April 17, 2007D. Brothwell, CPSLO 1 Revenue Management Program Past, Present and Future Financial Officers Association Annual Conference - April 2007

D. Brothwell, CPSLO2 April 17, 2007 The Past

D. Brothwell, CPSLO3 April 17, 2007 The way it used to be In general, the CSU has funded the support of instruction from two sources  70% from state support  30% from student fee revenue The state funds $.70 on the dollar and students fund $.30 on the dollar  Campuses collected the $.30 from the students Campuses remitted the.$.30 to the state The state then allocated $1.00 back to the campus to spend ALL expenditures had to be processed thru the State Controller

D. Brothwell, CPSLO4 April 17, 2007 It seemed like such a simple change The state will continue to fund $.70 on the dollar Campuses will continue to collect $.30 on the dollar from the students  Campuses will deposit the fees collected from the student in State University Trust fund  Campuses will NOT remit student fees to the state Campuses will continue to have $1.00 in funding  $.70 from the state  $.30 from the student

D. Brothwell, CPSLO5 April 17, 2007 Original Vision of SB 1802 Improve Financial Management  Demonstrate to rating agencies that the CSU has control of its finances – deposit and investment of fee revenue CSU Central Bank Bring the state’s treatment of student fee revenue in line with other 4-yr Universities nationwide

D. Brothwell, CPSLO6 April 17, 2007 First Meeting of “Fees in Trust” Committee an idea is born

D. Brothwell, CPSLO7 April 17, 2007 Evolving Concept Initial Allow fees to be deposited into Trust Operate from General Fund and Trust Fund Revised Allow fees to be deposited into Trust Operate from one Fund

D. Brothwell, CPSLO8 April 17, 2007 Now we’re all on the same page Deposit Student Fees in Trust Implement CSU Central Bank  Control of our finances  Improve bond ratings Operate within the State University Trust Fund So we just have to do a few things

D. Brothwell, CPSLO9 April 17, 2007 Just a few things……

D. Brothwell, CPSLO10 April 17, 2007 Comprehensive Timeline

D. Brothwell, CPSLO11 April 17, 2007 As of today – April 17, 2007 The RMP Task Force:  Met for one week in May 2006  Met for one week in August 2006  Met for one week in February 2007 Approx 300 campus finance staff  Attended one day training May 22, 2006  Attended 3 day training October 23 – 25, 2006 CSU contracted with Wells Fargo for all CSU Banking activity CSU has contracted with 2 investment managers  Wachovia  US Bank Custodian Bank CSU has a new approved Plan of Financial Adjustment – (March 28, 2007) Interim guidelines issued March 19, 2007 addressing topics in need of immediate operating guidance

D. Brothwell, CPSLO12 April 17, 2007 As of today – April 17, 2007 All payroll is being processed within the State University Trust Fund 23 campuses have closed the general fund revolving fund  Modified all PeopleSoft claims set up accordingly  Modified all revolving fund business processes accordingly 23 campuses are fully operational within the CSU Central Bank – Wells Fargo  Modified all PeopleSoft Banking set up accordingly  Modified all banking business processes accordingly 23 campuses are fully operational within the State University Trust Fund

D. Brothwell, CPSLO13 April 17, 2007 In Summary The Past was really busy We changed almost everything we do It’s been a little crazy Oh yea, and year end is just around the corner

D. Brothwell, CPSLO14 April 17, 2007 The Present

D. Brothwell, CPSLO15 April 17, 2007 New Procedures and/or Processes Revenue Payroll Accounting Banking Cash and Investments Budget CSU Fund 499 New FIRMS Object Codes New Acronyms

D. Brothwell, CPSLO16 April 17, 2007 Budget Trailer Bill 1802 – Passed effective July 1, 2006  Amended Ed Code – “The Chief Fiscal Officer of each campus of the CSU shall deposit and maintain in local trust accounts….. “ (L) Moneys collected as higher education fees and income from students of any campus of the CSU and from other persons pursuant to Section 89700”Allows the CSU to deposit revenue from student fees into the State University Trust Fund What is Revenue Management Program?

