Accounting Procedures July 2018

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Barnaby Peters
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1 Accounting Procedures July 2018

2 Before We Begin All callers have been placed on mute. If you have a question, please send it via the chat function. We will monitor the chat throughout the meeting, and answer your questions during this session. We will have time for Q&As at the end of the meeting. A recording of the Webinar and a copy of this presentation will be posted on the University Controller s Office website by the end of the week. Surveys will be sent out to registered participants. 2

and Chart of Accounts Lead University Controller s Office Ed

3 Your Hosts for this Session Ernie DiSandro Interim University Controller University Controller s Office Sue Heleno Manager, and Chart of Accounts Lead University Controller s Office Ed Scheer Director of Budget, Policy & Analysis University Budget Office 3

4 Your Hosts for this Session Theresa Fronckowiak Senior Director RU Camden Erin Cuomo Senior Director, Budget and Finance Institutional Planning and Operations Vincent Nacco Executive Director of Finance, Dentistry Rutgers Biomedical and Health Sciences 4

5 Agenda Accounting Procedures Overview Funding Transfers Expense Recovery Faculty Funds 5

6 Chart of Accounts (COA): Goal After working in COA for more than a year, and hearing about difficulties staff, faculty and central administration are experiencing with its use, we are developing ways to better serve the University through chart of accounts changes, improved controls and education, guidance, support and policies to ensure the best use of the COA. GOAL Improve how we support our operations by making the chart of accounts simpler to use, ensuring the data are accurate and easily reportable across the University, and making certain that the project ledger interacts seamlessly with the general ledger. 6

Procedures and Guidance An internal controls framework under which all staff can work is critical to ensure we are all protecting and managing the university s assets.

7 Procedures and Guidance An internal controls framework under which all staff can work is critical to ensure we are all protecting and managing the university s assets. The following three topics we are discussing today represent the first group of procedures that will be implemented in fiscal year (FY19). Funding Transfers Expense Recoveries Faculty Funds 7

8 Funding Transfers v. Expense Recoveries Funding transfers are used to move resources from one chart string to another to provide support for a specific purpose. Amounts that are transferred from one fund to another must use specific accounts in order to be tracked separately to be in compliance with accounting standards. Expense recoveries are used to record the purchase of goods and services between Rutgers units. Expense recoveries should be used when an actual exchange of goods or services takes place internally and never when either party is external to Rutgers. Expense recoveries are primarily used when the goods or services being provided are reflective of the provider unit s official purpose or mission. During today s presentation we will explain when a funding transfer should be used vs when an expense recovery should be used vs when neither should be used, such as when recording external revenue, when correcting a transaction or when distributing expenses or revenues. 8

9 Funding Transfers 9

10 Funding Transfers Definition Purpose of Accounting Procedure Recording Examples Reporting 10

Funding Transfers: Definition Funding transfers (exclusively for internal use) are the flow of funds from one chart string (general ledger or projects) to another.

11 Funding Transfers: Definition Funding transfers (exclusively for internal use) are the flow of funds from one chart string (general ledger or projects) to another. Funding transfers have a similar impact as revenues (transfers in) and expenses (transfers out) but from an institutional perspective, transfers do not represent real revenues or expenses and must net to zero at the University level. 11

12 Funding Transfers: Purpose of the Procedure Ensure adherence to Generally Accepted Accounting Principles (GAAP). Standardize and promote the consistent accounting treatment for funding transfers across the University. Ensure that internal transfers of funds do not increase the total University revenues or expenses, or misstate the operating results of any University unit. Properly allocate resources across different chart segment values such as Unit-Division-Organization, Location, Fund Type or Business Line. 12

13 Funding Transfers: Examples When to use a transfer Providing funds to an academic unit to cover the expenses of a special event. Moving current year funds for current repair and replacement needs into plant funds. When NOT to use a transfer Transfers are NOT intended to reclass revenues or costs from one general ledger string to another. Transfers are NOT permitted on sponsored projects. Transferring funds to close a deficit in GL or Non-sponsored Projects. Moving funds to a designated fund type such as faculty start-up funds. Funding from donors (i.e., restricted gifts) cannot be commingled with other unrestricted funds. If a gift is in deficit, it is required that expenses are moved out. Do not transfer funding in. 13

