Reference/Resources

Revolving funds and change funds are established to expedite the handling of University business by providing funds for authorized purchases and/or to make change. The terms revolving fund, cash fund, and change fund are often used interchangeably. The definitions of each are as follows:

• Revolving Fund
  • Checking Account — uses pre-numbered checks for handling disbursements. Normally, checks are written to vendors; no checks may to be written to cash, employees or independent contractors without specific pre-approval
  • Cash Fund — for handling purchases on a cash basis. Normally, the amount of the fund is much smaller than those in checking accounts.
• Change Fund — used to make change in sales-type operations. The amount of the advance never changes and purchases are not permitted.

A memorandum from the department head, director, or business manager is sent to the Comptroller requesting authorization to establish a revolving or change fund. This memo should include a justification as to why the fund is needed, the name of the fund custodian (the individual who will be responsible for the fund and the statements of condition associated with the fund), and the requested dollar amount.

Requests for increases or decreases to the revolving fund must be made in writing. The memo should be addressed to the Comptroller, but sent to the Banking and Investments Assistant in Accounting Services. The request should provide an explanation for the increase or decrease.

Any checking account used for University business must be established with the authorization of the Trustees of Purdue University. The responsibilities for establishment, operation, and control of University bank accounts have been delegated to the Vice President for Business Services & Assistant Treasurer, the Director of the Office of Treasury Operations, and the Comptroller. If a checking account is to be established, the Director of the Office of Treasury Operations will issue a copy of the Bank Account Procedures to the Custodian and will work with the Custodian to establish the account.

Once a University checking account has been established, all activity on such funds must be handled by check and no funds, other than University funds, should be placed in the account. There should be no cash deposits or withdrawals by the fund custodian. The only deposits to such accounts should be the reimbursement of expenses made by Purdue via ACH from Purdue University.

Monthly, custodians of checking accounts must prepare a Statement of Condition (see example in Revolving Funds section below). The revolving fund must be reconciled on a monthly basis, in conjunction with the receipt of the bank statement, and a copy of the bank statement must be attached to the submitted Statement of Condition.

Revolving funds should not be used as a check cashing service unless it is specifically established for that purpose (i.e. Bursar’s fund). If the fund custodian permits such activity, he/she will be held personally responsible for any bad checks cashed by the fund.

Any exceptions to this policy must be approved by the Comptroller.

Every effort should be made to secure checking accounts free of service charges. Often, banks will approve accounts free of such charges for tax-exempt organizations.

There are a number of banks that now provide interest on checking accounts. This interest should be recorded on a request for reimbursement by listing the interest amount as a credit on the invoice voucher using GL Account 467010. This credit will reduce the amount of the reimbursement, thus maintaining the revolving fund balance in the bank at the amount of the original advance. Service charges, check charges, etc., should be recorded as a debit on the invoice voucher using GL Account 543025. Charges of this nature should be avoided for all banks that now provide interest on checking accounts. This interest should be recorded on a request for reimbursement by listing the interest amount as a credit on the invoice voucher using GL Account 467010. This credit will reduce the amount of the reimbursement, thus maintaining the revolving fund balance in the bank at the amount of the original advance. Service charges, check charges, etc., should be recorded as a debit on the invoice voucher using GL Account 543025. Charges of this nature should be avoided if at all possible.

Each revolving fund is established for a specific purpose as defined in the memorandum requesting the fund. Thus, the fund is restricted to expenditures listed on the original letter of approval. Personal advances, travel advances, and payments for items that can be readily procured though other purchasing options are not authorized.

The following guidelines should also be considered before making a purchase:

• The amount of each check should not exceed $50.00. Exceptions to this amount are to be approved at the time the revolving fund is established.
• Cash purchases should not be made to evade established purchasing procedures.
• Items that are carried in University Stores should not be purchased with this fund.
• Funds may not be used for reimbursing an individual for stolen or damaged personal items.
• “Bad Checks” should not be reimbursed though a revolving fund. An Invoice Voucher should be prepared to cover overdraft charges from a departmental account. Overdrafts of the account should be reported immediately to the Office of Treasury Operations and the Assistant Comptroller – Accounting Services. Inadequate management of the account may lead to closure of the checking account. Joint recommendation for action on the account will be made to the Comptroller.
• Travel advances or reimbursement of travel expenses should not be made through the revolving fund unless specifically identified as an approved expenditure item for that revolving fund.
• Advance registration fees may not be paid through the revolving fund.

Revolving Funds (Checking Accounts and Cash Funds) are established to make a number of small authorized disbursements. These funds may be established with the intent of maintaining a balance or they may be established with the expectation that the balance will be reduced by the authorized transactions.

• If the balance is expected to be maintained:
  • The custodian of the fund will periodically submit a completed Invoice Voucher to the Banking and Investments Assistant in Accounting Services. Original signed and dated receipts, supporting the fund expenditures, should be attached to the invoice voucher
    [NOTE: Reimbursement of revolving fund expenditures should be made electronically (ACH or wire transfer); deviation from this must be authorized by the Controller.]
• If the balance is expected to reduce with authorized purchases:
  • A Journal Voucher is submitted to the Banking and Investments Assistant.

