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Business and Financial Policies and Procedures

Section 22.4.1 - Stores and Services Activities

Chicago Campus Supplement

Storeroom Terminology

Storerooms - Sell goods, supplies, and/or equipment primarily to University units.

Markup - Amount added to the unit cost of merchandise for resale to fund operating expenses (less equipment expenditures), depreciation expense, and permissible prior year over/under recovery.

Selling price - Unit inventory cost of the merchandise for resale plus markup.

Operating costs - Allocable to the storeroom, allowable under University, state, and federal regulations, and reasonable in relation to the goods provided.

Services Terminology

Service facilities - Provide a specific service activity. The may also sell goods, but such sales are incidental to the service activity. Services are provided primarily to University units.

User fee - Aggregate total of estimated fiscal year operating costs (less equipment expenditures), depreciation expense, and permissible prior year over/under recovery, less equipment expenditures divided by estimated relevant user fee base .

Operating costs - Allocable to the service activity, allowable under University, state, and federal regulations, and reasonable in relation to the service provided.

Establishing a Service Activity Account

Upon obtaining the necessary approvals, a request to establish a storeroom or service account should be submitted to the Assistant Vice President for Business and Finance. The forms in Account Create Process are used for this purpose. Information required on the forms includes:

  • Storeroom or service facility name
  • Name, title, and telephone number of person responsible for the day-to-day operations and management of the account
  • Description of product or service
  • Information supporting establishment of user fee or markup:
    Fiscal year estimated operating costs by budget category, including equipment depreciation expense if applicable
    User fee base
    Rationale for user fee base
    Estimated revenue for fiscal year
  • Percentage of use expected by various groups (University units, faculty, staff, students, State of Illinois agencies, and affiliated organizations)
  • Billing rate procedures
  • Unit account number and title to which any excessive under recovery of costs can be transferred (The adjusted fund balance should be compared to the fiscal year revenue to determine the amount of under recovery)
  • Approval of responsible unit head and dean, or director

A general ledger account should be established for each dissimilar service activity. One or more subsidiary ledger operating accounts may be established under each general ledger account.

If there is a change in the operating expenses or user fee base during the year such that an operating surplus or deficit of approximately 10% of gross revenue would result, service unit business administrators are to record a revised budget in UFAS, and adjust user fees or mark-ups accordingly. When the person responsible for the day-to-day operations of the UFAS service account changes, the Accounting Division is to be notified in writing.

Responsibilities of Stores and Services Activity Unit Administrators

Administrative officials are responsible for management and operation of stores and services activities under their organizational jurisdiction, and for ensuring that stores and services activities are administered in accordance with these guidelines.

The Assistant Vice President for Business and Finance or delegate is responsible for promulgating stores and services activities policy and guidelines and for monitoring unit compliance with these guidelines.

A proforma statement of revenue and expenditures for all self supporting accounts must be prepared for each fiscal year. The proforma statement is required for all self supporting accounts which are in the UFAS budget planning system (see Annual Budget Requirements at the end of this section).

At the end of each fiscal year closing adjustments must be prepared (see Annual Accounting Year End Closing Adjustments at the end of this section).

Markup percentages for storeroom operations must be calculated at the subsidiary account level. Interim rate adjustments should be made whenever necessary throughout the fiscal year. The markup percentage is derived by dividing the aggregate total of estimated fiscal year operating expenses, equipment depreciation, and prior year over/under recovery by estimated cost of goods sold (see Storeroom Markup Calculations at the end of this section).

User fees for service activities must be calculated at the subsidiary account level. Interim rate adjustments should be made whenever necessary throughout the fiscal year. User fees are derived by dividing the aggregate total of estimated fiscal year operating expenses, equipment depreciation, and prior year over/under recovery by the expected user fee base (see User Fee Calculations at the end of this section).

