INTERDEPARTMENTAL Charges and the online journal entry process

1. INTERDEPARTMENTAL Charges and the online journal entry process Presented by Melissa Cope Manager of Financial Accounting BAS Forum June 9, 2010

2. IDC Overview • IDC’s defined: internal billing transactions for goods or services (i.e. telecom charges, CE&O work order charges, parking services). • Importance of following these guidelines for IDC’s: ▪ in adherence with Generally Accepted Accounting Principles (GAAP) ▪ consistent accounting treatment across all University units ▪do not result in an overall increase or decrease of income and/or expense to the University’s financials ▪do not misstate the operating results of any University unit

3. IDC Operating Procedures University Customers • Internal customers: the customer is another unit or department within the University. This department will have their own operating index that is part of the University’s financial chart of accounts. • External customers: the customer is a separate entity to the University and is not operating under the University’s financial chart of accounts.

4. IDC Operating Procedures • ▪ These guidelines will only apply to internal customers. Refer to Accounts Payable Payment Processing Procedures for more information on payments to external customers. http://www.kent.edu/controller/accountspayable/forms/index.cfm

5. Accounting for IDC Transactions • The following procedures relate to charges for goods or services provided to internal departments within the University. • For restricted units (grants): please contact the Grants Accounting Office at extension 2-0988 for further guidance before committing to perform services for a grant funded project.

6. Accounting for IDC Transactions • Unrestricted & Restricted Units (E&G, Designated, & Grant Index types): • IDC’s must not result in an increase or decrease in overall University income or expenditures • all IDC’s among unrestricted and restricted units should be recorded to an expense account for both the debit and credit side of the transaction.

7. Accounting for IDC Transactions • IDC’s for Goods: • The charge or debit side of the transaction should hit the internal customer’s appropriate index and expense account (7XXXX). • The credit side of the transaction (representing the department’s sale to the internal customer) should hit the billing department’s appropriate index and the interdepartmental sale account code (77020).

8. Accounting for IDC Transactions • IDC’s for Goods: Example: The Kent State University Bursar’s Office sold the Controller’s office a stapler, the Bursar’s Office can process an IDC that would look like the following…….. • Note: The billing department (Bursar’s Office) would initiate the IDC transaction. D 100304-72017 (Controller’s Office, Office Supplies Expense) $$$ C 100303-77020 (Bursar’s Office, Interdepartmental Sale) $$$

9. Accounting for IDC Transactions • IDC’s for Services: • The charge or debit side of the transaction should hit the internal customer’s appropriate index and interdepartmental labor account (77201). • The credit side of the transaction (representing the department’s service to the internal customer) should hit the billing department’s appropriate index and the interdepartmental labor account code (77201).

10. Accounting for IDC Transactions • IDC’s for Services: Example: The Kent State University Police Department provides services to the Controller’s Office for a special event, the KSU Police department can process an IDC that would look like the following……. • Note: The billing department (Police Dept) would initiate the IDC transaction. D 100304 -77201 (Controller’s Office Interdepartmental Labor) $$$ C 100223-77201 (Police Dept Interdepartmental Labor) $$$

11. Accounting for IDC Transactions • Auxiliary & Agency Units: • These units bill internal and external customers. • Since Auxiliary enterprises and most agency units are self-supporting or business-type enterprises, meaning their operating expenditures should not exceed their revenue earned; these units should recognize interdepartmental sales from internal customers as revenue. • The credit side of the transaction should be recording the billing department’s sale to the internal customer.

12. Accounting for IDC Transactions • IDC’s for Auxiliary & Agency Units: • The Controller’s Office has established a specific revenue account code to record all transactions for the interdepartmental sale (53086) related to Auxiliary and Agency IDCs. • The charge or debit side of the transaction should hit the internal customer’s appropriate index and expense account (7XXXX).

13. Accounting for IDC Transactions • IDC’s for Auxiliary & Agency Units: Example: Kent State University Health Services provides medical supplies to the Controller’s Office, KSU Health Services can process an IDC that would look like the following…….. • Note: The billing department (KSU Health Services) would initiate the IDC transaction. D 100304-72016 (Controller’s Office Exp-Medical Supplies) $$$ C 333000-53086 (Health Svc-Interdepartmental Sale) $$$

14. Submitting IDC’s • IDC’s can be processed in Banner by using form FGAJVCQ or FGAJVCM. Please refer to the step-by-step instructions provided on the Business Administrative Services (BAS) website under Banner Tips and Quick Guides/IDCs. • Include a detailed description of the IDC transaction along with the appropriate references (i.e. date, job number, invoice number, or work order number). • Provide a contact name and telephone extension in the document text field of the IDC form (FGAJVCQ or FGAJVCM) in case there are any questions related to the IDC transaction.

15. Submitting IDC’s • The department initiating the IDC is responsible for maintaining the substantiating documentation supporting the IDC transaction. • This information is required to be maintained for a predetermined number of years based on the University’s Accounting Record Retention Policy. • Please contact University Counsel or the Controller’s Office for more information on record retention.

