ACCOUNTING GUIDELINES INTERNAL TRANSFERS

Transcription

1 1 BACKGROUND AND OBJECTIVES TYPES OF INTERFUND TRANSFERS RECOMMENDED USE OF INTERFUND TRANSFERS NON-ALLOWABLE USE OF INTERFUND TRANSFERS PROCEDURE INTERNAL CHARGES OR BILLING NORMAL USE OF INTERNAL CHARGES NON-ALLOWABLE USE OF INTERNAL CHARGES ACCOUNTING FOR INTERNAL CHARGES REVENUE TRANSFERS NORMAL USE OF REVENUE TRANSFERS NON-ALLOWABLE USE OF REVENUE TRANSFERS ACCOUNTING ENTRIES EXPENSE TRANSFERS NORMAL USE OF EXPENSE TRANSFERS NON-ALLOWABLE USE OF EXPENSE TRANSFERS PROCEDURE AND ACCOUNTING ENTRIES FUNDING ALLOCATION TRANSFERS RECOMMENDED USE OF FUNDING ALLOCATION TRANSFERS NON-ALLOWABLE USE OF FUNDING ALLOCATION TRANSFERS PROCEDURE OTHER CONSIDERATIONS... 9 Page 1

2 1 BACKGROUND AND OBJECTIVES At the University level, internal transfers are ften used t prvide supprt r funding t a particular activity, transfer csts r revenues frm ne activity t anther, prvide services t anther department r unit, r t assess an administrative charge. There are different ways fr prcessing an internal transfer and these accunting guidelines are develped t prvide guidance t University departments n which type f transfer is apprpriate fr certain situatins. Adhering t these accunting guidelines will facilitate cnsistency in reprting peratinal activities acrss all University departments and prvide sufficient audit trail fr jurnal transactins entered. 2 TYPES OF 2.1 INTERFUND TRANSFERS These are transfers f mnies nt included in the University s revenue r expense accunts in fund statements. Interfund transfer accunt cdes (488XXX and 988XXX) are created t specifically identify the surce/target fund f the mnies being transferred, represented by the last three digits f the accunt cde. Interfund transfers must net t zer fr each transfer transactin, i.e. interfund transfer accunt cdes must be used in pairs in the debit (transfer ut 988XXX) and credit (transfer in 488XXX) sides f a jurnal entry. The use f interfund transfer accunt cdes are nt limited t different fund cdes but can als be used t transfer mnies within the same fund cde where needed RECOMMENDED USE OF INTERFUND TRANSFERS Transfers t r frm an Endwment fund s Capital r Stabilizatin accunts, e.g. internal funding t match an external cntributin, encrachment where all necessary apprvals have been btained, internal funding t reduce r eliminate the pre-existing deficit in the Stabilizatin accunt, r spending allcatin transferred t the endwment fund s Spending accunt; Transfers t r frm an Endwment fund s Spending accunt, e.g. internal funding t tp-up the fund s spending allcatin, r funding transfer fr research supprt prvided that such transfers are within the restrictins specified in the terms f the deed (if any); Lump sum transfers based n agreements with n specific expenses assciated with the transfer and/r there is a cmpelling reasn why expenses shuld be recgnized in the ther fund, e.g. faculty funding f a majr capital prject, transfer t supprt a specific purpse r research activity, r transfer t fund an award; Cst recvery arrangements where expenses have nt yet been incurred by the receiving department r prject, r expenses have been incurred by the receiving department r prject in the prir year(s) ttal expenses f the receiving prject shuld nt shw a net credit balance fr the year; Page 2

