1 The A-B-C’s of Accounting Presenters:. 2 Agenda n Fund Accounting n Fund Definitions n...

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The A-B-C’s of Accounting

Presenters:

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Agenda

Fund Accounting Fund Definitions Chartfields Class Codes Revenue Types &

Transfers Journals Q&A

FUND ACCOUNTING What is Fund Accounting?

– The University is a non-profit, governmental entity, therefore it has to follow the fund accounting principles.

– The University receives money from many different sources. The source determines what Fund the money will be deposited into. The Fund also dictates what kind of expenditures will be allowable.

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Two Types of Funds

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Operating Funds Non-Operating Funds

General 10000 Endowment 7XXXX

Gift 30000 Plant 8XXXX

Designated 40000 Agency 90000

Auxiliary 5XXXX

Federal Sponsored 20000

Non-Federal Sponsored 25000

Funds available for the normal operation of the University’s missions

Funds to be used to strategically enhance the University, but are not considered available for normal operations

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Agenda



General Fund – 10000 The General Fund contains the economic resources that are

expendable for operating purposes in the following activities:– Instruction for credit, i.e. degree earning credit– Research – Public service – Academic support – Student services – Institutional support – Plant operations and maintenance – Scholarships and fellowships

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FUND DEFINITIONS

General Fund – 10000 (cont.)

These activities are primarily funded by:

– State appropriations – Student tuition and fees – Indirect cost reimbursements from research contracts – Departmental revenues related to student lab and course

fees – Distribution of investment income (UIP)

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Federal Sponsored Fund – 20000 Funding provided by the federal government for research,

instruction and public service. Activity for this fund is governed by federal laws enacted by Congress as well as the rules prescribed by individual contract agreements. The primary revenue sources for this fund include:– Federal Grants and Contracts– Small Distribution of Investment Income (UIP)

All University spending of federal funding is subject to an annual audit under the guidelines set forth in OMB Circular A-133. To ensure compliance, all activity affecting a federally sponsored project/grant should meet the terms and conditions of the grant or contract. 8

Non-Federal Sponsored Fund – 25000 Funding provided by non-federal government sources,

Charitable Foundations, and State and Local Governments for research, instruction, and public service. The activity on this fund is regulated by the individual contract agreements. The primary revenue sources for this fund include:– Grants and Contracts from State and Local Government– Grants from Charitable Foundations– Contracts from Industry– Small Distribution of investment income (UIP)

It is the responsibility of the unit receiving the grant/contract to comply with the guidelines set forth by the sponsor in the governing agreement when funds are spent.

Departments should ensure that activity is appropriate to the grant/contract. 9

Gifts given to the University with specific stipulations on how the money is to be used. The primary revenue sources for the Gift Fund include:– Gifts from outside donors– Endowment distributions – University Investment Pool (UIP)

distributions

Revenues in the Gift Fund are expendable and not permanently invested.

Gift Fund – 30000

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Gift Fund – 30000 (cont.)

It is the responsibility of the unit receiving the gift to comply with the guidelines set forth by the donor in the governing gift agreement when funds are spent.

Departments should reference an applicable gift agreement to ensure that activity is appropriate to the gift.

If you have any questions regarding transferring funds into or out of the gift fund, contact Financial Services.

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Designated Fund – 40000 Funds internally designated, but otherwise unrestricted

(no identified purpose). Revenue sources include:

– Departmental revenue from non-degree academic programs such as continuing professional education (non-degree credit) conferences and seminars

– Investment income from the University Investment Pool (UIP) and other sources

– Royalty income – Endowment distributions – Expenditures are limited to activities designated by

University management12

Auxiliary Fund – 5XXXX The Auxiliary funds track activities that are maintained

with revenue from their own operations. Internal service providers are also auxiliary units. Examples include:

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Early Childhood Education Center

Contract Services

Vending Parking

Auxiliary Fund – 5XXXX (cont.)

