The Survival Guide was developed to review some unique administrative principles and requirements at public universities, and specifically at the University of Arizona. New administrators as well as those who have been here for many years often get frustrated when trying to accomplish certain tasks that might be much easier in private business or in a private university. The twenty minutes it will take to read this brief guide could save hours of aggravation and frustration in the future.
There are two sections:
Section 1, FRS & Your Money, briefly describes sources and uses of money and how to monitor finances.
Section 2, Administrative Principles, provides a brief summary of some of the administrative principles for managing a department at the University in relation to financial and personnel considerations. We have focused on principles that are unique to the University environment or to the University of Arizona and on policies that are commonly misunderstood or misapplied.
The information in this guide contains generalizations and brief excerpts from a variety of policies. This guide should not be cited as an authoritative source because policies may have exceptions or additional requirements that are not included here.
Also be aware that this guide addresses just a few of the many administrative policies that must be followed at the University of Arizona. It is important to check with your Business Manager or one of the central administrative offices when new actions are being considered to ensure that the action complies with all applicable policies.
FRS, an acronym for Financial Records System, is the University's central accounting system. All receipts are deposited into accounts on this system and expenditures are paid from those accounts. That's what it is all about - how to get it, how to spend it and how to keep track of it. Money comes from a number of sources. But there are a myriad of rules regarding acceptance and usage of money.
In general, all money held at the University is considered "public money." Under the public information act, private citizens and University employees have the right to inspect all public records held by the University (with the exception of certain types of personnel and student information). Since these records are under public scrutiny, we have to take care to follow requirements. It is preferable not to have headlines blaring "University Misuses Public Money."
Even if you have support staff available to interpret and apply the rules, you should at least know the general guidelines, which are outlined here. If you will be doing anything new or different, check into the possible implications before taking action. That way, things can be processed properly the first time. Properly prepared and supported documents are rarely delayed or returned.
Getting and Spending It
There are many ways to get money and many ways to spend money. The rules associated with obtaining and spending money are sometimes complex and sometimes frustrating, but they were written to assist us in making correct decisions, in compliance with Federal and State regulations and industry requirements. Since we are a public institution and accountable to the taxpayer, we need to learn these rules and principles to manage well and avoid problems.
If your staff think they know the rules, but you find that documents are frequently rejected or returned for additional information, approvals or other reasons, maybe it is time they took a refresher training course.
Industry standards and State law require the University to organize money in "funds." Transactions must be managed in accordance with rules appropriate to the fund, and rules are different for different funds. It is not enough to have money; you must have the right type of money. It is important to note the big no-no's: Money in University funds may NEVER be used for employee social or recreational functions, gifts ( such as for condolence, illness, congratulations), service organization dues (such as Kiwanis, Lion's Club) or charitable contributions.
Money is usually sent directly to the University by the sponsor, donor, or other source. If you receive a gift in the form of a check, it must be delivered immediately to the Central Gift Office. Cash and other checks received must be deposited immediately with the Bursar's Office. You may not set up separate bank accounts without express permission of the Financial Services Office.
As money is received, it is classified into the appropriate fund and deposited into an account within that fund. Following is a summary of the different funds and general guidelines on using the money deposited in each fund.
State: Each year, the State legislature appropriates a certain amount of dollars to fund authorized programs and the related support functions for the fiscal year. The State and University operate on a July 1 through June 30 fiscal year.
These appropriations are primarily used for the general operating expenses of the instructional programs and support functions. Because these include tax dollars, there is a lot of concern over how this money is spent. For example, State funds cannot be used for entertainment, employee recruiting, business meetings, departmental or institutional service awards, or business entertainment.
Sponsored Projects: Amounts awarded for grants or contracts by Federal or State agencies or other organizations for a specific purpose, usually research or public service, are classified as Sponsored Project accounts. To obtain such an award, a proposal is submitted to the granting agency. If the agency selects your proposal, you are awarded the grant or contract. You are then referred to as the Principal Investigator.
With the funding, you also usually get a comprehensive document with detailed restrictions on how to spend the money. These rules apply in addition to University rules. Federal grants require compliance with OMB Circular A-21, which identifies allowable and unallowable expenditures. It is important to understand and follow the rules, or you could have trouble later. You don't want to find out that a $500 expenditure is not authorized and that you are responsible for paying that out of your own pocket.
