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Non Sponsored Program Accounts

Policy Training Program for the Lifecycle of an Account

Delivered by:Jennifer Craig & Kristi Mickle

Content Experts:Suzanne Bennett Kathy VanderwallJason Dietz James WileyKristi Hartwick JoAnn Wiley

May 2009

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Course Content

• Objectives• Gifts and Endowments• Residual Accounts• Continuing Education and Conferences• Construction Accounts• Hospitality• PRF Accounts

Business ServicesUpon completion of this course you will:• Understand why we have the different types of non sponsored program accounts within the University• Gain an understanding of the University policies associated with the non sponsored program accounts

Course Objectives

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Gifts and Endowments

Why are gifts classified differently?• GASB and GAAP Requirements

– Restricted vs. Unrestricted• University Policy IX.6.2 Classification, Administration and Reporting of Nongovernmental Support

– Voluntary support vs. Contract Support• Donor intent / Purpose of funds (Gifts, Scholarships, Construction, etc)

http://www.purdue.edu/policies/pages/advancement/ix_6_2.html

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Gifts and EndowmentsThe gift acceptance policy • University Policy IX.2.1 http://www.purdue.edu/policies/pages/advancement/ix_2_1.html

• Policy Exists to protect University and donors interests“A gift shall not be accepted by the University unless there is a reasonable expectation that acceptance of the gift will support the University in its missions of learning, discovery, and engagement.”

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Gifts and Endowments

Would there be a situation where Purdue would not accept a gift?

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Gifts and EndowmentsGifts of significant risk are reviewed by gift

acceptance committee

Examples include:• Gifts of land• Non-publically traded securities or businesses• Cash gifts with significant donor restrictions• All unusual gifts or gifts of questionable value

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Gifts and EndowmentsWhy is it necessary to process the form 44?

• Update UDO Advance system with gift information• Funds need to be deposited to the appropriate

account (51XXXXXX & 52XXXXXX)• Determine the correct gift classification

• Voluntary support vs. Contractual support

http://www.purdue.edu/sps/pdf/fundguide.pdf

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Gifts and EndowmentsWhy is it necessary to process the form 44?

• Dean / Department Head signature for:- Accepting the Gift

- Document potential conflict of interest

Donor backup documentation is important for stewardship and classification purposes

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Gifts and EndowmentsWhat are the benefits of gifts in kind and loans?

• To further the teaching, research, and engagement missions of the University

• Examples of gifts in kind include equipment, software, books, art, animals, etc.

• Examples of loans include equipment• Process gifts in kind and loans via form 41B

https://www.purdue.edu/udo/info/pdf/gift_in_kind_form.pdf

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Gifts and EndowmentsWhy do gifts process through Purdue(PU), Purdue

Foundation(PF), or Purdue Research Foundation(PRF)?

• The PF and PRF exist to secure private gifts for the benefit of Purdue

• Both Foundations are organized as corporations, exempt

from federal tax liability, and qualify as a public charity

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Gifts and Endowments

Why do some gifts process through Purdue (PU), Purdue Foundation (PF), or the Purdue Research Foundation (PRF)?• Purpose of gift and donor restrictions• Gift instrument (i.e. securities, land, estate, trusts, etc.) drive where it should be deposited

Donors are encouraged to write checks to PF for the flexibility to deposit into a PU or PRF account

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Gifts and EndowmentsDiscussion Item:

What do you do if the back updocumentation for a gift indicates somethingdifferent than the recipient has indicated?

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Gifts and EndowmentsWhy do we establish endowments?

• Endowments provide income stream for university in perpetuity and protects purchasing power over time• Donor wishes

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Gifts and EndowmentsDifferent classifications of endowments:

True Endowment (7201XXXX-7223XXXX): • Book value is kept intact• Income expended according to the endowment agreement

Term Endowment (7275XXXX): • Similar to true endowment• Book value may be spent according to the agreement

Quasi Endowment (7230XXXX-7263XXXX): • Mgmt decision to invest internal funds

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Gifts and EndowmentsWhy are there different classifications of

endowments?

• GASB Financial Reporting Requirements– Non-expendable vs. Expendable– Restricted vs. Unrestricted

• Funds classification tracking• Reporting purposes

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Gifts and EndowmentsWhy do we have a spending policy?

• Smooth market volatility

• Protect long-term growth and purchasing power

http://www.purdue.edu/invest/

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Gifts and EndowmentsWhy do we track the book and market value

of endowments?

• Book and market value are currently used in the composition of financial statements

• Stewardship

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Non-SPS Account Task ListWe’ve received funding from a donor and now

have it properly classified and deposited

Next – I need to better understand my residual accounts . . .

