Section 22.1 - Contracts for Revenue Generating Activities
A contract is an agreement between the University and one or more other parties, creating obligations that are legally recognizable or enforceable. Revenue generating agreements are contracts under which the University receives compensation for providing goods or services to a third party. Before providing goods or services, units should ensure that an agreement has been fully executed between the University and the client. Agreements are fully executed when they bear the signatures of all parties obligated by the agreement, including the University Comptroller. Delegates who sign agreements on behalf of the Comptroller must have express authority to do so, as outlined in Section 1, Initiation, Review, and Approval of University Contracts and Leases.
Revenue generating activities should support at least one of the University's missions of teaching, research, public service, and economic development. Units proposing to enter into revenue generating agreements with third parties must protect the interests of the University by adhering to the uniform policy and procedures outlined below and in Section 2.3.
A written revenue generating agreement is required whenever a University unit is providing goods or services or access to University facilities for which payment will be received from a third party. Such revenue generating activities are not a part of the University's daily operations and may include:
- Professional services, such as consulting, educational programs, health care services, counseling, and training
- General services, such as utilities, data collection, proficiency testing, and laboratory testing
- Outsourced dining services, vending services, and franchising operations
- Entertainment and other events held on University premises
- Sponsorships for which the University provides acknowledgment opportunities or other considerations in return for contributions or donations, such as athletic sponsorships
- Leases or rentals of University property, such as real estate, facilities, or equipment
Revenue Generating Activities Not Covered by this Policy
The University engages in many revenue generating activities that are part of its daily operations, but do not require revenue generating agreements. This section does not cover the following revenue generating activities:
Examples of normal, daily operations include the hospital treating patients, the library providing research and reference services, students enrolling in the University, and the sale of goods and services by campus unions, bookstores, agriculture, and other units.
Services provided by one University unit to another (such as consulting services) do not require revenue generating agreements. (See Section 17.2, Classification of Independent Contractors Versus Employees).
Third-party sponsored projects that have a defined scope or objective and generally require the University to submit reports if not more to the sponsor. Typically the University submits a proposal to a funding source, such as a federal, state, local, or foreign governmental unit, a foundation, an association, or a commercial entity. The University may charge a facilities and administrative (F&A) fee and/or fringe benefit rates for sponsored projects. (See Section 16.1.5, Sponsored Projects Administration)
Use of Intellectual Property
The Office of the Vice President for Research sets guidelines and assists in structuring agreements related to the use of patents, copyrights, and research related trademarks, in consultation with the Office of the Vice Chancellor for Research in Chicago or Urbana-Champaign and the Associate Vice Chancellor for Academic Planning and Graduate Education and Research in Springfield. The Office of Public Affairs on each campus sets guidelines for use of other University symbols, logos, and trademarks.
Policies and procedures related to gifts are defined in Section 11, Gifts and Endowments.
Use of State or Federal Funds
Revenue generating agreements involving state or federal funds must be submitted to the appropriate campus pre-award unit for review and assistance in determining the appropriate method of processing.
Healthcare Related Services
Specific contract terms are required when healthcare services are provided by the University. Units providing healthcare related services to clients should contact OBFS for guidance.
Guidelines for Revenue Generating Agreements
Units may enter into revenue generating agreements based on a client's need for University services and/or use of University facilities. Once a unit determines the need for a revenue generating agreement, college/administrative approval is required before the unit continues discussions with the client. Units need to consider the following factors in evaluating the feasibility of providing goods, services and/or access to University facilities:
- Relevance to the University's mission
- Insurance considerations - see Section 6, Insurance
- Availability of unit resources to provide the requested services, including personnel, facilities, time, equipment, and other considerations
- Potential for damage to the University, including, but not limited to:
- Negative impact on the University image
- Damage to University-owned equipment or property
- Compliance with applicable laws and University policies including, but not limited to:
- Completion of a competitive selection process (required for most concessions)
- Unrelated Business Income Tax (UBIT):
- UBIT is assessed on business activity that is carried on regularly for the production of income and is not substantially related to the missions of the University and otherwise qualifies as unrelated business income (UBI) according to Section 18.13, Unrelated Business Income Tax (UBIT).
