Financial Sub-Certification

Prerequisites

Prior to reading the standard on Financial Sub-Certification it is beneficial to review the below items to gain foundational information:

1. Role of Fiscal Officer, Account Manager and Account Supervisor Policy (FIN-ACC-1)
2. Internal Controls Policy (FIN-ACC-470)
3. Financial Compliance: Authority and Accountability (FIN-ACC-650)
4. Internal Controls Standard
5. Closing Procedures and Dates

Preface

This standard is an overview of the Financial Sub-Certification process for Indiana University. Information presented below will provide a general understanding of the Financial Sub-Certification, reporting requirements, and best practices.

Introduction

Indiana University (IU) is committed to procedures that enhance our institution’s internal control environment. Policy FIN-ACC-470, Internal Controls “All Constituent Reporting Units (CRUs) must annually attest to their financial activity, internal control structure, and overall adherence to IU Accounting Standards through the university’s Sub-Certification process.” As part of this process, IU has developed a Financial Sub-Certification requirement for all Constituent Reporting Unit (CRU)'s. The Financial Sub-Certification process serves two primary objectives:

1. To provide reasonable assurance of a sufficient and effective internal control structure which can identify weaknesses in financial processes and systems, and
2. To support the Executive Vice President for Finance and Administration’s (EVPFA) basis for the annual financial attestation (Management Representation Letter) by providing reasonable assurance of the underlying financial activity reported in the university’s financial statements.

Importance and Impact of Financial Sub-Certification

As outlined in Policy FIN-ACC-650, Financial Compliance: Authority and Accountability, “The Executive Vice President for Finance & Administration (EVPFA) formally delegates to the Office of the University Controller (UCO) oversight authority for the university’s external financial audits, fiscal internal controls, and related compliance. This delegation encompasses financial policy, standards, transactions, systems, and reporting, as it relates to external financial compliance for the university as a whole. UCO oversees the Fiscal Governance, Compliance and Accountability Standards within the IU Accounting Standards, which further delegates institutional responsibilities by the EVPFA for university financial compliance. The IU Accounting Standards serve as the authoritative and comprehensive guide on accounting, financial reporting, fiscal compliance, and controls at Indiana University.”

Indiana University’s EVPFA is required, in connection with the annual financial audit, to attest via the external audit Management Representation Letter that the university’s financial statements present fairly, in all material respects, the financial position of the university. The EVPFA is further required to attest responsibility for adoption of sound accounting policies, establishing, and maintaining effective internal controls over financial reporting, and preventing and detecting fraud.

Financial sub-certification is a means to focus on accountability and compliance with internal control responsibilities across the institution. This is especially important in a decentralized operational and financial decision-making organizational structure.

Financial Sub-Certification Overview

What is a Financial Sub-Certification

The Financial Sub-Certification is a rating of the effectiveness of the Constinuent Reporting Unit’s (CRU) internal controls. The individual completing the financial sub-certification will use the following rating scale to assess each financial area listed.

For each area assessed as “yellow” or “red,” the individual completing the Financial Sub-Certification will be asked to identify the gaps or weaknesses and briefly articulate the steps that will be taken to resolve the identified gaps or weaknesses. If substantial explanation is required, please attach a further explanation and an action plan to the Financial Sub-Certification. If a section does not apply, please indicate N/A.

Who Should Complete a Financial Sub-Certification

The Office of the University Controller (UCO) only requires sub-certification of the Constituent Reporting Units (CRUs). As a best practice, CRUs may require the sub-certification of smaller units for internal assurance purposes.

Once the document is completed, it must be signed by the CRU:

• Unit Leader (Dean, VP, etc.)
• CRU Fiscal Officer
• Campus Vice-Chancellor for Finance (or equivalent)

In the event that a responsible party, has not been in their current position for the duration of the reporting period, the signature can be deferred to Campus Vice-Chancellor for Finance or equivalent.

When Should a Financial Sub-Certification Be Completed

A Financial Sub-Certification should not be finalized until ALL closing activities are complete.

Final Steps of the Financial Sub-Certification Process

Once the Financial Sub-Certification process is completed, the CRU should forward the signed completed sub-certification to their Campus Controller by the specified time on the closing calendar. For UA units, please send directly to University Accounting & Reporting Services (uars@iu.edu). Additional reviews will be completed by UARS and the UCO Internal Controls Manager.

Requirements and Best Practices

This section outlines general requirements and best practices related to Financial Sub-Certification.

Requirements

1. As outlined in Policy FIN-ACC-470, Internal Controls, “All Constituent Reporting Units (CRUs) must annually attest to their financial activity, internal control structure and overall adherence to IU Accounting Standards through the university’s Sub-Certification process.

Best Practices

1. An optional version of the Financial Sub-Certification form, Unit Level Sub-Certification Form, can be used for non-reporting units reporting up to a CRU as an additional assurance tool. However, UCO will not be collecting this version of the form.