1410 PR.03 University Service Providers: Accounting and Billing
This procedure supports Policy 1410 University Service Providers. It describes the accounting and billing procedures all University Service Providers (“USPs”) are required to follow.
A. Unique Chart of Accounts
Per Policy 1410, Section 1410.3, USPs must establish a unique combination in the Chart of Accounts (“COA”), distinct from other departmental accounts. USPs must use their unique COA combination to record all revenues and expenses pertaining to the USP’s activities.
USPs need to be able to capture the cost buildup and cost recovery for services provided (either for each individual service or by grouping multiple services or service lines) in a unique COA combination and are required to use a specific set of programs. Complex USPs (e.g., Specialized Service Facilities (“SSFs”), some Recharge Centers (“RCs”), and some Other Service Providing Units (“OSPUs”)) are typically identified by a unique cost center or department. Less complex USPs (e.g., other RCs, Cost Allocation Units (“CAUs”), and other OSPUs) are typically identified by a unique project.
The USP’s unique COA combination should include only expenses necessary to operate the USP, including salaries, wages, fringe benefits, and supplies, as well as the cost recovery (a.k.a. revenue) generated from the sale of that good or service. If the USP offers multiple goods and/or services whose rates are different, it is recommended (but not required) that the USP establish a unique COA combination for each good or service.
USPs should establish their unique COA combination(s) at initial registration (see Procedure 1410 PR.01 University Service Providers: Registration and Annual Renewal) and as-needed thereafter.
See Accounting by and for University Service Providers in the Accounting Manual for detailed guidelines on COA usage and USP accounting.
B. USP Monthly Revenue Ledger Account Reconciliation
USPs that charge sponsored awards and/or external customers are responsible for ensuring that revenue ledger accounts for which they are accountable are reconciled monthly and in a timely manner. All other USPs are encouraged to perform the monthly revenue ledger account reconciliation as a best practice.
The USP revenue ledger account reconciliation is the comparison of a revenue balance in the general ledger to another source of financial data, such as a sub-ledger or another system. The purpose of the USP revenue ledger account reconciliation is to verify the accuracy, completeness, and validity of revenue ledger accounts included in the general ledger at a given point in time.
Reconciliation, verification, and substantiation are essential for an effective internal control environment to help ensure:
- Accumulated general ledger account balances can be substantiated by supporting detail records;
- The accuracy and completeness of transactions that have been posted to general ledger account balances;
- The information transmitted to, contained in, and reported from the University’s financial systems is accurate, complete, and recorded in a timely manner;
- The information can be relied upon for making financial and administrative decisions;
- Efficient and effective audit process; and
- Fraud, theft, compliance violations, and other irregularities are quickly detected and reported to the appropriate authorities.
The difference between revenue balances recorded in the general ledger and other sources of financial data are reconciling items. Reconciling items may be caused by timing differences, general ledger errors (e.g., sub-ledgers errors, manual journal entries), or errors in the other sources of financial data. A critical element of the account reconciliation process is the resolution of differences. Please refer to the Accounting Manual for University standards on how to properly resolve and account for differences identified during the reconciliation process.
A. General Billing Information and Journal Sources
USPs must document and submit information regarding their billing practices as part of the initial registration and annual renewal processes (see Procedure 1410 PR.01 University Service Providers: Registration and Annual Renewal). USPs are expected to adhere to the billing information provided during this process, unless they submit a request, and subsequently receive approval, for modifications.
USPs bill internal users with journal entries, which may be entered manually or uploaded in a spreadsheet. Each USP should use its unique system identifier (Journal Source) and its assigned Ledger Accounts and Categories in the COA for billing. Journal Sources, Ledger Accounts, and Spend/Revenue Categories are acquired at initial registration (see Procedure 1410 PR.01 University Service Providers: Registration and Annual Renewal). USPs should not use the ISP Adjustments (ISPADJ) source for billing.
The following points are important information pertaining to Journal Sources:
- Each USP may only use the unique Journal Source assigned by the Controller’s Office;
- USP Journal Sources are for billing customers only; and
- USPs must not make regular journal entries (i.e., anything other than customer billing and corrections to customer billing) using the USP Journal Sources.
USPs must accept, as necessary, multiple charging instructions for each good and/or service they provide. If the USP’s system generally feeds a spreadsheet into the accounting system and is not able to accept multiple charging instructions, the USP must bill the charges with manual data entry into a journal entry.
