13.8 Administrative Allowance Funds Overview

Policy Statement

Units must ensure that administrative allowance funds are properly accounted for within Banner.

Reason for the Policy

To ensure accurate reporting for the University of Illinois System’s audited financial statements.

Applicability of the Policy

All units who manage administrative allowance funds.

Procedure

To ensure administrative allowance funds are properly accounted for in Banner, follow the guidelines and procedural steps below.

1. Units must understand the definition of an administrative allowance fund.
   1. Administrative allowance funds (which reside in fund type 2A) are funds that account for financial resources generated from overhead assessments charged primarily to self-supporting, service plan, loan, or certain types of grant funds.
   2. These administrative allowance assessments help fund the University of Illinois System’s overhead costs, as well as the administrative services provided by personnel within departments, the universities, and the System Office. While some of these assessments are optional (such as those at the department-level), others are required (such as those at the university and System Office level).
   3. Since the daily operations taking place within the assessed funds utilize system overhead and administrative services, these assessments can help recover an applicable amount of these costs (as opposed to directly charging the assessed funds for the actual expenses).
   4. The applicable administrative allowance fund is then able to utilize the revenue from these assessments for the various administrative and indirect costs that the assessed funds are benefiting from, such as utilities, building maintenance, building operations, infrastructure support costs, and administrative support staff.
2. Units must understand how administrative allowance rates are calculated.
   1. The simplest way to recover overhead and administrative costs is to charge up to the applicable fiscal year’s Other Sponsored Activities (OSA) rate. This rate varies every three to four years, so it is always important to locate the rate for the current fiscal year within the applicable document located at the Rate Schedules resource page.
      1. However, when assessing a self-supporting fund selling to a mixed customer base of both grant funds and external customers, including an appropriate overhead assessment in the rate charged to external customers is required, since external customers should not be given preferential pricing when compared to grant funds.
      2. To ensure this requirement is met, external customers should typically be charged an overhead assessment rate appropriate for the activity. This may be the applicable fiscal year’s Other Sponsored Activities (OSA) rate, the Sponsored Instruction rate, or the Organized Research rate. This will help ensure that external customers do not receive preferential pricing when compared to grant funds. See the Rate Schedules resource page for further details.
   2. Another option is to determine the total cost of the overhead and administrative services that the assessed fund’s operations are utilizing and dividing that total amount by the assessed fund’s total expenses during the prior fiscal year (excluding those within the 198nnn account code range). The resulting percentage from that calculation would then be multiplied by the assessed fund’s total expenses from the current fiscal year (excluding those within the 198nnn account code range). The amount resulting from that calculation would be the amount assessed to the fund within the applicable 1985nn–1987nn expense account code range.
   3. Once a rate has been determined, the related Banner entry to record the assessment can be recorded either: (1) manually, via a unit-generated journal voucher; or (2) automatically, via the Allocations and Assessments (ALAS) system.
      1. For units who choose to complete these entries manually, the journal voucher entries should ideally be completed on a monthly or quarterly basis to ensure compliance with good business practices. However, if that is not possible, then the minimum requirement is to complete the entries on an annual basis. For further guidance on how to complete the journal entry, contact University Accounting and Financial Reporting (UAFR) at uas@uillinois.edu.
      2. For units who choose to utilize ALAS to automate their assessments, the journal entries to record these entries occur daily. For guidance on how establish and utilize assessments within ALAS, contact UAFR at uas@uillinois.edu.
3. Units must be able to identify administrative allowance funds in Banner and understand how to segregate different types of administrative allowance activities into separate C-FOP accounting strings.
   1. Administrative allowance funds can be identified by examining the fund code segment of the Banner C-FOP, which is assigned with a 2A fund type as mentioned earlier.
   2. There are several fund codes within the 2A fund type, and the fund codes themselves are shared across the entire system. Each unit must use their applicable organization code and department-specific program code along with the shared 2A fund code to distinguish their allocation of the 2A funding from others.
