Account Management Guidelines
Summary
Prior to the current process, account management crossed many organizational lines but was administered independently by the separate entities involved. This often resulted in conflicting goals and objectives, inefficient use of resources, cumbersome, duplicate reports and systems, and an inability to prioritize for maximum organizational impact.
In order to achieve maximum utilization of Purdue resources, the interim Account Management guidelines were established March, 1995. The guidelines have been used as a working document to provide more accurate and timely financial information to appropriate individuals. Through quarterly management meetings and feedback sessions, the Account Management Guidelines have been updated for Funds 500-699, 700-750 and 840 as follows.
Account Management is accomplished through account establishment, account transaction and document management, cash management and closeout management. These procedures highlight the following major issues:
1. OVERDRAFTS
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The unencumbered total cost balance for accounts should not be less than $0.
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Move charges to an appropriate account. Overdrafted accounts should be corrected by the cut off date for the month after the overdraft occurs.
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Proactive use of Notice to Proceed (Form #27) is strongly encouraged, if applicable.
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If allowable, record expenses as voluntary cost sharing.
2. EXPIRED PROJECTS WITH BALANCES:
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Departments should have projects ready in the accounting system for closing by 60 days after expiration.
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All fiscal, technical reports and final billings will be submitted in accordance with sponsor regulations.
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Accounts will be zeroed in accounting records within 4 months of project expiration except if awaiting income.
3. CASH DEFICITS:
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Each letter of credit or advance payment program should have a positive balance.
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All contracts and grants will be negotiated to provide an initial or advance payment, if possible.
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Collections will be aggressively pursued utilizing the cash management process identified in the guidelines.
Account Management is a Business Services priority and will be treated as such. At peak times it will be expected that Business Services will pool resources to meet account management guidelines.
Table of Contents
Account Management in Business Services Guidelines
Mission Statement
Account management at Purdue University exists to provide timely and accurate financial information to principal investigators, department heads, administrators and external funding providers. This information is used by Business Services and other university staff in decision making, project planning, policy analysis, program planning and long range financial planning.
Proper account management allows Business Services staff to be proactive rather than reactive and is increasingly important as we respond to diminishing resources. Proactive account management requires that each staff member integrate account management tools, techniques and thought processes into their daily activities. This integration is a basic expectation for each Business Services staff member.
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Account Establishment
Is a new account required or can the funding be added to an existing account?
(Consult Sponsored Program Services (SPS) or Accounting Services if unsure)
The following issues should be considered when making this determination:
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Source of Funding - Federal, State of Indiana, Industrial, etc.
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Size of award (dollar amount)/ length (time involved)
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Sponsor reporting/billing requirements
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Use of existing account - contract support, voluntary support
When establishing a new account the following issues need to be considered:
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Proper classification - Contract support or voluntary support, who administers the funds, refer to Executive Memorandum C-25 http://www.purdue.edu/policies/pages/finances/c_25.html
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Timely establishment and notification
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Award Documentation - award letter/agreement; confirmation for Notice to Proceed (NTP); regulatory compliance approvals granted, if applicable; and proposal for SPS accounts (Proposal includes signed transmittal check list, statement of work, budget including breakout for minor accounts, if applicable, and email addresses of the PI and Business Office)
Establishment of an account
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Receipt of fully executed approved documentation from agency: SPS should notify the PI and Business Office by email within 24 hours of receipt of the award. The email notification will notify them of the account number or if there is a problem in establishing the account. If a major/minor account is to be established the Department needs to provide budgets/spreadsheets. SPS will put funds in unallocated available of the major account until the paperwork for the minors are provided by business office.
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Without approved documentation from agency: Departments are strongly encouraged to request an account be established on a University-backed or Department-backed Notice to Proceed (Business Office Form 27) when expenses are being incurred for the benefit of the project. Upon receipt of completed Form 27 and/or verification from the sponsor for a University backed NTP, SPS should notify within 24 hours, the PI and Business Office with the account information. NOTE: Must have regulatory compliance approvals on file for NTP regardless of backing. If minor is a subcontract, that account can not be established on NTP.
