Chapter 5 - Journal Vouchers
Part 9 - Finance and Accounting
|Chief Financial Officer||9-5.3A|
|Journal Voucher Entry Approval Roles||9-5.4|
|Segregation of Duties||9-5.4A|
|First Level Approval||9-5.4C|
|Second Level Approval||9-5.4D|
|Third Level Approval||9-5.4E|
|Journal Voucher Entries||9-5.5A|
|Examples of Manual Entries and Related Supporting Documentation||9-5.5C|
|Financial Management Officer Alerts||9-5.6B|
|Restricted Access to Application Desktop Integrator||9-5.7A|
Manual Exhibit 9-5-A
||Summary of Requested Data Elements|
- Purpose. This chapter establishes the policy and procedures to ensure manual entry journal vouchers are properly prepared, supported by adequate documentation, reviewed, and approved; and that journal entries and supporting documentation are accessible to auditors. Properly prepared, authorized, documented, and reviewed manual entries are essential in providing assurance that the Indian Health Service (IHS) financial statements are fairly stated and meet audit standards surrounding proper authorization and documentation of transactions.
- Scope. This chapter is applicable to all IHS staff that prepares and record manual journal voucher entries; and to all data prepared and entered into the IHS financial management system.
Authorization requirements apply to all Financial Management Officers (FMO).
This chapter establishes policy and procedures for preparing all manual journal voucher entries entered into the IHS financial management system. Included are journal voucher entries where standard general ledger (SGL) accounts to be debited and credited are selected by the end user and entered by the user either manually or with a tool such as the Oracle Application Desktop Integrator (ADI). In addition, the scope applies to journal voucher entries manually prepared and entered directly into the general ledger by end users using transaction codes. It does not include journal voucher entries created by the sub-ledgers or feeder systems, where the debit and credit pairs come from SGL decode or from configurations in or transaction codes sent from those modules.
- Background. The Office of Management and Budget (OMB) Circular A-123, Appendix A, establishes internal control responsibilities that update and strengthens the OMB guide for Federal managers in implementing the Federal Managers' Financial Integrity Act (FMFIA) of 1982. The Department of Health and Human Services (HHS) Guidance Manual for OMB Circular A-123 Assessments provides implementation guidance.
This policy strengthens internal controls governing the preparation, authorization, and documentation of manual journal voucher entries, and addresses potential risk associated with preparing and recording manual journal voucher entries into the general ledger. The HHS implemented the Unified Financial Management System (UFMS) to standardize processing of all financial transactions. This policy implements controls to limit transactions entered outside of UFMS sub-ledgers.
- Title 31, United States Code 3512, "Executive Agency Accounting and Other Financial Management Reports and Plans" (includes the Federal Financial Management Improvement Act of 1996)
- The Federal Managers' Financial Integrity Act of 1982, Public Law (P.L.) 97-255
- Office of Management and Budget Circular A-123, Appendix A, Management's Responsibility for Internal Control, Internal Control over Financial Reporting (updated annually)
- United States SGL, Treasury Financial Manual
- Government Accountability Office, Policy and Procedure Manual for Guidance of Federal Agencies, Title 7, "Fiscal Guidance"
- Department of Health and Human Services, Guidance Manual for OMB Circular A-123 Assessments
- Office of Management and Budget, Bulletin No. 07-04, Audit Requirements for Federal Financial Statements
- Policy. It is IHS policy that all manual journal entries:
- must be entered into UFMS to consolidate reporting, as well as, generating financial statements from the accounting system of record. There must not be any entries posted outside of UFMS as top level adjustments.
- must be consistent across the IHS and contain standardized data element and supporting documentation with a detailed description of the manual journal voucher entry.
- must be approved using the criteria as stated in section 9-5.3, "Responsibilities," of this chapter.
- Accountant. One who is skilled in the practice of accounting or one who is in charge of public or private accounts. Education and training requirements are set forth in section 9-5.2, "Accountant Requirements," of this chapter.
