indirect Rate chart illustrates that SLAC’s operating indirect costs as a percent of the direct operating costs have steadily declined from the FY 1998 benchmark of 31.0% to 25.8% in FY 2002.  Although the actual dollars expended for operating indirect support in FY 2002 are higher than the dollars expended in FY 1998, the percentages decline in indirect costs as a percentage of operating costs demonstrates that SLAC has been able to effectively control its operating indirect costs such that they have not grown at the same rate as the operating direct costs.

$ x 1,000

Discussion:  The Departments charged with carrying out SLAC’s indirect functions must compete for funding along with the research programs and must justify their requests based on the services to be provided.  The budget is allocated based on an assessment of Laboratory mission priorities and goals.  All functional elements of the Laboratory are held accountable for their assigned budget.  The Laboratory’s indirect rate is derived from the indirect budgets rather than the budgets being derived from the indirect rate.  Over the last several years, as the direct programs have grown, the indirect functions at SLAC have been able to control their growth at a rate lower than that of the direct programs.  The apparent decrease in indirects between FY00 and FY01/02 is less than it appears since prior to FY01, Safeguards and Security costs were included in the indirect cost pool.  If an adjustment is made for the Safeguards and Security effect, the decrease from FY00 to FY01/02 is 2.4% and 2.7% respectively.  Likewise, in FY03 SLAC expects to see an increase in indirects expressed as a percent of direct costs because of the migration back into the indirect pool (at the direction of DOE) of waste management costs.  These activities, which have been directly funded since FY1990 will become an indirect cost in FY2003.  Although SLAC’s record in controlling indirect costs is outstanding by any measure, this performance measure has a track and trend metric and can therefore, by DOE reckoning, only be rated as Good.

Performance Measure 3.1.b:  Policies, data, and reports consistent with Cost Accounting Standards (CAS) compliance and DOE requirements; financial practices are consistent with approved CAS Disclosure Statement.

Process used to meet objectives/measures:  SLAC partnered with DOE Oakland to develop a CAS Disclosure Statement that was fully satisfactory to Oakland and comprehensive in describing SLAC cost accounting practices.  SLAC has procedures and process in place to ensure that the assimilation and analysis of its financial data is consistent with the approved CAS Disclosure Statement.

Findings:  SLAC’s financial management practices and process are fully compliant with its approved CAS Disclosure Statement and DOE requirements.  This is verified by the recent review by DOE/OAK-BEPD on indirect costs allocated to the Safeguards and Security Program of Office of Science.  The review confirmed that the indirect cost allocation practices used by SLAC are in compliance with the CAS and DOE requirements.  This equates to a performance rating of Outstanding.

Performance Measure 3.1.c:  SLAC prepares and submits the Functional Support Cost Report (FSC) in accordance with DOE requirements.

Process used to meet objectives/measures:  SLAC partnered with DOE Oakland to identify the appropriate categorization of costs for the FSC Report.  The FSC Report was prepared following the applicable guidelines and submission requirements.

Findings:  SLAC submitted its FSC Report on time and in accordance with DOE guidelines.  It was complete and accurate with adequate supporting documentation.  All issues were resolved with DOE Oakland prior to the formulation and submission of the FSC Report.  This equates to a performance rating of Outstanding.

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For Questions or comments, Please contact Ziba Mahdavi, Last Updated 10/30/02