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Voluntary support – account established by either SPS or accounting, depending on the administration of the account. Complete the Form 44 http://www2.itap.purdue.edu/sps/vs/, obtain proper signatures and forward the Form 44 and check to the appropriate office.
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011 fund - If single account cost sharing is applicable, SPS should establish the 011 fund and transfer the funds in conjunction with the establishment of the award.
Web and FTP site addresses
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Account Transaction and Document Management
Every effort should be made to charge the appropriate account in order to minimize the processing of correcting documents.
A. Maintain Appropriate Balances
1. Gift and Award Funds.
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Cash balances greater than $0 should be maintained on 700-701, 703-750, and 840 funds.
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Specific project account balances should be reviewed and appropriate action taken on a monthly basis.
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When unusual conditions exist such that an overdraft cannot be cleared, the overdraft should be monitored on a continuous basis and should be brought to the attention of the appropriate individual. It is the responsibility of all areas to ensure overdrafts are managed appropriately.
2. Sponsored Program Funds (500-699):
The unencumbered balance for 500-699 accounts for total costs should not be < $0
(Accumulated expenses plus encumbrances should not exceed total award). If not,
the following actions will occur:
The Business Manager will be notified of an overdrafted account by SPS . The
Business Office should take appropriate action and in addition notify the Principal
Investigator. The Business Office will have three days to notify SPS of their intended
actions to resolve the overdrafted account which include the following:
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Request SPS to lock the account.
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Communicate to SPS that a document has been prepared to bring the account to a positive balance and request the account to remain unlocked.
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Request a NTP on Business Office Form #27 if additional funding is expected.
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If the Business Office doesn't respond in the three days, SPS will lock the account.
The following actions are to be taken on overdrafted accounts (whether the account is locked or not):
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Move charges to an appropriate account. Overdrafted accounts should be cleared by the cut off date for the month after the overdraft occurs.
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If allowable, record expenses as voluntary cost sharing.
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Change demurrage, MERS numbers, etc. to prevent further overdrafting of the account.
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For major/minor accounts, if a budget reallocation is appropriate, it should be prepared immediately. If unsure how to proceed with the request, consult the SPS Account Manager/Project Administrator. A sample template is available here.
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Related 011 cost sharing accounts should have an available balance greater than $0.
There are several reports and queries that can be used to monitor and assist in the maintenance of proper account expenditures and balances. These reports and queries can be referenced in the Account Management Process Guide
The following websites provide assistance in account management:
Prior Approval:
B. Getting Started
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Confirm Notice of Award (NOA) agrees with sponsor award and budget workpapers (include cost sharing, if applicable). This should also be done with each Change Notice of Award (example, addition of year 2 funding or supplemental funding)
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We suggest that Business Offices use the Departmental New Account Set-Up Checklist when setting up a new account.
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Confirm charges are being posted appropriately to the FSSR at various stages of the project (examples: F&A costs are being charged at correct percent and base, fee remits are being charged if appropriate, cost sharing is being charged if applicable, subcontracts are encumbered). Note: special sponsor requirements may necessitate frequent checking of FSSR.
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Use Management Reports Summary for Account Transaction and Document Management in the Account Management Process Guide
C. Procurement and Account Management
Purchasing requisitions, purchasing card procurements and direct invoice vouchers should be reviewed for correct account numbers, correct object code, funds available, allowability, allocability of the charge and within project period, before approval.
Review should be completed by the person with the appropriate signature authorization.
If an encumbrance is generated, the encumbrance is reviewed against the original requisition to ensure correct processing. Encumbrances with "last activity dates" greater than 4 months should be investigated to determine problems, if the requester still needs the item, if item has been received but not invoiced, if paid but encumbrance not relieved, etc.
D. Maintain Allocability Supporting Documentation
The department's procurement process should include documented academic approval for the purchase. This documentation can be on a departmental request form, Form 12 or whatever format best suits the department. This documentation serves as the proof of allocability.
E. Verify Appropriate Signature Approval
If signature approval is delegated, an appropriate authorization form for each project account should be completed and maintained with the project account. The form must be completed by the P.I. and should verify who is authorized to purchase on the account.