- All revenue generating activities that may qualify as UBI must be reviewed by University Tax for determination of UBI status.
- If University Tax determines that an activity produces unrelated business income, the unit must annually provide University Accounting and Financial Reporting with detailed information on revenue and expenditures for the University's UBIT return.
- Compliance with laws prohibiting unfair competition with the private sector (e.g., University Credit and Retail Sales Act)
- Cost of providing services/facilities compared to the anticipated revenues
- Client's financial viability and liquidity/ability to pay
Units should consult with the appropriate OBFS office for guidance in interpreting and applying the factors described above.
For additional information regarding the contracting process, see Section 1, Initiation, Review, and Approval of University Contracts and Leases.
Illinois Contract System (iCS)
The Illinois Contract System (iCS) is the University's electronic contract management system. Units using iCS are able to develop and route their contracts electronically, instead of in paper form. For more information regarding iCS, including job aids, training opportunities, who to ask for help, and other resource materials, see iCS Resources.
Responsibility for Management of Agreements
Units are responsible for the management and administration of each revenue generating agreement within the unit. This responsibility includes establishing and maintaining adequate internal controls.
The unit head/designee will ensure periodic reviews with the client(s) to reconfirm scope of services, confirming that services are being provided in accordance with the agreement. In case of a dispute, or a potential breach of contract, the unit should contact the appropriate OBFS office for assistance.
Account for Revenue Generating Activity
After a revenue generating agreement has been fully executed, the unit is responsible for properly recording the revenue, corresponding accounts receivable, and receipts collected in Banner Finance according to the following guidelines.
Establishing a Revenue Generating Fund in the General Ledger
After a revenue generating agreement has been fully executed, the unit is responsible for properly recording the revenue and corresponding accounts receivable in Banner Finance. Revenue generating activity is typically recorded in a self-supporting fund. If a suitable revenue fund (C-FOAPAL) for the activity does not exist, it must be established. See Section 22, Request Approval for Self-Supporting Activities for detailed information on establishing a suitable revenue fund and unit responsibilities for managing this fund.
Billing and Recording Receivables
Accounts Receivable (AR) functionality resides in the Banner AR system which serves as the University's centralized billing system. See Section 5, Receivables, for requirements pertaining to the proper billing, recording and collection of receivables expected from revenue generating activity. Units at all campuses that request and receive approval for exemption from using Banner AR are responsible for accurately recording all revenues and corresponding receivables in the University accounting system.
Units that have received OBFS approval to bill clients directly instead of through Banner AR are responsible for depositing all payments immediately upon receipt to University Student Financial Services & Cashier Operations (USFSCO) along with the correct C-FOAPAL and all pertinent information concerning their source and application. Units receiving payments for deposit must be authorized to collect funds. See Section 10, Cash Handling for information on becoming an authorized cash handling unit.
Collecting Delinquent Receivables
USFSCO performs all collection activity on delinquent receivables billed through Banner AR. Units that have received OBFS approval to bill clients directly instead of through Banner AR may request assistance from USFSCO if they encounter difficulty collecting their accounts receivable.
Concession - The right granted by a license, lease or other agreement to use University property, whether tangible or intangible. A concession also includes the right to engage in a certain activity on the property or using the property.
Contract - an agreement between the University and one or more other parties, creating obligations that are legally recognizable or enforceable.
OBFS chief business officer -
- At UIUC: Assistant Vice President for Business and Finance
- At UIC: Executive Assistant Vice President for Business and Finance
- At UIS: Director of Business Services
- For System Offices: Senior Associate Vice President for Business and Finance
Unit Head - a unit head is a department head or higher. Some units do not have department heads; some small colleges do not have departments. When there are only College-level offices for administration, signature should be that of the Associate Dean or Dean as "unit head."
Who To Ask
Sponsored Projects/Use of State or Federal Funds
Revenue Generating Agreements, including those for Healthcare Related Services
Illinois Contract System (iCS)
Accounting and Receivables Reporting
Cash Handling, Managing Receivables, or Collection Assistance
Related Policies and Procedures
Please send questions regarding this policy manual to OBFSPolicies@uillinois.edu.
Last Updated: January 24, 2017 | Approved: Senior Associate Vice President for Business and Finance | Effective: December 9, 2013