- Application Desktop Integrator. An application that loads manual journal voucher entries into the general ledger. These journal entries are created from Excel spreadsheets or from a Standard Query Language (SQL) query. Examples of ADI entries are as follows:
- Error corrections for sub-ledger to general ledger transfers, this example contains reference information,
- Financial Statement Journal Voucher, this example does not contain reference information and is auto-reversed,
- Pre-Closing Entries, this example does not contain reference information, it can be permanent or temporary, or
- Prior Year Adjustment Entries, this example does not contain reference information, it generally is permanent.
- Budget Account Code Structure. Key flex fields in UFMS that record global and site specific segment values used to accomplish daily budgeting and accounting activities. The global values include fund, budget year (BY), budget activity code, organization, object class code, SGL account, cost center, and future use segments.
- Category. A type of entry posted in UFMS and is a breakdown or description of the journal source. Example, a journal entry with a "manual" source may have a category entry of adjustment, accrual, or top level adjustment.
- Financial Statement Journal Voucher. A manual journal voucher entry required to accurately reflect the financial statement line items. These entries usually are auto-reversed at the opening of the subsequent financial statement period and do not contain sub-ledger reference information. In the past these entries were recorded outside the accounting system as topside adjustments; however, IHS is now required to post these entries in UFMS. Examples of these entries are as follows:
- Auditor recommended journal voucher entries
- Payable Accruals
- Elimination Adjustments
- Allocation of Suspense Accounts
- Departmental Adjustments, such as UFMS Capitalization, Federal Employees Compensation Act, etc.
- General Ledger Accounts. A standardized chart of accounts to record asset, liability, equity, budgetary, revenue, and expense transactions.
- Manual Entries. Adjust general ledger balances for transactions not captured by the sub-ledgers or subsidiary systems, or to correct accounting entries from those sources. Examples include:
- Error Corrections
- Conversion Corrections
- Attribute Corrections
- Prior-year Budget Execution (BE) transactions
- Allowances for Doubtful Accounts
- Property, Plant, and Equipment Adjustments
- Other Administrative Corrective Entries
- Mass Allocations. The movement or allocation of costs from one Budget Account Code Structure (BACS) string to another or multiple BACS strings. One example is to spread costs posted to an allocation Government Performance Results Act (GPRA) code to multiple GPRA codes. Another example is to close balances posted in anticipated general ledger accounts, such as 421001 or 406001, to account 459001 at year end.
- Source. Where the journal entry originated. Example, a journal entry that originated in the purchasing module, is from a "purchasing" source. Whereas a manual journal entry, is from a "manual" source.
- Standard Entries. Transactions where the net result of the posting is United States (U.S.) SGL compliant and updates made to budgetary and proprietary pairs of SGL accounts are in line with the event being recorded.
- Standard General Ledger Decode. A table in UFMS that crosswalks legacy transaction codes to the UFMS transaction codes along with proprietary debit and credit pairs.
- Subsidiary Ledger (Sub-ledger). The UFMS modules (Accounts Payable, Purchasing, Accounts Receivable, and Projects) as well as the feeder systems (Payroll, Grants, or other systems) which interface directly to the general ledger.
Note: All transactions in the general ledger must reconcile back to the detail in the sub-ledgers. The feeder systems interfacing to the financial management system sub-ledger modules would not be considered a sub-ledger. Only those modules directly interfaced to the general ledger would be considered sub-ledgers.
- Top Level Adjustments. A "category" journal within UFMS that are manual journal voucher entries posted directly to the general ledger without document level details.
Note: These entries contain minimum data to perform financial reporting but may not contain all the detailed segment values in BACS.
- Education. Accountants must have at least 24 credit hours of accounting education, or a four-year degree in accounting, or have acquired the equivalent experience as determined within the Office of Personnel Management (OPM) classification standards.
- Training. Accountants must have successfully completed U.S. SGL, Treasury Financial Manual training. The completion must be certified by the CFO or the Area FMO, as applicable, and comply with the OPM classification standards.
- Chief Financial Officer. The Chief Financial Officer (CFO) or designee must review and approve all manual journal voucher entries. The CFO:
- Establishes a mechanism for pre-approving standard manual journal vouchers that occur routinely. The Area FMO will brief the CFO and/or designee on the purpose of the standard entries.
