Office of the Controller
The Office of the Controller comprises the following groups:
- The Controller's Accounting Office (CAO) provides general accounting and payroll services to the Institute including accounts payable, accounts receivable, travel, sponsored research accounting, general ledger, financial reporting, employee and retiree payroll, and retirement plans accounting.
- The Procurement Office assists the MIT community in the procurement of goods and services—providing advice and services that ensure favorable prices, protective terms and conditions, and compliance with MIT and federal policies and procedures.
- The Property Office is responsible for the accounting and asset management of over 160,000 items of equipment that are both MIT- and sponsor-owned, and tracks all capital costs associated with buildings.
- The Lincoln Fiscal Office provides accounting, payroll, cashier, and cash management services to MIT's Lincoln Laboratory.
- The Insurance Office purchases casualty, property, and construction insurance for the Institute and administers claims.
Fiscal Year 2003 was a busy and fulfilling year for the Office of the Controller. We were able to support the Institute's needs and increase our level of service. The year's excellent results are due to all the Controller's Office employees who worked together to accomplish our goals. The following sections describe some of the year's highlights.
Systems
Two major extensions to the SAP system—SAP Human Resources/Payroll and the MIT Lincoln Laboratory Enterprise Resource Planning (ERP)/SAP project—made significant steps towards completion in FY2003. Specification and configuration of the SAP pension payroll module was substantially completed during 2003, with parallel testing scheduled to begin in September 2003 and cutover to the new SAP pension payroll system on January 1, 2004. Late in 2003, a Business Process Redesign Team was launched to plan and facilitate the review of current payroll business processes and the development of recommendations for future processes.
Lincoln Laboratory has been partnering with campus over the past several years in the implementation of SAP as the Laboratory's ERP solution, starting with accounting and finance and property functions. Project teams, timelines, team structures, known impacts and roles have been discussed and selected. Accounting and Finance (including HR/Payroll and Property conversions) have been initially selected from the Lincoln Fiscal Office functional areas for development. Payroll will use its current legacy system with input from Lincoln Laboratory SAP CATS (Cross-Application Timesheet System) and feeds from the Payroll legacy system into Lincoln Laboratory SAP distribution as an interim step until there is a full SAP implementation of campus payroll.
As required, system changes were made to Lincoln Laboratory's legacy financial systems to support Laboratory operations in a number of areas including Accounts Payable, General Ledger, Property, Travel, Purchasing and LINEIS, the Lincoln Executive Information System.
The Controller's Office collaborated extensively with other central units and department, lab, and center staff in a significant update to the SAP financial accounting system in April 2003. This upgrade, which included both infrastructure improvements not visible to users as well as substantial improvements to the web interface to SAP, increased the overall utility of SAP to the MIT community as well as its sustainability for future growth.
Other improvements to SAP included a new sponsored billing program that permits monthly bills to be processed five times faster than before, speeding the mailing of invoices and the collection of funds, and the addition of three new suppliers (Dell Computers; WW Grainger for maintenance, repair, and operating supplies; and Minuteman Press for letterhead) to the ECAT Electronic Catalog procurement system. The Travel Office began a pilot test with selected DLCs of online airfare booking via the Expedia travel web site. Accounts Payable contracted with Clareon Systems to begin paying vendors via electronic funds transfer instead of paper checks, streamlining the payables process. To date, 400 of MIT's suppliers have signed on to the Clareon wire payment service. Accounts Payable also switched to a web service provided by Fleet Bank for doing wire transfers, which is much faster than the previous method.
In the merchant services area (electronic commerce sales), the process of setting up a merchant was simplified by using a swipe through a computer rather than the use of a separate card reader. As this process is rolled out to more organizations on campus wishing to sell via a credit card, we should see a reduction of cash usage on campus.
Reporting
The quarterly reporting process, a collaboration between the Controller's Office and the Budget Office, continued in FY2003 with improvements in timeliness and supporting schedules. The result is an earlier and greater understanding of the Institute's financial position and results, a more standardized closing process, and an alignment of financial information for senior management, the Auditing Committee, and the Corporation.
Also in the reporting area, the Controller's Office collaborated with the Treasurer's Office to review documentation for endowment gifts and to improve a database describing the restrictions placed on the use of income from endowments by donors. The resulting product, a database that can be used to test the use of restricted income, and a set of notebooks with clearly labeled and organized documentation to allow for easier research, will be extremely useful to the Institute currently and in the years ahead.
The Controller's Office reporting group also worked with Human Resources, Budget, and Audit to develop reports to show salary expenses associated with headcount, information not previously available to the Institute as a whole. This report is extremely useful both to the Auditing Committee and the Compensation Committee.
