1. University of Minnesota Office of Internal / External Sales Fiscal Year-End Actions for Internal/External Sales Organizations

2. 2 Internal/External Sales Activity related to: Year-End Review process Journal Entries Required Rate Assessment Preparation for next review Learning Objectives

3. 3 Fiscal Year End Actions for Internal/External Sales Organizations: Invoicing Depreciation expense Unallowable costs Expense allocation between Funds/CF2’s Segregation of Expenses Prepaid expenses Fund Subsidies Fund Deficits Surplus > 15% Handout: Fiscal Year End Actions for Internal/External Sales Organizations Agenda for Year-End Review

4. 4 Invoice and record revenue for all completed sales activity Match revenue with expenses for June month-end (fiscal years end). Basis for allocating expenses between Internal and External Sales Review External Sales contracts and determine amount to be billed (monthly billing is best business practice) If invoicing will not be complete, determine amount that should be invoiced Invoicing

5. 5 Record journal entry for the accumulated depreciation for all ISO assets recovered in the sales rate Use capital asset reconciliation job aid Review the presentation “How to reconcile Capital Assets” Journal entry required to match depreciation recovered in the rates for the Operating Fund and the remaining balance to be recovered in the Plant Fund Net Book Value at year end = Balance in Plant Fund # 7201 Handout: Internal Sales Organization Capital Asset/Depreciation Reconciliation Process Depreciation

6. 6 Record journal entry to remove any unallowable costs incurred in Operating Fund Change process to identify costs that are not allowed Use unallowable costs job aid Definition: allowable cost are cost are directly related to the ongoing completion of activity Handout: Unallowable Internal Sales Costs Unallowables

7. 7 The only allowable Transfer Out for Internal Sales Funds is for recording depreciation The only allowable Transfer In for Internal Sales Funds is recording subsidies Expenses should be adjusted by account number rather than accumulated expenses using a transfer account Handout: Journal Entries that Internal Sales units can make through the General Ledger. Transfers In or Out

8. 8 Record journal entry for any expenses (salaries, materials, supplies, repairs, maintenance, non-capital equipment and/or other) incurred in Internal Sales – Fund 1150 that should be allocated to External Sales – Fund 1026 or any other fund. Adjust for actual cost versus system generated allocation (Historical Salary Adjustments or service maintenance contracts) Expenses should be adjusted by account number Expenses Allocation

9. 9 Record journal entry for any expenses (salaries, materials, supplies, repairs, maintenance, non-capital equipment and/or other) incurred in External Sales – 1026, or any other fund, that should be allocated to Internal Sales—Fund 1150.. Adjust for actual cost versus system generated allocation (Historical Salary Adjustments or service maintenance contracts) Expenses should be adjusted by account number Expense Allocation

10. 10 Insure that all Internal & External Sales transactions are: Internal Sales is in Fund 1150/1151 External Sales revenue is in Fund 1026 or segregated by a unique chartstring. Segregated Accounts

11. 11 Determine if any expense in the year end balance are prepaid expenses Materials Material for resale Supplies Maintenance agreements Insurance contracts Other Exclude these expenses from the balance to determine the deficit to fund Prepaid Expenses

12. 12 Fund all Subsidies originally planned in the rate development. Dollar amount Deficit Balance Expense by Account Specific Individuals Specific Departments Subsidies

13. 13 Fund all Deficits that are not allowed to be included in next year rates. Fund Deficits that would be required to keep rates at the same level. Definition: Deficits that are greater than 15% of revenue and/or costs that are incurred that does not relate to the activity completed. Deficits

14. 14 If there is a surplus greater than 15% of revenue, contact the Internal Sales Office for resolution. Definition: any balance that indicate that the customer was charged to much. Surplus

15. A review of internal sales activity and a recalculation of the internal sales rate is required annually after the close of the fiscal year. 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. 15 Rate Review

16. Review the Internal Sales during the year Monitor internal sales activity throughout the year to assure a significant surplus or deficit will not exist at year-end. If a significant surplus or deficit is projected, work with the Internal Sales Office to determine if the rate should be adjusted within the same fiscal year. Handout: Reconciling Financial Information 16 How to review sales activity:

17. Review the Internal Sales 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? 17 How to review sales activity:

18. Determine the surplus or deficit Allowable surplus or deficits from prior year considered in next year's rate development. Include any additional services to be provided and/or any costs that has been added or was previously excluded (salary increases, new equipment or retired equipment) Any excessive surplus may require refunding the customers. Any excessive deficit may require a subsidy from the college or department. Handout: Internal Sales Reconciliation for Surplus and Deficit 18 How to review internal sales activity:

19. Determine the surplus or deficit Calculate the adjusted rate using the steps described in Administrative Procedure: Establishing Internal Sales Rates. Use the preceding fiscal year's financial data to estimate expenses and revenues. 19 How to review internal sales activity:

20. Implement the new rate Customers are to be charged the new rate at the beginning of the fiscal year. 20 After review is completed:

21. Review last year compliance review Complete and accurate financial statement at fiscal year end Complete documentation of year-end review and adjustments Implement process changes for any items that can be improved upon Budget the rate development for variance analysis 21 Preparation for next review:

22. Complete the Year-End Review process using step by step handouts Complete Journal Entries Required Update Rates based on results Preparation for next review 22 Summary