Funding Transfers: Recording Funding transfers between projects, between projects and general ledger and general ledger to general ledger must be recorded using a general ledger journal or project

14 Funding Transfers: Recording Funding transfers between projects, between projects and general ledger and general ledger to general ledger must be recorded using a general ledger journal or project cost journal. When recording a funding transfer between or within fund types, find the correct account value by using the Transfer Account Matrix found in the appendix and on the Controller s website. These values are not valid in PeopleSoft and RU Marketplace. 14

15 Funding Transfers: Recording The same funding transfer account must be used on all lines of the journal entry to ensure the transaction will net to zero by account. All general ledger journals should have attachments with supporting documentation when applicable. As a reminder, there is no functionality to add an attachment on project cost journals so supporting documentation should be retained by the department. All general ledger journal transfers require a second approval by the University Controller s Office within 24 hours of the departmental approval. Journal entries that do not balance, or that do not have the same single funding transfer account on all lines of the journal entry, will be rejected. There should be only one purpose per funding transfer journal with a detailed description at the journal entry and the journal line level. Refer to the appendix for the complete transfer matrix. 15

16 Funding Transfers: Recording The funding transfer account values in the table below have been created to facilitate the funding transfer journals. Funding Transfer Account Transfer Account Description Transfers Within Unrestricted Operating Transfers Between Operating and internally Designated Funds Transfers Within Internally Designated Funds Transfers Between Plant and Operating Funds Transfers Between Plant and Internally Designated Funds Transfers Within Plant/Capital Funds Transfers Between Unrestricted Endowment and Operating Funds Transfers Between Unrestricted Endowment and Internally Designated Transfers Within Unrestricted Endowment Funds Transfers Between Unrestricted Endowment and Plant Funds Transfers Between Unrestricted Endowment and Contributions Transfers Within Endowment Principal and Operating Funds Transfers Within Contributions Transfers Within Contributions and Plant/Capital Funds Transfers Mandatory Transfers Debt Service Transfers Mandatory Transfers Deferred Maintenance Costs Transfers Year End Balances 16

17 Funding Transfers: Example GL-to-Project Department ABC needs to fund its capital project. Department ABC transfers funds from Fund Type 100 (Unrestricted Operating General) to Fund Type 180 (Unrestricted Capital Projects), using funding transfer Account value (Transfer between Operating Funds and Plant). * For project transfers refer to the Projects Cost Adjustments Job Aids found on the Controller s website. 17

18 Funding Transfers: Example GL-to-Project 18

transferring funds from his GL under FT 100 to the

19 Funding Transfers: Example GL-to-GL The Dean is funding the English department conferences by transferring funds from his GL under FT 100 to the English department s GL under FT 100 using account value

20 Funding Transfers: Examples When Not to Use Transfer accounts are intended to move funding, not to move expenses or revenues. DO NOT USE FUNDING TRANSFERS for the following types of transactions. Corrections Example Explanation Solution Department ABC purchased a printer under $5K, the expense was booked mistakenly to office supplies computer (Account value 52930) This is a reclassification of an expense. It s not related to funding transfers. Reclassify the expense transaction by crediting (-) (Account value 52930) the wrong chart string, then debiting (+) the correct chart string (Account value 58010) for computer equipment. 20

21 Funding Transfers: Examples When Not to Use Transfer accounts are intended to move funding, not to move expenses or revenues. DO NOT USE FUNDING TRANSFERS for the following types of transactions. Distributions Example Explanation Solution School XYZ shares a copy machine with School ABC. School XYZ pays the invoices directly to the copy machine company and then spreads a portion of the cost to School ABC based on School ABC s use of the machine. This is a an expense distribution transaction. It s not related to Funding Transfers or Expense Recovery. Adjust the expense transaction by debiting (+) school ABC s expense account, then crediting (-) school XYZ s expense account. 21

