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Financial Management & Controls is charged with implementing the UC Regents' Controls Initiative on the Merced campus. A principal element of this initiative is the group of central and departmental key controls that are carried out in support of the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards 115 (SAS 115). 

Our programs and activities under the Controls Initiative are designed to: 

  • Suppport a campus control environment in which ethical decision-making and financial risk assessment and mitigation are embedded into all business practices
  • Identify significant financial risks to UC Merced's achieving its objectives in the areas of teaching, research, and service
  • Recommend process improvements and best practices to ensure significant financial risks are held to an acceptable level
  • Establish and maintain a communication support network to improve the control environment
  • Provide management tools and financial management training to improve operational effectiveness through cost-efficient controls

UC Regents' Controls Initiative

In 1996 the UC Regents approved the UC Controls Initiative in the wake of high-profile control failures. The Controls Initiative was designed to strengthen accountability, responsibility, and control across the UC system by:

  • Promoting a culture of accountability and ethical decision-making
  • Helping the campus and departments identify and mitigate risks
  • Strengthening operational effectiveness and efficiency of administrative functions

Financial Management & Controls supports the Controls Initiative in the following areas:

  • Controls Design and Assessment
  • Training on Financial Management and Controls Topics
  • Monitoring of Financial Transactions
  • Financial Risk Assessment and Mitigation
  • Fiscal Close Certification Letter Coordination

Statement of Auditing Standards 115 (SAS 115)

Statement on Auditing Standards 115 (SAS 115) is an auditing standard for how auditors communicate internal control matters identified in their audits of an organization's financial staetments. This standard applies to UC's external auditors, KPMG. Because KPMG is required to perform certain procedures under SAS 115 when auditing the Merced campus, the campus has elected to undertake certain complementary activities, specificially the identification and monitoring of key controls. If our key controls are designed and carried out effectively, it will reduce the likelihood of incurring a material misstatement in the campus's financial statements.

SAS 115 does three things:

  • Defines three categories of deficiencies that may be identified during an external audit of the financial statements (see below for definitions)
  • Provides guidance on evaluating the severity of the deficiencies identified
  • Requires the auditor to communicate in writing to management any significant deficiencies or material weaknesses identified

SAS 115 defines three categories of deficiencies:

  • Control Deficiency: Exists when the design or operation of a control does not allow management or employees, in the normal course of performing functions, to prevent or detect misstatements on a timely basis
  • Significant Deficiency: Less severe than a material weakness, yet it is significant enough to merit the attention of those charged with governance
  • Material Weaknesses: Deficiency such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis