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Learning Objectives�

Year-End Review process
Rate Assessment

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Year-End Review�

Reviewing Internal/External Sales activity annually is a best business practice and should be completed by all units.

Activities to consider:

Invoicing
Depreciation expense
Unallowable costs
Expense allocation
Planned subsidies
Transfers
Variances

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Invoicing

Invoice and record revenue for all completed Internal sales activity
Review External Sales contracts and bill accordingly
Validate entries posted – Exceptions and Budgets Errors
Monthly billing is best business practice

*Refer to Fiscal Year End Calendar for cut-off date

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Depreciation

Record journal entries for the accumulated depreciation for all equipment recovered in the sales rates through June month end

Journal entries:

Record depreciation expense in the operating fund if recovered in the rates
Reduce the deficit balance in the plant fund
Subsidize operating fund if appropriate

Net Book Value at year end = Balance in plant fund 7201

Depreciation expense is recovered in the sales rates

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Unallowable Expenses

Identify and remove any unallowable cost incurred in operating fund

If necessary, correct the accounting.

According to federal regulations (OMB Uniform Guidance), certain operating costs are specifically unallowable, such as bad debts, entertainment costs, and fines.

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Expenses Allocation�

Record journal entries/retros for expenses incurred (salaries, materials, supplies, repairs, maintenance, non-capital equipment and/or other)

Internal Sales activity should be allocated to fund 1150
External Sales activity should be allocated to fund 1026
Allocated to CF2 for activity

Expenses should be adjusted by Chart of Accounts expense code and not summarized in a transfer code

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Planned Subsidies�

Fund all subsidies originally planned in the rate development and budget.

Examples include:

Dollar amount (specific or shortfall)

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Transfers�

Depreciation is the only allowable transfer out on Internal Sales funds account code # 610310 – NMTO – Equip Replace

Recording of subsidies is the only allowable transfer in on Internal Sales funds # 600308 – NMTI – ISO Subsidy

Any other transfers should be corrected

Expenses should be adjusted by Chart of Accounts expense code

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Variances

Fund reconciled deficits that will not be included in the next year’s rates

If there is a surplus greater than 15% of revenue, contact the Internal Sales Office for options on resolution

If there is a deficit greater than 15% of revenue, contact the Internal Sales Office for options on resolution

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Rate Review�

Reviewing Internal Sales rates annually is a best practice business model.

Activities to consider:

Timing
Review of Business Plan

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Timing

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 of 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?
Why should the internal sales activity be continued?

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Resources

Fiscal Year End Activities
Capital Asset/Depreciation Reconciliation Process
Reconciliation of Surplus or Deficit Balance
Journal Entries that Internal Sales units can make through the General Ledger
http://controller.umn.edu/units/internal-external-sales/index.html