Revenues in the fund consist of:

– Internal recharge from service unit billings– Operating activities– Investment income– Endowment distributions

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Endowment Fund – 7XXXX

Endowment Funds are long term invested funds established by either a donor or departmental funds where only the distributions earned on the investment may be spent.

If you have any questions regarding

the Endowment fund, contact Financial Services.

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Endowment Fund – 7XXXX(cont.)

Funds donated by a donor to be invested in perpetuity. The interest earned may then be spent on purposes designated by the donor/unit - also includes funds functioning as endowment (quasi-endowments).

– True Endowment: Funds 70002-74999 and E0001-E9999 – Quasi Endowment Restricted: 75000-76999 and Q0001-Q9999– Quasi Unrestricted: 77700-77999 and U0001-U9999– Quasi Permanent: 77000-77699 and P0001-P9999– Endowment Specific: 78500-78799– Quasi Specific: 78800-78999

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Plant Fund – 8XXXX

Construction Funds (80000)– Used to track expenses for construction and renovation

projects– Funding source must be identified prior to project

authorization

Departmental Equipment Funds (82000)– Used for current or future equipment

purchases/replacements, minor renovation, and other non-operating expenditures

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Agency Fund - 90000

The University acts as the custodian for the agency fund. The balances consist of amounts held for organizations affiliated with, but not legally part of, the University. All agencies must maintain a positive cash balance in the general ledger. Examples include:

– Alumni Society– United Way– Toastmasters– Student Organizations

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Agency Fund – 90000 (cont.)

Please note the University doesn’t own any of these assets. The cash and investments on deposit with the UM in this fund are offset by a liability in the UM financial statements, i.e. we owe these amounts to the entities that have deposits in this fund.

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Agenda



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CHARTFIELDS

Account The type of transaction. It is NOT the shortcode.

Fund Source and intended purpose of monies and how they should be spent.

Department ID The academic or administrative unit.

Program Additional reporting layer for the dept.

What are Chartfields?ChartFields are the seven fields used in M-Pathways to enter, record, and report financial transactions for the University.

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CHARTFIELDS (cont.)Class The functional nature of the expense.

Project/Grant Identifies a specific pool of money or activity.

Shortcode A shortcode represents a string of chartfield values. Shortcodes are required to:

• Process payroll transactions

• Gift/development processing

• Order through Marketsite

• Use Concur reimbursement system

• May be used with Service Unit Billings in place of Chartfields

SHORTCODE = CHARTFIELD

239475 = 10000/926400/OPERA/62000

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Agenda



CLASS CODES

Value that identifies the functional nature of an expense– E.g. instruction, research, scholarship

Essential for external and internal financial reporting– Audited financial statements– Facilities & Admin cost proposal for federal sponsored

programs– State of Michigan reporting– Various surveys– Management and departmental reporting

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CLASS CODES (cont.)

For additional information on Class, including a complete list and definition of all Class values:

http://www.finops.umich.edu/accounting/chartfields/classoverview

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• 1XXXX – Instructional • 6XXXX – Institutional Support

• 2XXXX – Research • 7XXXX – Operation and Maintenance of Plant

• 3XXXX – Public Service • 8XXXX – Scholarships and Fellowships

• 4XXXX – Auxiliary Activities

• 9XXXX – Auxiliary Activities

• 5XXXX – Student Services

Costs classified as indirect cost recovery excluded (ICRX) by the federal government must be specifically identified by using the appropriate Class ending with "X". The most �frequently used categories of ICRX costs are:

- Alumni activities

- Entertainment

- Fund raising

- Hosting (when considered "entertainment")

- Lobbying

- Public relations

CLASS CODES (cont.)