The authorization form should include: P.I. name, project account title and account number, date of form completion, list of individuals authorized, any restriction on what an individual can purchase (dollar limit, capital equipment), any other restrictions on the account.
Each purchase request should be reviewed for the appropriate authorizing signature. (The signature could be on the department request form or the Form 12 itself, depending upon the department system.)
F. SPS Suspense/Departmental Default Account Management
Departmental Business Office staff responsible for clearing the departmental default suspense account need to be on the e-mail list server that exists. Those that subscribe to this list server will receive e-mail messages daily that indicate all departments having default suspense entries posted. To subscribe to this list server and others go to the following web site:
http://www.purdue.edu/bscompt/Other_Information/MailList/Welcome.html
G. Records Retention
All business offices are expected to maintain their records in accordance with the University's record retention policy. As a general rule, documentation over and above the official policy should not be maintained. For RECORDS RETENTION GUIDES, see: http://www.purdue.edu/Business/Quick_Links/records.xls
H. Follow Established University and School Policies
Unrestricted funds still need to comply with University policies.
I. Voluntary Cost Sharing
Review voluntary cost sharing commitments in order to comply with sponsor requirements.
J. Department Activities - Account Expiration Procedures
The timely closing of expiring project accounts will yield great efficiencies for business office staff and allow for departments to complete all activities for the second statement generated past project expiration. Activities which will help staff meet this expectation can be referenced in the Account Management Process Guide
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Cash Management
Cash for Purdue University/Purdue Research Foundation will be managed in a method, which maximizes the University’s cash position and at the same time meets federal and/or other regulations. Different aspects of program management contribute to the effective management of cash. These include daily cash management, overdraft management, cash deficit monitoring, grant/contract negotiation, billing and accounts receivable management, and effective communications among University staff.
A. Cash Handling
All payments received via check, cash or electronic transfer must be handled in accordance with the University Cash handling manual. Required separation of duties and internal controls must be established.
B. Daily Cash Balance Review
Each letter of credit or other federal advance payment program should have a positive cash balance. The University Department of Investments must be kept informed of large cash draws and payments.
C. Cash Deficits
Cash deficits should be minimized. Identify and follow up on any projects which carry cash deficits. Cash deficits of over $100,000 must be reviewed and followed up on in the first ten days following the end of the month in which the deficit appears at that level. Other cash deficits should be followed up beginning with the largest deficits.
D. Academic Staff
Academic staff will fulfill the project reporting requirements. In situations where this does not occur and impacts funding, appropriate administrative action is necessary to assure that reporting requirements are met.
E. Management Reports – Cash Deficits
Cash deficit reports will be generated monthly for management review. The responsible administrator for each area will review the report, and projects which do not meet the criteria in Section B above, will be brought to management’s attention. Any other situations, which are problems, will also be brought to the attention of management. Deficits in excess of $100,000 that will not be resolved within the next 30 days will be brought to the attention of the Associate Director for Sponsored Program Administration.
F. Management Reports – Accounts Receivable
Aging reports will provide necessary information regarding delinquent accounts. These reports are management tools that will allow for analysis and review of delinquencies. When an account becomes 120 days delinquent, it should be reported to the Associate Director for Sponsored Program Administration, with the account history and recommendation to review and act on the recommendation.
G. Grant/Contract Negotiation
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All contracts and grants will be negotiated to provide an initial or advance payment, if possible. In the acceptance of contracts and grants, every attempt will be made to have the award placed on an advance payment program including letter of credit, advance payment systems, and other forms of advance payment. All payments should be negotiated and made in U.S. dollars.
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Contracts and grants will be reviewed to determine if straight-line payments are appropriate or if the payment schedule should be adjusted to reflect projected spending patterns including large start-up costs. Billing schedules with specific due dates will be established as a part of payment provisions.
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Billing requirements should be kept as simple as possible. It must be emphasized that accounts are audited by State and Federal auditors on a regular basis and that records are on file for any other audits. Supporting documentation is on file at the University and should not have to be submitted with each billing.
