Rebate Revenue/Applicable Credits for Recharge and Federal Grants
Prior to reading the standard on Rebate Revenue/Applicable Credits for Recharge and Federal Grants, it is beneficial to review the below sections to gain foundational information:
- Accounting Fundamentals Section
- RC, Org & Account Standard
- Rate Submission Guidelines
This standard provides an overview of what is required when the university receives a rebate revenue from a supplier related to a federally sponsored project or a recharge activity. The information presented below will walk through both the procedure and the timing of events that will occur to accurately record the rebate revenue related to federally sponsored project or recharge activity to ensure compliance with Uniform Guidance.
The Office of Procurement Services negotiates numerous agreements with suppliers that result in the university receiving rebate revenue for a percentage of the business activity with the respective vendor. This rebate revenue is also referred to as an applicable credit. When the business activity is related to a federally sponsored project or a recharge activity, the university must comply with the Uniform Guidance (CFR-Part 200), Applicable Credits (200.406).
Uniform Guidance section 200.406 requires that any credits related to allowable costs on federal sponsored projects or recharge activity be credited to the federal award or recharge activity, where the originating expense was incurred, either as a cost reduction or cash refund. Section 200.406 also requires that amounts for matching or cost sharing for federal projects be net of applicable credits.
Importance and Impact of Applying Applicable Credits
Correctly identifying, documenting and recording the applicable credits to the federal sponsored project or recharge account is a federal compliance requirement. When applicable credits are not properly recorded, this may result in audit findings, fines and potentially a loss of future federal awards.
Identification, Documenting and Recording of Applicable Credits
On an annual basis, the Federal Cost Accounting office (in the Office of the University Controller) will review rebates received during the fiscal year to determine if they are considered applicable credits. Only annual rebate amounts of over $5,000 will be allocated. If the rebate meets both criteria, the rebate will be allocated to those accounts based on their percentage of total spend.
Credits Related to Federal Sponsored Projects
The federal portion specifically identified to a sponsored project that is not closed or expired, will be recorded as a cost reduction to the respective project account using a Kuali Financial System (KFS) Distribution of Income and Expense (DI) document, at least annually.
The federal portion identified to a sponsored project that is closed or expired will be refunded to the U.S. Treasury on an annual basis.
Credits Related to Recharge Activities
Since internal billings by recharge centers become allowable cost if billed to sponsored projects, credits related to recharge center activity must be included in the calculation of recharge rates. The amounts identified to a recharge account (accounts starting with 61 thru 67 and 69*) will be recorded as a cost reduction to object code 5000 in the recharge account using a KFS DI document.
Recording of Applicable Credits
|Expense on Grant/Recharge Account||5XXX||$XXXX|
|Cash on Purchasing Rebate Account||Expense Object Code||$XXXX|
Requirements and Best Practices
- Federal Cost Accounting (in UCO) will identify and record the applicable credits for federal sponsored projects and recharge activities, where appropriate.
- Recharge activities must include applicable credits when calculating their rates for goods and/or services.