- Establishes criteria for authorizing and approving the non pre-authorized manual journal vouchers with total thresholds that are based on the total debits and include both proprietary and budgeting pairs. The transaction code populates the budgetary SGL pairs when only the proprietary pairs are entered as a manual journal voucher. The approval hierarchy is listed below:
- First level of approval. The Area FMO approves those manual journal vouchers less than $1 million.
- Second level of approval. The first level of approval plus the Area Executive Officer. The Executive Officer is authorized to approve manual journal vouchers from $1 million to $7.5 million.
- Third level of approval. The first and second levels of approval plus the CFO or designee. The CFO or designee is authorized to approve manual journal vouchers above $7.5 million.
- Establishes criteria for monthly certification of the accuracy and completeness of posted journal vouchers.
- Establishes naming conventions and accounting rules for entering and posting manual journal voucher entries.
- Designated Reviewer. The designated reviewer, who may be the CFO, must review and approve all manual journal voucher entries and accomplish the same duties as the CFO (above).
- Accountant. The IHS Accountant:
- Prepares the manual entry.
- Validates that the journal entry is complete and accurate.
- Reviews the impact of entry.
- Ensures budgetary and proprietary accounts are synchronized.
- Prepares a description that is thorough and concise, so that an accountant that has not prepared the entry would understand the purpose and rationale for the entry.
- Ensures that the supporting documentation is detailed and concise.
- Ensures that the journal numbering sequences are followed.
- Ensures that the journal balances and the control totals equal.
- Segregation of Duties. Segregation of duties must be established for each of the roles described below. Each office will establish and document procedures that mitigate the risk when staffing levels do not permit segregation of duties.
- Preparation. The Area Office Accountant or Headquarters (HQ) Accountant:
- Prepares the manual journal voucher entry.
- Validates that the journal voucher entry is complete and accurate.
- Reviews the impact of entry.
- Ensures budgetary and proprietary accounts are synchronized.
- Prepares a description that is thorough and concise, so that an accountant who has not prepared the entry would understand the purpose and rationale for the entry.
- Ensures the inclusion of supporting documentation that is detailed and concise.
- Validates that journal numbering sequences are followed.
- Validates that journal balances and control totals equal.
- First Level Approval. The Area FMO, the Director, Office of Finance and Accounting (OFA), the Director, Division of Budget Execution (DBE), or the Director, Division of Systems Review and Procedures (DSRP):
- Validates the need for the manual entry.
- Approves manual journal voucher entries.
- Validates that all journal voucher entries (including budgetary and proprietary accounts) are complete and accurate.
- Reviews the impact of the entry.
- Verifies that the description is thorough, concise, and adequately describes the entry.
- Verifies that supporting documentation is detailed, clear, concise, and can easily be traced to the manual entry.
- Verifies that the accounting period is correct.
- Checks that budgetary and proprietary entries are in synch.
- Second Level Approval. The Area Executive Officer or the Deputy Director, OFA:
- Performs the same functions as the first level approver.
- Verifies that the entry was approved by the first level approver.
- Third Level Approval. The CFO or designee:
- Concurs with justification or need for the manual journal voucher entry.
- Ensures authorization is provided by the HQ or Area Level Accountant, the first level approver (Area FMO, Director, DBE, or the Director, DSRP) and second level approver (Area Executive Officer or the OFA Deputy Director).
- Verifies that supporting documentation is detailed, clear, concise, and is easily traced to the manual journal voucher entry.
- Understands the impact of the transactions on IHS financial statements.
- Journal Voucher Entries. Journal voucher entries may be prepared either in a hard or soft copy. Hard copy entries must include the required data elements formatted, as shown in Manual Exhibit 9-5-A. All journal voucher entries must include the following data elements and must be completed using the following guidelines.
- Manual Journal Voucher Number. The standard journal voucher numbering system is "JV11APXXXX," in accordance with FMO Alert 11-02 (which supersedes FMO Alert 02-04).
- The acronym "JV" stands for journal voucher.
- The number "11" is the fiscal year (FY).
- The acronym "AP" stands for Accounting Point.
- The "XXXX" is a unique 4 digit number that must be included as the first item in the batch name as well as the journal name.
- Journal Name. Journal names entered in the system must include, for the approver, a brief description of the entry.
- Description. Each manual journal voucher entry must include a clear, concise, specific, and thorough explanation for the manual entry for audit purposes.