22 Funding Transfers: Examples When Not to Use Transfer accounts are intended to move funding, not to move expenses or revenues. DO NOT USE FUNDING TRANSFERS for the following types of transactions. Restricted Funds in Deficit Example A gift fund established to purchase textbooks for needy students is over expended and is in deficit. Explanation Solution This is a reclassification of an expenses, not a transfer of funding. Since funding from donors/sponsors cannot be comingled with unrestricted funds, it is required that expenses be moved out using the expense account value. Funds may not be transferred in. The account segment value used to purchase books in the gift fund should be credited and another string such as the dean s operating account should be debited. 22

23 Funding Transfers: Reporting Two separate reports are available to review and reconcile transfers. One report for GL to GL transfers only and one for the projects transfers. The reports can be accessed via the Oracle financial management system by following the paths listed below, under the Tools tile. Tools/Reports and Analytics /Shared Folders/Custom/RU Custom/Reports/ATC Reports/RU GL 085 Tools/Reports and Analytics /Shared Folders/Custom/RU Custom/Reports/PGM Reports/RU PJ

24 Q & A QUESTIONS & ANSWERS 24

25 Expense Recovery 25

26 Expense Recovery Definition Purpose of Accounting Procedure Requirements Recording Example 26

27 Expense Recovery: Definition An expense recovery is a transaction that is used when one University unit bills another University unit for goods and/or services provided. The service provider unit incurs all of the direct expenses and, subsequently, allocates an amount to the consumer unit(s) in accordance with an agreement. Expense recoveries must only be used for internal transactions and either facilitated by an IPO (Internal Purchase Order) in RU Marketplace or a general ledger journal entry or project cost journal. Expense recoveries must net to zero. 27

28 Expense Recovery: Purpose of the Procedure Ensure adherence to Generally Accepted Accounting Principles (GAAP). Standardize and promote the consistent accounting treatment for recording expense recoveries across the University, whereby expenses are recorded accurately to ensure that financial statements are precise, and do not double-count expenditures. Ensure that expense recoveries do not increase the total University income or expenses, or misstate the operating results of any University unit. Allow service provider units to charge consumer units for goods and/or services. 28

29 Expense Recovery: Requirements Both the service provider and consumer units must be Rutgers entities. If the consumer unit is a non Rutgers entity, revenue must be recorded. All service provider and consumer units will use the account values on both the debit and credit side of the transactions to record expense recoveries. The Internal Purchase Order (IPO) Account Mapping file posted on the Controller s Office website. Expense recoveries cannot be used to transfer funds or allocate resources. Expense recovery account values are for internal use only. Expense recovery account values cannot be used to record external revenues. Expense recovery account values cannot be used to pay external vendors. 29

30 Expense Recovery: Recording The units that provide the goods and/or services will designate the correct account values to use for recording an expense recovery. The units that consume the goods and/or services must use the specific account values designated by the service provider unit when purchasing goods and/or services. Service providers are expected to include the designated account value required for purchasing goods and/or services on quotes, invoices and/or any form of communication sent to internal customers who will order through an IPO in RU Marketplace. The same expense recovery account values must be used for the debit and credit sides of the transactions to ensure that the accounts will net to zero for accurate financial reporting. The Controller s Office will be updating the account values on all IPO purchase orders that have balances as of 06/30/2018 to match the account value of the IPO supplier. 30

31 Expense Recovery: Recording For Service Provider Units: Expense recovery credits that need to be applied to a project must be recorded via a general ledger-to-project transaction to move the expense recovery to a project. Please refer to the Projects Cost Adjustments Job Aids on the Controller s website for specific instructions. The RU Marketplace approver is responsible for ensuring that the appropriate expense recovery account value is being used when placing the order (creating the requisition in RU Marketplace); not the receiving department. The Finance approver for journal entries and/or project adjustments is responsible for ensuring that the appropriate matching expense recovery account value is being used. 31

Expense Recovery: Example Rutgers Dining Services incurred expenses (food items) to

