Getting and Spending Your Money
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.
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 that 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 Development Office. Cash and other checks received must be deposited immediately with the Bursar's Office. You may not set up separate bank accounts.
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.
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.
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 for it out of your own pocket. Sponsored Projects monies not spent within the project period or for the intended purpose may revert to the sponsor, depending on the terms of the contract.
Designated funds include proceeds from a variety of sources. A few examples are summer session/Outreach College classes; income from short-term investments; proceeds from sales and services; and the recovery of indirect costs from Sponsored Projects. The Arizona Board of Regents and University Administration determine the purposes of these funds.
All gifts (money or property) must be officially accepted by the Development 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 Development 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.
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.
The following list indicates at a glance the type of account based on the account number range.
1000000 through 1599999 State General Operating Accounts
1600000 through 1999999 Auxiliary (Sales) Accounts
2000000 through 2999999 Designated Accounts
3000000 through 4999999 Sponsored Project Accounts
5000000 through 5999999 Other Restricted Accounts
6000000 through 6999999 Student Loan Accounts
7000000 through 7999999 Endowment Accounts
8000000 through 8999999 Plant Accounts
9000000 through 9399999 Agency 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.
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.
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 professionals 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.
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. Why reimbursement is required is another concern. 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. Procurement and Contracting Services and the Purchasing Card (PCard) 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 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 UA 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 Your Money
All monies are maintained in the University's official accounting system, UAccess Financials. In UAccess Financials, we establish "accounts" for each different source of money. You might compare these accounts to checking accounts, with some important differences.
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.
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 object 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).
UAccess Financials accounts can be viewed on-line to determine the status of the account. UAccess Financials provide a variety of information, from a summary by main category to a detailed list of the transactions posted to an account.
You may or may not reconcile your own checking account, but policy requires that all accounts be reconciled at least monthly. Errors do occur, and some errors can only be caught through the reconciliation process. Reconciling means checking to see if the transactions that you requested showed up in your account 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.
Most accounts are budgeted and the reports 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 look up information on accounts on-line. UAccess Financials is fairly simple to use and you can save time by looking up some things yourself. The University Information Technology Services (UITS) offers training classes in these areas.