Accounting and Financial Management Governance – Finance Topics

AG FUNDS

• Funds that are unique to the College of Agriculture.
• Identify sources of income that have originated from the State or Federal legislatures.
• Because Purdue is a Land-Grant Institution, it has been designated as the recipient of funds allocated to fulfill the goals of the State and Federal governments.
• These funds are categorized into three missions:
  • Instruction (Learning)
  • Extension (Engagement)
  • Research (Discovery)

WBSE – FACULTY ALLOCATION STRUCTURE

• Node 1 of the Faculty Allocation Structure is reserved for Ag/Vet/HHS use only.
• This is where expenses for salary on federal and matching funds is tracked by project for the Federal Appropriation reporting.
• When viewing allocations, faculty will not see Node 1.
• Business Offices can run a custom SAP report (TBD) to view all Node 1 entries and balances.

• Discretionary Node’s 3 and 4 should never be used with Federal funds.
• Node 1 will be used for setting up any salary accounts, as mentioned in the previous slide.
• Use Node 5 for Start-Up accounts regardless of fund.
• All other accounts on federal appropriated funds should be set up in Restricted Node’s 6 or 7.
• Unless marked as an Internal Award, all WBSE accounts on State Line funds should be listed in Discretionary Nodes 3 or 4.

Federal appropriation categories, allowable expenditures and WBSE – Faculty Allocations

WBSE – FACULTY ALLOCATIONS

• Node 1 of the Faculty Allocation Structure is reserved for Ag/Vet/HHS use only.
• This is where expenses for salary on federal and matching funds is tracked by project for the Federal Appropriation reporting.
• When viewing allocations, faculty will not see Node 1.
• Business Offices can run a custom SAP report (TBD) to view all Node 1 entries and balances.

• Discretionary Node’s 3 and 4 should never be used with Federal funds.
• Node 1 will be used for setting up any salary accounts, as mentioned in the previous slide.
• Use Node 5 for Start-Up accounts regardless of fund.
• All other accounts on federal appropriated funds should be set up in Restricted Node’s 6 or 7.
• Unless marked as an Internal Award, all WBSE accounts on State Line funds should be listed in Discretionary Nodes 3 or 4.

This process will take place in two steps.  Purchase order carryforward will occur the evening of June 30th, and the residual available balance carryforward will take place after June month end close as defined by the year end calendar. 

Any open Purchase Requisitions, Purchase Orders and Funds Commitment documents will automatically carryforward to the next fiscal year.  This carryforward will occur at 12:01 a.m. July 1. No activity should occur on Purchase Orders until you receive communication via Business@Purdue from Accounting Services that activity can resume.

The commitment carryforward will carry forward both the commitment from the individual fund/funds center/funded program and commitment item as well as the appropriate available balance to cover that commitment.

The example below shows the available balance calculation as of 6/30/20XX as it would appear in GR55 ZSFA. 

After commitment carryforward has been completed the available balance will remain unchanged in the old fiscal year while the commitment and carryforward columns are reduced by the amount of commitments.  In the new fiscal year, the carryforward and commitment columns will be equal and available balance will be zero. 

Available balance in the new fiscal year will appear as zero until available balance carryforward is completed after month end close.

You can see the detail of commitment carryforward utilizing SAP Tcode FMEDDW with the following criteria:

Residual available balance carryforward will occur after June month end close at a date determined by Accounting Services. Please refer to the year end calendar for specific dates.  Residual available balance carryforward moves the ending available balance from the old fiscal year to the new fiscal year at the funded program level with the carryforward amount posting on commitment item 520000 in the new fiscal year, or in cases where parent/child relationships have been defined from the child account to the parent account.  

In the old fiscal year the carryforward amount is reduced by the available balance, bringing the available balance calculation to zero.  In the new fiscal year, the carryforward amount is increased by the available balance, bringing the entire available balance forward into the new year. 

The available balance in the new year should match the available balance from the old year except for those that have been defined as having parent/child relationships. For accounts that have a defined parent, the carryforward of the available balance at the end of the year rolls up to the account that has been defined as the parent as shown in the example below.

