9.0 - Allocating Salaries to a Recharge Activity
SOURCE: |
Cost Accounting, Financial Management Services |
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DATE ISSUED: |
September 2016 |
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DATE OF LAST REVISION: |
June 2019 |
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RSOP NO: |
9.0 |
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RATIONALE: |
To provide options to fiscal officers, account managers and account supervisors in allocating salaries to recharge/service center activity |
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RSOP: |
Costs that are shared by both external and recharge/service activity must be allocated. A recharge center billing rate cannot include more salary and wages than have been allocated to the account. The allocation method used must be based on the benefits received or other such equitable or logical association. The department should determine and document the allocation method. This documentation should be retained by the department for audit or other purposes. Below are some examples of acceptable allocation methods. The allocation should not be made based on percentage of revenue.
Examples of Allocation Methods for Salary & Wages: All allocation methods and percentages should be reviewed by the department at least annually and modified for significant changes.
1. Use of a Recharge/Service 66* Account for All Salary & Wages In order to preserve a central administrative account for budget purposes, a recharge/service center activity may elect to budget all of salary and wages for both internal and external activity in a (central payroll) recharge/service 66* account within their organization. The recharge/service center would then bill other internal and external accounts for their proportionate usage of salaries and wages using an internal billing. The billing organization must use an expense object code that reports to the S&E object level.
The development of your rate for salary and wages can be a single pooled rate or a tiered pooled rate.
Examples of pooled rates, can be found on S&W Rate Allocation Example .
2. Updating Job Funding for Each Employee Based on an Allocation On an annual basis, the recharge/service activity could evaluate the percentage of time each employee spends on internal and external activities. Once they have a reasonable and documented allocation method, the department could update the job funding for the employee so that the internal and external accounts each reflect the allocated amount of salary, based on historical effort, for a given pay period. Any significant changes throughout the year would require that the job funding be updated accordingly.
3. Initiating Salary Transfers for a Given Employee for a Pay Period The Salary Transfer (ST) document is used to move salaries and associated staff benefit charges for a given employee for a particular account period (or set of periods) from one or more accounts to another account (or set of accounts) after payroll has posted to the labor ledger.
Summary of Options: The chart below outlines the primary differences in the options listed above.
Other allocation methods may be allowed. Please contact fmsaux@iu.edu if you wish to allocate salary and wages using another method.
Exceptions to this standard operating procedure require the approval of the Chief Accountant. |
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DEFINITIONS: |
External Activity: An activity that furnishes goods or services a non-Indiana University department. This includes sales to students, faculty and staff for non-IU business, or the general public.
Internal Activity : An activity that furnishes goods or services to another Indiana University department.
Recharge/Service Center Activity: A recharge/service center activity is an activity that furnishes goods or services to another Indiana University department for the convenience of the university and charges a fee directly related to, and not more than the allowable cost to provide the goods or services. |
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CROSS REFERENCE: |
OMB Uniform Guidance (PDF) "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards" |
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RESPONSIBLE ORGANIZATION: |
Organizations that bill other Indiana University departments for goods or services |