3 Transfer f prir year carryfrward balances due t DeptID changes r t clse an inactive r drmant prject; Transfers initiated by Research Services r the University Industry Liaisn Office, regardless f amunt, fr new prject budgets; r Transfers cmbining residual mnies in research r specific purpse activities where apprpriate and subject t spnsr apprval NON-ALLOWABLE USE OF INTERFUND TRANSFERS Interfund transfer accunt cdes cannt be used where the transfer invlves the Agency (Z) fund. Agency activities are nt included in the University s financial statements, hence a transfer invlving an Agency fund will result in a discrepancy when accunting fr the cnslidatin f fund peratins; Interfund transfer accunt cdes cannt be used if either the debit r credit side is nt an interfund transfer accunt cde. This will result in the interfund transfer being ut-f balance fr accunting purpses; Externally restricted cntributins initially recgnized in a Specific Purpse fund and then transferred t the designated activity, e.g. fundraising received in a Specific Purpse dnatin PG intended fr a majr capital prject use Revenue Transfers; Transfers t r frm a restricted Research prject where the use f interfund transfer accunt cdes are prhibited, e.g. prvincial funding f negtiated salary increases in a Tri-Cuncil Research prject use Expense Transfers; Cst recvery arrangements where expenses have already been incurred by the receiving department r prject during the fiscal year, e.g. internal funding t supprt a specific purpse activity where related expenses are incurred in the current year use Expense Transfers; Crrectin f revenue r expense accunt cding errrs use the riginal accunt cdes when making the crrectin and will either be a Revenue Transfer r an Expense Transfer; Internal buy and sell transactins use Internal Charges r Billing; r Full r partial recvery f actual expenses incurred where the charging department r unit is nt nrmally engaged in prviding such services use Expense Transfers. Page 3

4 2.1.3 PROCEDURE Interfund transfer entries can nly be cmpleted by the respnsible staff persn in a Central unit, i.e. Financial Services (includes Reprting and Budget Office) and Research Services. Fr interfund transfers invlving the Office f Research Services (ORS), cntact the respnsible staff persn in ORS fr detailed prcedures. Fr all ther interfund transfers, fllw the succeeding plicies and prcedures. All interfund transfers must be apprved by an apprpriate Prject Grant (PG) signing authrity r department level signing authrity. All apprvals must be dcumented, e.g. mem r r actual signature in the jurnal vucher frm. All interfund transfers must specify the reasn fr the transfer. Dcumentatin supprting the reasn fr the transfer must be attached t the request where apprpriate (regular jurnals), r be available fr review r audit upn request (excel jurnals). Fr units with n nline data entry access, cmplete a Jurnal Vucher frm fr the interfund transfer transactin. An request is als acceptable, but nt preferred. Fr units with nline data entry access, enter the Interfund Transfer transactin directly in PepleSft Live and send an t the respnsible staff persn in Finance requesting fr apprval f the entry. Cnfirm the interfund transfer accunt cdes with Central Finance. Finance will apprve the interfund transfer entry befre the transactin will be psted. Finance will bk manual budget adjustments where needed. Finance will ensure that all funding transferred frm a restricted accunt (endwment, research, capital, specific purpse, awards) are allwable under the terms f the deed r agreement with spnsrs befre the transfer is prcessed. 2.2 INTERNAL CHARGES OR BILLING Interdepartmental revenues (internal charges) are created when ne University department sells gds and/r services t anther University department. An invice frm the charging department is usually prepared t supprt the internal charges. Internal charges are recgnized whenever a Revenue accunt is credited with a crrespnding debit t an Expense accunt. Transactins invlving Agency (Z) funds are nt cnsidered internal transactins fr accunting purpses even when a Revenue accunt is credited and an Expense accunt is debited. Page 4

5 2.2.1 NORMAL USE OF INTERNAL CHARGES Revenues generated by ancillary units frm the sale f gds and/r services t University departments, e.g. Bkstre internal sales; Internal buy and sell transactins where the charging department r unit is nrmally engaged in the activity f prviding such services and may r may nt be purely n a cst recvery basis, i.e. may have a prfit cmpnent included in the charge, e.g. technical services prvided t research activities, r animal sales fr research purpses; Administrative verhead charges, such as thse fr research and endwment; r Cntributins r funding received frm an Agency (Z) fund NON-ALLOWABLE USE OF INTERNAL CHARGES Artificial entries where revenues are credited and expenses are debited within the same PG. Departments will be asked t explain the ratinale fr the entry; r Full r partial recvery f actual expenses incurred where the charging department r unit is nt nrmally engaged in the activity f prviding such services, e.g. phtcpying r lng distance charges use Expense Transfers ACCOUNTING FOR INTERNAL CHARGES In rder t crrectly recgnize revenues and expenses in the University's cnslidated financial statements, internal revenues must be eliminated against internal expenses upn cnslidatin. When cmpleting the Jurnal Vucher frm fr internal charges, mark the I bx fr interdepartmental revenue and expense transactins. Fr nline data entry users and departments sending interface files, the Jurnal Class field in the header must have the value f Internal t identify the transactin as an internal charge subject t eliminatin. Fr departments sending excel uplad files, the t Data Management shuld cntain infrmatin whether the transactins in the file are interdepartmental charges subject t eliminatin. Page 5