D. Brothwell, CPSLO17 April 17, 2007 Revenue referred to in AB1802 “Money’s collected in the Higher Education Fees and Income Fund”  SCO Fund 0498  CSU deposited approximately $1.2B in SCO Fund 498 in as of June 30, 2006 However, campuses were not all depositing the same fee revenue Need to establish consistent base  CSU will continue to pay the state back for lost interest earnings on these specific fees Budget Act Item

D. Brothwell, CPSLO18 April 17, 2007 Budget Act Item – “Fiscal Neutrality”

D. Brothwell, CPSLO19 April 17, 2007 The Problem – How do we define the $1.2B?

D. Brothwell, CPSLO20 April 17, 2007 The Solution – CSU Fund 485 Revenue Definition for all Campuses

D. Brothwell, CPSLO21 April 17, 2007 Transfers In to CSU Fund 485 – CSU Operating Fund Campuses can continue to record transfer in activity as appropriate with CSU fund 485  These transfers would meet the following criteria The funds are for state support of instruction and related programs Can not identify a specific expenditure  EX: Cost Recovery Income

D. Brothwell, CPSLO22 April 17, 2007 The following fee revenue shall be reported within CSU Fund 485 effective FY

D. Brothwell, CPSLO23 April 17, 2007 Implementation Issues Health Service Fee  Campuses may continue to operate as self-support Establish a unique PeopleSoft Fund within CSU Fund 485  Can change FNAT but MUST create a new fund in the old CSU Fund and journal the appropriate equity amounts and transfer in/out to avoid FIRMS reject errors Program Code classification for this activity will be “0507 – Student Health Services” within CSU Fund 485  Was previously classified as “2001 – Auxiliary Enterprise” within the Health Service CSU Fund Reported as CSU Fund 485, Accounted for separately

D. Brothwell, CPSLO24 April 17, 2007 Payroll Accounting Changes Payroll originates by the SCO within the State University Trust Fund CO Processes an expenditure transfer for the estimated payroll between the campus General Fund (SCO Fund 0001) and the campus State University Trust Fund (SCO Fund 0948  Can be processed as AD-NOAT, CPO or Both  Campus are to record the expenditure adjustment in FIRMS Object Code within both SCO Fund 0001 and SCO Fund 0948

D. Brothwell, CPSLO25 April 17, 2007 Payroll Accounting Changes Payroll posts at the campus in the appropriate fund Campus processes a PFA to adjust the SCO Funds to reflect payroll within the correct SCO Fund. This PFA DOES NOT include an adjustment to the SCO Fund 0001 – General Fund  All activity posted within the SCO Fund 0001 – General Fund is initiated by the Chancellor’s Office NOT the campus

D. Brothwell, CPSLO26 April 17, 2007 Payroll Accounting Changes The CO initiated PFA for the estimated payroll amount is referred to as Central Payroll Activity (CPA) This process assists the CSU in fully expending (depleting) the General Fund appropriation each year on or before the month of May.

D. Brothwell, CPSLO27 April 17, 2007 Recently approved PFA refers to this activity

D. Brothwell, CPSLO28 April 17, 2007 The original plan

D. Brothwell, CPSLO29 April 17, 2007 Payroll Accounting Changes - Cont As per the interim guidelines issue March 19, 2007, Section 2 of 9  Positive Payroll for the June pay period may be posted to July 2007 – no accruals  Effective with FY – 12 months of positive payroll activity will be posted, June thru May Fiscal year will have savings as a result of this change This change will assist with a more timely year end close  NO payroll accruals for faculty payroll for the July and August pay-periods are to be accrued

D. Brothwell, CPSLO30 April 17, 2007 Banking State Treasurer Activity  FIRMS Object Code – Cash Wells Fargo Activity  FIRMS Object Code – Investments Other

D. Brothwell, CPSLO31 April 17, 2007 State Treasury Activity All University Union Fees received by campuses with “senior debt” must transferred to the state treasury  Until August 2007 Chico, Northridge, Fullerton, San Diego, San Francisco  Until November 2007 San Luis Obispo Principal and Interest payments for revenue bonds payable to the Dorm Revenue Interest and Redemption Fund 15 days prior to due date  Procedures in development