Dining Services incurred expenses which is debited to their expense string (1).

recovery account designated by Dining Services to record the expense on their books

32 Expense Recovery: Example Rutgers Dining Services incurred expenses (food items) to accommodate a lunch meeting held by Unit (ABC). Dining Services incurred expenses which is debited to their expense string (1). Unit (ABC) should initiate an IPO requisition in RU Marketplace using the expense recovery account designated by Dining Services to record the expense on their books (Debit) (2). Dining Services will receive an expense credit using the same expense recovery account once the IPO process is complete (2). 32

33 Expense Recovery: Direct Journal Entry Process In the event that the IPO process cannot be used, a general ledger journal entry may be done for expense recovery transactions. The entry follows the same accounting steps outlined above whereas, same expense recovery account value(s) must be used for the debit and credit transactions to ensure that the accounts will net to zero for accurate financial reporting. 33

34 Expense Recovery: Example Public Safety provides fixed post security services to the Camden Law School. Public Safety incurs the expenses (Salaries & Fringe) for the services provided on their general ledger. The Camden Law School pays for the services provided using a general ledger journal entry. The journal entry should use the expense recovery account values as specified by Public Safety on both sides of the entry. Ex: Debit Account value Public Safety Services and Credit Account value Public Safety Services. The department providing the services maintains the expenses on their general ledger in Salary and Fringe account values but recovers its costs in the expense recovery account value. The department consuming the service has an expense on the expense recovery line. The matching account value debit and credit nets to zero for accurate financial reporting on a university wide basis. 34

35 Expense Recovery: New Account Values as of July 1 Account Goods and Services Category Construction & Renovation Services Copy, Mail, and Print Services Facilities and Maintenance Services Information Technology and Media Services Lab/Equipment/Core Use Parking Services Public Safety Services Records Management Services Recovery Materials, Supplies, COGS Recovery Professional Services Registration, Rental, and Conference and Event Services Student Services Surplus and Moving Services Training Services Transportation Services The current expense recovery account values will be deactivated on July 1,

36 Q & A QUESTIONS & ANSWERS 36

37 Faculty Funds 37

38 Faculty Funds Definition Purpose of Accounting Procedure General Guidelines How to Request a Faculty Funds Project Examples 38

39 Faculty Funds: Definition Faculty funds are resources that are allocated to an individual faculty member, or an academic department, to support research and other academic activities of the faculty. The faculty funds resources are allocated by University leadership, such as: The President Board of Governors Board of Trustees Vice President or Chancellor Dean or Director Some examples of faculty funds are: Start-up funds A return on revenue generated by a faculty member such as Facilities & Administration (F&A) Incentive funding Internal research awards Discretionary funding available to a faculty member 39

40 Faculty Funds: Purpose of the Procedure Ensure adherence to Generally Accepted Accounting Principles (GAAP). Standardize and promote the consistent accounting treatment for recording faculty funds across the University. Track expenses and balances by faculty member or academic department. Track funds by funding source and/or purpose (start-up, incentive, or internal research award), as needed. Make faculty funds easily identifiable. Allow fund balances to carry forward over multiple fiscal years. Carry forward rules will be determined by the funding source. 40

41 Faculty Funds: General Guidelines Faculty funds are managed and tracked using the projects sub-ledger and must be recorded using the new Fund Type 160 Internally Designated Faculty. All faculty funds projects will be in the 3XXXXX series. A faculty fund is for an individual faculty member or an academic department. No minimum dollar threshold will be imposed on faculty funds projects. Faculty funds projects will use the following naming convention: Unit and faculty member s name when the funding is specific to a single faculty member (i.e. SAS John P. Smith ) Unit and academic department when the funding is allocated to a department, rather than an individual faculty member (i.e. SAS Biology Department) An individual faculty member or academic department should use one project, and distinguish various funding sources or uses identified by tasks. Faculty projects are funded via transfers. Faculty funds projects do not receive revenue directly. 41