H. Billings
The billing/invoice process will begin when a project is set up and the payment terms and schedules are reviewed. Billing information is then entered into the CARS system. All awards not funded via letter of credit or paid in full when the award is set up must be entered into CARS when the award is set up. The entry of billing data for an award set up in CARS automatically generates accounts receivable entries in the University accounting system.
Billings set up in CARS are reconciled daily. For funds 500-699, all billings are reviewed in CARS and printed the second Tuesday of each month and mailed by the end of that week. Due dates for billings will show on the invoice as “due upon receipt”. All advance payment bills are generated and mailed the month before the due date. Summary accounts receivable management reports will be available with month-end accounting statements.
Billing statements will be printed for all customers who have an outstanding receivable balance. Reminder statements will be sent to customers every month as long as there is a past due balance on the account.
I. Collection
All payments are expected as per the initial contractual agreement. Delinquencies will be collected and pursued consistently, following good collection practices, utilizing various University resources when appropriate. At 120 days delinquent, if SPS determines it is appropriate, the University Collections Office (UCO) may become involved in the effort; however, UCO will become involved earlier upon request.
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Accounts 45 days past due:
A daily CARS generated e-mail message will be sent each morning to designated account receivable clerks identifying all outstanding receivables that became 45 days past due as of the previous night update. The account receivable clerks will make inquiries with the sponsor(s) regarding the status of the outstanding payment(s). Conversations will be documented in the comment section of the CARS system providing the name of person contacted, date contacted, brief description of conversation, and follow-up date. Any issues/problems identified that will delay Purdue from receiving payment within the next two weeks should be brought to the attention of the Contract Receivables Administrator for appropriate action.
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Accounts over 60 days past due:
The Contract Receivables Administrator will follow-up with the sponsor(s) regarding the status of the outstanding payment(s) that are over sixty days past due. If it is determined that work on the project has been delayed or other actions are required by the University, the Sponsored Program Account Manager (Account Manager) who manages the project account will be notified. The Account Manager will be responsible for coordinating resolution of the issues between the Sponsor, Sponsored Program Services, the Business Manager, and the Principal Investigator. The Contract Receivables Administrator will be informed of the actions to be taken and shall be responsible for making sure the information is entered into the comment section of CARS.
The Contract Receivables Administrator will handle cash flow problems by the sponsor. She/he will develop and recommend a payment plan for the outstanding receivable and review it with the Assistant Director of Sponsored Program Administration (SPA) for his/her approval.
A summary report of the outstanding receivables over 90 days past due identifying accounts that required Purdue actions and those with cash/billing issues will be generated. A copy of the report will be submitted to the Assistant and Associate Directors of SPA. The Contract Receivables Administrator and Assistant Director of SPA will determine if the Account Managers, Business Managers and the Principal Investigators as well as the University Contracting Group should be notified of the sponsors with cash/billing issues. If so, the Contract Receivables Administrator will provide the appropriate Account Managers with the specific information. The Account Manager will then inform the Business Manager and the Principal Investigator as well as the University Contract Group of the sponsor’s delinquent payments.
Based on the information known about the outstanding receivables it may be decided that the Principal Investigator contact his/her Program Manager at the sponsor to determine why payment has not been made. Likewise if the University Contracting Group is reviewing new agreements with sponsors who have receivables over 90 days past due they may request information on why payment has not been made.
It will also be determined if referral to UCO is appropriate for those delinquencies that are not a result of actions required by the University. If referral is appropriate, copies of the file and correspondence will be sent to UCO. Upon review of the file and documentation, UCO will either attempt telephone contact, send out an initial collection letter, or send out a final demand letter to the sponsor. Within 30-45 days of receiving the file, UCO will report back to SPS to determine if collection agency referral or legal action is appropriate. UCO will coordinate the collection agency referral or legal action as agreed upon by UCO and SPS. UCO will provide periodic status reports to the appropriate SPS staff.
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Write-off:
In accordance with the University’s Accounts Receivable Write-off Policy dated October 18, 1999, all sponsored program accounts that have been expired for two years with delinquent account receivables will be identified by the Contract Receivables Administrator. A list of these accounts will be provided to the Associate Director of SPA for review with the Comptroller for write-off. This review pertains to both governmental and industrial sponsored accounts.