A cost of goods sold calculation should be made at the end of each fiscal year. The cost of goods sold is derived by aggregating beginning inventory, purchases for resale, and freight, less ending inventory, purchase returns, and items removed because of obsolescence, spoilage, etc. (see Cost of Goods Sold Calculation at the end of this section).

The depreciation schedule for equipment which is manually recorded by the Accounting Division and provided to each stores or service activity should be reviewed at least annually (see Depreciation Schedule Form)

UFAS statements of account should be reviewed monthly.

UFAS-Property Accounting System (PAS) records of equipment used in storeroom and services activities should be current and accurate.

Billings should be completed in a timely manner (at least monthly) and include adequate documentation.

Fund surplus/deficit must be adequately explained and justified.

Required records must be maintained (see Record Requirements in this section).

Billings

Billings to users should be issued as soon as the service is rendered or the goods delivered, or at least monthly. Since some buying departments use User References 1 and 2, service activities cannot use these fields except as directed by the buying department. Income from user fees and storeroom sales are recorded using a revenue object code. The invoice is to indicate the service provided, date of service or sale, unit cost, and total dollars charged to the user. Any services provided to external users must be billed through the General Accounts Receivable System (GAR).

Documentation

The storeroom or service facility must document that the goods or services were provided to users.

Recommended Documentation Procedures

An authorization requisition (or its equivalent) should be required prior to providing goods or services. The requisition should include the goods or services to be provided, the date, the name of the user, the unit, and the account to be charged. This documentation may be in the form of a paper or electronic work order, requisition, or stores/services voucher authorized by appropriate unit official, principal investigator, or delegate. The person approving the requisition (or its equivalent) must have approved signature authorization on file with the Office of Business and Financial Services.

Goods should be issued:

  • Upon submission of an authorized requisition (or equivalent) which includes the goods requested, the date, the name of the purchasing unit, and the account to be charged
  • Upon signature or authorization of the user or messenger receiving the goods

Either a form or a log may be used as documentation that the goods or services were provided. The form or log may be a hard copy or electronic media.

No signature is required by the seller on the interdepartmental stores or service voucher. In submitting stores or services transactions to the OBFS, the selling unit is certifying that the goods or services have been delivered, the purchasing unit's approval to charge the account is on file, and the source of funds charged is appropriate for the expense.

Review And Error Corrections

The unit receiving the goods or services is responsible for a timely review of the charge:

  • Were the goods or services received?
  • Was the correct amount billed?
  • Were the charges billed to the appropriate account (were the allocations among multiple recipients appropriate)?

The unit charged is responsible for notifying the storeroom or service facility of any billing errors in a timely manner. The storeroom or service facility is responsible for promptly providing the unit with copies of the documentation supporting the charge and promptly crediting any improperly billed amounts.

Inventory For Resale

Storeroom and services activities that purchase merchandise for resale generally record these purchases as a debit to purchase of goods for resale (object codes 8700-8799). Periodically these purchases should be debited to inventory for resale. Inventory for resale should be adjusted periodically for the cost of goods sold by debiting cost of goods sold (object codes 0910-0919) and crediting inventory for resale (account control 1501).

These adjustments should be made at least annually, preferably monthly for high volume activities. The entries may be made manually, by an automated billing system (if one exists), by a UFAS-GL pro-rate program, or by a combination of these methods. Storeroom or services activities should consult with the Accounting Division to determine which method is best for their activity (see "Accounting Entries for Recording Storeroom Inventory" at the end of this section).

Record Requirements

Each stores or services activities unit is responsible for maintaining the following documentation which is to be available for review upon request by University administrators, as well as University, state, and federal auditors. Paper copies or computer files may be used for documentation.

