Reviewing Internal Sales Activity / Rates��Internal / External Sales Office�

Learning Objectives

Internal Sales Activity related to:

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• Annual review
• Review Business Plan
• Budget to Actual Analysis
• Budget Considerations
• Reducing Budget Variances
• Surplus or Deficit
• Submit & Implement Rates

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Annual Review

• Monitor internal sales activity throughout the year
• Identify potential significant surplus or deficit
• Work with the Internal Sales Office to determine best course of action
• 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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Review 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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Case Study

Documents used:

• Reporting Center
• Account Budget Status for Current Non Sponsored Funds
• Actual Account Summary by Accounting Period for Current Funds
• Salary and Fringe Detail by Pay Period
• Asset Management Depreciation Expense/Schedule
• Internal Sales Reconciliation Template
• Rate Development Reconciliation Template

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Budget to Actual Analysis

• Compare budgeted revenues, resources, depreciation and other expenditures to the current year-end results on a line-by-line basis
• Identify large variances and determine reason for variance
• Recharge center sold more than expected, costs of materials higher/lower, unexpected downtime, purchasing more than required
• Determine if all resources are used as planned
• Personal, materials, equipment, etc.
• Depreciable life versus remaining useful life of capital assets should be analyzed

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Budget Considerations

• Salary & Fringe adjustments
• Salary allocations
• Capital equipment added, fully depreciated or improved
• Purchases of non capital equipment
• Equipment repairs
• Maintenance contracts renewed or expired
• New services provided

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Reducing Budget Variances

• Productive time vs. hourly wages
• Production volume estimates
• Cost estimates
• Include all costs
• Detailed analysis of variable vs. fixed costs variances
• Too few/many rates
• When to round
• Estimated values or rates

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Surplus or Deficit

• Surplus or deficits from prior year should be considered as indicator of a potential rate change
• Handling of surplus/deficit less than 15%
• While it is good practice, there may be instances in which the recharge center chooses to forgo including a surplus/deficit less than 15% in the next year rates
• Work with the Internal Sales Office for variances greater than 15%
• Any excessive surplus may require refunding the customers
• Any excessive deficit may require a subsidy from the college or department

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Submit & Implement Rates

• Submit rates to the Chief Financial Manager
• Upon approval, distribute rates locally
• Implement the new rate
• Charge the customers the new rates when available

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Summary

• Monitor activity throughout the year
• Review current year sales activity & business plan
• Analyze variances between actual & budget
• Determine potential rate change
• Implement the new rate

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Internal Sales Rate Development Procedure & Website

Internal Sales website: http://controller.umn.edu/sales/

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• Reviewing Internal Sales Activity Job Aid
• Internal Sales Reconciliation for Surplus and Deficits
• Calculation for Billable Hours
• Beginning, Intermediate and Advanced Rate Development Presentations
• Subsidies, Surplus, Deficit Management Presentation
• Equipment and Depreciation Reconciliation Presentation
• Administrative Procedure: Establishing Internal Sales Rates