Internal Recharge Activity in Accounts under $100,000 in Internal Revenue Overview

This standard provides guidance for reallocating costs among university accounts when internal revenue is anticipated to be under $100,000 in a fiscal year.

This standard outlines the use of specific documents- Distribution of Income and Expense, General Accounting Adjustment, Transfer of Funds, and Salary Transfers- for processing transactions. Each document services a distinct purpose, such as reallocating expenses or moving cash. These documents are crucial for ensuring accurate financial records, compliance with federal regulations, and minimizing audit risks. Accurate documentation and timely processing of internal recharge activities help maintain appropriate cost allocation practices, supports operational integrity, and ensures compliance with federal funding regulations and internal requirements within Indiana University.

Internal Recharge Activity in Accounts under $100,000 in Internal Revenue

Prerequisites

Prior to reading the Internal Recharge Activity for Accounts under $100,000 in Internal Revenue standard, it is beneficial to review the below items to gain foundational information:

1. FIN-ACC-400: Recharge and Service Center Activity
2. Accounting Fundamentals Standards
3. Chart of Accounts and General Ledger Standards
4. Financial Statements Standards
5. Recharge and Service Center Units Standards
6. Distribution of Income & Expense/General Accounting Adjustment Standard
7. Transfer of Funds Standard
8. Rate Submission Requirements for Recharge Centers Standards

Preface

This standard provides guidance regarding units needing to allocate costs to other Indiana University accounts when the activity estimates less than $100,000 in internal revenue. Information presented below will walk through a general understanding of the documents that should be used to transfer funds or moved expenses, when to use each document, and lastly, will specify requirements and best practices for users utilizing accounts with estimated activity under $100,000.

Introduction

Internal activities with less than $100,000 in anticipated internal revenue in a fiscal year should use Distribution of Income and Expense, General Accounting Adjustment, Transfer of Funds, or Salary Transfer documents to complete transactions between university accounts. The $100,000 threshold is measured at the activity and/or account level, not the transactional level.

Activities with under $100,000 of internal revenue that intend to use Internal Billings or Service Billings must follow the standards laid out in Rate Submission Requirements for Recharge Centers.

For smaller activities to continue providing goods/services to other Indiana University accounts, they must move the allowable cost to another Indiana University account. Review the Unallowable Expenses for Recharge/Service Centers standard for guidance regarding unallowable cost. There are several approved internal documents which can be used to transfer allowable cost. This standard provides guidance on when to use each specific document and best practices when processing recharge activity.

Importance and Impact of Recharge Activity for Accounts under $100,000 in Internal Revenue

Recharge activities may be subject to federal and non-federal audits of sponsored programs.

As a recipient of federal funding, Indiana University must comply with OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Due to this, it is of the upmost importance to accurately identify and transfer allowable cost. Non-compliance with Uniform Guidance could result in audit findings, reflect negatively on future award proposals, limit federal cost reimbursement, and lead to repayments or fines to the granting agency.

Accuracy and the proper use of Distribution of Income and Expense, General Accounting Adjustment, Transfer of Funds, and Salary Transfer documents is important in ensuring cash and general ledger balances are correct at the account, organization, Responsibility Center (RC), and campus levels. Inaccurate cash balances and general ledger positions can impact decision making as well as increase audit risk for the entire university. Misuse of these documents can lead to increased audit risk in Contract and Grant and cost accounting areas in addition to general financial statement audit risk.

Financial Documents Available for Accounts under $100,000 in Internal Revenue

There are several internal financial documents which can be used to move allowable costs when the recharge account is under the $100,000 threshold. Review the document options in detail to determine which document is most appropriate for the transfer of cost:

Distribution of Income and Expense

The Distribution of Income and Expense document is used for the reallocation of internal expense within the same basic object code category. The Distribution of Income and Expense document requires the approval of the fiscal officer or delegate for each account appearing on the document.

This document cannot be used for internal compensation reallocation.

Review the Distribution of Income & Expense/General Accounting Adjustment standard prior to processing a Distribution of Income and Expense document.

General Accounting Adjustment

The General Accounting Adjustment document is used to move a specific transaction from one account to another account. The document number, reference origin code, and reference number of the expense being moved must be entered on the General Accounting Adjustment.