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Agenda



Reimbursements Rebills Recharges Revenue Transfers Account Codes Processing Retroactive Salary Distribution

Changes Processing Manual Payroll Journal Entries Useful Resources

REVENUE TYPES & TRANSFERS

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A payment received from an employee or individual who is paying back the University for a personal or non-University expense

Non-revenue generating Recorded as a negative expense against the account the

expense was originally recorded to Rebates are also recorded as a negative expense against the

account originally recorded to

Example: Using your business phone to make a personal call

Reimbursements

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Examples of ReimbursementsOriginal Expense (IT Com billing)

Journal ID Journal Date Account Fund Code DeptID Program Code Class Project Grant Dollar Amount Journal Line Descr

SUB2343871 08/22/2010 611500 10000 440400 ADMIN 11100 U008906 28.21Service Unit Billings

Reimbursement

Journal ID Journal Date Account Fund Code DeptID Program Code Class Project Grant Dollar Amount Journal Line Descr

CRD0831068 08/22/2010 611500 10000 440400 ADMIN 11100 U008906 -0.56Local calls-Smith

CRD0831069 08/22/2010 611500 10000 440400 ADMIN 11100 U008906 -0.49Local calls-Jones

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Moving an original cost of a good or service from the department that was charged to the department that used the good or service

Non-revenue generating Recommend to bill through Service Unit Billings (SUB) Rebill activity should be recorded as a reallocation of

expenses instead of revenue using the following options:

Rebills

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Use original expense account on both sides of the journal entry when moving the expense

Use the contra-expense accounts in the Internal Rebill ranges (620200 to 620999)

Example: When a department allows another department to use their copy machine.

Rebills continued

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Rebill Example Using Original Expense Account

Rebill

Journal ID Journal Date Account

Fund Code DeptID

Program Code Class

Project Grant

Jrnl Ln Ref

Dollar Amount Journal Line Descr

SUB2387368 12/04/2009 615080 10000 380000 11472 11000 SUB

(252.13)Service Unit Billings

SUB2387368 12/04/2009 615080 50000 240000 OPERA 11100 U000824 SUB

103.26 Service Unit Billings

SUB2387368 12/04/2009 615080 20000 185500 10000 22000 F009334 SUB

148.87 Service Unit Billings

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Original Expense

Journal ID Journal Date Account

Fund Code DeptID

Program Code Class

Project Grant

Jrnl Ln Ref


SUB2387352 12/04/2009 615080 10000 380000 11472 11000 SUB 252.13Service Unit Billings

Rebill Example Using a Contra Account

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Original Expense

Journal ID Journal Date Account Fund Code DeptIDProgram Code Class Project Grant Dollar Amount Journal Line Descr

0002348982 12/04/2009 615080 10000 380000 11472 11000 252.13Rebill Copy Expense

Rebill

Journal ID Journal Date Account Fund Code DeptIDProgram Code Class Project Grant Dollar Amount Journal Line Descr

0002349007 12/04/2009 620200 10000 380000 11472 11000 -252.13Rebill Copy Expense

0002349007 12/04/2009 615080 50000 240000 OPERA 11100 U000824 103.26 Rebill Copy Expense

0002349007 12/04/2009 615080 20000 185500 10000 22000 F009334 148.87Rebill Copy Expense

When a department’s primary existence is to provide goods and services

Revenue generating Recharged through Service Unit Billings (SUB) Recharges operate in the Auxiliary Fund Should use fund 52000 Departments should have a recharge rate approved by

Financial Analysis

Example: Fairlane Events Center

Recharges

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Example of a Recharge

Journal ID Journal Date AccountFund Code DeptID

Program Code Class

Project Grant Jrnl Ln Ref


SUB2726851 7/12/2010 410000 52000 685100 12134 92320 SUB

(1,267.50) Service Unit Billings

SUB2726851 7/12/2010 615080 30000 240000 OPERA 31100 C302289 SUB 200.25 Service Unit Billings

SUB2726851 7/12/2010 615080 56000 311673 31100 SUB 67.25 Service Unit Billings

SUB2726851 7/12/2010 615080 10000 185500 LNCUR 11100 U005590 SUB 100.00 Service Unit Billings