Refer to Procedure 1101 PR.03 Journal Entries for instructions on creating journal entries manually and by spreadsheet upload. Please note, the service provider journal instructions include key data points that should be included in the journal entry (e.g., include billing contact name and phone number in the “External Reference ID” field).
B. Billing and Accounting for Discounts
USPs have the discretion to offer users discounts on their goods and/or services, with approval from their lead administrator. A discount is a reduction in price charged to a user below the typical Customer Rate for that good or service. USPs should indicate such discounts in their billing mechanism and should properly record such discounts in their accounting, pursuant to Accounting by and for University Service Providers in the Accounting Manual.
C. User Charging Instructions
USP users are expected to provide valid and appropriate charging instructions at the time of the initial order, and to provide timely updates for any changes to those charging instructions. USPs are expected to process updates from users in a timely fashion (generally, within one full billing cycle). USPs that experience problems with provided charging instructions should contact the user’s respective Business Office.
D. Substantiation of Charges and Billing Documentation
USPs that charge sponsored awards and/or external customers are expected to substantiate the billed amounts and provide information to the user about the services provided. All other USPs are encouraged to substantiate the billed amounts and provide information to the user about the services provided as a best practice. This substantiation may take many forms including, but not limited to, the journal entry memo fields, standalone invoices from the USP’s optimized subsystem, or emails provided to users. At a minimum, USPs are expected to be able to provide substantiation documentation upon request from either the user (or representative), the billed COA’s owner (or representative), or an internal compliance request.
Substantiated billing documentation is defined as including, at a minimum, the following pieces of information:
- Requestor’s name;
- Description of delivered goods/services;
- Date each deliverable was delivered;
- Number of units delivered per service;
- Customer Rate per unit of service;
- COA(s) charged and breakdown of split charging, if applicable; and
- Discounts from Customer Prices, if applicable.
E. Timing of Transaction Billing
All USPs must submit bills for their services at least monthly based on actual usage. Annual charges are not allowed, as they do not generally represent usage. As a best practice, goods and/or services should be billed in the fiscal month in which they are provided. Where a USP is unable to perform accurate billing within the applicable fiscal month, the USP is permitted a grace period allowing charges to be billed no later than the following fiscal month-end close. Note, however, all charges incurred in June must be billed in the current fiscal year.
USPs that previously elected to use the alternative billing period that runs from the 21st of the month to the 20th of the following month may continue to do so. If the USP elected this option, the June/July period is split into two bills as follows:
- June 21 through June 30: first of two split bills for June/July period – post to the June period in accordance with year-end closing procedures and timeline.
- July 1 through 20: second of two split bills for June/July period – post to the July period.
If an order or service is not complete during a billing period, the USP should bill the user for the portion of goods or services that were provided. The billing description should state that the billing is for a partial order.
F. Correcting a Billing Error
Users should contact the USP directly if they notice a billing error. If a requested correction is the result of the USP’s error, the USP is responsible for making the correction in a timely manner. If the USP uses a sub-system for billing, the USP should generate an adjustment to the original invoice through that sub-system, whenever possible. USPs making corrections to departmental billings must use their original assigned Journal Source.
If, after attempting in good faith to resolve an error, the user is not satisfied with the USP’s resolution, the user may contact the Controller’s Office (email@example.com) or the YSM Controller’s Office (firstname.lastname@example.org) to request assistance with the resolution.
Users are responsible for making any needed correction to an original charge that is not the result of a USP error. If the change is permanent and continuing forward, users are responsible for contacting the USP with updated charging instructions. Departments and/or their representatives must use a Journal Source that has been specially configured for this purpose (i.e., Name = ISP Adjustments; Ref ID = ISPADJ). Departments may NOT use the original USP’s Journal Source.
Note: Internal income and expense codes may NOT be used on capital projects. Alternatives for recovering internal costs from capital projects are found online in Ledger Accounts and Categories. Departmental users should not reclassify USP charges from a non-capital project to a capital project. If such a change is required, departments must reach out to the USP so that the full transaction can be reversed (internal income and internal expense) and reprocessed using pairs that are approved for usage on capital projects.
USPs wishing to provide goods and/or services to External Users must obtain approval pursuant to Procedure 2100 PR.02 External Sales Approval Process prior to providing goods and/or services to External Users. USPs must record all external revenue in an external income ledger account and revenue category. For detailed account information, see Accounting by and for University Service Providers in the Accounting Manual.