42 Faculty Funds: How to Request a Project Download the Faculty Funds Project Request form from the University Controller s Office Forms Repository. Forward the completed, and approved form to the Chart of Accounts team at coa@finance.rutgers.edu. Requests for changes to an existing faculty fund project set up should also use the project request form and sent to the Chart of Accounts team at coa@finance.rutgers.edu. Current non-sponsored designated projects, 2XXXXX series, that are Faculty Funds have the following options: Setup a new project under 3XXXXX series. Departments would transfer balances to the new 3XXXXX series project. Departments can keep their current 2XXXXX series projects and spend down the funds by end of the 2019 fiscal year 06/30/2019. It is preferred to change the Fund Type to 160 by completing the Project Request form. See Forms Repository. Projects 2XXXXX series & 3XXXXX series will be linked together to assist in tracking the transaction history. The 2XXXXX series project number will be populated in the 3XXXXX series related project field and vice versa for the 3XXXXX series projects. 42

43 Faculty Funds: Example Department XYZ have a faculty fund project for Dr. Manish Smith. The project is series 2XXXXX and the FT is 150. The department s business manager projected that the funds remaining in Dr. Smith s project will not be spent by end of FY19. The department requested a new project number 3XXXXX series and received project number under new Fund Type 160. The department now should initiate a transfer of the funds remaining in the 2XXXXX series project, FT 150 to the new project, FT 160 using account value To determine the funding transfer account value the department searched the transfer account value matrix on the Controller s website. 2- For project transfers refer to the Projects Cost Adjustments Job Aids found on the Controller s website. 43

44 Q & A QUESTIONS & ANSWERS 44

45 Accounting Procedures: Who to Contact for Support Please send inquiries or questions regarding the new processes to the Financial Management Help Desk Phone: (848)

46 Accounting Procedures: Conclusion Accounting Procedures Overview Funding Transfers Expense Recovery Faculty Funds You can access updates and resources on the University Controller s Office website at 46

47 Appendix: Funding Transfers Account Matrix & & & & & & Transfer Matrix for All Fund Types Unrestricted Operating General Unrestricted Operating Auxiliary Unrestricted Medical Contracts State of New Jersey Future Use to Unrestricted be Cleaned Cost Share up in FY19 Internally Designated Faculty and Internally Designated General Unrestricted Endowment Principal Quasi Type 3B and Unrestricted Endowment Operating Quasi Type 3B Term Endowment Principal & True Endowment Principal LTIP Endowments & Separately Invested Endowments Restricted Endowment Operating Term & True & Quasi Type 3A and Restricted Endowment Principal Quasi Type 3A Unrestricted Capital Projects and Restricted Capital Projects Restricted Debt Service Net Investment in Capital Assets Contributions Gifts 100 Unrestricted Operating General Unrestricted Operating Auxiliary Unrestricted Medical Contracts State of New Jersey NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS 150 Future Use to be Cleaned up in FY Unrestricted Cost Share 160 & 165 Internally Designated Faculty and Internally Designated General NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS 120 & 130 Unrestricted Endowment Principal Quasi Type 3B and Unrestricted Operating Quasi Type B NOT AVAILABLE FOR TRANSFERS & 220 Term Endowment Principal & True Endowment Principal 230 & & 710 LTIP Endowments & Separately Invested Endowments Restricted Endowment Operating Term & True & Quasi Type 3A and Restricted Endowment Principal Quasi Type 3A NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS 180 & 610 Unrestricted Capital Projects and Restricted Capital Projects 620 Restricted Debt Service NOT AVAILABLE FOR TRANSFERS Net Investment in Capital Assets 650 Contributions Gifts NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS NOT AVAILABLE FOR TRANSFERS

UNIVERSITY CONTROLLER S OFFICE STANDARD OPERATING PROCEDURES

UNIVERSITY CONTROLLER S OFFICE STANDARD OPERATING PROCEDURES Overview ACCOUNTING PROCEDURES FOR FUNDING TRANSFERS July 1, 2018 1. Definition of Funding Transfers 2. Purpose of Funding Transfers Accounting