D. Brothwell, CPSLO32 April 17, 2007 State Treasury Documents used to process transaction with State Treasury and SCO Accounts  State Treasury Deposit Slip  Remittance Advice  Local Bank set up to ZBA to the State Treasury

D. Brothwell, CPSLO33 April 17, 2007 Wells Fargo All fees and income not required to be transferred to the state treasury remain in Wells Fargo Currently, the CMO office is manually transferring cash from Wells Fargo to Wachovia  Campuses receive a Cash Posting Order (CPO) Campuses need to notify the CO Cash Management Office (CMO) regarding any “large” deposits or withdrawals as it effects the daily investment activity  $200,000 or more, especially wire transfers (ACH in or out)

D. Brothwell, CPSLO34 April 17, 2007 Implementation Issues Campuses were originally advised to record banking activity within Wells Fargo in FIRMS Object Code Campuses are now required to record all banking activity within Wells in FIRMS Object Code (Investments)  No year end accrual required to adjust negative cash  Reflects accurately that campus is fully invested  Cleared by KPMG

D. Brothwell, CPSLO35 April 17, 2007 FIRMS Object Code – Campus implementation options  Modify all sub-system codes and open documents to reflect account Reconcile to Wells – journal to  Re-map campus account to FIRMS Object code for the interim Modify all sub-system codes and open documents - later

D. Brothwell, CPSLO36 April 17, 2007 Cash and Investment Activity All banking activity recorded within the CSU Central Bank (Wells Fargo) is to be recorded in FIRMS Object Code – Currently, the CMO office is manually transferring cash from Wells Fargo to Wachovia  Campuses receive a Cash Posting Order (CPO) Some campuses are recording the CPO  Credit Cash  Debit Investments – other Need to revisit as both of these accounts should now be mapping to

D. Brothwell, CPSLO37 April 17, 2007 Cash and Investment Activity All campuses are to record all their allocated investment income for SCO fund 0948 in CSU Fund 499 – FIRMS Object Code  FIRMS Object Code is only to be used in CSU Fund 499 within SCO Fund 0948  Campuses may re-allocate investment income to other CSU Funds using the following new FIRMS Object Codes Transfer out – investment income Transfer in – investment income

D. Brothwell, CPSLO38 April 17, 2007 Implementation Issues Campus investment earnings (508001) for SCO Fund 0948 to date have been recorded in various CSU Funds  Need to be corrected by Investment Income for 0948 is to be posted to CSU Fund 499 (508001) Investment Income allocation by the campus to various CSU funds within 0948 is to be recorded using Transfer out ( ) in CSU 499 and Transfer in (506051) in the receiving CSU Fund CSU Fund 485 should only receive interest earnings if they are needed to cover planned expenditures within the year (506051)

D. Brothwell, CPSLO39 April 17, 2007 Budget Campus financial management of CSU Operating Fund  BBA vs Fund Equity SWAT Transaction Sweep balances vs roll forward Managing Contingencies SAM 6 – Managing the campus current year plan

D. Brothwell, CPSLO40 April 17, 2007 Same World Different Perspective The view of the world by the Budget Office The view of the world by the accounting office

D. Brothwell, CPSLO41 April 17, 2007 Systemwide Allocation Transfers - SWAT SWAT documents are a notice to the campus budget office that additional cash will be deposited into the campus CSU Operating Fund  Budgets should be recorded to reflect the new revenue and the corresponding spending authority – net zero The revenue will be recorded in FIRMS object code  Funds could also be transferred out would be used

D. Brothwell, CPSLO42 April 17, 2007 SWAT Accounting Entries Either a CPO or an AD-NOAT never both, CPO = Cash/Investment entry, AD-NOAT = FBC entry. Both credit the same revenue account (506100)

D. Brothwell, CPSLO43 April 17, 2007 SWAT Budget Entries Budget is posted to regardless of the method of deposit (AD- NOAT or CPO) then recorded for expenditure in the receiving departments accounts