The Statement of Condition is a reconciliation of the balance in the revolving or change fund to the approved amount as recorded in the General Ledger Fund.

REVOLVING FUNDS:

Monthly, the revolving fund custodians must complete, sign, and forward a Statement of Condition (or a reasonable facsimile) to the Banking and Investments Assistant by the 20th of the month following the month end for which the statement is being prepared. (i.e. January 31st report is due by February 20th) Each report must include the Revolving Fund Number for identification purposes, the Custodian’s name, the month it’s for, the preparer’s signature, and a copy of the bank statement. No reimbursements or increases will be made if a current Statement of Condition is not on file.

The Statement of Condition should identify the acknowledged revolving fund balance, cash on hand, reimbursement request(s) in process, and receipts not yet processed. A list of all checks aged over 60 days should be attached to the Statement of Condition or included on the statement itself. If any outstanding checks are aged over two years, contact Accounting Services. Statement of Condition

If the custodian is unable to sign the statement of condition, it should be delegated in writing to someone else. The written delegation form should be on file with the Banking and Investments Assistant in Accounting Service. Only those who have been delegated by the fund custodian have authorization to sign in his/her absence.

CHANGE FUNDS:

Quarterly, the revolving fund custodians must complete, sign, and forward a Change Fund Balance of Record Statement, indicating the “amount of record” for the change fund , to the Banking and Investments Assistant by the 20th of the month following the month end for which the statement is being prepared. (i.e. January 31st report is due by February 20th).  The custodian must verify the amount, sign the statement, and return it to the Banking and Investments Assistant.  Complete all items in red.  Change Fund Verification Form

 If the custodian is unable to sign the Change Fund Balance of Record Statement, it should be delegated in writing to someone else. The written delegation form should be on file with the Banking and Investments Assistant in Accounting Service. Only those who have been delegated by the fund custodian have authorization to sign in his/her absence. 

Complete all items in red. 

• Change Fund Signature Delegation Form 
• Change fund custodian signature form
• Revolving fund signature delegation form
• Revolving fund custodian signature form

If money from a revolving fund or change fund is lost or stolen, the University Police and Internal Audit should be notified immediately. An Invoice Voucher must be processed to replenish the fund to the amount of the original advance. The charge will be against a departmental fund and cost center using expense GL Account.

The custodian is responsible for accounting for any advanced funds. The Banking and Investments Assistant may be contacted to obtain an expected balance of the revolving fund. When a revolving fund or a change fund is no longer needed the custodian should prepare a final Statement of Condition and complete the following procedures.

CASH FUNDS

Prepare a Journal Voucher to record any expenses not yet reimbursed and attach original receipts. Credit GL Account 101450 on the appropriate General Ledger Fund and debit the appropriate expense fund and cost center. The Journal Voucher should be routed to the Banking and Investments Assistant in Accounting Services. Any remaining cash should be deposited on a Cash Receipts Voucher using GL Account 101450 on the appropriate General Ledger Fund.

CHECKING ACCOUNTS

If you wish to close a bank account for a revolving fund, contact the Office Treasury Operations. They will instruct you on the proper procedures to close an existing bank account that has been created in the name of the University.

The custodian is responsible for accounting for any advanced funds. The Banking and Investments Assistant may be contacted to obtain an expected balance of the revolving fund. When a revolving fund or a change fund is no longer needed the custodian should prepare a final Statement of Condition and complete the following procedures.

CASH FUNDS

Prepare a Journal Voucher to record any expenses not yet reimbursed and attach original receipts. Credit GL Account 101450 on the appropriate General Ledger Fund and debit the appropriate expense fund and cost center. The Journal Voucher should be routed to the Banking and Investments Assistant in Accounting Services. Any remaining cash should be deposited on a Cash Receipts Voucher using GL Account 101450 on the appropriate General Ledger Fund.

CHECKING ACCOUNTS

If you wish to close a bank account for a revolving fund, contact the Office Treasury Operations. They will instruct you on the proper procedures to close an existing bank account that has been created in the name of the University.

• Definition: Financial support based on achievement, performance, or other criteria. The grantor does not specifically state that the money should be used for educational expenses.
  Example: Departments and schools honor students at award ceremonies held at the end of an academic year. Certificates are typically given to students at that time.
• Tax Implication: US citizens – include in taxable income on your tax return
  A 1099 will be issued for amounts greater than $600
  International students – 30% tax withholding
  Reported on a 1042-S form
• All prize or award payments made to employees must be paid through the payroll process, per the IRS tax code, where all applicable income and employment taxes are withheld.  These types of payments are required to be reported on the employee’s W-2 form.

Note: For International student’s taxes may have to be withheld on all of these forms of payments. All of these forms of payments must be considered educational resources for the student per federal regulations. Therefore, they have to be reported to the Division of Financial Aid.

• Definition: Recognition based on competition or other criteria.
  Example: A competition is held and prizes for 1st, 2nd, and 3rd places are awarded to students.
• Tax Implication: US citizens – include in taxable income on your tax return
  A 1099 will be issued for amounts greater than $600
  International students – 30% tax withholding
  Reported on a 1042-S form
• All prize or award payments made to employees must be paid through the payroll process, per the IRS tax code, where all applicable income and employment taxes are withheld.  These types of payments are required to be reported on the employee’s W-2 form.