Account 3200008175 has been defined as the parent for all of the Start-Up accounts within the department.  These accounts have a total negative available balance of $233,930.71.  The parent account has an available balance of $863,441.36, but is reduced by the negative child balances to $629,510.65 (863,441.36 – 233,930.71 = 629,510.65)

You can also find the detail of the residual available balance carryforward using SAP tcode FMEDDW with the following criteria.

For all funds, all 4xxxxx and 5xxxxx g/l’s will close to 300001 g/l.   When executing GR55 / Z100 report, use period 0 to display your carryforward balances. 

1. Review one of the Cost Distribution Reports before each payroll to ensure nothing is set to post to NOT-RELEVANT.
2. Identify outstanding NOT-RELEVANT balances by using one of the Account Balance Listing reports or the Transaction Listing (summary version), shown below in Resources, to identify balances.
3. Process correcting documents or IT27 changes to clear balances.
4. If process that created the posting is recurring, work with process owners to fix the process.

• Be sure newly hired staff have cost distributions set up in IT27.  Use Data Change Report or Data Change Schedule Version report to identify newly hired staff.
• Be sure to fix the source system so recurring NOT-RELEVANT charges do not take place.

• Work with Property Accounting on Asset Transfer balances.
  • B@P News Article: Asset transfers will reflect differently on financial reports for FY 2019
  • Complete Change In Asset Funding form
• WIP Charges – charges if the departments are being charged on Not-Relevant they need to be contacting Sherry McQueary ( AOBOacct@purdue.edu) to get the settlement receiver changed.
• Be aware that Unreconciled Travel Card transactions are now being accrued on a monthly basis. These transactions are hitting Commitment Item 535110 (In-State Travel, Period 2019-02)  or  546417 (Travel Card Charges, 2019-03 on) on the NOT-RELEVANT Funded Program.  These charges will automatically reverse themselves in the next month. To help reduce the amount hitting not-relevant each month, travelers should be reconciling expense reports within 30 days of travel.  Contact Janessa Martin with questions.

• The table is by position number so when there is turn over nothing is changed in the table. When changes are made to the table the position and level are reviewed to ensure they are appropriate.
• Best practice is to have 2 approvers at each of the Fund Center Levels 1-3.
• To make changes to the Fiscal Approval Table use the Master Data SharePoint site at the link below.
  • Master Data SharePoint – West Lafayette

The following table outlines the Fiscal Approval Levels and how they are used:

*Ariba and Concur changes level at 1000.01, 5000.01, etc. and   SAP changes levels at 1001.00, 5001.00 etc.

• The BA level 3 is considered the Preauditor and the Preauditor should attend the preaudit training before being placed in this level. Because this level approves balance sheet transactions some exceptions have been made to areas that do not have many grant funds.  Contact Master Data team if you feel you have this situation.
• This level will approve FV50’s with grants and federal funds included in the document.
• This level will also approvers balance sheet transactions. Balance sheet transactions are defined as a document where there are no WBSE or IO’s.

• Direct Invoice Voucher – ZV60 KR
• Journal Voucher – FV50 SA
• Purchasing – Ariba Purchase Orders
• Concur – PCard/TCard Reconciliations
• Concur – Travel Approvals
• Property Accounting Documents

• Will be initiated via SAP ZV60 transaction only
  • Initiator role limited to Business Office/Central staff only
• KR doc type transactions will route for fiscal approvals
• Tax reviews all payments to vendors not coded as corporate, government or tax-exempt
  • If vendor’s Recipient Type is blank, payment will route to Tax for review and updating
• Transactions > $1,000 routed electronically for required fiscal approval
  • Initiator cannot approve their own transactions
  • Transactions > $5,000 will skip the level 1 approver
  • Transactions > $25,000 will skip level 1 and 2 approvers
• Total invoice amount will determine approver level for all cost centers involved.
  • If more than one cost center or BA, will route to approver for each unit at total invoice level
  • If the invoice is for more than $100,000 it will route to level 3 first and then stop at each level after until it is approved by the highest level needed for the amount. Example:  If the payment is for 900K it will route to Level 3, 4, and 5 before it is approved.  
• Process designed to allow previously approved contract payments to bypass workflow
• ZV60 initiators need to complete the ZV60 training