- Accounting Period. Each manual journal voucher entry must contain the applicable accounting period.
- Date.Each journal voucher entry must contain the date of the transaction which may be different than the accounting period posted if the journal is processed for a prior accounting period.
- Category. The category "top level adjustment" is a manual journal voucher entry. All ADI entries entered with sources from the sub-ledgers or feeder systems must contain the appropriate categories as if the transaction originated from these sources. Example, posting of an Accounting for Pay System (AFPS) manual entry must contain a category of AFPS Adjusting Accruals, AFPS Adjusting Disbursements, AFPS Adjusting Reversals, AFPS Payroll Accrual, AFPS Payroll Accrual Reversal, or AFPS Payroll Distribution.
- Source.The source is defaulted when entering manual entries directly into UFMS. The manual source, for transactions not originating in feeder systems or the sub-ledgers must be used when loading manual entries to the general ledger. These entries may or may not auto-reverse including financial statement adjustments, as well as permanent entries. If a transaction is entered through the ADI, the source must be selected using the following guidelines:
- Sub-Ledger Source. Sub-ledger sources such as; payables, receivables, or purchasing, must only be used when correcting UFMS related issues for out of balance sub-ledgers and general ledgers or for sub-ledgers missing necessary reference information. All transactions using the sub-ledger resources must contain appropriate reference information with appropriate ties to the sub-ledgers to support sub-ledger to general ledger reconciliations and document-based reports. Any ADI using sub-ledger sources must be thoroughly tested, in a test instance, and reconciliations performed between the sub-ledger and general ledger, to ensure both remain in balance after the ADI is posted.
- Spreadsheet Source. Similar to the manual source, the spreadsheet source must be feeder systems or sub-ledgers. These entries may or may not auto-reverse and could include financial statement adjustments as well as permanent entries.
- Feeder System Source. The Feeder System Source (i.e., AFPS, HHS Grants) must only be used for manual entries when correcting UFMS-related issues. All transactions using feeder system sources must contain appropriate reference information with appropriate ties to documents in the interface systems. Any ADI using feeder system sources must be thoroughly tested, in a test instance, and reconciliations performed between the interface and general ledger, to ensure both remain in balance after the ADI is posted.
- Other Manual Sources. All requests to establish other manual sources to track the recording of manual journal voucher entries must be sent to the HQ Accountant for prior approval.
- Special Sources. Special sources have been established to record financial statement manual entries to facilitate data pulls from the system for these items. In addition, these special sources can be used to restrict users from posting entries for specific sources.
- Budget and Accounting Classification Structure String. All necessary data must be present in the BACS to properly record transactions. The BACS entry must exactly match the BACS string in the sub-ledger.
- Descriptive Flex Fields. All manual entries must contain the appropriate descriptive flex field (DFF) values for general ledger DFF established to support Federally mandated reporting. The DFF values may include HHS trading partner information, Government-wide financial reporting system values, Federal Agency Centralized Trial Balance System trading partner information, public law codes, or other required reporting attributes.
- General Ledger Account. General ledger entries must contain both budgetary and proprietary general ledger accounts when required, to ensure proper account relationships are maintained according to U.S. SGL guidelines. If budgetary and proprietary accounts do not balance on the face of the manual entry, supporting documentation must be attached to the manual entry that demonstrates the entry is correcting an existing deficiency on the general ledger.
- Dollar Amount. Debits must equal credits for the entire manual journal voucher entry. However, there does not need to be a one-to-one relationship between SGL account amounts. For example, you may record a debit to an account for $1,000,000 and credits to two accounts that total the $1,000,000. All amounts entered must be easily traced and clearly tie to the required supporting documentation for the manual journal voucher entry.
- Reference Information. All permanent manual entries that are entered through the ADI to correct issues with transfers from either the sub-ledgers or the interfaces to general ledger must include reference information with the appropriate ties to sub-ledgers or interface systems. Such references must include purchase order document numbers, invoice numbers, vendor names, trading partner information, or other reference information required to tie the general ledger entries to the sub-ledgers.
- Signature of Accountant. The signature of the accountant is required on all manual entries to the general ledger.
- Authorization Signature(s). Proper authorizing signatures are required in accordance with section 9-5.6, "Authorization," of this chapter.
