�Reviewing Internal & External Sales Rates at Year End��Internal / External Sales Office�

Learning Objectives

Internal/External Sales Activity related to:

​

• Annual review
• Budget to Actual Analysis
• Budget Considerations
• Reducing Budget Variances
• Determine Surplus or Deficit
• Adjustments to Rates
• Submit & Implement Rates

​

Annual Review

• Monitor Internal/External sales activity throughout the year
• Identify potential significant surplus or deficit balances (+/-15% of the revenue)
• Determine the source of the issue
• Determine best course of action
• Rate review should be performed during budget process with final updates prior to July 1
• Contact customers with new rates
• Preceding year's financial information will provide the basis for developing the following year's rate

​

Case Study - Example

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

​

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
• Salaries, supplies, depreciation, etc.
• Depreciable life versus remaining useful life of capital assets should be analyzed

​

Budget Considerations

• Salary & Fringe adjustments
• Salary allocations (Internal vs External) (Planned vs Actual)
• Capital equipment added, fully depreciated or improved
• Purchases of non capital equipment
• Equipment repairs
• Maintenance contracts renewed or expired
• New services provided
• Purchase of materials / supplies
• Overall volume of activity

​

Reducing Budget Variances

• Productive time vs. hourly wages (Billable hours)
• Production volume estimates
• Consider moving to an hourly rate if the task values are unpredictable
• Cost estimates
• Review utilization of resources
• Include all costs
• Detailed analysis of variable vs. fixed costs variances
• Too few/many rates
• Do not round
• Estimated values or rates

​

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%
• Should be included in next year’s 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

​

Submit & Implement Rates

• Submit rates to the appropriate financial staff
• Upon approval, distribute rates internally & externally
• Implement the new rate

​

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

​

Summary

• Determine if the Recharge Unit should continue
• Sales less than $25,000
• Not charging grants
• Not charging on a rate basis (Account 500103 Non-ISO sales)
• Not enough sales volume to cover expenses

​

Internal Sales Rate Development Procedure & Website

Internal Sales website: http://controller.umn.edu/units/internal-external-sales/index.html

​

• 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