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Types of Residual Accounts

• Residual Funds from fixed price

contracts/agreements

• Royalty Funds from Intellectual Property

Residual Accounts

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SPS INSTRUCTION NO. 4

1.     The contract is fixed-price (i.e., there is no provision for return of unexpended funds to the sponsor.)

2.     All payments required under the contract have been received by Purdue.

3.     All required project work is complete, and all reports and other deliverables have been provided to the sponsor.

4.     All expenses related to the project have been properly charged to the account.

Residual Funds

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Residual Funds

The unexpended direct cost balance in the account can be transferred to a residual fund in the appropriate department.

http://www.purdue.edu/sps/accountmgmt/i4.html

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If the residual balance is > 15% of the total award, an explanation should accompany the request for transfer.

• Proposal is fully costing projects – not inflating• Not make a profit • Reimbursement for cost

 

Residual Accounts

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Residual Accounts Discussion Item:

“Due to a miscalculation, the grant was undercharged for the PI’s April salary.  If the correct amount had been charged the amount remaining would have been less than 15%.”

Is this adequate justification to transfer the residual funds?

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Residual AccountsDiscussion Item:

“The funding was given for a project at Company A.   Two students worked on the project, the first stayed several weeks and the second several months.  Beyond the work that was accomplished there was no interest from Company A to continue the project.”

Is this adequate justification to transfer the residual funds?

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Royalty activity, which is generated from Intellectual Property, is also tracked in residual funds.

Intellectual Property Policy (VIII.4.1) http://www.purdue.edu/policies/pages/teach_res_outreach/viii.4.1.htm

Residual Accounts

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Residual and Royalty (2201XXXX funds)are expended like general funds andexpenditures must be in compliance withUniversity Policies

Note: these funds are chargeable for fringe benefits

Residual Accounts

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Non-SPS Account Task ListWe’ve received funding from a donor and now

have it properly classified and depositedMy residual accounts are all in order

Next – Understand what I need to do to get ready for the department’s Team Building conference . . .

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Continuing Education and ConferenceWhy do we have CEC?

As a land grant institution, Purdue bears a majorresponsibility to provide continuing education,professional development activities, and otherextended accesses of learning and discovery tothe public.

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Continuing Education and ConferenceResponsibility and Authority for ContinuingEducation and Conference Activities (VIII.2.1)http://www.purdue.edu/policies/pages/teach_res_outreach/VIII_2_1.htm

This policy assigns academic, administrative, andfiscal responsibility for all CEC activity sponsoredby a college/school, department, or other agency ofthe University.

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Continuing Education and ConferenceWhy do we have a CEC policy?

• To address how the University administers these unique activities

• Establish the authority for approving rates and registration fees

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Continuing Education and ConferenceWhy are there separate funds for CEC activities?

• Institutional tracking of credit (2209XXXX) and non-credit (2210XXXX) programs• Residual funds transferred to 2203XXXX • Unique Allowable Expenses

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Continuing Education and ConferenceWhy do we use Letter of Agreements in CEC?

• Outlines and provides approval for conference activity, budget, and fees

• Details funding sources and where residual funds should be transferred

• Ensure that the event is scheduled on the University calendar

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Continuing Education and ConferenceWhy do we need to be careful with grant funded

Activities?

• Charges to grant must be A-21 allowable costs• Charges must be within grant project period• Food must be specifically budgeted and

approved in sponsored project budget

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Continuing Education and Conference

Why it is important to quickly close Accounts?

• Good Customer Service• Want to know fiscal status of the project • Post within grant project period• Tracking receivable balances

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Continuing Education and Conference

Discussion Item:

My area wants to charge a registration fee for

an event, but doesn't want to use conferences

because of their fee...what do I do?

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Non-SPS Account Task ListWe’ve received funding from a donor and now have

it properly classified and depositedMy residual accounts are all in orderTeam Building conference is scheduled in the

tropics

Next – I couldn’t talk my Department Head out of remodeling, so I need to understand construction . . .

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Construction AccountsLevels of Construction Projects• Work Orders (under $2,500) • Less than $50,000 Construction Projects• $50,000 to $500,000 Construction Projects• Greater than $500,000 New Construction

http://www.purdue.edu/physicalfacilities/architect/project_mgmt/cpc/index.htm

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Construction AccountsWhat governs the approval processes?• Purdue University By-laws

– Article V, Committees– Article VII, Contracts and Other Written

Instruments– Article IX, Buildings

• Indiana State Statutes– ICHE, State Budget Committee, Governor approvals

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Construction AccountsWhy do we need to complete a Request for

Professional Services (RPS) form?

