Reviewing Internal Sales activity annually is a best practice business model and should be completed by all units conducting internal sales. The preceding year's financial information will provide the basis for developing the following year's rate.
Internal Sales Business Managers should monitor internal sales activity throughout the year to assure a significant surplus or deficit will not exist at year-end. If a significant surplus or deficit is projected, work with the Internal Sales Office to determine if the rate should be adjusted within the same fiscal year.
How to review internal sales activity:
Review the Internal Sales Business Plan.
The department or college that conducts the internal sales activity is responsible for reviewing the Internal Sales Business Plan on an annual basis.
The review of the business plan should consider, but not be limited to, the following questions:
- Does the recharge center continue to meet the criteria to conduct internal sales activity? As a recharge service? As a specialized service?
- Does the internal sales activity continue to provide a service that cannot be met elsewhere?
- If this service can be provided more cost effectively elsewhere, what is the rationale for sustaining the internal sales activity?
- Should the internal sales activity be discontinued?
Budget to Actual analysis
Compare budgeted revenues and expenditures to the current year-end results on a line-by-line basis. Identify large variances and analyze reason for variance, i.e.
- Determine if all resources required are included in the rates
- Depreciation expense in the operating fund should match annualized depreciation.in the plant fund.
Determine the surplus or deficit:
Total annual revenue less total expenses plus inventory not consumed and subsidies equals the surplus or deficit. (See Internal Sales Activity Reconciliation Template)
Determine adjustments to be made to following year's rate:
All reasonable surplus or deficits from prior year must be incorporated in the calculation of the following year's rate development. Any excessive surplus may require refunding the customers. Any excessive deficit may require a subsidy from the college or department. Please contact Internal Sales Office for assistance in determining the appropriate handling of excessive surpluses or deficits.
Calculate the adjusted rate using the steps described in Administrative Procedure: Establishing Internal Sales Rates. Use the preceding fiscal year's financial data to estimate expenses and revenues for the following year.
Submit the new rate proposal to the Internal Sales Office
Each year the new rate proposal for the forthcoming fiscal year may be submitted to the Internal Sales Office by the Chief Financial Manager in preparation for future compliance reviews.
Implement the new rate.
Customers are to be charged the new rate at the beginning of the fiscal year.