Sponsored Projects moneys not spent within the project period or for the intended purpose may revert to the sponsor, depending on the terms of the contract.
Designated: Designated funds include proceeds from a variety of sources. A few examples are the Alumni Association; summer session/extended university classes; income from short-term investments; grants for administration of student aid programs; and the recovery of indirect costs from Sponsored Projects. The Arizona Board of Regents and University Administration determine the purposes of these funds.
Gifts: All gifts (money or property) must be officially accepted by the Central Gift Office. The donor must provide documentation (usually a letter) specifying how the gift should be used. The donor may be general ("to support the Chemistry Department") or specific ("to purchase a microscope for the XYZ program"), but must provide documentation specifying the purpose of the gift. The documentation is very important in determining how the gift is accounted for.
The Gift Office will review the documentation to determine if the University can accept the gift. There are circumstances when it is not the University's best interests to accept some property gifts. In addition, the donor cannot ask for anything in return for a gift. If the donor requires something in return, such as a product or service, then the receipt cannot be classified as a gift, but must be classified as a contract or a sale. If the person or organization giving the gift wants the money used for a purpose not allowable by University policy, the donor should make the check payable to the UA Foundation, not to the University. All gifts are classified as restricted from an institutional standpoint, but from a departmental standpoint some gifts are more restricted than others.
Restricted gifts are for a specific purpose, such as scholarships. In that case, they can only be spent for the intended purpose.
Sales: A number of departments have set up arrangements to sell a product or service. Sometimes the product or service is a byproduct of instructional, research or public service activities. In other cases, departments are set up specifically to provide products or services to other departments on campus or to the public. This makes a difference. All departments that sell a product or service should contact the Financial Services Office for more information.
Account Numbers: The following table indicates at a glance the type of account based on the account number range.
1-00000 through 1-49999 State General Operating Accounts
1-60000 through 1-99999 Auxiliary (Sales) Accounts
2-00000 through 2-99999 Designated Accounts
3-00000 through 4-99999 Sponsored Project Accounts
5-00000 through 5-89999 Other Restricted Accounts
Expenditures Requiring Special Attention
While all expenditures from accounts must be appropriate and allowable, certain payments are subject to more scrutiny from outside sources than others due to the sensitive nature of the expense or certain risks associated with the payment of the expense. The Financial Services Office will take extra care to ensure that requirements are complied with and proper documentation is attached on these types of payments. Some examples are travel expenditures, consultant payments, reimbursements to individuals, and payments to students and nonresident aliens.
Travel: Please realize that it is the State of Arizona, not the University of Arizona, that established the complex travel regulations which all University employees must comply with when traveling. Regulations at private universities and at some other public universities are not nearly as complex. Travel expense is one of the highly scrutinized categories because of the potential for misuse. One person's idea of reasonable travel expenses may be far different from another person's (such as a tax payer). The State mandated travel regulations are intended to prevent inappropriate or excessive travel expenses by requiring that travel be pre-approved and that travel expenses meet specified limits.
Independent Contractors: The IRS would prefer that we treat all individuals providing services to the University as employees rather than independent contractors and will assume that an individual is an employee unless we can provide adequate documentation to prove otherwise. Why? Because the IRS receives more tax revenue, and on a more timely basis, from employees than from independent contractors. In recent years, the IRS has been increasing its audits of questionable classifications. Since the University hires a considerable number of individuals as outside professional or consultants, there is a good chance that the University could face such an audit. The penalties for improper classification include fines.
The guiding principle entailed in the proper classifications lies not in the length of time the person will work or on the nature of the assignment, but on your right as the employer to control and direct the individual's efforts. If you have the right to control not only the end result but also how the job will be accomplished, then the individual is an employee, not a consultant. However, the determination of the employer's rights in this regard can be a very difficult exercise. Please ask for assistance in reviewing questionable situations.