Another reporting highlight of 2003 was a collaboration between Publishing Services Bureau and Controller's Office staff on the graphic redesign of the Treasurer's Report. The Treasurer's Report contains MIT's audited financial statements, footnotes, and a financial summary. The new look for the Treasurer's Report was the culmination of several years of discussion about making the report easier to read, clearer, and more visually illustrative of the MIT experience. The new Treasurer's Report design complements other MIT official documents, which were also redesigned in 2003—the Reports to the President and the Budget book.
Insurance
Because MIT had several two- and three-year policies, we had been fairly well insulated from dramatic insurance premium increases for most lines of coverage, in direct response to the tragic events of September 11. In FY2003, with the expiration of many of the multi-year policies, we experienced the full weight of the significant change in the insurance markets, post 9/11. Property premiums increased by 100+ percent, while our limits were reduced by more than 50 percent. Increases in liability and D&O (directors and officers) policies ranged from 14 percent to 100+ percent. We continue to evaluate and where appropriate, change risk financing alternatives to include: self-insurance/higher retentions and deductibles; increased use of the Barton Insurance Co., Ltd., (MIT's captive insurance company); policies and controls to mitigate risks, costs; and hold responsible parties accountable.
Collaboration and communication with many departments, on an ongoing basis, has been a key initiative in addressing concerns regarding insurance coverages, liability issues, and proactive risk management strategies. The Insurance Office will continue to take a proactive role in this process.
Audits
Controller's Office staff both on campus and at Lincoln Laboratory participated in the FY2002 A-133 government audit, which consists of two main parts: an audit of the basic financial statements, and an audit of the entity's major federal award programs—research and financial aid. The audit concentrated on review and testing of internal controls. Controller's Office staff continued to support the Defense Contract Audit Agency's (DCAA) ongoing audits by providing information and reports. At Lincoln Laboratory, there has been an increased effort to provide separate audit information on classified projects, so in essence, each request made during DCAA's annual A-133 audit had two components to it and had to be acted on separately.
The Department of Labor concluded its review of MIT's basic Retirement Plan for the period 1996 through 1999, with no exceptions identified. The Property System was approved with no audit findings or recommendations, after a Property System Survey conducted by the Office of Naval Research. The Defense Contract Management Agency (DCMA) reviewed and approved the property control system at Lincoln Laboratory.
This year, Controller's Office staff also worked with the Audit Division and Archives to review and update record retention requirements, and to add retention requirements for electronic data. These recommendations are nearly complete, and will be released to the community during 2004. These guidelines will provide the DLCs a greater understanding of retention requirements and when items can be destroyed.
The following sections highlight selected new and existing efforts within the Controller's Office to implement the five themes established by the Executive Vice President's Office.
Client Orientation
Through its wide range of services, the Controller's Office serves virtually everyone at MIT—faculty, students, staff, and retirees. We listen to our clients daily through a variety of formal and informal mechanisms—face-to-face, telephone, issue-oriented electronic mail lists, and meetings. We disseminate information our clients need to know using vehicles such as the Controller's message on the monthly financial statements, announcements to a financial administrators' electronic mail list, our web pages, periodic administrative officer meetings, presentations to individual departments, year-end closing meetings, vendor fairs sponsored by Procurement and the Travel Office, and training sessions such as the VIPcard class.
We also assist departments, labs, and centers on business issues, processes, accounting practices, and financial reporting. In 2003 we began assisting the MIT Museum with its accounting via a service level agreement arrangement, saving the Museum from hiring a part-time bookkeeper to do this work. This year we expanded our support for specific client projects, including electronic billing for student bills and increased use of the MIT Card.
Collaboration
As the central organization that processes and consolidates MIT's financial transactions, the Controller's Office collaborates with other units on a daily, ongoing basis as an essential part of our work. The Controller's Office participates in all financial-related project teams, which last year included numerous SAP teams, e-commerce sales, the Shared Services initiative from the Executive Vice President's Office, Environmental Health and Safety, daycare, the health and fitness center, and the MIT Card. A significant and extremely positive collaborative effort in 2003 was working with Facilities, the Real Estate Office, Information Systems, and other groups to move approximately 150 Controller's Office employees from E19 to NE49. In addition, the Property Office collaborated and supported a "Computer Cleanup" run by the Environmental Health and Safety Office and Facilities. Departments could bring old electronic equipment (including computer monitors) to collection sites for free disposal. It is estimated that over 30 tons of material were disposed of and recycled. We work with the Safety Office, Environmental Medical Services, Risk Management, the Audit Division, and Facilities to address loss control issues. Efforts continued with the Benefits Office to outsource the administrative and record keeping of the Basic Retirement Plan to a third-party administrator and to provide retiree payments using SAP. Also, we assisted retirees who have variable annuities with a one-time option to transfer to a fixed annuity.