When moving costs to a Contract and Grant account (C&G fund group), the actual object code of the original cost must be used to move the cost. A General Accounting Adjustment document is the preferred document for transferring non-compensation expenses to a C&G fund group as it captures the original document number for audit purposes.

Review the Distribution of Income & Expense/General Accounting Adjustment standard prior to processing a General Accounting Adjustment document.

Transfer of Funds

The Transfer of Funds document is used to move cash from one account to another.

• Transfer of Funds documents can never be used to move costs to a Contract and Grant account.
• Restricted internal service fund groups cannot use a Transfer of Funds document to move cash to a recharge or service center account.
• Transfers of Funds into a recharge account cannot be transferred out apart from depreciation.

For non-Contract and Grant accounts, transfers are the preferred method when moving multiple costs and/or when an organization wants to reflect income on their financial statements. The to object code will reflect revenue and the from object code will reflect expense on the auxiliary income statement. Using the appropriate object codes on the Transfer of Funds document will enable the transfer to show as revenue for the account providing the goods/services and expense for the account receiving the goods/services on the auxiliary financial statement. Review the Object Code Dictionary for more information on the corresponding object codes for revenue and expense.

Review the Transfer of Funds standard prior to processing a Transfer of Funds document.

Salary Transfer

The Salary Transfer document moves compensation and benefits from one account to another account. In order to process this document, it is important to identify the specific employee and calculate the corresponding effort and related benefits that should be moved to another Indiana University account as this information is needed to fill out a Salary Transfer document.

Moving Costs to Contract and Grant Accounts

When moving compensation and benefits to a Contract and Grant account, a Salary Transfer document must be used.

When moving costs to a Contract and Grant account (C&G fund group), the actual object code of the original cost must be used to move cost. General Accounting Adjustment is the preferred document for non-compensation expenses as it captures the original document number for audit purposes. Departments using the General Accounting Adjustment to move cost to a Contract and Grant account may be required to submit supporting documentation of the cost. For moving compensation and benefits to a Contract and Grant account, a salary transfer document must be used.

Regardless of the document used, only allowable cost may be moved to a Contract and Grant account. In case of an audit, the cost moved must be substantiated by the originating account.

Requirements and Best Practices

Requirements

1. All Salary Transfer documents must be processed prior to the closing of the effort period. Review the Best Practices and Requirements for Managing Effort from the Office of Research Administration to find the specific requirements and timeline for processing salary transfers.
2. General Accounting Adjustments must be processed within 90 days of the original transaction.

Quarterly Activities:

1. Review account activities to see if any transactions need to be moved from one Indiana University account to another. Confirm appropriate supporting documentation is present prior to transferring internal funds. In case of an audit, the costs moved must be substantiated by the originating account.
2. Review the object codes of previously processed Distribution of Income and Expense, General Accounting Adjustment, Transfer of Funds, and Salary Transfer documents to ensure accuracy of data.

Annual Activities:

1. Review account activities to see if any transactions need to be moved from one Indiana University account to another. Confirm appropriate supporting documentation is present prior to transferring internal funds. In case of an audit, the costs moved must be substantiated by the originating account. Any internal recharge activity document intended to post in the current year must be submitted on a Year-End Distribution of Income and Expense, Year-End General Accounting Adjustment, or a Year-End Transfer of Funds document. The year-end documents are only available during year-end close. The year-end version allows the user to initiate a document and post it into the previous fiscal year after July 1st. The year-end documents will route to the Controller’s Office workgroup for approval instead of the fiscal officer.

2. Review all Distribution of Income and Expense, General Accounting Adjustment, Transfer of Funds, and Salary Transfer documents as part of year-end closing procedures and make any necessary corrections during the year-end close period. Please refer to the Closing Procedures for more information.

Best Practices

1. Review account activities to see if any transactions need to be moved from one Indiana University account to another on a monthly basis.
2. Confirm the appropriate document is being used prior to submitting an internal transfer of funds.
3. Continuously review all internal recharge activity to ensure accuracy of data.
4. Review the Providing Goods and Services to Other Indiana University Accounts flow chart for a summary about the requirements and best practices when transferring funds from one internal account to another at Indiana University.
5. Monitor Distribution of Income and Expense, General Accounting Adjustment, and Transfer of Funds standards and instructions on a regular basis. Stay up to date on any potential changes to the document and submission requirements.