Reimbursements: Because reimbursements are paid to individuals, the University must take extra care to ensure that the expenditure occurred, was for a valid University business purpose and that proper documentation exists to support the payment. We must also make sure that payment is not made twice, so original receipts are required and are canceled when paid. If there is no receipt, other documentation must be provided to support the payment. Another concern is why reimbursement is required. There are times when it is appropriate for an employee to make a business related purchase using his or her own money, then request reimbursement (for example, an emergency purchase of supplies). However, equipment should never be purchased on a reimbursement basis. The University Purchasing and Stores Department should be used whenever possible to ensure compliance with University policies.
Payments to Students or Nonresident Aliens: Special care must be taken when making payments to students because such payments could affect the student's ability to qualify for financial aid.
Payments to nonresident aliens must be made in accordance with complex US Citizen Service regulations. For example, the visa type determines whether the nonresident alien is eligible for compensation for providing outside professional services or for reimbursement of expenses and may establish limits on how much they can be paid.
About Foundation Monies
The U of A Foundation is a private nonprofit corporation whose primary purpose is to enhance the University of Arizona. The Foundation is a completely separate entity from the University and has its own rules and regulations, many of which are less stringent than those imposed on the University. If you have money on deposit with the Foundation designated for your use, you may be able to use the money in different ways than you use the money deposited in your University accounts.
However, it is very important to keep Foundation money separate from University money and to deposit receipts with the appropriate institution. A common misunderstanding relates to conferences. If a conference is held at University facilities and is supported by expenditures from University accounts, the proceeds must be deposited with the University, not the Foundation. If the conference sponsors intend for the proceeds to be deposited with the Foundation, the conference may not be held using University facilities and University money may not be used to support the conference without the payment or reimbursement from the Foundation. Such arrangements must be approved in advance.
When University money is used, follow University policies and procedures. When Foundation money is used, follow Foundation policies and procedures.
Keeping Track of It
All moneys are maintained in the University's official accounting system, called the Financial Records System (FRS). In FRS, we establish "accounts" for each different source of money. You might compare these accounts to checking accounts, with some important differences.
Accounts: The University receives funding from various sources, most of which is specified for certain types of expenditures. To enable the administrators of these funds to monitor and report on the activity of the funds, the accounting system must maintain separate records of each source of funds, and the expenditures from each source. This is accomplished by establishing separate accounts in the system, much as a bank establishes separate accounts for each depositor. An account is defined as a functional unit established for a specific purpose, with one individual having primary responsibility for its activity.
Object Codes: In FRS accounts, all transactions are tracked by "object codes," which identify the type of revenue or expense. Every request to spend money must include both the account and the code that best describes the purpose of the expense.
Why is it necessary to keep track of expenses by object code? Every year the University is required to provide audited financial statements and other financial reports to people outside the University who are interested in how we are spending our money. These reports require varying levels of detail. Tracking expenses by object code provides the detail needed to prepare these reports.
Use of the correct object code to classify each expense is important because we face audits of the finances from various sources. The financial statements are audited by the Office of the Auditor General, an agency of the State of Arizona, for accuracy and for compliance with State and Federal regulations, industry standards and internal control requirements. Other organizations that provide funding for programs at the University and the Arizona Board of Regents also ask to audit the finances to ensure that money is being spent as intended.
In addition to external reporting and audit requirements, tracking expenditures by object code is a good management tool. If used properly, you can determine exactly how the money has been spent. This is useful for historical analysis as well as for budgeting and forecasting (for example, analyzing which expenses could be reduced or which expenses are likely to increase).
On-line Access: FRS accounts can be viewed on-line to determine the status of the account. Screens provide a variety of information, from a summary by main category to a detailed list of the transactions posted to an account. You can also find out the status of an outstanding Purchase Requisition or Purchase Order.
Reports/Reconciliation: At the end of each month, a report is generated listing the activity in the account. You may or may not reconcile your own checking account, but policy requires that all FRS accounts be reconciled at least monthly. Errors do occur, and some errors can only be caught through the reconciliation process. Reconciling means checking the report to see if the transactions that you requested showed up and for the right amounts. If you come across a transaction that shouldn't have been charged to your account, it is your responsibility to notify the appropriate office so the error can be corrected as soon as possible.
Monitoring Budget: Most FRS accounts are budgeted and the reports and screens display the available budget balance. You need to monitor the balance to make sure you don't exceed the budget.