The equipment retention period is four years after disposition of the item:

  • PAS property control number
  • Description
  • Calculation for equipment depreciation for equipment
  • Disposition, including date, method (traded-in scrapped, or cannibalized for parts), and amount of gain or loss on disposition

The following is to be recorded in PAS by the unit and should be kept current:

  • Useful life if different than the asset category useful life
  • Availability code
  • Condition code
  • Entity code

The retention period for other records is four years:

  • Documentation of calculation of user fees and markups
  • Documentation that the goods or services were requested and provided (requisitions, logs, etc.)
  • Stores vouchers documenting the accounts billed
  • Calculation of over/under recovery of costs

Service Activity Costs

User fees and markups should be established to recover actual costs of providing services. Adjustments to user fees and markups are required when needed to avoid a surplus or deficit in the storeroom or services activity account. Any surplus or deficit amounts not considered in rate calculations for the subsequent year must be justified in departmental documentation. The user fee or markup should be established for each fiscal year to recover:

  • Operating costs of the storeroom or services activity
  • Equipment and facility depreciation where applicable
  • Adjustments for over/under recovery of costs

Over Recovery Of Costs

Storeroom or services activities that accumulate an adjusted fund balance surplus in excess of specified limits must refund this difference to users unless the reason for over recovery is adequately justified. Justification should be sent to the Accounting Division. Exception to these guidelines may be granted by the Assistant Vice President for Business and Finance. Such exceptions may be referred by the Accounting Division or requested by the unit (see calculations under Limitation of Over/Under Recovery Costs in this section).

Each storeroom or services activity is required to make an analysis to determine if there was an over recovery in excess of specified limits, based on the April adjusted fund balance, so that any necessary refunds are made in May. (Stores and Services Questionnaire provides a model for determining if a stores or service activity has a surplus/deficit balance.)

Under Recovery Of Costs

Storeroom or services activities that accumulate an adjusted fund balance deficit in excess of specified limits must charge the difference (at year end) to unit funds appropriate for this purpose unless adequately justified. Justifications should be sent to the Accounting Division. Exceptions to these guidelines may be granted by the Assistant Vice President for Business and Finance. Such exceptions may be referred by the Accounting Division or requested by the unit (see calculations under "Limitation of Over/Under Recovery Costs" in this section).

To minimize under recovery of costs, the unit is encouraged to review and adjust the user fee or markup as needed, or at least annually. (Stores and Services Questionnaire provides a model for determining if a stores or service activity has a surplus/deficit balance.)

Limitation Of Over/Under Recovery Of Costs

The aggregate over/under recovery of costs for the campus storerooms and service activities is to be within 10% of fiscal year revenue. The adjusted fund balance of individual storeroom or services activities must be within the limits specified in the following table depending on the storeroom or services activity's fiscal year revenue, unless an exception has been granted.

Limit For Adjusted Fund Balances

Amount of Fiscal Year Revenue

Limit for Adjusted Fund Balances

Up to $50,000

Greater of $3,000 or 20% of FY revenue

$50,000 through $99,999

$10,000 + 10% of FY revenue above $50,000

$100,000 through $1,000,000

$15,000 + 9.5% of FY revenue above $100,000

Over $1,000,000

$100,000 + 5% of FY revenue above $1,000,000

Operating Costs

Costs recovered by a storeroom or services activity may include only those costs which are directly allocable to the activity; allowable under University, state, and federal regulations; reasonable in relation to the storeroom or services performed; and depreciation of equipment and facility used directly by the activity (see "Equipment and Facilities" in this section).

Operating costs include salaries and wages of storekeepers, machinists, technicians, storeroom or services activity supervisors, and billing clerks; vacation and paid leave to be taken during the rate year; termination vacation and sick leave estimated to be taken during the rate year; cost of goods sold; freight (if not considered part of cost of goods sold); operating materials and supplies; maintenance and repair of equipment assigned to the storeroom or services activity; building improvements, such as site preparation for equipment installation which are not capitalized as plant in the PAS; staff development specifically related to the activity; billing supplies; services; value of obsolete items removed from inventory; inventory shrinkage; and inventory overages and shortages. Equipment and capitalized facilities expenditures must be excluded from operating costs.

