Internal SalesPolicy and Procedure Updates

AgendaAgenda

o Policy

o Procedures

o Roles & Responsibilities

o Definitions

o Questions & Answers anytime during the presentation

PolicyPolicySelling Goods and Services to University DepartmentsSelling Goods and Services to University Departments

oRates should be reviewed annually by the department in accordance with Administrative Procedure: Reviewing Internal Sales Activity oUpdated Internal/External Sales Approval Form (UM1608)oUpdated Internal/External Sales Business Proposal (UM1741)oUpdated Internal Sales Vendor Authorization Form (UM1793)oNew Procedure: Reviewing Internal Sales Activity by Internal Sales Office

PolicyPolicySelling Goods and Services to University DepartmentsSelling Goods and Services to University Departments

oTransactions require:• Cost substantiation • Justification• Proper record retention • Transactions must be charged to departments within 60 days from

the day the product or service was provided • Subsidies should be documented in the rate development

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ProceduresProceduresObtaining Approval to Conduct Internal Sales ActivityObtaining Approval to Conduct Internal Sales Activityo Units with expected internal sales revenues less than $25,000

that do not charge federal grants

o These units should use: • Cost allocations • Cost sharing • Historical salary adjustments• Direct retros • Transfers• or a Non-ISO account 500103 (Inter-departmental exchange)

ProceduresProceduresObtaining Approval to Conduct Internal Sales Obtaining Approval to Conduct Internal Sales

ActivityActivity

oRecharge services must be managed through the use of a separate ChartField 2 code to track recharge service separately from external sales

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ProceduresProceduresObtaining Approval to Conduct Internal Sales ActivityObtaining Approval to Conduct Internal Sales Activity

Training•Training is required for all new recharge center managers. •Training can be taken on-line. •The Internal/External Sales department will provide direct training to an individual or department if on-line training is not a feasible format.

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ProceduresProceduresEstablishing an Internal Sales Accounting ModelEstablishing an Internal Sales Accounting Model

Prepare an Internal Sales Vendor Authorization/Change Form Internal Sales Vendor Authorization/Change Form (UM 1679) if:

• A new internal sales accounting structure in PeopleSoft is needed

• A vendor code does not already exist in PeopleSoft

ProceduresProceduresEstablishing an Internal Sales Accounting ModelEstablishing an Internal Sales Accounting Model

• Whenever possible expenses should be recorded as such and not as a transfer in or out that doesn’t use the correct account code.

• The costs of internal sales need to be separated from the costs of external sales and all other funds.

ProceduresProceduresEstablishing an Internal Sales Accounting ModelEstablishing an Internal Sales Accounting Model

•Billing internal customers should be done using the PeopleSoft Accounts Payable module in the UMNIS SetID.

– Manual Payables Voucher– Spreadsheet upload– XML Interface

ProceduresProceduresEstablishing an Internal Sales Accounting ModelEstablishing an Internal Sales Accounting Model

•Charges must be:– Timely - Within 60 days from the day the goods or

service was provided. – Clearly identifiable – The voucher must include

the 5 Ws. The 5 Ws will be located in the comment section of a manual payables voucher or on the 258 character line description on spreadsheet uploads or XML interfaces

ProceduresProceduresEstablishing an Internal Sales Accounting ModelEstablishing an Internal Sales Accounting Model

•Charges must be:– Accurate – The unit selling the goods or services

must make every attempt possible for recording charges to the accurate chartfield string provided by the purchasing unit.

•Units that have Sponsored Projects should retain purchasing documents as defined in the University of Minnesota Records Retention Schedule.

ProceduresProceduresEstablish Internal Sales RatesEstablish Internal Sales Rates

oBilling rates should be reviewed annually and updated no less than every two years

• Units may update rate more often to avoid large fluctuations in the rates due to unexpected surpluses or deficits

ProceduresProceduresReviewing Internal Sales ActivityReviewing Internal Sales Activity

oReviewing Internal Sales activity annually is a best practice business module

ProceduresProceduresPurchasing Internal Sales Capital Equipment Purchasing Internal Sales Capital Equipment

and Recording Depreciationand Recording Depreciation

oCapital transactions should be recorded in the Internal Sale Capital Purchase fund code 72017201

oThe cost of the capital purchase will be recovered over the useful life of the equipment through allowable depreciation

oDepreciation is manually transferred from the unit's internal sales operating activity (fund 11501150 or 11511151) into the Internal Sales Capital Purchase fund at least on an annual basis