To help monitor the budget, the University uses a system of "encumbering" funds. Encumbering is a method of reserving a portion of your budget when a commitment has been made. For example, if you order a piece of equipment, the estimated amount of the expense will be removed from the budget at the time the Purchase Order is sent to the vendor. When the bill is paid, the actual amount of the expense is posted to your account and the encumbrance is removed. The monthly report shows the actual expenses and the encumbrances separately.
Even if your staff usually performs these tasks, you should take the time to learn how to read the reports and how to look up accounts on-line. The screens and reports are fairly simple to use and you can save time by looking up some things yourself. The Financial Services Office offers training classes in these areas.
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The University has many forms and instructions on how to handle situations in the legal and (usually) most efficient way. To follow such instructions effectively, however, it helps to understand the general principles behind the pieces of paper. Some of these principles, such as the need to document payments, are common sense. We learn about these when managing our personal finances, such as filing our income tax returns. Other principles, especially those that apply uniquely to universities or uniquely to this university, may not be obvious.
General Observations
Common Sense: Most actions that are common sense are legal. However, this is not always the case. Some actions may be legal only if approached in a particular way. For example, some expenditures can be made using money from a designated accounted but not from a state account.
Rule of Thumb: Never ask if you can do "X." Instead, ask how can we do X? If X is legal and sensible, you are much more likely to get a helpful answer. If it is not legal or sensible, you will learn why not.
Avoid Messes: Checking first is always easier than cleaning up a mess afterwards. Occasionally some departments will try to "sneak something by" because they think it may be questionable and they want to avoid resistance from fund accountants or other reviewers. Other documents get processed incorrectly out of ignorance. The consequences are awkward for everyone. Not thinking ahead, waiting to the last minute or being ignorant of the rule does not prevent you from getting an exception or special handling; however, it may reduce the chance of getting the paperwork handled quickly and cheerfully. Messes can be avoided or minimized by clarifying what has to be done or how it has to be done before submitting the paperwork or making the decision.
Exceptions: Most policies provide for exceptions when a good reason exists for the exception. Exceptions must be approved by the Vice President in charge of your area. It helps to know when these approvals are needed so they can be obtained ahead of time. This will prevent documents from being returned, and therefore delaying processing.
Appearances Are Important: You must not only act correctly but also appear to act correctly. On every sensitive financial or personnel action, stop and consider how it could be perceived by those affected by the action as well as third parties - such as auditors, the media, the general public. Time after time, paperwork has to be redone because of inadequate documentation. The problem may have been an inappropriate choice of words or approach or a lack of sufficient documentation to support the request. Sometimes there is a real problem. For example, a department acting as an advocate in a promotion and tenure case rather than as an evaluator is inappropriate. Looking at the issue from the other person's viewpoint will make the need for revision obvious.
Conflict of Interest: The State of Arizona has passed conflict of interest statutes to ensure that employees do not use their position with the State to benefit themselves or their relatives or to the detriment of the State. These statutes require that an employee disclose any full or partial ownership or other substantial interest that the employee or a relative of the employee has in any type of entity that does any manner of business with the University. This disclosure must be done by filing a declaration of the conflict of interest; forms are available for this disclosure in the Purchasing Office, Department of Human Resources or the Provost's Office. Employees who have a conflict of interest with a party may not act on behalf of the University in any aspect of an agreement with that party.
Killing the Messenger: The person who answers your phone call or first handles and follows up on paperwork almost never sets the policy. Although we may wish the people interpreting such constraints were more helpful, we gain nothing by dealing with such people in an arrogant or antagonistic way or by blaming them for the policy or procedure.
What Could Happen? Many actions that we take may have effects that we don't intend. When beginning a new project, check with appropriate authorities beforehand to determine what problems might be anticipated and avoided, what authorizations might be needed, or if there are any special requirements. For example, many departments get involved in remodeling facilities, wiring or installing new equipment. The departments to contact in these circumstances may include Facilities Management, Telecommunications or Risk Management. Some problems that have occurred due to lack of proper coordination include the following:
Much of the wiring strung for local area networks on campus does not meet the fire code. During a fire, these cables would give off toxic fumes.