6 2.3 REVENUE TRANSFERS Revenue transfers can be used when necessary t ensure the prper recgnitin f cntributins and funding received int their respective activities r prjects. This will enable the department t reflect the full amunt f external funding received fr a particular activity r prject NORMAL USE OF REVENUE TRANSFERS Externally restricted cntributins initially recgnized in a dnatin hlding PG and then transferred t the designated activity, e.g. fundraising received in a Specific Purpse dnatin PG intended fr a majr capital prject; r Crrectin f revenue cding errrs NON-ALLOWABLE USE OF REVENUE TRANSFERS Transfer f externally restricted cntributins frm a restricted fund (endwment, specific purpse, capital, research, awards) t a fund with n external restrictins (general purpse perating, fee fr service, cntinuing studies, ancillary) using revenue accunt cdes. Transfer f cntributins frm an external dnr with n restrictins, hwever the University has internally designated the funds fr use in endwments, revenue accunt cdes cannt be used, instead use Interfund Transfers after btaining apprpriate apprvals ACCOUNTING ENTRIES External cntributins r funding received during the year must be reflected in the destinatin prject r activity by year-end t eliminate r substantially reduce instances where ttal revenues in a particular activity shw a net debit balance. The same revenue accunt cde must be used in the debit and credit sides f the revenue transfer. T illustrate: Where a cntributin is received frm an individual and credited t a specific purpse PG, but is externally restricted t fund a majr capital prject: DR Grants and Dnatins Individuals PG xxsxxxxx CR Grants and Dnatins Individuals PG nnpxxxxx Fr research, specific purpse, and capital PGs with revenue transfers, Finance will review these transactins t determine if budget adjustments are required. Adequate backup up dcumentatin t supprt the revenue transfer must be attached t the jurnal vucher r be available fr review upn request. Page 6

7 2.4 EXPENSE TRANSFERS Expense transfers can be used when necessary t ensure that csts are recgnized in the activity r fund where these csts are directly incurred. Expenses incurred during the year must be transferred by year-end t eliminate r substantially reduce instances where ttal expenses in a particular activity shw a net credit balance NORMAL USE OF EXPENSE TRANSFERS Salary transfers relating t a specific persn and a specific pay perid, e.g. where the appintment frm reflecting a change in earnings distributin was nt prcessed prir t the effective date f the change; r Cst recvery arrangements between tw r mre PGs where administrative expenses are all initially recgnized in ne PG but supprt is prvided t tw r mre activities which may r may nt be within the same fund, e.g. funding received in a specific purpse r research PG but administrative supprt is prvided by a staff persn paid ut f the perating fund; Transfers t r frm a restricted research prject where the use f interfund transfer accunt cdes are prhibited, e.g. prvincial funding f negtiated salary increases in a Tri-Cuncil research PG; Cst recvery arrangements where expenses have already been incurred by the receiving department r prject during the fiscal year, e.g. internal funding t supprt a specific purpse activity where related expenses are incurred in the current year; r Full r partial recvery f actual expenses incurred where the charging department r unit is nt nrmally engaged in the activity f prviding such services, e.g. cst-sharing agreement fr sftware purchase r develpment; Reimbursement frm third parties fr expenses incurred n their behalf, e.g. travel expenses, phtcpying charges; r Crrectin f expense cding errrs NON-ALLOWABLE USE OF EXPENSE TRANSFERS Lump sump transfer f funds nt related t any specific expenses and there is a cmpelling reasn why expenses shuld be recgnized in the ther fund use Interfund Transfers; Transfers in advance f expenditures being incurred which may result in the PG shwing a net credit balance in the expense accunt classificatin use Interfund Transfers; r Internal buy and sell transactins where the charging department r unit is nrmally engaged in the activity f prviding such services n a direct cst recvery basis use Internal Charges r Billing. Page 7