ProceduresProceduresPurchasing Internal Sales Capital Equipment Purchasing Internal Sales Capital Equipment

and Recording Depreciationand Recording Depreciation

oThe Internal Sales Capital Purchase fund 72017201 should use the same DeptID, Program and other ChartField codes that uniquely identify the internal sales activity in the internal sales operating fund (11501150 or 11511151)

ProceduresProceduresPurchasing Internal Sales Capital Equipment Purchasing Internal Sales Capital Equipment

and Recording Depreciation : Policy Managing and Recording Depreciation : Policy Managing University Capital EquipmentUniversity Capital Equipment

oUse of the Internal Sale Capital Purchase fund is restricted to capital expenditures that relate to and benefit the internal sales activities

oInternal Sales equipment will be purchased in the Internal Sale Capital Purchase fund 72017201 using account 850101 – 850101 – Capital Equipment Purchases

ProceduresProceduresPurchasing Internal Sales Capital Equipment Purchasing Internal Sales Capital Equipment

and Recording Depreciationand Recording Depreciation

oThe unit conducting internal sales activity will manually record the depreciation expense transfer to the Internal Sales Capital Purchase fund 72017201 from the internal sales operating fund (11501150 or 11511151) using transfer accounts 600310600310/610310 610310 (ISO Depreciation Expense)

ProceduresProceduresPurchasing Internal Sales Capital Equipment Purchasing Internal Sales Capital Equipment

and Recording Depreciationand Recording Depreciation

oUnits may choose to subsidize the depreciation of the equipment

› Note: Additional transfers to the Internal Sale Capital Purchase fund Note: Additional transfers to the Internal Sale Capital Purchase fund 7201 from other current funds may be needed when subsidizing 7201 from other current funds may be needed when subsidizing depreciation expense depreciation expense

› Contact the Internal/External Sales department for appropriate accounting treatment

ProceduresProceduresPurchasing Internal Sales Capital Equipment Purchasing Internal Sales Capital Equipment

and Recording Depreciationand Recording Depreciation

oCapital Asset Sales & Salvage (Gains) due to disposal of the capital equipment should be recorded in the internal sales operating fund (11501150 or 11511151)

DefinitionsDefinitions

oBreak-even PeriodBreak-even Period

› Time period in which total revenues for a good/service equal total expenses

› Three –year average margin of + or – 15% is considered an acceptable range

› Annual variance within that range should be included in future rates

› Variance greater than 15% should be resolved with Internal Sales Compliance Office

DefinitionsDefinitions

oBreak-even PeriodBreak-even Period

› Time period in which total revenues for a good/service equal total expenses

› Three –year average margin of + or – 15% is considered an acceptable range

› Annual variance within that range should be included in future rates

› Variance greater than 15% should be resolved with Internal Sales Compliance Office

Roles & ResponsibilitiesRoles & Responsibilities

Internal Sales Office•Approve initial rates. •Ensure ongoing compliance to University Policy and Procedures.• Perform compliance reviews of recharge centers and follow up on management action plan.

Roles & ResponsibilitiesRoles & Responsibilities

Internal Sales Office•Recommend and monitor resolution to the handling of variances > 15% threshold.• Develop and update content in internal sales training materials.• Update and document the Disclosure Statement as required by the Uniform Guidance.

Roles & ResponsibilitiesRoles & ResponsibilitiesInternal Sales Business Manager•Prepare business plans, rate development and analysis.• Notify Inventory Services of equipment included in rates. •Comply with established University policy and its related procedures •Creation of management action plan and implementation.

Roles & ResponsibilitiesRoles & ResponsibilitiesChief Financial Manager•Act on or disapprove internal sales activity prior to obtaining Internal Sales approval.• Responsible for compliance of all University policy and federal regulations. •Review internal sales revenues, expenses, rates and business plan to evaluate financial solvency.

Roles & ResponsibilitiesRoles & ResponsibilitiesChief Financial Manager•Work with business manager to cover any deficits or disallowances.•Review the internal sales compliance memo and management action plan. •Provide resources as necessary.

Questions?Questions?

Office of Internal Sales website:http://finsys.umn.edu/sales/iso.htmlhttp://finsys.umn.edu/sales/iso.html

This presentation is posted on the site.