• Will be initiated via FV50 transaction only
• SA doc type transactions will route for fiscal approvals
  • Uses same approver table as external transactions
  • Total debits/credits determine approver level
  • All cost centers impacted will approve
  • “Skips” to final approval level
  • Will not route above level 3
  • Initiators cannot approve their own JV’s
• SA docs with grant accounts will always route directly to BA level 3 approver for pre-audit approval.
• Journal vouchers with balance sheet transactions which are defined as transactions with only the BA and no Order or WBSE will route to the BA level 3. If the document has a line that does include an Order or WBSE it will route to the approver associate with the cost center at the appropriate level. 
• Journal vouchers with Ag federal funds included will also route to the BA level. At this time not all federal funds are routing properly but this is being investigated. 

• Requisitions $1,000 and less will not route for approval
• Requisitions > $1,000 will route for approval and it will not skip any levels
  • Example:  A requisition for $27,000 will stop at Level 1, 2 and 3
• Other special approvals currently in use will also be in the approval flow

• Document Type PC –Procurement Card and TC – Travel Card
• If T-Card and P-Card reports have any charges that are over $1000 they will route to the level 1 approver. If all the charges on the report are less then $1000 is will not route for approval.
• Transactions > $1,000 will require fiscal approval
• The reconciler approval will follow the Concur workflow
  • Level 1 $1,001 – $5,000
  • Level 2 $5,001 – $25,000
  • Level 3 > $25,000
• Only 1 Concur approver can be marked at each level for each Responsible Cost Center (RCC)
• Link for Purchasing Card Policies and Procedures

• Travel report approvals are split between small and large approver and is marked on the approver table at the Level 1 or the level 2 Cost Center.
  • Small approver is level 1 for up to $5,000
  • Large approver is level 2 for over $5,000
• Only 1 Concur approver can be marked at each level for each Responsible Cost Center (RCC)

• Property accounting forms completed via the Finance Launchpad in the OnePurdue portal.
• All property accounting forms will route to the level 2 fiscal approver.
• The property accounting forms include:
  • Cannibalize an asset
  • Change in location of an asset
  • Donation of an asset
  • Inventory reconciliation
  • Property off campus
  • Send to WL warehouse
  • Transfer ownership
  • Stolen asset
  • Transfer out of Purdue
  • Change in asset funding
• Link for Property Accounting

• Grant Subcontract Payments are processed via ZV60 but are XR documents so they do not use the workflow fiscal approver table. It is approved by the SPS account manager and the PI
• Intramural Invoice Voucher (IIV) Tcode FV50 document type JN and various other financial document types will not route through workflow
  • Users will continue existing process except that backup documentation will be attached electronically by the user rather than routed on paper
  • Preparers should NOT approve their own documents

• Policies and practices must reflect government regulatory costing and accounting principles which are required by:
• The Code of Federal Regulations 2 CFR 200, also known as Uniform Guidance
• Costing Principles required by the Cost Accounting Standards Board
• Federal and State Tax Regulations

• While goods and services could in some cases be purchased from commercial sources, for reasons of convenience, cost and/or control, the good or service is often provided more effectively through an income producing operation.
• The activities can either be ongoing or one-time.
• All appropriate internal controls for cash, inventory and accounts receivables must be followed.
• Policies and procedures have been established to provide consistent operational practices among the various income producing operations and to ensure compliance with governmental regulations.

• Recharge and General Service Centers use Internal Services Fund 22500000 and the Funded Program Type ‘Income Producing – Recharge’.
• Customers are primarily University departments; however, can have external customers.
• Goods and services provided are necessary for University operations.
• Rates are calculated and maintained in a manner appropriate for charging grants.
• Items that are specifically restricted by the federal government under 2 CFR Part 200, Cost Principles under Uniform Guidance, may not be charged.
• Internal rates for goods and services must be computed at the break-even by estimating the full direct cost of the activity for the upcoming period including any accumulated surplus or deficit from prior year operations.
• Centers must not generate an operating surplus on internal charges (including grants); however, subsidization of rates may be appropriate in some cases.
• Sales to external customers must be at least breakeven plus F&A; however, market rates can be charged to external customers
• Rates must be reviewed for market competition, UBIT (Unrelated Business Income Tax) and sales tax issues.
• Examples of centers include:
  • Core Research Facilities (Birck, Prime Lab, Electron Microscopy, etc.)
  • Animal Care Facilities
  • Transportation
  • Benefits
  • Risk Management
• All associated revenues and expenses for the operation must post to the IO.
• The full direct cost of the recharge center activity should be incurred in the recharge center IO and subsequently included in the charge rates.