Inventory Adjustments

These adjustments reconcile differences between physical inventories and inventory records for occurrences such as spoilage, obsolescence, etc. Adjustments to inventory records should be made as explained in Inventory of Merchandise for Resale in this section.

Equipment Depreciation Expense

For those service facilities or storerooms where equipment is purchased with Ledger 3 funds, accumulated equipment depreciation will be manually recorded in the Accounting Division. Depreciation expense for equipment purchased with funds other than Ledger 3 can also be part of the operating costs of a facility if the equipment is used in support of the storeroom or services activity and appropriate accounting procedures explained in "Facility Depreciation Expense" are followed. The related accumulated depreciation will be manually recorded in the Accounting Division. Units must advise the Accounting Division of the equipment purchased with funds other than Ledger 3 so that it can be added to the manually kept unit equipment list. Units will be advised annually by the Accounting Division of depreciation expense. Depreciation expense will not be recorded in UFAS.

Facility Depreciation Expense

In those service facilities or storerooms where the facility is purchased with Ledger 3 funds, facility accumulated depreciation will be manually recorded in the Accounting Division. Units will be advised of the amount of applicable facility depreciation. Depreciation expense will not be recorded in UFAS.

Subsidies

Units may subsidize a storeroom or services activity by charging related personnel and expenses to unrestricted funds in the unit and/or by transferring any fiscal year-end deficit to unit funds appropriate for this purpose (if Ledger 1, limited to transfer of current year transactions). Neither a deficit nor a surplus can be transferred to another storeroom or services activity. Subsidy expenditures for stores and services activities should be coded as unallowable expenditures to ensure exclusion from the indirect cost proposal calculation. They must be recorded in XXX9 object codes, which are reserved for recording A-21 unallowable costs.

Where storeroom or services activities provide free or reduced rate services (such as free services to students), the cost of providing these services must be charged directly to an appropriate unit account.

These subsidies cannot normally be recovered as a component of the user fee or markup assessed by the activity. However, if units elect to use such subsidies as the basis for documenting differential (higher) rates for non-departmental users, this can be done with appropriate accounting procedures, and with special approval of the Assistant Vice President for Business and Finance or delegate.

Unallowable Costs

Unallowable costs consist of costs unallowable under University policy, state law, and U.S. Office of Management and Budget Circular A-21 (see Section 16: Grants and Research Contracts - Sponsored Projects Cost Transfers). Unallowable costs include interest costs (such as working capital, merchandise for resale, etc.) and bad debt expense.

Costs allowable under University policy, but not under A-21, can be charged to storeroom or services accounts when such costs are essential for the management of the activity. They must be recorded in XXX9 object codes which are reserved for recording A-21 unallowable costs so they are excluded from the indirect cost rate calculation, as well as from the user fee and markup computations.

Costs not allocable to storeroom or services activities, such as the salary of departmental administrative staff and expenses paid by the campus, may not be recovered as a component of the user fee or markup charge to internal users since these costs are recovered as a component of the University's indirect cost rate.

Service Provided To External Entities

Although storeroom or services activities are established principally to serve the University community, services are occasionally requested by external entities.

Where the external party is foreign or commercial, the University cannot provide services unless the services are not readily available from a commercial firm in the region, and the services can be provided without a disadvantage to the University users of the facility. The rate to be charged is the rate that would be charged by commercial providers (even though there are no such providers capable of providing the service readily), or the University rate (increased by the indirect cost rate appropriate to the activity), whichever is higher.

Where the external party is another educational institution, the service may be provided if doing so does not disadvantage University users of the facility. The University rate is charged, increased by the indirect cost rate appropriate to the activity.

Inventory of Merchandise for Resale

Inventory Records

Each storeroom must maintain inventory records of each item of merchandise for resale, in order to compute the value of the inventory.

