MGIC - Financial Management System and Processes

Financial Management Systems and Processes

Purpose

The purpose of this policy is to ensure sound management of Maryland Global Initiatives Corporation (MGIC) financial systems and processes. These include a wide range of standards related to Accounting, Payment, and Transaction Approval and Recording.

Background

MGIC is a mechanism through which the University of Maryland, Baltimore (UMB) and other institutions of the University System of Maryland (hereafter referred to, for purposes of MGIC policies only, as Affiliate Entities) can effectively conduct business outside the United States. The MGIC finance function supports this purpose by processing payments from MGIC’s United States (U.S.) bank account to foreign vendors, service providers, research collaborators, project partners, and other parties in a prompt and equitable manner that mitigates institutional risk, promotes compliance with applicable laws and regulations, and reflects sound partnership principles in alignment with UMB’s Core Values.

The MGIC mechanism is administered by the International Operations (IO) division of UMB’s Administration & Finance Department. The IO finance team manages the payment process, accounting of transactions, and financial record-keeping for MGIC U.S.-based operations in compliance with this policy.

Policy Statement

Accounting Standards

1. Accounting software: MGIC utilizes commercial software for all accounting needs, procurement workflows, and financial management and reporting. Access to the MGIC software license must be restricted to employees with financial management and procurement duties and designated approvers.
   • The Assistant Vice President (AVP) - IO (in their capacity as MGIC Vice President – Policy & Administration) and IO International Finance Manager (FM), as the administrators of the accounting software, have certain privileges associated with system administration that no other personnel may have, including the ability to:
     • Assign, change, or revoke user profiles
     • Make changes to the Chart of Accounts
     • Close the books at month’s end
2. Basis for Accounting: MGIC records all financial transactions, including travel advances, program advances, and vendor prepayments, using the cash basis of accounting. Bills are entered into QuickBooks to document workflow and approvals, but the bills do not record expenses. Expenses are officially recognized when the related cash transaction appears through the bank feed, after which the bill is matched or cleared to maintain accurate cash‑basis reporting.
3. Treatment of Fixed Assets: Fixed assets purchased are expensed in the financial statements. Capital expenditures, if approved, are accounted for in the financial statements of Requesting Units. See MGIC policy on Property Management for more information on asset inventory and transfer.
4. Chart of Accounts: The Chart of Accounts (COA) contains the income and expense accounts required by UMB. MGIC may add new numbered accounts to the COA only with the express permission of the MGIC Treasurer. The FM may add subaccounts to the numbered expense accounts in order to segregate costs under a single account.

