OSU FIS 1403-03: Designated Operations

Purpose

To provide accounting guidance for a Designated Operation including fee structure, customer base, expenses, carryover, and subsidies.

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Policy

The 05xxxx series of funds (Fund Type 12) are used to account for self-sustaining activities related to community education, testing, and other public services. 

These are identified as Designated Operations:

1. Non-credit Instruction (field trips and international education) - the university collects funds from students for their individual travel, housing, and other related expenses which are not part of the direct cost of instruction.
2. Community Education (non-credit workshops, conferences, and seminars) - there is generally a registration fee for these.
3. Testing services (a testing activity that performs work primarily for customers external to the university) - fees charged for these activities must be formally approved by the State after a public hearing held each fiscal year.
4. Public Service (non-instructional services for the general public or outside groups) - fees are charged for the service.

Designated operating funds are accounted for in the Other Funds Non-Limited category of the OUS legislative budget. 

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Procedure

A Designated Operation fund is established when approximately 80% or greater of a self-support activity is funded from external sources (outside OSU).  A Service Center fund should be used when the majority of the recharge activity is internal to the university.

Expenditures
All costs for carrying out the self-support activity should be placed on the Designated Operation fund. This includes labor, OPE, supplies, minor equipment and travel, as applicable.   Purchase of capital equipment should be made in the departmental Education & General (E&G) funds.

Designated operations are subject to a university administrative overhead applied to all expenditures.  There is no overhead charge on transfers (see “Fund balances” below).  The administrative overhead charge is posted as account code 70003 and is automatically calculated by Banner.  Do not use account code 70003 on individual JVs.

Designated operations are subject to State of Oregon Department of Administrative Services (DAS) assessments.  These are covered by the university E&G budget funds and are not posted to the individual designated operation funds.

Departmental administrative effort may be incurred for promoting, supporting, or accounting for these activities.  Up to 15 % of revenue for the current fiscal year may be recovered by the department for these administrative costs.  Justification for the percentage charged must be included in the text of the charging journal voucher and backup must be available in the department for review by Business Affairs and/or auditors.

The journal voucher entry is:

Dr. Designated Ops 05xxx fund Index       use Account Code 28201
                                                             (Admin. Service Charge)

Cr. Department E&G 001100 fund Index    use Account Code 79390
                                                              (Admin. Service Internal Sales)

Types of costs that can be considered in the calculation of the departmental administrative effort above:

Department clerical activities- brochure and workshop material preparation, workshop registrations, travel/lodging arrangements for speakers or attendees, and handling workshop logistics (locations, refreshments, equipment).

Departmental accounting activities - billing of service and testing activities, depositing of receipts, preparation of personal services contracts, payment of vendor invoices, balancing and reconciliation of funds.

Developing fees
Fees should be developed to cover all costs associated with the self-support activity and posted on the fund. There may be multiple services and fees associated with one fund.  Fees to Internal customers (OSU and other OUS institutions) may not include unallowable costs, capital equipment purchases or depreciation, building space, or building operations/maintenance costs. 

The fees must be published in the OSU External Fee Book, or Internal Fee Book if appropriate, before they may be charged.   See “Recharge Activities” FIS 1403-01 for greater detail in calculating fees and documentation of customer usage.  

Customer base
The percentage of external vs. internal revenue (customers) should be reviewed annually to see if a Designated Operation fund is still appropriate.   Internal sales (09xxx account codes) should be no greater than 20% of total revenue.  Contact Business Affairs if a change occurs.

Revenue
All cash received from recharge activities of a Designated Operation is to be deposited with an 06xxx income Account Code.  Cash received as a gift can not to be deposited in these funds; see FIS 102-05: Gift Income. 

Internal (non-cash) transactions must use 09xxx internal sales Account Codes as the credit on the journal voucher processing the recharge activity.  See FIS 1107 JV Processing.

Carry forwards
Funds may be carried forward from one year to the next fiscal year for continuation of the designated operation program.  Fund balances exceeding $25,000 or 20% of the annual revenue will be reviewed with the department as to the planned future uses for the funds.

Fund balances
Fund balances above those needed for the future functions of the designated operation are transferred to the Education and General (E&G) Fund -Index ZARR70.  The responsible department of the designated operating fund completes the journal voucher.  The department then Emails a request to the Office of Budget and Fiscal Planning for expenditure budget to the appropriate E&G operating index for expenditure. 

The journal voucher entry is:

Dr. Designated Ops 05xxx fund Index   use Account Code 92001
                                                         (Transfer out)

Cr. Index ZARR70                             use Account Code 91001
                                                          (Transfer in)

Covering fiscal year-end deficits
Any overdrafts (deficit fund balance), as determined after posting receivables and outstanding payables, must be eliminated before year-end closing by transferring of adequate funding by the responsible department from E&G funds or gift funds.

The journal voucher entry is:

Dr. Department funded Index      use Account Code 24901
                                                 (Designated Operation Fund Support)

Cr. Designated Operation Index   use Account Code 09398
                                                 (Designated Operation Reimbursement)

Closing a Designated Operation fund
When closing a designated operation fund, all the accrual account codes (Axxxx and Bxxxx) must be $0 and there can be no encumbrances.  The cash balance then transferred to the E&G Fund -Index ZARR70.  The responsible department of the designated operating fund completes the journal voucher.  The department then Emails a request to the Office of Budget and Fiscal Planning for expenditure budget to the appropriate E&G operating index for expenditure. 

The journal voucher entry is:

Dr. Designated Ops 05xxx fund Index   use Account Code 92001
                                                         (Transfer out)

Cr. Index ZARR70                             use Account Code 91001
                                                         (Transfer in)

Record retention
For external (cash) transactions - documentation of fee, calculation, billing, and receipts should be maintained for three (3) years.

For internal (journal voucher) transactions - documentation of fee, calculation, and billing must be maintained for eight (8) years because these may involve charges to federal grants or contracts.

References
OUS Policy 05.712: Designated Operations in the OUS Fiscal Policy Manual
FIS 1401-02 Sales of goods and services policy

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