      1. For example, if a University of Illinois Urbana-Champaign unit (having an assigned organization code of 123000) assesses an administrative allowance to their self-supporting fund to cover the costs associated with their staff who provide administrative support to that self-supporting activity, then the applicable university budget office would need to know the organization and program code that the unit would want to use to receive their related administrative allowance budget within on the shared administrative allowance fund. If the unit wanted to use program code 123001 (which is their administrative services program code) along with their default 123000 organization code, then the budget office would allocate the related expense budget to 1-2002nn-123000-123001.
   3. Given these intricacies, units will typically need to request a new program code (not a new fund code) when requesting a new C-FOP string to use for their administrative allowance activities. These requests can be made via the Banner Fund, Program, Index Code Request Form.
   4. As mentioned earlier, there are a range of administrative allowance funds used across the system, as each administrative allowance fund is utilized for a different purpose. These various administrative allowance funds all reside within the 200200–200210 fund code range.
      1. For example, administrative allowances assessed to self-supporting funds that sell goods or services to external customers are accounted for within fund C-200204.
      2. There are also unique administrative allowance fund codes on each chart accounting for the revenue received from administrative allowance assessments to auxiliary self-supporting funds (i.e., self-supporting funds with a 3J or 3M fund type). These fund codes are unique and vary by chart, so there is no one consistent numbering scheme on these administrative allowance funds.
      3. One of the primary reasons for recording different types of administrative allowance revenue into separate 2A funds is related to benefit assessments. For example, if a 2A fund assesses a 3E or a 3Q self-supporting fund for overhead and administrative services provided to the self-supporting fund’s external customers, then the benefit assessments on the 2A fund receiving that revenue should closely mirror the benefit assessments that are typically assessed to external customers (e.g., as seen on a 3Q self-supporting fund). However, benefit assessments on 2A funds that assess 3J or 3M auxiliary self-supporting funds should closely mirror the benefit assessments on those 3J and 3M self-supporting funds. That way, if there are payroll charges on the 2A fund for the staff who provided the administrative support, then those payroll chares would be assessed for a similar amount of benefit costs as they would have been if they were charged to the self-supporting fund directly.
      4. Accounting for these administrative allowance revenue streams in separate 2A funds also helps with transparency in the financial reporting process, as each 2A fund is clearly titled to denote what types of assessments are recorded in that fund. For example, the long titles in Banner (found in Banner page FOATEXT) for the C-200204 administrative allowance funds are “Administrative Allowance Assessments to External Customers.” By viewing that title, units can clearly see the nature of the assessments recorded within that fund.
4. Units must understand how administrative allowance funds are budgeted to units and how budget adjustments involving administrative allowance funds are processed.
   1. The applicable university budget offices are responsible for allocating administrative allowance budget across the system. They will assign an expense budget to a unit’s specific organization and program code combination, using the applicable administrative allowance fund code used across the entire system. See below for a high-level summary of how this process works.
      1. When a fund is assessed for an administrative allowance, the related expense is charged to an expense account code in the 1985nn–1987nn expense account code range. The offsetting side of this entry will be a credit to a 3089nn revenue account code within the related administrative allowance fund.
      2. If the administrative allowance assessment relates to a department assessment, then this administrative allowance revenue is allocated to the applicable units as expense budget by the applicable budget office.
      3. For example, some units may charge an administrative allowance assessment to their self-supporting activities to help pay for the additional indirect administrative costs that their unit incurs from supporting the self-supporting activities. In these scenarios, the administrative allowance revenue would be credited to an administrative allowance fund, and the applicable university budget office would then allocate out budget to the unit using the centrally-held administrative allowance fund along with the unit’s applicable organization and program code.
   2. Given that administrative allowance funds are allocated via expense budget, it is important to understand that any adjustments to or from an administrative allowance C-FOP (such as moving expense budget to a different organization or program code) must be handled via a budget adjustment (as opposed to a lump sum transfer using expense account codes). For further details, see 3.1 Adjust a Budget or contact the appropriate university budget office.
   3. c) Units must be aware of the limitations regarding to where administrative allowance funding can be transferred.
      1. For example, it is unallowable to transfer administrative allowance funding to gift, endowment income, or self-supporting funds.