Payment Standards

1. Confidentiality and data security: MGIC must protect the confidentiality of salary information, payroll documents, certain vendor information, and other data subject to special protection.
2. Standards for Invoices: Vendors are required to submit an itemized invoice before payment may be approved and processed. The only exception to this requirement is under a milestone-based contract or agreement stipulating that the first payment will be issued upon execution of the contract or agreement, with no additional required deliverables. The MGIC requirements for invoices are as follows:
   • Vendor invoices must be submitted to the IO finance team, not the procurement team. IO maintains a dedicated email address for vendor invoices, provided to every MGIC vendor.
     • A valid invoice acceptable for payment by MGIC must include:
     • The vendor’s business name, address, contact information
     • Date of the invoice
     • Contract number, PO number, or another unique identifier
     • Clear description of goods and services provided
     • Date goods and services were provided
     • Amount being charged, including taxes
   • Invoices must be paid in the currency of the invoice, unless other agreements with the vendor are documented and on file.
   • Invoices on which the total is greater than the amount on the procurement agreement shall not be honored. The staff member dealing with the vendor must resolve the difference with the vendor before payment is made.
   • It is not permitted to break up invoices to keep the amount below a certain procurement or payment threshold.
   • These standards apply to invoices associated with all types of procurement agreements, including service contracts, purchase orders (POs), blanket purchase agreements (BPAs), and other binding collaboration agreements with implementing partners.
   • Invoices submitted in a language other than English may be returned to the Requesting Unit for translation if the IO division cannot verify all required invoice elements. IO reserves the right to use publicly available translation platforms.
3. Standards for reimbursements and liquidation of advances: Reimbursements and clearing of advances in the case of approved business expenses by MGIC personnel or external collaborators must be supported by a valid proof of payment and relevant deliverable(s) stipulated in the contract, agreement, or award letter for which the expense was incurred, except in the case of expenses made with a pre-approved Meals and Incidental Expenses (M&IE) allowance.
   • A valid proof of payment (receipt, order confirmation, etc.) should include:
     • Name of vendor
     • Description of a business transaction (detailed or itemized description of goods or services purchased)
     • Date of the transaction
     • A specific amount of money
   • The form of payment, demonstrating payment was completed
   • If receipts or other supporting documents have been lost, damaged, destroyed, or unobtainable, reimbursement may be authorized at the discretion of the MGIC VP - Policy & Administration, upon authentication of the expense by the Requesting Unit.
   • Submission of fake receipts constitutes a violation of the MGIC Ethics and Conduct Policy and those who submit them shall be subject to disciplinary action, up to and including termination of employment or contract.
   • Advances to UMB personnel and affiliates other than MGIC employees are prohibited, unless a policy exception is granted by the MGIC President. See MGIC Policy on Payment of Expenses and Advances, and MGIC Policy on Travel.
4. Payment Authorization: MGIC will only issue payments upon receipt of a completed MGIC Payment Authorization Form (PAF) from the Requesting Unit, signed by an authorized representative of that unit. The PAF serves multiple concurrent purposes: 1) confirmation that the goods, services or activities for which payment is requested have been completed to the satisfaction of the Requesting Unit; 2) confirmation that the amount of the invoice matches the agreed price on the Contract or Non-PO request; 3) instruction to IO to make payment based on the Requesting Unit’s acceptance of work; and 4) commitment to reimburse MGIC from the Requesting Unit’s identified source of funds.
   • In exceptional cases where the Requesting Unit has not provided a PAF timely for an outstanding obligation to the payee and is placing MGIC and UMB at risk of legal or reputational damage by delaying payment, the IO division will escalate the matter to the UMB Controller and/or the MGIC President.

Transaction Standards

1. Standards for approving transactions: Personnel with the authority to approve an MGIC financial transaction must ensure that:
   • The MGIC Payment Voucher Form (PVF) and supporting documentation is complete.
   • MGIC, UMB, or an Affiliate Entity is named as the customer/client on the service agreement, commercial invoice, or a similar payment commitment document (e.g. a guest lectureship honorarium letter).
   • The transaction has occurred within the period of performance and conforms to the technical specifications of an approved procurement instrument.
   • The Requesting Unit has approved payment via the MGIC Payment Authorization Form (PAF), and by signing the PAF attests to the accuracy of the amount and acceptance of delivered work.
   • Foreign sanctions vetting and bank information have been validated by IO Finance or Procurement staff.
   • The transaction is coded to the correct expense account.
2. Signatory approval: All MGIC Payment Voucher Forms and Payment Authorization Forms must include the approver’s printed name, title, signature, and date of signing. See MGIC Table of Authorities.
3. Standards for recorded transactions: Recorded financial transactions utilize the modified cash basis of accounting. Recorded transactions must be complete, valid, accurate, final, and supported by original source documentation:
   • Complete: Each payment must be supported by documentation showing a final cost.
   • Valid: A payment is valid if it is made to a verifiable vendor for an allowable expense, and if the documentation exists to show that the goods or services paid for were received.
   • Accurate: The record of a transaction must show the exact value and be charged against the appropriate source of funds.
   • Final: An original transaction and its supporting documentation must not be altered in any way, e.g., the date on an invoice may not be modified by MGIC.
   • Supported by documentation: Supporting documentation for any transaction must include, at a minimum, authorized approval, purpose of transaction, evidence that the goods or services purchased were received, and proof of payment.
4. Correcting Journal Entries: If a transaction entered into the accounting software needs to be corrected or reversed for any reason, the IO finance team shall fix the transaction as long as the books for that month are still open. If the books for that month have been closed, the finance team must make a correcting journal entry in a subsequent month. Changes must not be made to original entries in previous, closed months.
   • The IO finance team must obtain prior written approval from the Assistant Vice President (AVP) - IO in these situations:
   • When the correction requires transferring costs that were incurred more than 90 days prior to the journal entry
   • When the correction requires transferring costs more than 90 days after the end date of the award charged for those costs
5. Cost Principles: When MGIC incurs expenses on behalf of a Requesting Unit, it is the Requesting Unit’s responsibility to ensure that all charges, including approved pre-award costs, are allowable, reasonable, and allocable and within applicable regulations, policies, and the budget period of performance.