Telephones have been moved to different jacks resulting in incorrectly identifying the phone location and thus misdirecting a response to a 911 call.
Documentation Detail and Consistency: Documents submitted for processing must be properly completed. University staff approving the document will call you or send a document back for correction if the document is incomplete or if something is unclear, which causes delays in processing. Auditors, promotion and tenure committees and the courts make their decisions about a case based on what is in the record. If the evidence is not there, the action is likely to be turned down.
You must ensure consistency between forms and the supporting documentation. If necessary, explain inconsistencies in a note or on the paperwork itself. Provide enough detail to ensure that an auditor, committee or lawyer, unfamiliar with the situation and perhaps unfamiliar with University practices, will understand what has happened and find no gaps in the record. What is the best possible documentation?
The best documentation is obtained when proper, complete and original records are maintained at the time (document as you go).
The second best is an explanation by whoever created the original documentation.
The third best is an explanation by whoever approved the original documentation.
The least effective is documentation that consists of notes taken over the phone when contacted by the office requiring the support.
If there are problems with documentation, it is best to correct them at the time, rather than try to deal with them later. Following are some examples of areas where inconsistencies or lack of detail often occur:
Personnel Actions: Once you make a choice in hiring, merit evaluation, or promotion and tenure, you must be able to document the reasons for this decision. This includes documentation of peer committee actions: for example, number of votes. With classified staff especially, departments must keep records to substantiate personnel actions later (for example: exceptional performance which might justify an exceptional merit raise, or problems with an employee). Without documentation, you may find it impossible to act or you will lose grievances and law suits when you do act.
Reasonable Expenses: Many people are puzzled by the term "reasonable expenses." The easiest way to think of this is that reasonable costs are those directly related to the performance of a contract. For example, paying for a taxi for an independent contractor may be reasonable but paying for personal long distance calls generally is not. Paying for an independent contractor's food is reasonable but paying for his or her wine is not. When in doubt, don't.
Purchasing: There must be consistency or an explanation of any differences between a requisition document and its attachments, such as a letter of agreement. For example, two air fares on a purchase requisition may have the same destination but different costs. Everyone knows fares vary depending on what day of the week one flies, but the reason for the cost variance may not be obvious and needs explanation.
Conferences: If a program is advertised as sponsored by the U of A, then revenue from the conference should go to the U of A and all purchases (such as for hotel and conference facilities, catering, printing, etc.) must be processed following University purchasing and bid procedures. Payments should only be sent to the U of A Foundation if the conference is sponsored by the Foundation.
Operational Activities
Purchases: The University subscribes to the philosophy of a strong centralized purchasing function to ensure compliance with the State of Arizona procurement laws. Only the Director of Purchasing and persons delegated by the Director of Purchasing are authorized to commit the University for a purchase of goods or services. Be sure to allow sufficient lead time for the Purchasing Department to process your orders - don't tie their hands by making arrangements with a vendor then asking the Purchasing department to formalize the agreement. Unauthorized purchases will be considered a personal obligation.
At the University of Arizona, goods or services ordered in one fiscal year from a general operating account must be received by June 30 to be paid from that fiscal year's budget. If the order is delayed beyond June 30, the funds will have to come from next year's budget.
Grants/Contracts: Individual employees of the University are not authorized to sign a contract or bind the University on their own authority. The Arizona Board of Regents has granted signature authority to certain officers of the University. In accordance with Arizona Revised Statutes, any unauthorized person incurring an obligation for the University may be held personally liable.
Sponsored Projects Services is responsible for central grants and contracts administration, including proposal review, award processing, account setup and closeout, budget maintenance, financial reporting, cash management, expenditure preapprovals, accounting error corrections, property administration, and audit contact.
Service/Recharge Centers: Departments frequently request the establishment of "recharge style" accounts for the purpose of charging other accounts, frequently grant or contract accounts. For example, a department may generate goods or services that are used by other departments and they want to recover their costs. These activities, referred to as "service centers," are subject to the University's Service Center Policy, which provides guidelines to ensure compliance with Federal and accounting requirements. Departments entering into such activities must be willing to devote above average levels of administration time because the process of establishing and maintaining such activities is very involved.