• Obtain departmental approval• Document funding source• Outline scope of work• Requested schedule

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Construction Accounts

Greater than $500,000 New Construction• Capital Projects Council (CPC) Process Including:

– CPC approval– BoT Approval– ICHE Review– Budget Committee & Budget Agency Recommendations– Governor Approval

http://www.purdue.edu/physicalfacilities/architect/project_mgmt/cpc/index.htm

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Construction Accounts

Accounting of Construction Projects is driven by

financial reporting requirements as implemented

through the University Capitalization Policy

Non-Capital Projects vs. Capital Projects

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Construction AccountsTypes of construction project funding

• Debt Funded Projects• State Appropriated Funds (Including Repair and

Rehabilitation)• Sponsored Programs Funded Projects• Gift Funded Projects• Mixed Funded Construction Projects

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Construction AccountsFunds expended in following order:

• Debt proceeds (8202XXXX) • State appropriations (8203XXXX) • Gift funds (8204XXXX) received by the

University for construction• School, Department, or Unit unrestricted gift

funds (8203XXXX)• Designated internal funds (8203XXXX)

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Non-SPS Account Task ListWe’ve received funding from a donor and now have

it properly classified and depositedMy residual accounts are all in orderTeam Building conference is scheduled in the

tropicsRPS for office remodel is routing for approval

Next – Need to reimburse Prof. Smith for prospective employee lunch. Can I use University funds?

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Why the Policy was created:

• Department’s lack of PRF Funds• Lack of flexibility with university funds• Dean’s requested the ability to use

University funds for hospitality expenses• Allowable at Peer Universities

Hospitality

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Hospitality Expenditure Policy (II.1.1)

http://www.purdue.edu/policies/pages/finances/ii_1_1.html

• Guidelines are based upon an understanding that food and beverage expenditures are allowable only when clearly required to advance the mission of the University and are appropriate to the occasion.

Hospitality

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HospitalityHospitality Expenditure Policy (II.1.1)

• Expenses should be reasonable in amount and necessary to fulfill the mission of the University.

• Consistent treatment for expenses • Have to be excluded from cost study

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Allowable hospitality expenses have been divided into three general categories:

• Meals or refreshments served during business meetings,

• Meals for prospective employees, visitors, guests, or donors, and

• University receptions.

Hospitality

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HospitalitySpecial Note on Sponsored Programs Funds

• Sponsored program accounts may be used if the expense is specifically approved in the budget and is in accordance with sponsor and University policy.

546305 - Conference Meals

533380 - Conf Arrangements for CEC events only

533615 - Hospitality/Food Service

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Risks of Not Following the Policy/Procedures:

• Unallowable expenses on funding sources

- Departmental costs- Personal costs

Hospitality

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Non-SPS Account Task ListWe’ve received funding from a donor and now have it

properly classified and depositedMy residual accounts are all in orderTeam Building conference is scheduled in the tropicsRPS for office remodel is routing for approvalReimbursed Prof. Smith from University funds

Next – Need to reimburse my Dept Head for funeral flowers purchased . . .

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Benefits of having PRF funds:• Assist in supporting the mission, goals and

objectives of the University

• Provide ability to incur expenditures that are unallowable on University funds

• Allows flexibility to transfer unrestricted gifts to the University

Purdue Research Foundation

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Types of PRF Accounts:

• Donor contributed funds (SDIP)

• Funds requested annually by select non-academic areas

Purdue Research Foundation

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Philosophy behind the use of PRF funds:

• Stewardship• Would you ask a donor to contribute

money for this purpose?

Purdue Research Foundation

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Why do we have PRF guidelines?

• Stewardship• Consistent use of funds• Parameters for reasonable and appropriate

expenditures• Tax implications

Purdue Research Foundation

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Risks of Not Following the Guidelines:

• Unallowable charges • Stewardship/donor relation issues• Potential for audit finding• Inconsistent administration causing more

exception requests and confusion

http://www.prf.org/financial/forms/Discrect%20Guidlines.pdf

Purdue Research Foundation

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Discussion Item:

What would you do if your Department Head

brought you a receipt for funeral flowers

totaling $150? What questions should you

ask?

Purdue Research Foundation

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Purdue Research FoundationDiscussion Item:

Your Department Head turns in his monthly PRF

log with a receipt attached for holiday cards. How

do you respond?

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Non-SPS Account Task ListWe’ve received funding from a donor and now have it

properly classified and depositedMy residual accounts are all in orderTeam Building conference is scheduled in the tropicsRPS for office remodel is routing for approvalReimbursed Prof. Smith from University funds Reimbursed my Dept Head for funeral flowers

Next – send my vacation request to my supervisor . . .

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Policy Training Program for the Lifecycle of an Account

Questions?