Sustainability
The systems work described previously enhances the sustainability of our business processes and systems. Below are several other examples of efforts last year that also contribute to sustainability.
In December 2002, the Controller's Accounting Offices, the Property Office, and the Procurement Office moved from E19 to new space in NE49. Our offices were closed only one day for the move, and even then there was continuous phone coverage via cell phone for emergencies on moving day. Our offices reopened for business the Monday following the move and resumed operation with no interruption in service to our clients. All systems—computers, phones, faxes, printers—were up and running in the new location on the day when we opened for business in NE49.
Partnerships with preferred vendors for commodities and travel are part of our strategy for sustainable procurement and have been successful in enabling MIT to use its aggregate buying power to obtain favorable prices. Over $18 million of purchases were to partner vendors in 2003. This year we made it easier for the community to order from three partner vendors (Dell Computers, WW Grainger, and Minuteman Press) by implementing web-based electronic catalogs for browsing and placing orders. We rebid and reawarded the scientific supplies contract with VWR Scientific.
In Sponsored Accounting, which is responsible for the funding and financial reporting for all sponsored research contracts and grants, improvements to the SAP billing system have reduced time spent on monthly bills, permitting staff to spend more time on financial reporting. The results have been significant, with 2,960 cost elements closed out during calendar 2002.
Accountability
Responsibilities and roles are clearly defined in the Controller's Office areas. This information is published for the community on our web pages, beginning with the directory of CAO Offices on http://web.mit.edu/org/c/cao/www/offices.htm, which includes the names of supervisors of operating units. A variety of operational measurements are compiled and reviewed by the different units, and summary operational dollar and transaction volumes metrics are collected monthly. For example, the Controller's Office continues to monitor and log all issues sent to the accounting-issues@mit.edu electronic mail list and review purchasing transactions for compliance with MIT and federal policies.
We worked with internal organizations to "insource" work to them where they had more expertise and could provide more cost-effective service. We also contracted management of our copiers and procurement of standard paper in NE49 to Copy Tech and our daily courier runs to Mail Services. To date, these have been successful collaborations.
Representative Metrics
The following selection of metrics gives an idea of the volume of FY2003 transactions in various operational units in the Controller's Office.
Volume of Payments During FY2003 (# in thousands)
| Non-PO Invoices | PO Invoices | VIP Credit Card | Travel Vouchers | Payroll Payments | Pension Payroll (excl. lump sums) | |||||||
| # | $M | # | $M | # | $M | # | $M | # | $M | # | $M | |
| Campus | 90 | $264 | 200 | $764 | 126 | $25 | 29 | $28 | 291 | $568 | 66 | $94 |
| Lincoln | -- | -- | 93 | $174 | -- | -- | 7 | $2 | 60 | $194 | -- | -- |
| Total | 90 | $264 | 293 | $938 | 126 | $25 | 36 | $30 | 351 | $762 | 66 | $94 |
At the end of FY2003, there were 34,999 active cost objects in SAP, comprising 5,744 cost centers, 23,381 internal orders, and 5,874 WBS elements. Approximately 365,000 financial transfers were done via SAP journal voucher, totaling almost individual 360,000 line items. More than 18,000 items of equipment were tagged by the campus and Lincoln Laboratory property offices. This year, there was a record high number of VIP credit card procurement transactions, averaging about $2 million per month. Paper requisitions were reduced from 13 percent to 9 percent of all requisitions received, meaning that 91 percent of our purchasing transactions are done electronically.
Professionalism
This year the Lincoln Property Office conducted a workshop on the new property system at the SAP User Group (ASUG) meeting in New Orleans. Controller's Office staff members make significant contributions to industry groups such as the Boston Consortium, Masco, the National Association of College and University Business Officers, the Massachusetts Higher Education Consortium, the American Payroll Association, and the National Property Management Association. In addition, the Lincoln Fiscal Office participated again in 2003 in a Business Services Benchmarking analysis, comparing key indicators of Lincoln Laboratory with those of three peer organizations, two other federally funded research and development centers (FFRDCs) and one university affiliated research center (UARC). The objective of this annual effort is to understand the factors that influence the way a business function is performed and contribute to the practices, complexity, and cost of the function.
This year, Controller's Office staff continued teaching a course called Fundamentals of Financial Management, which was developed in 2002 in collaboration with Financial Systems Services and three fiscal officers from MIT research labs and academic departments. This course for fiscal officers in departments, laboratories, and centers is now offered on a regular schedule.
More information about the Office of the Controller can be found on the web at http://web.mit.edu/org/c/cao/www/, http://web.mit.edu/purchasing/, http://web.mit.edu/org/p/property/www/, and http://web.mit.edu/ila/.