16. Corrections & Reimbursement of Expense Entries (excluding Grants) • Since the inception of the online journal entry process, departments have been approved to process corrections and departmental reimbursement of expense through the normal IDC process while using the same rule class type (IDC). • Effective 7/1/10, departments may continue using the same Banner online journal entry process to submit corrections and departmental reimbursement of expense, however using a separate rule class type (no longer using IDC).

17. Corrections & Reimbursement of Expense Entries (excluding Grants) • The rule class type for corrections and reimbursement of expense entries will be (COR). • This is necessary to differentiate the intent of the transactions coming through the approval process and to establish a clearer, more defined set of guidelines when processing diverse types of entries.

18. Corrections & Reimbursement of Expense Entries (excluding Grants) • PLEASE NOTE: Correcting entries and reimbursement of expense entries will not be approved if the original document has not posted to Banner Finance. Scope: • Correcting entries and reimbursement of expense entries may be processed through the online Banner function for actual expenditures and or revenues associated with non-grant index classifications. • Budget revisions, fund transfers, encumbrances, and expenditures related to salary, wages, and benefits are excluded from the online journal entry process. • Refer to the Business Administrative Services website for more information on those specific processes that are excluded from the Banner online journal entry process.

19. Operating Procedures • Correcting journal entries and reimbursement of expense entries can be processed in Banner by using form FGAJVCQ or FGAJVCM. Please refer to step-by-step instructions provided on the BAS website under Banner Tips and Quick Guides/Correcting Entries and Reimbursement of Expense Entries.

20. Operating Procedures • When entering information in the Banner online journal entry process for correcting entries and reimbursement of expense entries, please be aware of the location (what index and account code) in which the original revenue or expense transaction was recorded. • This information will need entered with the opposite sign in order to reverse/move all or a partial amount of the original transaction. • The correcting or reimbursing side of the transaction should reflect the appropriate departmental index and account code in which the revenue or expense should be recorded.

21. Accounting for Corrections & Reimbursement of Expense • Example of a Reimbursement of Expense: The Controller’s Office purchased printer cartridges for the entire Controller’s Office and Payroll department using the Controller’s Office departmental purchasing card and charged the full amount to the Controller’s office index upfront. The total amount of expense that was recorded to the Controller’s Office was $300.00. Of that total amount that was expensed to the Controller’s Office, $25.00 belongs to the Payroll Office.

22. Accounting for Corrections & Reimbursement of Expense • The following Reimbursement of Expense entry can be processed to allocate the expenditures appropriately…….. • Note: The department where the original expense or revenue transaction occurred should initiate the Reimbursement of Expense journal entry. D 101372-72017 (Payroll Office Exp- Office Supplies) $25 C 100304-72017 (Controller’s Office Exp-Office Supplies) $25

23. Accounting for Corrections & Reimbursement of Expense • Example of a Correcting journal entry: A Controller’s Office employee submitted a travel expense reimbursement that was coded to the wrong index (this was a keying error). The amount of the travel expense was $500.00 and was coded to index 100305 (BAS) in error. The travel expense should be recorded to index 100304 (Controller’s Office).

24. Accounting for Corrections & Reimbursement of Expense • The following correcting entry can be processed to correct the travel expenditures to the appropriate index………. • Note: The department where the original expense or revenue transaction occurred should initiate the Correcting journal entry. D 100304-71011 (Controller’s Office Travel) $500.00 C 100305-71011 (BAS Travel) $500.00

25. Accounting for Corrections & Reimbursement of Expense • Please Note: The main difference between the IDC process and the correcting entry and reimbursement of expense process is the difference in the journal entry rule class codes. • For correcting entries and reimbursement of expense entries, rule class code “COR” will need to be selected rather than IDC. • Additionally, in the transaction description field, please be sure to reference the original document that was posted in error.

26. Corrections & Reimbursement of Expense Entries Related to Grants • Grants Accounting requires a separate process for corrections and reimbursement of expense entries related to grant funds. These types of entries should be submitted on a Cost Transfer Request form. The Project Director’s signature must be obtained. The form can be located on the BAS website under the Forms Library. • When submitting the Cost Transfer Request form, be sure to include a justification for the transfer, including how this expense will benefit the grant. All requests for transfers that are over 90 days from the date of the original charge require the approval of Sponsored Programs. An explanation of why the request is over 90 days and what measures have been taken to ensure that this type of delay does not occur in the future, must be included.

27. SUMMARY • IDC’S: • Use IDC account codes for goods and services • Use rule class code “IDC”. • Provide contact information and a detailed explanation of the charge (utilize the text field). • Communicate charges among departments when submitting an IDC. • Review monthly statements to verify charges. • Retain supporting documentation for record retention purposes.

28. SUMMARY • Correcting & Reimbursement of Expense Entries: • Effective 7/1/10, will need to use rule class code “COR” instead of “IDC”. • Be aware of the location (what index and account code) in which the original revenue or expense transaction was recorded. You will need this information when submitting your journal entry. • Entries will not be approved if the original document has not posted to Banner Finance. • Reference the original document in the document text.

29. Finance Functions

30. QUESTIONS?