Transcript University of Minnesota Office of External Sales

University of Minnesota
Office of Internal / External Sales
Fiscal Year-End Actions for
Internal/External Sales Organizations
Learning Objectives
Internal/External Sales Activity related to:
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Year-End Review process
Journal Entries Required
Rate Assessment
Preparation for next review
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Agenda for Year-End Review
Fiscal Year End Actions for Internal/External Sales Organizations:
• Invoicing
• Depreciation expense
• Unallowable costs
• Expense allocation between Funds/CF2’s
• Segregation of Expenses
• Prepaid expenses
• Fund Subsidies
• Fund Deficits
• Surplus > 15%
Handout: Fiscal Year End Actions for Internal/External Sales
Organizations
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Invoicing
• Invoice and record revenue for all completed sales activity
• Match revenue with expenses for June month-end (fiscal years
end).
• Basis for allocating expenses between Internal and External
Sales
• Review External Sales contracts and determine amount to be
billed (monthly billing is best business practice)
• If invoicing will not be complete, determine amount that should
be invoiced
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Depreciation
• Record journal entry for the accumulated depreciation for all
ISO assets recovered in the sales rate
• Use capital asset reconciliation job aid
• Review the presentation “How to reconcile Capital Assets”
• Journal entry required to match depreciation recovered in the
rates for the Operating Fund and the remaining balance to be
recovered in the Plant Fund
• Net Book Value at year end = Balance in Plant Fund # 7201
Handout: Internal Sales Organization Capital Asset/Depreciation
Reconciliation Process
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Unallowables
• Record journal entry to remove any unallowable costs incurred
in Operating Fund
• Change process to identify costs that are not allowed
• Use unallowable costs job aid
Definition: allowable cost are cost are directly related to the
ongoing completion of activity
Handout: Unallowable Internal Sales Costs
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Transfers In or Out
• The only allowable Transfer Out for Internal Sales Funds is for
recording depreciation
• The only allowable Transfer In for Internal Sales Funds is
recording subsidies
• Expenses should be adjusted by account number rather than
accumulated expenses using a transfer account
Handout: Journal Entries that Internal Sales units can make through
the General Ledger.
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Expenses Allocation
• Record journal entry for any expenses (salaries, materials,
supplies, repairs, maintenance, non-capital equipment and/or
other) incurred in Internal Sales – Fund 1150 that should be
allocated to External Sales – Fund 1026 or any other fund.
• Adjust for actual cost versus system generated allocation
(Historical Salary Adjustments or service maintenance contracts)
• Expenses should be adjusted by account number
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Expense Allocation
• Record journal entry for any expenses (salaries, materials,
supplies, repairs, maintenance, non-capital equipment and/or
other) incurred in External Sales – 1026, or any other fund, that
should be allocated to Internal Sales—Fund 1150..
• Adjust for actual cost versus system generated allocation
(Historical Salary Adjustments or service maintenance contracts)
• Expenses should be adjusted by account number
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Segregated Accounts
Insure that all Internal & External Sales transactions are:
• Internal Sales is in Fund 1150/1151
• External Sales revenue is in Fund 1026
• or segregated by a unique chartstring.
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Prepaid Expenses
Determine if any expense in the year end balance are prepaid
expenses
• Materials
• Material for resale
• Supplies
• Maintenance agreements
• Insurance contracts
• Other
• Exclude these expenses from the balance to determine the deficit
to fund
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Subsidies
Fund all Subsidies originally planned in the rate development.
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Dollar amount
Deficit Balance
Expense by Account
Specific Individuals
Specific Departments
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Deficits
• Fund all Deficits that are not allowed to be included in next year
rates.
• Fund Deficits that would be required to keep rates at the same
level.
Definition: Deficits that are greater than 15% of revenue and/or
costs that are incurred that does not relate to the activity completed.
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Surplus
If there is a surplus greater than 15% of revenue, contact the
Internal Sales Office for resolution.
Definition: any balance that indicate that the customer was charged
to much.
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Rate Review
A review of internal sales activity and a recalculation of the
internal sales rate is required annually after the close of the
fiscal year.
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Rate review should be performed at the close of the fiscal
year
• The preceding year's financial information will provide the
basis for developing the following year's rate.
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How to review sales activity:
Review the Internal Sales during the year
• Monitor internal sales activity throughout the year to assure
a significant surplus or deficit will not exist at year-end.
• If a significant surplus or deficit is projected, work with the
Internal Sales Office to determine if the rate should be
adjusted within the same fiscal year.
Handout: Reconciling Financial Information
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How to review sales activity:
Review the Internal Sales Business Plan
• Continue to qualify to conduct internal sales activity?
• Annual internal sales revenue greater than $25,000.
• Charging a federal grant of any dollar amount.
• Provide the services that are identified on the original
business plan?
• Provide a service that cannot be met elsewhere?
• Should the internal sales activity be continued?
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How to review internal sales activity:
Determine the surplus or deficit
• Allowable surplus or deficits from prior year considered in
next year's rate development.
• Include any additional services to be provided and/or any
costs that has been added or was previously excluded
(salary increases, new equipment or retired equipment)
• Any excessive surplus may require refunding the customers.
• Any excessive deficit may require a subsidy from the
college or department.
Handout: Internal Sales Reconciliation for Surplus and Deficit
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How to review internal sales activity:
Determine the surplus or deficit
• Calculate the adjusted rate using the steps described in
Administrative Procedure: Establishing Internal Sales
Rates.
• Use the preceding fiscal year's financial data to estimate
expenses and revenues.
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After review is completed:
Implement the new rate
• Customers are to be charged the new rate at the beginning of
the fiscal year.
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Preparation for next review:
• Review last year compliance review
• Complete and accurate financial statement at fiscal year end
• Complete documentation of year-end review and
adjustments
• Implement process changes for any items that can be
improved upon
• Budget the rate development for variance analysis
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Summary
• Complete the Year-End Review process using step by step
handouts
• Complete Journal Entries Required
• Update Rates based on results
• Preparation for next review
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