Yale University Financial Support Services

1. Yale University Financial Support Services Reclassification and Transfer of Funds Training Session

2. Topics of Discussion Session Goals General Journal Entry Rules Current Year Activity/Funds Prior Year Fund Balance Transfers Scenarios

3. Session Goals Review moving funds and correcting errors Distinguish between: The movement of current year activity & funds (revenue/expense correction & group reclassification) The movement of accumulated funds from prior years (fund balance transfer) Introduce the Best Practice Guide Explain that the University is not consistent in the way transfer of funds are created. Explain that the goal of review today is to introduce the best practice guide to be used as a reference when making a journal entry decision.Explain that the University is not consistent in the way transfer of funds are created. Explain that the goal of review today is to introduce the best practice guide to be used as a reference when making a journal entry decision.

4. General Journal Entry Rules Make every attempt to initially apply activity directly to the correct funding source Process and authorize Journal Entries promptly Provide clear and specific explanations for transactions on each journal line including, where possible, the offset PTAEO An authorized department administrator must approve Journal Entries Let�s begin by noting some general rules about journal entries. Remind users that the journal entry description should be the �what� of the transfer, not the �why�Let�s begin by noting some general rules about journal entries. Remind users that the journal entry description should be the �what� of the transfer, not the �why�

5. General Journal Entry Rules Continued The originator of the journal entry is responsible for determining the correct PTAEO and must provide information to all affected parties Appropriate documentation must support all fund balance transfers, corrections and reclassifications. It is assumed that documentation is maintained in the department unless otherwise stated on the transaction Determine if a correction or reclassification is possible prior to making a fund balance transfer Always use the labor distribution application for adjusting salaries and wages

6. Basic Definitions Revenue and Expense corrections, reallocations, or group reclassifications are created when moving CURRENT year activity or net income surplus. Note: a year-end surplus in EXPOP, ENDOW or SPPRO will appear in fund balance for the following year. No journal entry required. Fund Balance Transfers are created when moving accumulated funds from PRIOR years. The 351xxx range of expenditure types are used. When deciding which type of journal entry you need to create, consider these basic definitions. When deciding which type of journal entry you need to create, consider these basic definitions.

7. Prior Year Funds vs. Current Year Activity/Funds This is a visual representation of prior year funds vs. current year activity/funds. Note that July balances are not �true� until the prior fiscal year has ended � generally by October. Note the location for identifying prior year beginning balance. This is a visual representation of prior year funds vs. current year activity/funds. Note that July balances are not �true� until the prior fiscal year has ended � generally by October. Note the location for identifying prior year beginning balance.

8. Current Year Activity- Revenue & Expense Corrections The majority of corrections and reallocations will be completed using the original expenditure type of the transaction being moved. For example, when moving a debit to catering expense from one PTAO to another: Credit 832500 in the PTAO originally debited and Debit 832500 in the PTAO where the expense belongs. Do not use fund balance transfer expenditure types (351xxx) to move current year activity There may also be occasions when a revenue or expense is charged to the wrong expenditure type. The same rules apply when correcting this type of error. Note that revenue and expense corrections must be made when transactions are applied incorrectly to any combination of the ptaeo; errors should be corrected in the year they occur as expenditure types consolidate at the year end. Note that revenue and expense corrections must be made when transactions are applied incorrectly to any combination of the ptaeo; errors should be corrected in the year they occur as expenditure types consolidate at the year end.

9. Current Year Activity/Funds- Group Reclassifications Group reclassification expenditure types were created for use: When the movement of current year activity does not represent a correction. If the movement of current year revenue activity is not an allocation of gift, endowment, or tuition income. Moving a percentage of many expenditures Providing support of activities in another department with current year net income

10. Current Year Activity- Revenue & Expense Group ReclassificationsExpenditure Type Guide

11. Current Year Activity- Revenue & Expense ReallocationsExpenditure Type Guide

12. Current Year Activity/Funds � Scenario Guide

13. Prior, Current & Future Year Funding �Fund Balance Transfers Fund Balance Transfer expenditure types (351xxx range) are often used inappropriately. Fund Balance Transfers are appropriate when: A prior year fund balance is the funding source of a current year activity. A prior year fund balance is being used to cover a prior year deficit (current fiscal year beginning balance). Never use fund balance transfers for movement of current year net income to cover a current year activity. Never use a fund balance transfer in correcting an improperly applied current year transaction.

14. Prior, Current & Future Year Funding �Fund Balance Transfers (351xxx)

15. Prior, Current & Future Year Funding �Fund Balance Transfers (351xxx) Fund Balance Transfer Expenditure Type Guide

16. Processing Matrix � When to Correct, Reclassify, and Transfer Follow this processing matrix for the majority of transfer scenarios. Follow this processing matrix for the majority of transfer scenarios.

17. FBT vs. R/E Reclassification�Real Life Example� A department wants to use prior year SPPRO funds from Project A to cover a current year expense for SPPRO Project B � Is this a fund balance transfer, an expense correction, or a group expense reclassification? Fund Balance Transfer (351XXX)� Why? Prior Year accumulated funds are being moved from Project A to project B. Use 351101 using YBalShtRevAdj category. Prior year funds are used for current & future year expenses, however when dealing with this issue interdepartmentally the current expenses of department B are considered the current year expenses for department A. Prior year funds are used for current & future year expenses, however when dealing with this issue interdepartmentally the current expenses of department B are considered the current year expenses for department A.

18. FBT vs. R/E Reclassification�Real Life Example 2� A Department wishes to use prior year SPPRO funds from Org A to cover the GA deficit of Org B � Is this a fund balance transfer, a revenue correction, or a group revenue reclassification? Fund Balance Transfer (351XXX) � Why? The department is using Org A�s prior year funds to cover a current year�s deficit incurred by Org B. Use 351101 using YBalShtRevAdj category.

19. FBT vs. R/E Reclassification�Real Life Example 3� Department A receives endowment income (current year spending distribution) and wishes to allocate to several projects consistent in serving the donor�s intent � Is this a fund balance transfer, a revenue correction, or a group revenue reclassification? In most cases, reclassify using 469206 and 469207 � Why? The income allocation from the endowment is meant to fund current year activities per the donor�s intent. Contact Funds Management for consultation. Use YBalShtRevAdj category. Stress the importance of contacting funds management when moving money relating to a gift/endowment. Stress the importance of contacting funds management when moving money relating to a gift/endowment.

20. FBT vs. R/E Reclassification�Real Life Example 4� Department A agrees to �pay� for 10% of all current year expenses charged to Department B, expenses relate to several different expenditure types � is this a fund balance transfer, a revenue/expense correction or a revenue/expense reclassification? Expense correction using original expenditure types and YNonGCNonLabTrf category. Identification of specific revenues and expenses is always preferred Alternative � group reclassification using the YExpenseAdjust category and 968001 & 968002 expenditure types. Reclassification can occur at the specific expenditure type level here, and that is in fact preferred. However, it is not necessary when there are several different expenses and department A is funding them regardless. Reclassification can occur at the specific expenditure type level here, and that is in fact preferred. However, it is not necessary when there are several different expenses and department A is funding them regardless.

21. FBT vs. R/E Reclassification�Real Life Example 5�

22. Journal Entry Best Practices Handout & Questions/Answers

23. Questions? Contact ga.usersupport@yale.edu Your Business Support Center Your Budget Analyst Funds Management Journal Entry Category Information: http://www.yale.edu/jeff/