ADMINISTRATIVE PROCEDURE

Moving Uncollectible Costs to Non- Sponsored Programs

Introduction

Uncollectible Costs must be moved within the guidelines and deadlines in the Administrative Policy: Processing Accounting Transactions or within the timeframe allowed for final sponsor report and/or invoice submission, whichever is earlier. The type of transaction that is processed depends on the type of uncollectible costs, and how old the costs are.

  • Movement of uncollectible costs should be done using either a HSA/Direct Retro (for uncollectible payroll expenses) or a Journal Entry (for non-payroll expenses that are uncollectible).
  • Movement of uncollectible costs from prior U of M fiscal years (for non-payroll expenses) must be processed via a journal entry and the appropriate chartfield strings or via an HSA/Direct Retro for payroll expense.

To Move Uncollectible Costs Select One of These Processes:

A. Removing Budget Overruns

  1. Department Instructions:
    • Identify the transactions not included on the budget period end or final invoice/report to the sponsor. These transactions are in the documents provided to the academic unit by the Sponsored Financial Reporting (SFR) Accountant at the time of budget period end or final invoice/report preparation.
    • Process necessary documents (in accordance with guidelines set forth at the beginning of this procedure) to remove budget overruns from the sponsored project to a departmental non-sponsored program with the correct function code. Refer to Administrative Policy: Processing Internal Accounting Transactions and its procedures for proper deadlines.
    • If budget overruns are the result of pre-award costs, a re-budgeting request that is in process, or similar circumstances, notify the appropriate SFR accountant that the costs should not be removed. If it is later determined that the pre-award costs, or re-budgeting request has not been approved, then remove the costs to a non-sponsored program.
    • If SFR removes the costs to the default UNC0X program, transfer resources to cover the deficit before the end of the fiscal year.
  2. Sponsored Financial Reporting Instructions:
    • Provide the department, at time of budget period end or final invoice/report preparation, a listing of transactions not included on the invoice/report.
    • Determine if the department has transferred the uncollectible costs associated with a budget overrun to a non-sponsored program in accordance with guidelines set forth at the beginning of this procedure.
    • If the department has not removed the uncollectible costs:
      • Prepare the journal entry (in accordance with guidelines set forth at the beginning of this procedure) to remove uncollectible costs associated with a budget overrun from the sponsored project to a departmental non-sponsored program with the correct function code provided by the department or default UNC0X program and charge the department a fee to process the removal if applicable.
  3. Budget Office Instructions:
    • On an on-going basis, monitor deficits in the default UNC0X programs.

B. Removing Unallocable and Unallowable Costs

  1. Department Instructions:
    • Immediately upon identification / notification of unallocable / unallowable costs, process a journal entry to remove the costs from the sponsored project to a departmental non-sponsored program with the correct function code.
    • If SFR removes the unallocable/unallowable costs to the default UNC0X program, transfer resources to cover the deficit before close of the fiscal year.
  2. Sponsored Financial Reporting Instructions:

    Determine if the department has transferred the uncollectible costs associated with a budget overrun to a non-sponsored program, in accordance with guidelines set forth at the beginning of this procedure.

    • If the department has not removed the unallocable and unallowable costs:
      • Prepare the journal entry (in accordance with guidelines set forth at the beginning of this procedure) to remove these unallocable/unallowable costs from the sponsored project to a departmental non-sponsored program with the correct function code provided by the department or default UNC0X program, and charge the department a fee to process the removal if applicable.
      • Continue with procedures to inactivate the project.

Removing Other Uncollectible Accounts Receivable

  1. Department Instructions:
    • Ensure that technical and all other reports and deliverables have been submitted to the sponsor according to the terms of the grant / contract.
    • Be proactive in assisting SFR to facilitate collection process, where appropriate.
    • Forward pertinent payment-related information to SFR and grant administrators.
    • If it appears that a sponsor is not paying invoices timely because of financial difficulties or other complications, consider suspending expenditures until issues can be resolved.
    • Within 30 days of determination of uncollectibility of receivable, process a journal entry (in accordance with guidelines set forth at the beginning of this procedure) to remove uncollectible costs from the sponsored project to a departmental non-sponsored program with the correct function code.
    • If SFR removes the uncollectible costs to the default UNC0X program, transfer resources to cover the deficit before the end of the fiscal year.
  2. Sponsored Financial Reporting Instructions:
    • Follow reporting / invoicing deadlines agreed to in the grant / contract.
    • Follow the Accounts Receivable collection process if the payment is not received.
    • At 120 days from the date of the invoice, make a determination, per the internal collection processes, if the Office of the General Counsel (OGC) should be consulted. If the OGC is consulted, SFR will act as a liaison between the OGC and the academic department to decide on the best course of action. If the OGC is not consulted and it is determined that the uncollectible receivable resulted from problems at the department level (i.e., agency terms and conditions have not been fulfilled) inform the Principal Investigator and department.
      • Void the invoice that created the receivable.
      • If the department has not already done so, remove any uncollectible costs to the default UNC0X program or the program the department identified with the appropriate function code, and charge the department a fee to process the removal if applicable.

Subsequent Payment of Uncollectible Accounts Receivable

  1. Sponsored Financial Reporting Instructions:
    • If the uncollectible costs (or portion thereof) are subsequently collected from the sponsor (bankruptcy settlement, legal settlement, repayment plan, etc), the collected revenue will be applied to the open receivable. If no open receivable exists, an evaluation will be made on the available accounting options on a case-by-case basis. The available options vary based on several factors; sponsor, dollar amount, length of time since the original receivable was voided, if the receivable can be re-generated on the sponsored award or if a non-sponsored receivable must be generated, etc. The end result is reimbursement to the non-sponsored program that bore the responsibility of the uncollectible costs.

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