Financial Practices: Trust your people but check regularly. Accounting policies and procedures have been established to ensure accuracy of the financial records, compliance with laws and regulations, and effective internal controls over financial activities. Internal controls require "separation of duties" and standard business checks and balances in handling financial matters. These rules do not imply a lack of trust but rather are intended to make the organization safer and sounder, more efficient in its operations and more effective in meeting its objectives by discouraging negative actions and supporting positive actions. Following are some examples of internal control procedures.
The same person should not prepare and approve a document. For instance, the person preparing the payroll roster should not also approve or sign it. The review process provides reasonable assurance that the time has been recorded correctly and discourages illegal actions, such as recording more time for an employee that was actually worked or recording time for a nonexistent employee.
The person authorizing a payment should not be the same person who receives or delivers the payment. This discourages illegal actions such as an employee charging items for personal use to the University.
Cross training of staff. Besides providing control, it is reassuring to know that others in the office understand the rules and procedures.
Indirect Cost Recovery (ICR): Under current Federal rules, we have no obligations to spend ICR money in any particular way. The University has generally reallocated ICR money to support areas based on their relative contribution to the overall pool of indirect costs. The Federal government negotiates our ICR rate after a review of costs incurred, applying the principles of OMB Circular A-21.
Because UA has used ICR funds prudently in the past, the Arizona legislature has allowed us to allocate the funds as we see fit. This program must be maintained to preserve our current flexibility.
Personnel Administration
The University has established comprehensive policies and procedures for employment to ensure compliance with Federal and State legal requirements. There will always be paperwork that must be completed BEFORE a person can begin working at the University.
It is very important to check with the person in your department or the central administration department responsible for handling personnel issues to ensure that all requirements have been considered and addressed. It is much easier to prepare the paperwork correctly to begin with than to correct something that was done wrong. For example, all employees must submit proof of citizenship or authorization to be employed in the United States. With student hires we must ensure that the position will not affect his or her eligibility for financial aid. One problem that can result from incorrectly processing new hires is that the new employee may not get the first paycheck in a timely manner, which frequently causes ill feelings.
The University is committed to equal opportunity and affirmative action. The Affirmative Action Office is responsible for providing a work and educational environment of excellence for all persons, guaranteeing equal opportunity to all personnel, students, and sponsored programs and activities regardless of race, color, religion, sex, age, national origin, handicap, disabled veteran or Vietnam Era Veteran status. This task is inherently shared with all administrators. Equal opportunity and affirmative action apply, but are not limited to, the following: employment, upgrading, demotion and transfer, recruitment and recruitment advertising, layoff and termination, rates of pay and other compensation means.
Equal Treatment of Comparable Groups: All personnel actions involve two processes: 1) formulating standards that will define a group of people; and 2) treating all members of that defined group in the same way. Some less obvious examples of this principle follow:
Procedures on interviews and opportunities offered to each candidate at each stage in the recruiting must be the same. In the case of faculty, the standards for promotion and tenure must be the same for each member of a defined group. For example, our procedures should ensure that we don't have some candidates listing articles both in press and in print while other candidates list only articles in print.
Adjustments must be done in an egalitarian manner. General adjustments for employees paid from soft money (generally, any non-state accounts) cannot exceed that of state funded employees, and vice versa. The money allocated for merit adjustments for soft money employees as a percent of the soft money salary base cannot be greater than the percent approved by the legislature for state funded employees. This is true even if soft money is available for larger adjustments.
Supplemental Pay: Compensation in addition to the amount specified for full-time personnel is only permitted under certain circumstances and, when permitted, the amount of supplemental compensation is limited by policy.
If a person is already employed as one full-time equivalent (1.0 FTE) and takes on an additional duty within their current position, we can't pay that person additional salary. For instance, we cannot pay a research professional extra to teach a course if the professional is already working full time. However, if the person takes on additional duties outside of their current position, supplemental compensation may be possible.
For an employee on academic appointment, supplemental compensation is possible for certain instructional and other activities, such as summer session classes, credit-bearing courses offered off-campus through Extended University and instruction to noncredit conferences. For professional staff on fiscal year appointments, supplemental compensation is possible for certain instructional activities, but such compensation in any amount is not available without prior approval by the President.
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