• Depreciation recovery will be done by reducing the revenue-increasing-budget balance.
• This budget amount will be reposted to the account on a ‘Non-Consumable’ budget type, which will prevent the depreciation recovery from showing in the account balance.
• When the recovery funds need spent, an FMBB can be processed to reclassify the necessary funding as ‘Consumable’.

• Ancillary activities use Internal Services Fund 22500000 and the Funded Program Type ‘Income Producing – Ancillary’.
• Activities that charge fees; however, exist primarily to provide a practical learning experience for students in furtherance of core University missions of Learning, Research, and Engagement. For example:
  • Vet Hospital
  • Speech and Language Clinics
  • Nursing Clinics
  • Pharmacy
  • Ismail Center
  • HTM
  • Meat Lab
• Customers can be internal or external.
• Ancillary activities can generate an operating surplus or require subsidies to operate.
• Rates must be reviewed for market competition and sales tax issues.
• Rates are appropriate only for incidental charging of grants.
• Associated revenues and expenses for the operation must post to the IO.

• Uses Auxiliary Fund 24500000 and Funded Program type ‘Income Producing – Auxiliary.’
• Provides optional or convenience goods and services for which customers are primarily students and employees (or secondarily to the general public) rather than University departments.
• Primary purpose of the activity is something other than providing a practical learning experience for students that counts toward their degree programs.
• General expectation of financial self-sufficiency for the auxiliary organization as a whole including overhead costs.
• Activities that charge grants more than incidentally should not be in Auxiliary.
• Auxiliary activities can generate an operating surplus.
• All associated revenues and expenses for the operation must post to the Internal Order.
• Activities primarily include:
  • Athletics
  • Student Housing & Dining

• Other Income Producing Activities use General Fund 21010000* and the Funded Program Type ‘Income Producing – Other’.
• Operations that charge primarily external customers and need reviewed periodically for UBIT (Unrelated Business Income Tax) or Sales Tax liability.
• All associated revenues and expenses for the operation must post to the Internal Order.
• The activities can generate an operating surplus; however the surplus would need to be transferred out if it is spent on activities un-related to this.
• Grants cannot be charged.
• Rates must be reviewed for market competition and other issues.
  • Agriculture can also use funds 21030000 and 21020000
• Convocations, Bands, PMO, Rec & Wellness for specific rates that have UBIT issues
  • If UBIT unlikely, rates revenue can post to general fund

• Uses General Fund 21010000 and the Funded Program Type ‘Unrestricted to Department’.
• Some activities may be identified with an Institutional Attribute of ‘Digital Education – For Credit’.
• Income producing activities that do not require distinct accounting and reporting due to Federal or State regulations including Uniform Guidance, tax laws or other regulations – use of the funds is unrestricted
  • Agriculture can also use funds 21030000 and 21020000
  • Activities include:
  • Digital Education
  • Conferences
  • Study Abroad
  • Misc. Course Fees
  • Publications
  • Copy Charges
  • PUSH/CAPS
  • Material Testing Agreements

A Rate/Recharge Shared Service Center, housed within the Costing Department, provides expertise in development and monitoring of internal and external rates for Purdue’s Recharge and General Service Centers and other various miscellaneous rates.

• Efficiency and consistency in advising, developing, and monitoring rates due to expertise in cost accounting and rate development.
• Clear and consistent definitions and governance for Internal Service Centers, Auxiliary, Ancillary, and Other Income Producing Activities.
• A revised accounting structure which will allow for clear identification of each type of activity for enhanced reporting and simplified monitoring procedures that is adapted to limit the governance to what is required for each of the activities.