Note: For International student’s taxes may have to be withheld on all of these forms of payments. All of these forms of payments must be considered educational resources for the student per federal regulations. Therefore, they have to be reported to the Division of Financial Aid.

• Definition: Financial support based on academic achievement or other criteria that may include financial need. The donor of the scholarship sets the criteria for recipient selection. The grantor specifically intends money be spent to defray the costs of study, training, or research. Proceeds of the scholarship offset the cost of the student’s education for an upcoming or current academic year, depending on when the student receives the funds.
  Example: Departments, schools, or the Division of Financial Aid select recipients based on the criteria of the scholarship agreement (major, grade level, grade point average, financial need, or a combination other restrictive criteria). Credit for the scholarship is reflected on the student’s invoice for tuition/fees and/or housing.
• Tax Implication: Portions of the scholarship used to pay for qualified expenses, such as tuition, books, and fees, are not taxable income. The amount exceeding qualified expenses is taxable income for both US and international students. There is no tax withholding on scholarships for US citizens. There may be a 14% tax withholding for international students, depending on tax residence, or a reduced rate of withholding, if a treaty is available (US Tax ID required along with other parameters).

Note: For International students, taxes may have to be withheld on all of these forms of payments. All of these forms of payments must be considered educational resources for the student per federal regulations. Therefore, they have to be reported to the Division of Financial Aid.

• Definition: Financial support based on academic achievement or other criteria that may include financial need. A grant recipient is selected based on specific criteria, which is typically set by the federal or state governments or the institution. Generally the proceeds of the grant are used to offset the cost of the student’s education for an upcoming or current academic year for performance or criteria met during the previous academic year.
  Example: The Division of Financial Aid selects recipients based on financial criteria and/or grade level and cumulative grade point average as well as other criteria. Credit for the grant is reflected on the student’s bill for tuition/fees and/or housing or a check is prepared and given to the student if other assistance has paid fees and housing.
• Impact for the student and the institution: The institution is required to report the grant as part of the student’s total resources that are used to help offset the student’s cost of education for the academic year.
• Result: As new resources are added to the student’s financial assistance for the academic year, federal regulations governing the institution may require a small number of students to repay certain federal funds. In addition, the type of funds that certain students receive may also require that the institution withhold taxes from the proceeds of the grant.

An account that has no endowment to support it. May be non-recurring.

• An academic job held by a student, which involves pay for services rendered. Either graduate or undergraduate.
• The department providing the assistantship determines the nature of undergraduate assistantships.
• Graduate assistantships are classified as Teaching Assistantships (TA) or Research Assistantships (RA).
• Teaching and Research Assistantships receive a full or partial tuition waiver.
• A monthly stipend is paid to Teaching Assistants for the performance of teaching duties. Research assistants also receive a stipend for research duties (research is typically not related to the student’s thesis research).

These terms can be found in old endowment agreements and refer to merit.

A separate fund, the principal of which cannot be spent. The principal is maintained in perpetuity and invested for the purpose of producing present and future income, which may be either expended or added to principal. These are donor-specified.

A separate fund, the principal of which may be spent, but is primarily intended to be maintained in perpetuity. Present and future income may be expended or added to principal. These are department-specified, usually funds from several donors with common designation.

A separate fund, earnings of which may be expended or added to principal. Upon the passage of a stated period of time or the happening of a particular event, all or a part of the principal may be expended.

Refers to a fund into which earnings from an endowment are placed for expenditure.

An account intended to be used to zero balance, perhaps over a period of more than one fiscal year.

Financial support to reduce the cost of a graduate student’s education. Some fellowships include a tuition waiver or a payment to the University in lieu of tuition. Fellowships may include stipends to cover living expenses.
Students receive payments to assist them in pursuing a course of study or research. This payment is not a payment for teaching, performing research, or other services. Fellowships are taxable income to the recipient. Exclusions to the taxable income are amounts used to pay for tuition/fees and books and supplies.

Money provided to a student to help pay for the student’s education from federal, state, institutional, and private sources. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work).

The financial aid package is the complete collection of scholarships, grants, loans, and work-study employment from all sources (federal, state, institutional, and private) offered to a student to enable him or her to attend the University.

A federally mandated calculation. Standard cost of education less the family’s contribution equals the student’s financial need.

An individual working toward a post-Baccalaureate degree or certification.

Financial support which must be repaid, usually with interest.

Funds provided to a student on the basis of some achievement.

Funds provided to a student on the basis of financial need.

Financial support to a specific student determined by an outside entity. Recipient selection is performed by the funding source (e.g., organizations, clubs, trusts, and foundations).

Individual enrolled in a professional degree program.

An individual enrolled in an Associate or Baccalaureate degree program.

• Purdue Excellence 21 Scholarship Task Force
• Glossary of Financial Aid Terms: ( http://www.finaid.org)
• Audits of Colleges and Universities Audit Guide