- Manual Journal Voucher Number. The standard journal voucher numbering system is "JV11APXXXX," in accordance with FMO Alert 11-02 (which supersedes FMO Alert 02-04).
- Supporting Documentation. Documentation must clearly state the reason for preparing the manual entry. Reviewers must be able to determine, from the documentation, the purpose and need for the entry and that the manual journal voucher entry is proper and accurate. If not, the approving official will require additional information before approving the entry.
- Documentation must include all applicable authoritative guidance to support the need for the manual journal voucher entry including references to laws and regulations, calculations, description of methodologies and assumptions used for estimates, supporting reports, reconciliations, queries, process flows, detailed narrative explanations, memorandum, and spreadsheets. Dollar amounts of the manual journal voucher entry must be clearly and readily identifiable in the supporting documentation. If, because of the large number of detailed transactions summarized in the voucher, it is not practical to attach all of the documentation to the hard copy of the manual journal voucher entry, attach entry to the general ledger ADI system. In those cases, attach detailed information to the hard copy of the journal voucher, summarizing the content of the soft-copy information and identifying its source.
- Documentation must be maintained in permanent files in accordance with Part 5, Chapter 15, "Records Management Program," IHM.
- Examples of Manual Entries and Related Supporting Documentation.
- Reconciling Adjusted Trial Balances to Sub-ledgers. Reconciling Adjusted Trial Balances to sub-ledger entries to be made to reconcile items between trial balances, or other source data, to sub-ledger details. Evidence to support this type of manual journal voucher entry must include reference to specific documents, other source data and a complete analysis that supports the correct amount. When a manual journal voucher entry is necessary, the voucher must document why discrepancies exist among data, provide evidence to support the proposed correction, and a description of the methodology used to validate the entry. The ADI must be used for these entries and proper attributes and references must be populated in the entry to support reconciliation of the sub-ledger to general ledger post correction. These errors are generally related to systems errors. Tickets, change requests, and service requests must be included in the supporting documentation to demonstrate that corrective action is being taken to remove the deficiency. To ensure desired results are achieved, all ADI system-related corrective entries must be tested, in the test environment, before entries are loaded into the production environment. The test results must be included as supporting documentation.
- Data Clean-up Entries. Much of the data in the current financial management system has been through numerous conversions, variations of Treasury transaction codes, and variations of decode in legacy systems which may have created instances where general ledger balances require data clean up. Reconciliations of account relationships, including budgetary to proprietary accounts, may highlight such areas. Detailed reconciliations demonstrating the differences and a narrative explaining why the original entry is causing the difference must be included in the supporting documentation. The documentation must include the following about the transactions:
- The desired result when the transactions were originally processed;
- the difference between the desired result and what occurred;
- why the corrected entry is necessary;
- the calculation of the corrected amount; and
- data sources used to support the entry.
If the account relationship on the face of the manual journal voucher entry is out of balance, test results should also be included to show the entry corrects a deficiency in the account relationships that existed in the trial balance.
- Other Accruals. A number of typical month-end adjusting entries are made, and subsequently may be reversed at the beginning of the next period, to accrue amounts for accounts payable, payroll, workers compensation, judgment fund liabilities, unfunded leave, and other transactions. The supporting documentation of these other accrual entries shall include a narrative explaining the basis for the accrual, a worksheet documenting the calculation of the amounts being recorded, external supporting documentation, and the basis for reversal.
- Data Issues from a Feeder System. The majority are manual entries of property and depreciation of non-activated interfaces. These entries may be entered by a HQ Level Accountant with proper BACS values populated to support financial reporting. Entry information, source or locations of the transaction level detail and documentation of the amount must be included. Supporting spreadsheets must include document number, asset number, or other numbers necessary to track feeder system details.
- Reversing a Journal Voucher. If a manual journal voucher entry is reversed for any reason; prepare, approve, record, and document the transactions according to original journal voucher requirements, (other than transactions set to auto-reverse). The manual journal voucher entry must include the original journal voucher, supporting documentation, and details explaining why the original entry is being reversed. Explanations must be concise and cite applicable accounting policies or directives.