Management Of Inventory Levels

Efficient management of the inventory of merchandise for resale to maximize resources is the unit's responsibility. When deciding upon the appropriate level of inventory, the following and/or other items appropriate to the operation should be considered:

  • Quantity discounts available
  • Lead time (time between order and receipt of item)
  • Cost of storage
  • Obsolescence or shelf life
  • Cost of shortages (including operational shutdowns because of lack of inventory, additional shipping expense resulting from expediting of orders)
  • Opportunity cost of capital (investment income which could be realized if cost of inventory were invested)

State purchasing regulations require that no more than one year's inventory be on hand, except for lifesaving medications, mechanical spare parts, and items for which the supplier stipulates a minimum order.

Physical Inventories And Adjustments Of Inventory Records

A physical inventory of merchandise for resale must be taken at least once a year. This physical inventory may be completed on a cyclical basis throughout the year. The inventory records must be adjusted to reflect the quantity and value of the physical inventory. Additionally, any differences must be recorded in UFAS as a debit or credit to inventory over/short (SL object code 0920) and a credit or debit to inventory for resale (GL account control 1501). The inventory and UFAS records must also be adjusted to reflect the items determined to be obsolete by debiting obsolete inventory (SL object code 0950) and crediting inventory for resale (GL account control 1501). The storeroom or services activity unit business administrator is responsible for ensuring the physical inventory is performed, records are adjusted, and UFAS entries described above are made.

Valuation Of Inventory

Inventory of merchandise for resale should be costed in accordance with acceptable accounting practices consistently followed by the storeroom or services activity. Moving average is recommended for valuing inventory of merchandise for resale (see Inventory Valuation Calculations in this section).

Equipment

All equipment used by a storeroom or services activity must have a PAS entity code assigned (see Property Accounting System (UFAS-PAS) in this section). With appropriate accounting procedures and controls, storeroom or services activities may recover equipment depreciation expense through user fees and markups, and may purchase equipment with storeroom or services activity revenue. Equipment may not be purchased or depreciated through a storeroom or services account unless the accounting procedures described below are followed. Equipment purchased on funds other than storeroom or services activity funds which is used for storeroom/service operations can also be depreciated by following the appropriate accounting procedures described below.

The equipment must benefit multiple users. Otherwise, it should be the responsibility of the individual user. If a piece of equipment is used by more than one storeroom or services facility, its acquisition cost and related depreciation should be allocated to the various storeroom or services facilities based upon usage.

Definition Of Equipment

Storeroom or services activity equipment is nonexpendable, nonconsumable, tangible property with an estimated useful life of more than one year and a cost of $5,000 or more, purchased through any funding source. Equipment with an acquisition cost of less than $5,000 is to be expensed in the year of acquisition unless it is a component of a system. Equipment also includes additions, improvements, or modifications to existing equipment which increase the productivity or useful life of such equipment. Storeroom or services activity equipment is that equipment used by the storeroom or services facility.

Replacement parts which do not extend the useful life of the equipment are defined as operational expenses and are not capitalized.

Funding Of Storeroom Or Services Activity Equipment Acquisitions

The following sources of funds may be used for acquisition of storeroom or services activity equipment:

Fund Source

Ledger

State appropriations

Ledger 1

Institutional costs recovered

Ledger 2

Gift funds

Ledgers 2, 6

Non-federal external funds

Ledger 5

Storeroom or services activity funds

Ledger 3

Non-federal plant funds

Ledger 7

Donations of equipment

Not funded

 

Any projected cash deficit in a storeroom or services facility resulting from an acquisition of equipment must have the prior written approval of the Assistant Vice President for Business and Finance before the new equipment is acquired.

Lease-Purchase Equipment

Storeroom or services activity equipment may be acquired under a lease-purchase agreement (capital lease). For the interest on the lease-purchase contract to be a component of the rate, the cost of equipment (lease payments less imputed interest) must be $10,000 or more.

Property Accounting System (UFAS-PAS)

Equipment is recorded in UFAS-PAS. The asset cost is the acquisition price plus trade-in allowance for purchased equipment. Interest paid in connection with equipment acquisition is charged to an interest expense object code, and is not included in the asset value of equipment. For donated equipment, cost is defined as the fair market value when received. (For additional information concerning the determination of asset cost, see Section 12 Property Accounting.)