• Definitions:
  • A cost is considered allowable if it is necessary and reasonable for the intended use and allocable to that award.
  • A cost is reasonable if it is of a type generally recognized as ordinary and necessary for the operation of the institution or the proper and efficient performance of the award.
  • A cost is allocable if the goods or services involved are chargeable or assignable to that award.
• If MGIC is requested to incur an expenditure that IO has reason to believe may be unallowable, clarification will be sought from the Requesting Unit prior to proceeding.
• Because MGIC does not directly charge expenses to UMB or Affiliate Entity awards unless operating under a PAA, it is the responsibility of the Requesting Unit to accurately assign expenses in the MGIC replenishment invoice to the correct budget source in compliance with university and/or sponsor regulations. See policy on the Use and Administration of MGIC, and policy on MGIC Invoicing and Replenishment.

Scope

This policy applies to all UMB personnel and affiliates involved in the MGIC Financial Accounting and Management function.

Responsibilities

1. IO personnel: Comply fully with all aspects of this policy. Develop, implement, and follow appropriate standard operating procedures to ensure policy compliance, function efficiently, minimize risk to MGIC users and stakeholders, and maintain appropriate segregation of duties and standards of ethical conduct.
2. AVP-IO (in their capacity as MGIC VP – Policy & Administration): Approves MGIC Payment Voucher Forms in compliance with the MGIC Table of Authorities and any prevailing Delegations of Signatory and Execution Authority from the MGIC President. Approves Payment Authorization Forms for MGIC expenses charged to the IO division’s budget codes, in compliance with applicable UMB policies. Reviews and approves accounting transactions in MGIC commercial accounting software, as well as any justified deviations or policy exceptions to the standards and requirements above. Reviews and approves MGIC monthly financial reports and any audit disclosures or other periodic reports.
3. Requesting Units: Ensure their vendors and payees provide valid required documentation and approvals for invoice payments, reimbursements and clearances of advances. Ensure all expenses requested to be paid by MGIC are accurate to the executed procurement agreement or Non-PO payment request; are allowable, allocable and reasonable in keeping with applicable Sponsor regulations and UMB/Affiliate policies; and are accurately coded to the correct source of funds budget. Complete and submit Payment Authorization Forms (PAFs) for every payment requested through MGIC.

Documentation Requirements

• MGIC Payment Voucher Form (PVF)
• MGIC Payment Authorization Form (PAF)
• Valid vendor invoices, proofs of payment, and other supporting documents
• MGIC QuickBooks accounting records
• MGIC approved financial reports

References

• MGIC Policy on Ethics and Conduct
• MGIC Policy on Invoicing and Replenishment
• MGIC Policy on Payment of Expenses and Advances
• MGIC Policy on Property Management
• MGIC Policy on Travel
• MGIC Policy on Use and Administration of MGIC
• MGIC Table of Authorities