• Rate Consulting & Creation
  • Provide expertise and advice to the Facility Director and Business Office Financial Manager to determine the need for a rate.
• Rate Creation
  • Gather information from the Facility Director and Business Office Financial Manager to prepare the rate request documentation. Approval from the Dean or Department Head authorizing financial support of the recharge or general service center and then approval from the Senior Vice President and Assistant Treasurer or their delegate will be required before the rate is put into place.
• Rate Maintenance and Monitoring
  • Although the departmental Business Office will be responsible for the financial management of the center, the Rate/Recharge Shared Service Center will conduct an Annual Fund Balance Review and periodic detailed review of recharge and general service center rates and practices along with setting minimum timelines to update rates.
• Study Abroad
  • The Rate/Recharge Shared Service Center rate review after approval by Dean or Department Head authorizing support of the activity and Senior Director – Comptroller or their delegate.
• Delegated Rates
  • Provide guidance to the following areas that continue to have delegated rate setting approval: Digital Education, Excess Agriculture Commodities, Conferences, Convocations, WBAA Underwriting Rates, and Athletics. The state legislature and commodity boards set the Ag Commodity rates not the University. Only the Ag Workshops do not go through conferences.
• Regional Campuses
  • Currently the Regional Vice Chancellor for Financial and Administrative Affairs has been delegated approval; however, a process will be developed to allow for rate creation, maintenance and monitoring that includes the service center.
• Tuition or University Residences Room and Board Rates
  • The service center will not initially include advising, monitoring, or developing rates for these areas.

For purposes of applying this Statement, a lease is defined as a contract that conveys control of the right to use another entity’s non-financial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction.  As used in the definition of a lease, a non-financial asset includes land, buildings, vehicles, and equipment.

To determine whether a contract conveys control of the right to use the underlying asset, a government should assess whether it has both of the following:

1. The right to obtain the present service capacity from use of the underlying asset as specified in the contract
2. The right to determine the nature and manner of use of the underlying asset as specified in the contract.

Leases include contracts that, although not explicitly identified as leases, meet the definition of a lease. This definition excludes contracts for services except those contracts where an embedded lease is included. An embedded lease is a lease component within a larger contract.

For example, a company could enter into an arrangement with an information technology organization to host its data on a dedicated server. Embedded within this IT hosting arrangement may be the company’s right to direct the use of a specified server, which may meet the definition of a lease.

If you are unsure if your contract contains an embedded lease component, or applies to this standard, please contact Accounting Services at accountingservices@purdue.edu.

If we are the Lessee then we have contracted with another party to lease a right to use asset. The department will expense the lease payments.  Central Accounting will then record the right to use assets.  In these instances we are required to record those right to use assets on our books and appropriately amortize them.  In addition amortize the net present value of the lease liability we have entered into.  Below is an example of the entries that would need to be made.

If we lease one of our assets to another entity for use then we are the Lessor.  In those situations, per GASB 87, we are required to record the lease receivables and deferred inflow of resources on our balance sheet.

QRG – Create Lease Entry in SharePoint

Reserves are funds set aside separate and apart from an operating budget over time to invest in, maintain, or replace facilities or equipment, to support strategic programs and initiatives, or as a contingency for unplanned expenditures.  

The categories used to identify reserve internal orders (via the Department Account Classification (DAC) field) are:

• Capital: Reserves specifically for new buildings or capital renovations
• Equipment: Reserves for capital equipment purchases (either replacing existing equipment or investing in new capabilities) or maintenance
• R&R: Reserves for non-capital R&R projects
• General: All other reserve purposes not assignable to another category
• Institutional: Only to be used by Segment leaders (i.e. President, Provost, Treasurer, EVPRP, or regional equivalents)

Every “reserve” internal order (IO) has to be set up with a fund, cost center and DAC attribute. There are five DAC’s representing the five reserve categories.  See “Level and specific requirements” bullet below for more information regarding when, how many or what level reserve IO’s should be established.