Accounts that have been expired for two years as of July 1st of each year will be identified and reported to UCO in early July. The list will be reviewed and approved by the Comptroller prior to July 31st and communicated to UCO for inclusion in the annual write-off report. Accounting transactions to close the identified accounts will be posted prior to October 31st. Collection activity may continue, even though the account is generally deemed uncollectable and written off the University books.
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Close Out Management
A. Sponsored Program Funds
It is expected that Business Services shall complete the following activities:
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Departments should have projects ready in the accounting system for closing entries by 60 days after expiration (charges reviewed, overdrafts cleared, post termination charges removed, suspense entries cleared). Reminder that accounts automatically lock 50 days after the project expiration date, so please allow for processing time when preparing documents and mark bypass when appropriate.
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All fiscal reports and final billings will be submitted in accordance with sponsor regulations.
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Accounts will be zeroed in the accounting records within 4 months of project expiration except if awaiting income.
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Follow the management expectations set for SPTS reporting requirements.
Sponsored program accounts must be closed in accordance with sponsor regulations. The second FSSR generated past expiration should be the final FSSR reflecting department level activity. SPS will close activities based on the contents of this statement. The SPS Account Clerk will contact department business office to confirm that all expenditures have been recorded.
There are many tools which Business Services can utilize to ensure completion of the above expectations:
Closing Check List for Department Business Offices
Closing Check List for SPS
Account Management Process Guide closing queries
We recommend accounts that cannot be cleared/closed within 90 days after expiration and do not have an approved plan be handled in the following manner (all dollar amounts below refer to total costs):
1. Overdrafted Accounts:
Overdrafted Accounts with Compensation charges only:
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Overdrafts in excess of $100.00 for accounts that have only Compensation charges will always be cleared by the academic department. Once the correcting documents are processed, see "b" to clear any remaining small Compensation balances.
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Accounts that have small overdrafts ($ 100.00 or less) due only to salary issues (e.g., accounts that have only Compensation expenses, fellowship accounts that have balances due to rounding) will be cleared to account 010-1063-0001. A Journal Voucher will be prepared by SPS as follows. :
Salaries:
DR: FFF DDDD-PPPP 5-1001 (010-1063-0001)
CR- FFF DDDD-PPPP 5-1001 (SPS Account)
Explanation: To clear remaining overdraft per procedures recommended and approved by Account Management Guidelines.
Overdrafted Accounts that have S & E charges
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Accounts that are overdrafted and have S&E charges will be cleared by the responsible academic department.
2. Accounts with Balances:
Accounts that have a balance of less than $5.00, SPS will follow these guidelines for clearing the balance:
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The sum has made the final payment and the sponsor has removed the account from their letter of credit funds.
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There is no F&A or cost shown on the account to adjust in closing.
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Non letter of credit sponsors must be contacted to determine if they want the amount refunded. If yes, the balance must be refunded.
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If the sponsor does not want the balance refunded, the balance will be cleared as follows:
DR: FFF DDDD-PPPP 5-7993 (SPS Account)
CR: 010 1063-0001 5-7993
Explanation: To clear remaining balance per procedures recommended and approved by account management guidelines.
Fixed Price Agreements (where the University is entitled to retain the funds)
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For accounts that have unexpended funds after 90 days (all income has been received and no accounts receivable outstanding) and the University is entitled to retain these funds, the appropriate SPS account clerk will transfer the balance to the designated department 100 fund in accordance with SPS Instruction No. 4. http://www.purdue.edu/sps/accountmgmt/i4.html
3. Overdrafts and balances that do not fit the scenarios described above will be discussed with the appropriate staff in order to achieve resolution.
All Other Funds
Once a year, Accounting Services will request a review of all accounts needing to be deleted from the accounting system. A management report will assist with monitoring accounts with no activity. At this time, accounts should be evaluated to determine if the activity located in that account still necessitates separate accounting activities. Purpose of the account and the expense of its maintenance should be considered.
After an account is determined to no longer be useful, the balance should be cleared to a residual fund and a 1209 processed to close the account. Proper completion of this annual review will realize savings to the university in materials, as well as time and resources of various University staff members.
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