- Auto-Reversing Entries. Prepare, approve, record, and document reversed manual journal voucher entries according to original journal voucher requirements except when the journal voucher is part of the monthly or quarterly routine journal voucher reversal process. In those instances, documentation and approval are the same for both the original journal voucher and the auto-reversing entry.
- Audit Requested Manual Entries. If the auditor requests a manual entry for financial statement purposes and management makes the decision to accept the entry, the entry must be supported by copies of appropriate work papers or relevant information from the work papers to support the recommended journal voucher adjustment. It must also be supported by any reconciliation, policy, regulations, or calculations that further demonstrate the need for the entry.
- Test Results (ADI Entries). Testing all ADI entries, including financial statement and regular operational entries is recommended. At a minimum, all ADI entries initiated to correct system errors that occurred between the sub-ledger and general ledger must be tested, in a test instance, before entries are loaded in production. Testing includes validating the journal to ensure there are no technical issues with the upload. Examples of testing follow:
- validating accounting segment values,
- running reports to ensure expected impact of the manual entry,
- reconciling the reports to expected results, and
- ensuring budgetary to proprietary agreement after the manual journal voucher entry is loaded.
- Errors - ADI Processing. The result of required and recommended testing produces fewer ADI processing errors in the production environment, an improved IHS Federally-mandated report preparation, and consolidated Departmental reporting.
- Pre-authorization meetings and authorizations occur annually for each regular or recurring manual journal voucher activity for that FY.
- The CFO will annually confer with the FMO Advisory Group to determine the pre-authorized manual journal voucher entries.
- Financial Management Officer Alerts. An FMO Alert will be issued to inform Areas of the pre-authorized entries at the beginning of each FY.
- Pre-Authorization Entries. Pre-authorizations for regular or recurring manual journal voucher entries are based on the known content of regular entries:
- Pre-authorization must include the type of journal entry allowed.
- Pre-authorizations include financial statement entries and regular IHS monthly entries.
- Signed Pre-Authorization.
- The CFO signs a pre-authorization to allow the general ledger accountant to prepare and process regular recurring manual journal voucher entries.
- After receiving a pre-authorization, the general ledger accountant prepares and posts authorized manual journal voucher entries to the accounting system.
- Restricted Access to Application Desktop Integrator. Application Desktop Integrator access must be tightly controlled due to the ease in which it allows users to load large volumes of manual journal voucher entry transactions into UFMS that directly update the general ledger. No more than five persons IHS wide may have access to load entries for all sources.
- Reports. Each Area FMO must ensure that tools are in place to allow all manual journal voucher entries to be pulled as a report for monitoring and audit support purposes. These reports must include entries for all manual, ADI, and mass allocations. As this is critical to the authorization processes, this report must be provided each quarter to the CFO and to external auditors upon their request.
- Monthly as well as quarterly, a report consolidating all entries will be provided to the CFO and to the office that outlines all manual journal entries for that month or quarter.
- The CFO must review the consolidated entry report and provide the Area Director certification documenting the review.
- Upon receiving the CFO certifications, each Area FMO must update the quarterly reconciliation assurance statement, assuring that the CFO reviewed the manual journal voucher entry report and that supporting documentation exists. The statement and reconciliation assurance is transmitted to the HHS Office of Finance (reference: Financial Reconciliations Interim Policy, Policy Memorandum-2008-4).
- Reports of all manual journal voucher entries will be provided to the CFO on a monthly basis. Reports will include pre-authorized entries, as well as any outlier entries flowing through the threshold process.
- Area Offices must, on request, provide the CFO copies of entries and supporting documentation in the one or two level approval categories.
- Trend Analysis. Each Area FMO must monitor and perform trend analyses on the entry counts from period to period. Counts from one FY to the next should generally be on a downward trend; any increase in entries must be supported by an explanation. Increases in journal counts along with explanations must be sent to the CFO. The CFO will then send the journal counts and explanations to the HHS Office of Finance. Increases can indicate system or accounting issues that must be addressed.
- Workflow. Each accountant must use UFMS workflow settings to prepare and authorize journal entries. The workflow setting allows electronic approvals of manual journal voucher entries as either manual, spreadsheet, or from other sources. The workflow setting ensures entries are not posted to accounting systems that do not meet the criteria outlined in this policy.