SUB2726851 7/12/2010 615080 10000 406800 LDPRG 21000 U000428 SUB 175.00 Service Unit Billings

SUB2726851 7/12/2010 615080 30000 372300 10000 31100 C300049 SUB 250.00 Service Unit Billings

SUB2726851 7/12/2010 615080 56000 318104 31100 SUB 195.00 Service Unit Billings

SUB2726851 7/12/2010 615080 40000 755100 10000 51000 U006476 SUB 160.00 Service Unit Billings

SUB2726851 7/12/2010 615080 50000 686100 12706 92320 U000824 SUB 120.00 Service Unit Billings

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http://www.finance.umich.edu/accounting/recharge Financial Analysis Forms Recharge Vendor Request form Send completed form to Financial Analysis:

[email protected]

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Recharge Information

Revenue can come from several sources such as: Tuition Gifts Organized activities such as seminars and conferences Investments Other

Revenue

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Revenue Examples

Royalty revenue

Journal IDJournal Date Account

Fund Code DeptID

Program Code Class

Project Grant

Dollar Amount

Journal Line Descr

CR00352725 12/02/2010 413720 40000 587040 10000 21100 U000047 -1,828.87 Copyright Royalty

Gift revenue

Journal IDJournal Date Account

Fund Code DeptID

Program Code Class

Project Grant

Dollar Amount

Journal Line Descr

DAC02022245 07/01/2010 405075 30000 252400 10000 21000 G009154 -100.00Gift

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A transfer is used for:

Moving funding (e.g. appropriations)or moving expenses from one chartfield combination to another

Covering an overdraft Moving a balance to close a project grant

Transfers

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The Transfer Matrix shows users which transfer accounts to use for the debit and credit of their journal entries in an easy to read format.

http://www.umd.umich.edu/fileadmin/template/businessaffairs/files/Financial_Budget_General_Services_-_FILES/Accounting/TransferMatrix.pdf

Transfer Matrix

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http://www.finops.umich.edu/accounting/quicklinks/transfermatrix

The Valid Account List defines for all funds what revenue and expense accounts are allowable, unallowable, exceptions, or restricted for Financial Operations use only.

http://www.finance.umich.edu/finops/accounting/quicklinks/validaccounts

Valid Account List

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Contact Gift Processing to transfer a gift. They process the change in the DART system and process a journal entry in the General Ledger to ensure the systems stay in sync

Cannot transfer funding in or out of the General Funds. Transfer specific expenses only. Same rule applies to Gift funds, unless you have provost’s approval.

Transfers to/from the Plant Fund will always use class code 73000 on both sides

Transfers to/from Endowment Funds are processed by Financial Operations

Unique Transfer Guidelines

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Why does the Payroll Expense need to be moved?– Purpose of transfer indicates proper method to follow

The general purpose:– The movement of payroll expenses is to report the

effort of the individual’s appointment correctly

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Determine the Purpose of Payroll Transfers

Any change in effort reporting certification to adjust a prior pay period retroactively

• A change in one or more shortcode(s)• A change in the % of Distribution among existing

shortcode(s)• A combination of changes on SC’s and % of

Distribution• Retroactive changes can affect:

• Current Fiscal Year• Prior Fiscal Year (up to October 31st of current year)• Both current and prior fiscal years

Processing Retroactive Salary Distribution Changes

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Retroactive Changes for Sponsored Funds (20000, 25000)• Must be requested within 120 days from original

accounting date of transaction in question Retroactive Changes for Non-Sponsored Funds

• All changes needed for the prior fiscal year must be processed on or before October 31st of the current fiscal year, after that a funding transfer must be processed instead

Effort Reporting• Must be performed for certain individuals, per Federal

Regulations; see Policy on Effort Certification for more details

http://www.finance.umich.edu/finops/programs/effortrptg/principles

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All transfers of permanent faculty/staff salaries should be referred to Dearborn HR to handle the appointment change.

