Does reviewing non-personnel expenditures feel overwhelming during the rate calculation process? Below are some best practices to help make the non-personnel expenditure review process easier.
All expenditures included in the service activity fund and rate calculation must be directly related to the service activity operations. Expenditures must be allowable costs under University of Illinois System policy and federal and state regulations.
Non-personnel expenditures should be reviewed monthly for allowability and to ensure they relate to the 3E service. Reviewing monthly makes reviewing all fiscal year transactions during a rate calculation process much simpler since they have all been reviewed before that point.
Suppose you come across an expense that is unallowable per policy (such as alcohol, advertising, fines, penalties, etc.). In that case, it must be removed from the rate calculation and removed from the 3E fund. Expenditures unrelated to services provided by the 3E or unallowable per policy must be removed from the fund using a journal voucher.
There are some expenditures that show as negative amounts. These can either be transactions relating to adjustments from past fiscal years or revenue that is incorrectly coded as a negative expenditure.
- While adjustments from past fiscal years are allowable on the fund, they do not relate to the current fiscal year and therefore need to be adjusted out of the rate calculation. (Note, negative amounts related to a current year expense likely do not require an adjustment.)
- Revenue recorded as a negative expenditure should be coded to the correct account with an adjusting entry. If not done before the fiscal year closes, this needs to be adjusted within the rate calculation. Revenue recorded as a negative expenditure reduces the amount of true expenditures showing on the fund. If not adjusted or corrected, the amount of expenditures included in the rate calculation will not reflect the true expense to the fund, likely resulting in a deficit due to not recovering all costs.
There are also expenses that are allowable on the fund but not to internal customers and therefore need to be excluded from the internal rate. Government Costing’s rate calculation template has a column for these expenditures specifically. Examples of these expenditures are credit card fees and bad debt. They are only related to the cost of doing business with external customers to the university. Therefore, they can be on the fund and charged to external customers but not to internal customers.
Contact
If you have questions about Facilities & Administrative rates and how they are calculated, feel free to consult System Government Costing’s “Who to Ask” list to find an expert who can help.