8 2.4.3 PROCEDURE AND ACCOUNTING ENTRIES Befre initiating an expense transfer, ensure the transactin is valid and is in cmpliance with all applicable spending restrictins as stated in the endwment deeds r terms f agreement with spnsrs. Jurnal vuchers shuld have sufficient back up dcumentatin and explanatins t supprt the recvery f expenses and eligibility f the expense as allwed by the endwment deeds r terms f agreement with spnsrs. The dcumentatin must prvide enugh details t satisfy an auditr, internal r external. Examples f apprpriate dcumentatin include, but nt limited t: relevant clauses r endwment deeds r terms f agreement with spnsrs supprting the permissibility f transferred expenses; calculatin f recvery amunts, e.g. 30% f expenses t ne PG and 70% t anther PG, r calculatin f adjustment r redistributin f expenses; invices r statements f accunt fr expenses being transferred; payrll emplyee details r Statement f Salaries and Wages shwing salaries being transferred; r mem authrizing the jurnal vucher t be prepared; FMS detailed transactins r ledger summaries; cst sharing agreements between prjects. When recvering salaries, the related benefits fr the emplyee(s) must als be recvered. The same expense accunt cde must be used in the debit and credit sides f the expense transfer. T illustrate: Faculty salary expense transfer due t changes in earnings distributin: DR Faculty Salaries PG xxgxxxxx CR Faculty Salaries PG nnsnnnnn Travel expenses recgnized in an incrrect PG DR Travel Expenses PG xxgxxxxx CR Travel Expenses PG nnrnnnnn Expense accunt cdes can als be used in limited situatins where the expenses incurred by the department are reimbursed by an external party and the expenses are nt related t the department s nrmal curse f peratins. As much as practicable, the reimbursement must ccur in the same fiscal year when expenditures are incurred t ensure that the expense classificatin des nt shw a net credit balance. Fr these cash receipts, the cash accunt is debited and the apprpriate expense accunt cde is credited, instead f a revenue accunt cde. Situatins where the expense accunt cdes may be used fr external cash receipts are as fllws: Travel expenses incurred by the Dean t speak at a cnference at the invitatin f an external rganizatin. Travel expenses incurred by the Dean will be reimbursed in full by this external rganizatin. Page 8

9 Relatively small value phtcpying r lng distance charges incurred and reimbursed by students and/r emplyees t the department. 2.5 FUNDING ALLOCATION TRANSFERS Funding allcatin transfers are the nly type f transfer with n impact n the ACTUALS ledger. This type f transfer can nly be used in the General Purpse Operating (GPO) fund RECOMMENDED USE OF FUNDING ALLOCATION TRANSFERS Transfer f funding allcatin frm ne GPO PG t anther GPO PG. The transfer can be bth fr the current fiscal year nly, r n a recurring basis NON-ALLOWABLE USE OF FUNDING ALLOCATION TRANSFERS Transfer f funding allcatin invlving revenue-based funds (fee fr service, cntinuing studies, ancillary, agency). N entries shuld be bked in the funding allcatin in the CENTRAL ledger fr these funds use Interfund Transfers r Expense Transfers where apprpriate PROCEDURE Enter the funding allcatin transfer in Hyperin. 3 OTHER CONSIDERATIONS Where a staff persn is paid ut f the Operating fund but prvides research supprt n a full-time basis, cnsideratin shuld be given t changing the earnings distributin charge t a Research PG t avid verstating the headcunt in the Operating fund. T minimize cst reductin r expense recveries, the department may cnsider directly charging the actual expense t the department r PG that incurred it, rather than recgnizing the expenditure in a cst center and eventually claiming a recvery fr these items. Page 9