D. Brothwell, CPSLO44 April 17, 2007 Balance in SWAT accounts should be zero

D. Brothwell, CPSLO45 April 17, 2007

D. Brothwell, CPSLO46 April 17, 2007 Net Income vs BBA

D. Brothwell, CPSLO47 April 17, 2007 Budget Considerations Does your campus sweep budget balances (BBA) to contingency or roll them forward to the department  PeopleSoft Fund does not change from year to year so any differences between what was accrued and what is paid in the subsequent year will be processed within the users account

D. Brothwell, CPSLO48 April 17, 2007 Budget Considerations Managing Contingencies  Campuses historically manage contingencies thru the budget process. Prior year savings will be a reserve amount in fund equity Budget offices will more than likely establish a budget for this in order to manage the allocations and the transfers to departments in the subsequent year This budget will not be recorded in the reserve account Pre-closing reserve entries per “Interim Guidelines”

D. Brothwell, CPSLO49 April 17, 2007 CSU Fund 499 – Internal Service Fund All investment earnings for SCO Fund 0948 – State University Trust will be recorded in this fund Direct vendor pay activity will be recorded in this fund  CSU Fund 499 is capitalized by CSU Fund 485

D. Brothwell, CPSLO50 April 17, 2007 NEW FIRMS Object Codes and/or new uses – SWAT Transfer Out – SWAT Transfer In – Transfer in Invest Earnings – Transfer out Invest Earnings – Transfer in General Fund Exp – Investment - other

D. Brothwell, CPSLO51 April 17, 2007 New Vocabulary SWAT – Systemwide Allocation Transfer CPA – Central Payroll Activity CPO – Cash Posting Order CMO – Cash Management Operation SWIFT – Systemwide Investment Fund - Trust Positive Pay File – Electronic File of all checks #’s, amounts and payee CSU Operating Fund – CSU Fund 485 in SCO Fund 0948

D. Brothwell, CPSLO52 April 17, 2007 The Future

D. Brothwell, CPSLO53 April 17, 2007 EO 1000 – Delegation of Fiscal Authority SWATs CSU policies, standards, and definitions  CSU Manual to be produced New Investment Managers All qualified funds fully operational within SCO Fund 0948 Year end training CSU Reserve Policy

D. Brothwell, CPSLO54 April 17, 2007 SWAT’s in the Future – CPO Only

D. Brothwell, CPSLO55 April 17, 2007 EO 1000 – CSU Delegation of Fiscal Authority Overall approach  Create a framework that supports the development of CSU accounting definitions and standards (principle based). Create a delegation of authority based on “textbook” governmental accounting definition of funds – sustainability for the CSU.  This EO acknowledges, defines and guides the CSU, as it now operates within two succinct set of accounting records.

D. Brothwell, CPSLO56 April 17, 2007 EO 1000 defines the activity within SCO Fund 0948 Campuses will continue to maintain 2 distinct sets of accounting records

D. Brothwell, CPSLO57 April 17, 2007 New CSU “Manual” “CSU policies, standards, and definitions” refers to a unified system of CSU policies, standards, and definitions pertaining to the administration and safe-keeping of university assets, budgetary accounting and classification, financial accounting and classification, and financial reporting, and is inclusive of financial transactions between the campus and recognized Auxiliary Organizations.

D. Brothwell, CPSLO58 April 17, 2007 New Investment Managers US Bank (custodian) and Wachovia Effective with the implementation of the new investment activity (daily sweeping of balanced) campuses will NO LONGER receive CPO documents for investment activity  Daily sweep activity can be seen on-line in the Wells CEO

D. Brothwell, CPSLO59 April 17, 2007 Current “Report Card” on the Exit Strategy

D. Brothwell, CPSLO60 April 17, 2007 Year end training considerations Fund Roll Forward rules Combo Edit Changes Year end close rules  CSU Fund 485 closes to NOT No activity in Health Services Fund should be closed

D. Brothwell, CPSLO61 April 17, 2007 Important Documents Interim Guidelines Memo – March 19, 2007  From Dennis Hordyk to Vice Presidents EO 1000 – Delegation of Fiscal Authority Current Approved PFA – March 28, 2007 This presentation Year end training materials

D. Brothwell, CPSLO62 April 17, 2007 Planning for