All storeroom or services activity equipment, whether acquired through a storeroom or services account or from gifts or institutional funds, is identified by recording the entity code in UFAS-PAS. Each unit is responsible for ensuring the entity code is entered in UFAS-PAS.

Equipment can be transferred to a storeroom or services activity only with the specific approval of the Assistant Vice President for Business and Finance or delegate.

The availability and condition codes for storeroom or services activity equipment are recorded in PAS and updated as necessary by each unit. Depreciation expense must by supported by UFAS-PAS asset records with availability and condition codes which document that the equipment is usable, in use, and needed.

Implementation Of Equipment Depreciation

Equipment purchased prior to July 1, 1994 is considered expensed unless the storeroom or services activity was including depreciation as a component of their rates. These guidelines are effective for equipment purchased on or after July 1, 1994.

Recovery Period

For purposes of calculating depreciation, the recovery period for each piece of equipment will normally be five years.

Depreciation Method/Calculation

Only the straight line method of depreciation is used. For equipment with a 5-year recovery period, 20% of the asset cost is the depreciation in the year of acquisition and in each of the four succeeding years.

A capitalized addition to an existing item of equipment is depreciated as if it were a separate item of equipment. The length of the recovery period is the same as the equipment to which it was added and depreciation of the addition begins in the year of the addition's acquisition.

Manual Recording Of Depreciation Of Storeroom Or Services Activity Equipment

Equipment depreciation will be recorded manually in the Accounting Division. The storeroom or services activity unit business administrator will be provided an equipment depreciation schedule annually.

Documentation of equipment schedules for equipment depreciation is to be available for review upon request by University administrators, as well as University, state, and federal auditors.

Establishment Of Reserve

Units who elect to establish a Ledger 7 plant fund reserve account for storeroom or services activity equipment replacement must obtain approval of the Assistant Vice President for Business and Finance.

Disposition Of Equipment

A gain from a trade-in allowance may be used to support the storeroom or services activity. Net asset value, if any, at time of disposal will be considered depreciation in the year of disposition.

Any transfer of equipment between storeroom or services activities must be reviewed and approved by the Accounting Division to assure that appropriate UFAS entries are made.

Facilities

With appropriate accounting procedures and controls, storeroom or services activities may recover facility depreciation expense through user fees and markups, and may purchase facilities with storeroom or services activity revenue.

Definition Of Facilities

Facilities are buildings or additions to buildings (permanent structures to house persons or personal property), and improvements and additions (structural additions that did not previously exist, including remodeling that results in a significant increase in the usefulness and service life of a building, and fixtures, which are permanently attached equipment for furnishings that cannot be removed without cutting into walls, ceilings, floors, or otherwise damaging the building or the items being removed). The cost of facilities must be capitalized.

Remodeling is capitalized because it increases the usefulness of the building. Repairs and maintenance expenses are not capitalized and cannot be depreciated as they are required to put an asset back into normal working condition and are expensed in the year in which they are incurred. (For additional information concerning whether to capitalize or expense, see Section 12 Property Accounting.)

Funding Of Facilities Acquisition

Funding for facilities can be obtained from all the same sources as for equipment. However, facilities depreciation can be a component of the user fee or markup only for those facilities paid for by storeroom or services activity funds.

Any projected cash deficit in a storeroom or services facility resulting from a proposed facility acquisition must have the prior written approval of the Assistant Vice President for Business and Finance before the new facility is constructed or otherwise acquired.

Property Accounting System (UFAS-PAS)

Facilities are recorded in UFAS-PAS. The asset cost is the construction or acquisition price. Interest paid in connection with facility construction is charged to an interest expense object code, and is not included in the asset value of the facility. (For additional information concerning the determination of asset cost, see Section 12 Property Accounting.)