      2. Administrative allowance budget can be transferred from one administrative allowance C-FOP to another within the same chart. However, these transfers would need to be reviewed and approved by the applicable university budget office.
      3. Intercampus administrative allowance budget transfers (i.e., budget transfers occurring between different charts/universities) must be reviewed and approved by the System Office Budget Office.
      4. Units may also be able to transfer administrative allowance budget in exchange for state budget or other types of institutional fund C-FOPs, such as indirect cost recovery (ICR). This arrangement would need to be sent to the applicable university budget office for consideration, depending on budget availability. If approved, these transfers would have to be completed as a budget transfer.
5. Units must understand how to locate the Budget Balance Available (BBA) for administrative allowance C-FOPs in Banner.
   1. To find the available budget balance for an administrative allowance C-FOP string, go to Banner page FGIBDST and enter the applicable C-FOP string.
   2. Then, uncheck the Include Revenue Accounts box within this page, and hit the Go button.
   3. The unit’s available budget balance will then appear in the lower right-hand corner of the page, on the Net Total row of the Available Balance column.
   4. For further details, see Finding Your C-FOP Balance.
6. Units must ensure administrative allowance funds are expended in support of the system’s mission.
   1. As one of the primary purposes of administrative allowance funds is to recover administrative and indirect costs related to the services and activities assessed, the funding within an administrative allowance C-FOP can be utilized to pay for these administrative and indirect costs, such as utilities, building maintenance and operations, infrastructure support costs, and administrative support staff.
   2. Administrative allowance funds may also be used for general institutional expenditures supporting the system’s mission.
7. As administrative allowance funds are not meant to account for activities that generate sales revenue, units must understand that it is typically unallowable to deposit cash, checks, wires, Automated Clearing Houses (ACHs), or any other type of payment directly to an administrative allowance C-FOP. The only allowable exceptions are below.
   1. A unit receives a vendor refund or rebate from a past purchase that posted to an administrative allowance C-FOAP. In these cases, it is allowable to deposit the receipt as a credit against the administrative allowance C-FOAP where the related expense was recorded.
   2. A unit receives reimbursement from an employee who erroneously charged the administrative allowance fund for a personal expense (such as a movie rental in a hotel during a business trip that was charged to the administrative allowance fund). In these cases, it is allowable to deposit the receipt as a credit against the administrative allowance C-FOAP where the related expense was recorded.
8. Units must ensure that any administrative allowance C-FOP assigned to the unit is properly reconciled on a regular basis and that any discrepancies are corrected on a timely basis once identified. In addition, units must keep in mind that a final reconciliation for June 30 period 12 business is required at the end of the fiscal year, to ensure that any errors are corrected by the close of the fiscal year. This will ensure accuracy for the system’s audited financial statements.
   1. For further details and tips on good business practices surrounding financial reconciliations, see 13.2 Reconciliation of Financial Activities along with UAFR’s Reconciliation of Financial Activities resource page.
9. Units must understand how unspent funds within an administrative allowance C-FOP carry forward to the following fiscal year.
   1. Unspent funds within a Banner administrative allowance C-FOP may carry forward to the following fiscal year, depending on the practices of the applicable university’s budget office. If they do carry forward, then the unspent balance from the prior fiscal year can be found within the 109910 budget carryforward account code within Banner page FGIBDST.
   2. For example, if an administrative support unit received a $10,000 expense budget in an administrative allowance C-FOP for the support that they provide to self-supporting activities, and if that unit only spent $7,500 within the first fiscal year, then the remaining $2,500 of unspent funds would carry forward to the 109910 budget account code in that same administrative allowance C-FOP the following fiscal year.
10. Finally, if the administrative allowance activity ever comes to an end (e.g., if the unit no longer provides administrative support to self-supporting activities and they spend out their remaining balance and their administrative allowance program code will no longer be used), then the unit will need to:
    1. Perform a final reconciliation of the administrative allowance activity on that specific C-FOP to ensure all transactions are appropriate and all corrections have been made for any errors, if applicable.
    2. The remaining expense budget on the related administrative allowance C-FOP would also need to be cleared by either: (1) spending out the remaining expense budget on allowable expenditures or (2) working with the applicable budget office to complete an allowable budget transfer.
    3. Once all issues have been addressed, a termination request must be submitted to UAFR at uas@uillinois.edu requesting that the program used with the administrative allowance fund be terminated.