Departmental Account Classification (DAC) attribute for:

1. Capital Reserve*
   • Capital Reserve is categorized as non-operating.  Also note in the finance structure there is a Capital reserve DAC (includes projects not approved, future projects) and a Capital DAC (for projects that have been approved).
2. Equipment Reserve
3. Repair and Rehabilitation (R&R) Reserve
4. General Reserve
5. Institutional Reserve

Level and specific requirements in which reserves may be established:

• Capital Reserve – Internal Order (IO) may be established at Business Area level – this means an IO will be set up with an admin cost center (a financial unit).
  • Funds held in Capital Reserve IO held at the admin cost center level may provide part of the funding for Capital Revenue IO’s  that are set up at the financial unit cost center level (ie departmental level).
• Equipment Reserve – IO may be established for all cost centers.
• Repair and Rehabilitation Reserve – IO may be established at the financial unit cost center level (departmental level).
  • This reserve could be used for startup funding that is not or has not been provided as a faculty allocation.
• General Reserve – IO may be established for all cost centers.
  • No separate operating reserve for unfilled positions.  However, units can transfer funds to general operating reserve at Business Area level (eg admin cost center).
• Institutional Reserve – IO may be established at Segment level – this means an IO will be set up. with an admin cost center (a financial unit) only at the Provost, EVPRP, President, TCFO areas and at equivalent level at PFW and PNW
  • Institutional Reserves to be used for institutional goals and projects and may include internal grants.

Reserve internal orders should not have expenses posted directly to them.  Funds should be transferred to a non-reserve account to be expensed.

Establishing Earmarked Funds:

• Transaction code:  FMZ1 – Create Funds Commitment
• A Funds Management (FM) earmark document with unique earmark number is created.
• User selects FM document type 11- Funds Commitment; system assigns value type 65 – Funds Commitment
• Available balance is reduced/committed.
• Unless have specific configuration, funds committed will continue in perpetuity if not relieved (ie will cross fiscal years).
• No commitments (earmarks, PO commitment, and parked document) flow through FI.
• A reconciling item between FI cash and FM available balance

Earmarks will be used on reserve IO’s.  It is not a requirement to have earmarks on all reserves.  Specifically,

• Capital Reserve – Use earmarks for each project.
• Equipment Reserve – Use of earmarks is up to the discretion of the unit.
• R&R Reserve – Use of earmarks is up to the discretion of the unit.  Consider establishing earmark when a department commits to a future project, which has a specific timeframe, approved through a letter or with Dean’s approval.
• General Reserve – Use of earmarks is up to the discretion of the unit.
• Institutional Reserve – Use of earmarks is up to the discretion of the unit.

Outside of earmarks on reserves, earmarks will be used for contract payments.  Contract payments use a restricted procurement document type that bypasses workflow for signature delegation.

• Relieving Earmarked Funds:
  • Transaction code:  FMZ2 – Change Funds Commitment
  • Document transaction (such as JV (FV50)or invoice (FV60)) –  earmark number is input into earmark funds field
• Reporting and Tracking Earmarks:
  • Earmarks continue across fiscal years until relieved.
  • Statement of Financial Activity (SFA) report (Standard Cognos report) – Recorded as a commitment on the SFA.
  • SoFA Trend report (Excel based report) – Not recorded as a commitment on the SoFa Trend report.

In December, departments receive projection of maximum distribution for each endowment in the subsequent fiscal year.

• Max distribution policy set by CFO; projection prepared centrally for all endowments

In spring, departments select scholarships recipients and match them to the endowments for which they are the designated selector.

• Awards are entered into the DFA scholarship database by endowment
• Endowments are mapped to unique detail codes in Banner for each scholarship

In fall, awards are applied and expenses posted.

• Each business area has one scholarship IO for all endowed scholarships
• All endowed scholarship detail codes are mapped to the single, shared scholarship IO
• All endowed scholarship expenses post to the single IO

In October, a report is provided to PRF of the awards made from each endowment.

• Distributions are set to equal each endowment
• Distributions post to the single scholarship IO – account balances to $0

In spring, award posting and distribution process is repeated.

Separate accounts for new non-endowed gift and scholarship revenues will not be created, except by approval of the VP for Development and Controller.