If a facility is used by more than one storeroom or services activity, its acquisition cost and related depreciation should be allocated to the various storeroom or services activities based upon usage.

Recovery Period

The recovery period of each facility constructed with storeroom or services activity funds for the purposes of calculating facility depreciation is fifteen years.

Depreciation Method/Calculation

Only the straight line method of depreciation is used. The asset value of facilities is divided by fifteen years to determine the fiscal year depreciation; therefore, 6.67% of the acquisition cost is the depreciation in the year of acquisition and in each of the fourteen succeeding years.

Recording Facility Depreciation In Storeroom Or Services Activity UFAS Accounts

Accumulated depreciation for facilities will be manually accounted for in the Accounting Division and provided to the stores or services operation at the beginning of each fiscal year for facilities not fully depreciated, and at the time of completion for facilities put in service during the year.

During the first quarter of the fiscal year, the individual designated as the responsible person on the year-end fact sheet will receive the depreciation expense report from the Accounting Division. The depreciation expense report should be reviewed by the storeroom or services activity unit business administrator for accuracy and any problems brought to the attention of the Accounting Division.

Annual Budget Requirements

Pro Forma Statements and Ledger 3 Budget Planning Statements (BPS) are both a financial planning guide for your self-supporting activity and a mechanism for entering subsidiary ledger budgets (estimates of revenue and expense) into UFAS.

Your financial planning should focus on the current fiscal year end estimated fund balance (per the UFAS general ledger) and what the projected fund balance will be at end of the upcoming fiscal year . The fund balance and the cash balance in the general ledger should be in a positive financial position and should be within the allowable carry forward provisions of the Legislative Audit Commission.

Self-supporting units with permanent budgets in UFAS will use the Ledger 3 BPS in lieu of the Pro Forma Statement to establish their budget. Authorized users of the Budget Creation System have the capability to add new accounts and update object code lines by way of the BPS $ Edit/View screen. A statement of purpose for which activity in the account(s) entity is restricted must be completed for both new and existing self-supporting accounts. The Statement of Purpose should include:

  • The scope of the activities for which revenue is generated and expenditures are incurred.
  • A brief description of the clientele who provide income to the account(s) and the relative percentage from University versus Non-University sources.
  • Certification that the activity of the account is solely for the purpose(s) described above. Submitting this BPS information electronically by way of the U of I Budget Creation System will serve as this certification.

The Statement of Purpose should be entered or copied/pasted into the Budget Creation System's Remarks field of the Budget Planning Statement screen of the appropriate self-supporting accounts.

If you were required by the Provost to submit a business plan to eliminate a deficit in your self-supporting account, your estimated budget should conform to that plan.

Annual Accounting Year End Closing Adjustments

At June 30, the University's fiscal year end, it is necessary to make certain adjustments to accounts so that the balances are correctly stated for the annual report. These adjustments key on general ledger accounts, 2-0-XXXXX-XXXX, which are the balance sheets for activity. In determining what adjustments are needed, all account controls, the last four digits of the account number, should be examined.

To ensure that the AMO91 (general ledger) is accurate, the completion of certain tasks is important.

  1. An inventory of merchandise for resale or supplies on hand must be taken and compiled as of June 30.
  2. A trial balance of detail accounts receivable per departmental records must be prepared and reconciled to the receivable account controls in the general ledger.
  3. An analysis of income in the subsidiary accounts should be made to see if any income was for services or goods not yet delivered as of June 30. The preliminary June Report of Transactions (AMO 90) will be the basis for making this analysis.

If there is income which has not yet been recorded but has not been earned during the fiscal year, notify the Accounting Division.

