1. 1 Cash and Investment Accounting for Year-End and GAAP Presented by Sherry Pickering and Lily Wang April 16, 2007

2. 2 Agenda  Background  Interim Guideline  Bank and Investment Reconciliation  Investment Earnings and Earnings Distribution  GAAP Impact

3. 3 Background  Cash & Investments Prior to RMP –Campuses operated from the State Treasury  Revolving Fund  Some chose to bring wires into an outside Trust account to avoid complications with banking –For some transactions, this added steps to the accounting. –Investments managed by Wachovia (formerly MetWest) and controlled by campuses

4. 4 Background  Initial RMP Plans –Campuses were to discontinue operations in the State Treasury accounts and transition to a central bank (Wells Fargo Bank) –Investments would be centralized into a pooled concept and managed by CO Finance & Treasury (SWIFT)

5. 5 Background  Progress of RMP Implementation Systemwide –Wells Fargo Bank transition completed in April 2007 –SWIFT implementation postponed to July 1, 2007

6. 6 Interim Guideline  Cash in State Treasury –Un-remitted Cash held in state treasury must be recorded in object code 101001-General Cash. –Monthly balance in this object code should be reconciled to the state treasury bank statement. –Prior day activity inquiry on this account is available through the SCO terminal  SCO instructions describing this tool available herehere –Note: Remaining outstanding checks will continue to be honored, however campuses experiencing lengthy deficits in this account may be charged bank fees.

7. 7 Interim Guideline  Wells Fargo Bank (WFB) –Per RMP interim guideline, all campuses must operate and invest out of object code 108090-Investments Other, as of June 30, 2007. –For those campuses currently operating out of 101006 and 108090, the recommended implementation of the guideline is to run a one-time allocation process at year-end to move the balance from 101006 to 108090. See attached below.  Note: There are some setup changes involved, so workload must be evaluated before proceeding.  As an interim step, campuses may accomplish the reporting requirement by changing the AAT key connected to the campus local Peoplesoft account established to represent WFB. –Campus will still want to make a change later under this approach to eliminate training issues with systemwide materials and local chart of accounts.

8. 8 Interim Guideline  Year-End Balance before Allocation Process

9. 9 Interim Guideline  Year-End Balance after Allocation Process

10. 10 Bank and Investment Reconciliation  Through 06/30/07 - Third party documentations used to perform the monthly reconciliation of object code 108090 include: WFB statements, monthly CMO report, and Wachovia statement.  Effective 07/01/07 - Third party documentations to perform the monthly reconciliation of object code 108090 include: WFB statements, and the monthly “Bank of CSU” report that recap SWIFT activities.

11. 11 Sample Bank and Investment Reconciliation at 6/30/07

12. 12 Sample Bank and Investment Reconciliation at 7/31/07

13. 13 Investment Earnings and Earnings Distribution  Interim Guideline requires investment earnings in SCO fund 0948 to be recorded in CSU fund 499

14. 14 Annual GAAP Adjustment  For GAAP reporting, the cash and outstanding checks within the investments-other object code 108090 must be reclassified.  This reclassification entry needs to be reversed in the following year.  To determine the amount and account to reclassify to, a calculation must be performed to find the net cash balance (cash less outstanding checks).

15. 15 Annual GAAP Adjustment  If the net cash is positive, then –Debit Cash –Credit Investments To properly reclassify cash and restore the investment balance.  If the net cash is negative, then –Debit Investments –Credit Accounts Payable (this is the net outstanding checks owed to WFB under the overdraft protection) To reclassify net outstanding checks and restore the investment balance.

16. 16 Annual GAAP Adjustment  GAAP Adjustment to Reclassify Net Cash

17. 17 Excel File of Illustrations  To view the entire illustrations used in this presentation, click on the Excel file below.

18. For questions, please contact Lily Wang at lwang@calstate.edu or 562-951-4628 orlwang@calstate.edu Sherry Pickering at spickering@calstate.edu or 562-951-4519spickering@calstate.edu