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Processing Salary Transfers

The following are allowable manual payroll transfers that do not require a Retroactive Effort Change:• Temporary Staff• Other items not related to base appointment (see next

slide)

Allowable Manual Transfers

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The following are accounts that are allowable to be used for manual transfers:• Tuition Related Activity

• Tuition Refunds: 580800 & 581000• Geo Tuition Grant: 585200• GSA Tuition Waiver & Adj: 595250 & 597000

• Activity not related to an appointment• Prize/Award Pmts: 502300• Moving Expenses: 502500 & 502600• Royalty Pmts: 584400 & 586000• Unemployment Comp: 597250

• Non-employee activity• Prize to non-emp: 581600• Subject Fee Income – non emp: 582000• Accounted-For travel expense: 586400

See Valid Account List for appropriate account usage against corresponding Fund

Allowable Accounts for Manual Transfers

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What is today’s date? What is the original accounting date?

What type of employee is involved with the transfer? Also, what kind of payment is it, specifically?

When a salary transfer is processed within the GL, an automatic calculation is also processed using the current Benefit Recharge Distribution (BRD) rate, which can change between fiscal years

Factors to Consider when moving payroll

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Situation: It is October 1st, 2011. It has been determined that a regular full time professor with a 100% appointment (40.0 hrs a week) in the Mechanical Engineering department against short code 111111 should have been paid out of two short codes (111111 and 222222), split evenly between the two. The most recent appointment is for the time period 07/01/10 – 07/31/11.

Example 1

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A change in effort certification is required

Tell your staff member to recertify.

Solution to Example 1

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Situation: It is March 13th, 2011. A lecturer that is on the University’s payroll is compensated an additional payment of $5,000 for winning an award. This payment is to be transferred to a different short code within the department. How will this be processed?

Example 2

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A manual JE is required• Since this transfer constitutes activity not related to

appointment, then a manual JE will be processed at account 502300.

Solution to Example 2

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Standard Practice Guide 501.09: http://spg.umich.edu/pdf/501.09.pdf• Policy on Retroactive Salary Distribution Changes

Sponsored Transfer Guidelines: http://www.finance.umich.edu/finops/programs/effortrptg/principles

Non-Sponsored Funds Retroactive Salary Distribution Change: http://www.finance.umich.edu/finops/programs/rules/retrosalarytsfNonSP

Transfer - Useful Links and Resources

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Agenda



JOURNAL ENTRY PROCESSDEBITS AND CREDITS

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$ Amount Entry Type Financial Impact

+ Positive Debit Expense/Negative Revenue

- Negative Credit Revenue/Negative Expense

Balance Sheet Accounts

1XXXXX=Asset, Dr. Balance

2XXXXX=Liability, Cr. Balance

3XXXXX=Equity, Cr. Balance

Income Statement Accounts

4XXXXX=Revenue, Cr. Balance

5XXXXX=Expenses related to salary & fringes, Dr. Balance

6XXXXX=All other expenses, Dr. Balance

JOURNALSSample Journal Entry

Acct Fund Dept Prog Class P/G Amt

624350 40000 753060 DISCR 61000 U030441 1500.00

624210 40000 193000 FACAW 21000 U013848 (1500.00)

Transfer Matrix file is a useful guideline on proper account usage– In this case, per the file, a debit to acct 624350 and a credit to acct 624210 is

appropriate

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JOURNALSRESOURCES Journal upload template

http://www.finance.umich.edu/finops/accounting/forms/uploadtemplate

The all funds Valid Account List defines what revenue and expense accounts are allowable, unallowable, exceptions, or for Fin Ops use only. http://www.finance.umich.edu/finops/accounting/quicklinks/validaccounts

Transfer Account Matrix

http://www.umd.umich.edu/fileadmin/template/businessaffairs/files/Financial_Budget_General_Services_-_FILES/Accounting/TransferMatrix.pdf

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