The questionnaire in this section summarizes the information the Accounting Division needs to make journal entries into UFAS. Send responses directly to the Accounting Division, Office of Business and Financial Services, Room 408 MB. It is not necessary, in many cases, for the unit to receive the period 13 ledgers in order to fill out the questionnaire. If any adjustments are identified, or there will not be any based on the period 12 ledgers, submit the questionnaire as soon as possible. Account balances and June transactions may also be accessed by a computer terminal using the CICS screens. If the unit regularly prepares financial statements, they may be submitted in lieu of the questionnaire as long as the statements contain the equivalent information.

Storeroom Markup Calculations

Calculation Of Total-Costs

+ estimated fiscal year operating expenses

+ annual equipment depreciation expense for all equipment assigned/used by the Service Activity

+/- prior year under/over (within limit specified for level of revenue)

TOTAL COSTS

Calculation Of Markup Percentage

MARKUP % =estimated total costs excluding cost of goods sold

estimated cost of goods sold

Calculation of markup for storeroom merchandise

+ unit cost of merchandise for resale

x markup percentage

= MARKUP

Calculation of selling price for storeroom merchandise

+ unit cost of merchandise for resale

+ markup

= SELLING PRICE

User Fee Calculation

Calculation of Total Costs

+ estimated fiscal year operating expenses (excluding equipment purchases)

+ annual depreciation for all equipment assigned and used by the Storeroom or Services Activity

+/- prior year under/over recover

= TOTAL COSTS

User Fee Base Definition

The user fee base is defined as the projected relevant number of service units which will result in a reasonable allocation of costs to the various users. Labor hours, machine hours, CPU time, and computer network connect fees are examples of acceptable bases.

User fee = total costs

expected relevant user fee base

Cost of Goods Sold Calculations

Calculation of Cost of Goods Sold

+ beginning inventory

+ purchases for resale (net of purchase discounts and allowances)

+ freight (if not included in purchase price of items for resale)

  • items removed because of obsolescence, spoilage, etc.
  • purchase returns
  • ending inventory (net of any inventory overages or shortages)

= Cost of goods sold

Accounting Entries for Recording Storeroom Inventory

To Transfer Storeroom Purchases To Inventory:

Debit GL (of L3) acct. ctl. 1501

Credit SL3 obj. code 87XX

To Adjust Inventory Per UFAS To Physical Inventory Per Fact Sheet:

If the physical inventory greater than per UFAS:

Debit Gl ( of L3) acct. ctl. 1501

Credit SL3 obj. code 0910

If The Physical Inventory Less Than Inventory Per UFAS:

Debit SL3 obj. code 0910

Credit GL (of L3) acct. ctl. 1501

To Adjust Inventory Per UFAS To Reflect Removal Of Obsolete Inventory

Debit SL3 obj. code 0950

Credit GL (of L3) acct. ctl. 1501

Schedule A - Cost of Goods Sold

  1. Beginning inventory
  2. Purchases for resale
  3. Freight
  4. Spoilage
  5. Purchase returns
  6. Ending inventory
  7. Cost of goods sold (Lines 1 + 2 + 3 - 4 - 5 - 6)

Inventory Valuations Calculations

Moving average - Moving average is calculated on a per item basis as the sum of the cost of current purchases and existing inventory of that item, divided by the total number of that item.

Example of Moving Average

 

+ Initial purchases

50 items

at $4

=$200

- Sales

20 items

at $4

= 80

= Current inventory

30 items

at $4

= 120

+ Inventory purchase

20 items

at $3

= 60

= Current inventory

50 items

at $3.60

= 180

- Return to vendor

4 items

at $3

= 12

= Current inventory

46 items

at $3.65

= 168

+ Return from customer

5 items

at $4

= 25

= Current inventory

51 items

at $3.69

= 188

+ Inventory purchase

10 items

at $2.50

= 25

= Current inventory

61 items

at $3.49

= 213

- Sales

45 items

at $3.49

= 157

= Current inventory

16 items

at $3.50

= 56

 

Please send questions regarding this policy manual to OBFSPolicies@uillinois.edu.

Last Updated: March 23, 2008 | Approved: Associate Vice President for Business and Finance | Effective: September 1995

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