Invoicing, Cash Receipts, Revenue Recognition and Financial Statements Glenita Segura, Manager Office of Sponsored Programs, Finance (OSPF) Accounts Receivable Billing (AR Billing) May 2011
Office of Sponsored Programs Finance (OSPF) -AR Billing The Accounts Receivable Billing area is responsible for the following: Invoicing for different agreement types Requesting cash through the Letter of Credit Applying payments as they are received Monitoring the revenue recognition process Managing outstanding accounts receivable balances Providing accounts receivable aging and revenue reports Closing awards 2
What starts the process in the OSPF-AR Billing Office? 1. Receive an email notification from Project Set Up (PSU) that the project has been established and is ready to use. 2. Review the contract, activate the contract and establish the billing and revenue plan. 3
Agreement types invoiced by OSPF-AR Billing Prepaid Sponsor pays upfront or scheduled payments. Unexpended funds need to be returned to the sponsor. Cash received recorded to deferred revenue. Revenue recognized nightly as expenses incurred. No revenue will be generated if the amount of expenses are over the budgeted amount. Fixed payment Sponsor pays as milestones are met or scheduled payments. Unexpended funds do not need to be returned to the sponsor. Cash received recorded to Accounts Receivable. Revenue recognized monthly based on a percentage of the total award amount. No revenue will be generated if the amount of expenses are over the budgeted amount 4
Agreement types invoiced by OSPF-AR Billing Cost Reimbursable Sponsor agrees to reimburse UTMB for expenses as they are incurred. Types include Letter of credit (LOC) and manual invoicing. Invoices are created for the amount of expenses only, it does not include encumbrances or pre- encumbrances. Cash received recorded to Accounts Receivable. Revenue recognized nightly as expenses incurred. No revenue will be generated if the amount of expenses are over the budgeted amount. Non-Grants Module Contracts These are fee for service, fixed price or cost reimbursable awards with no effort certification required. Revenue is recorded monthly based on expenses. Cash received is recorded to Accounts Receivable. No revenue will be generated if the amount of expenses are over the budgeted amount. 5
Agreement types invoiced by OSPF-AR Billing Concurrence is requested on the final invoice of the award. PI and/or Administrator should verify the following: * Total expenses reviewed and deemed allowable * Total funds authorized * Unobligated balances Any costs over the authorized amount should be transferred from the award. All encumbrances and pre-enbumbrances should be cleared. 6
Agreement types invoiced by both AR Billing and individual departments Case_Study Industry sponsored clinical trials AR Billing will invoice for non-refundable, one-time fees Department is then responsible for invoicing as milestones are met AR Billing will apply payments as they are received 7
Agreement types invoiced by others TMO(Technology Management Office) Fixed or TMO Cost Reimb Invoiced by the Center for Technology Development (CTD) AR Billing will apply payments as they are received Bill or Other Placed in Grants Module for tracking May or may not be invoiced by the departments AR Billing will apply payments as they are received 8
Prepaid What it looks like in general ledger: Cash is received Credit to deferred revenue (account 208060) Debit to cash at the operating unit level for the project. Expenses are incurred Entry for the expense is to debit the expense account (5xxxxx) and credit cash at the project level. Revenue is recognized Entry for the revenue is to credit/increase revenue (4xxxxx) at the project level and to debit /decrease deferred revenue (208060) at the operating unit level. The expense and revenue recognition processes are completed nightly. No revenue will be generated if the amount of expenses are over the budgeted amount. 9
Cash received = 75,000 Expenses = 2,875.64 Revenue = 2,875.64 Equity = 0 Deferred revenue = 72,124.36 10
Fixed Expenses are incurred General ledger entry is recorded for the expense to debit the expense account (5xxxxx) and credit cash at the project level. This process is completed nightly. Monthly, revenue is recorded based on a percentage of the total award amount to account 4xxxxx at the project level and an unbilled AR (114090) at the operating unit level. Milestones are completed Sponsor will send the payment. Payment is received, the invoice is created. This invoice will transfer the amount of cash received from unbilled AR to billed AR (account 114050). The payment is applied to the billed AR. PI/Department should notify AR Billing of the milestone completion so that receipt of payment can be monitored. Occasionally, the sponsor will send payment based on the agreement. 11
Award amount = 26,736 Revenue = 26,736 Expenses = 23,734.90 Equity = 3,001.10 Accounts receivable = 0 12
Cost Reimbursable What it looks like in general ledger: Expenses are incurred Entry for the expense is to debit the expense account (5xxxxx) and credit cash at the project level. Revenue is recognized Entry for the revenue is to credit/increase revenue (4xxxxx) at the project level and to debit /increased accounts receivable (114090) at the operating unit level. The expense and revenue recognition processes are completed nightly. No revenue will be generated if the amount of expenses are over the budgeted amount. 13
Cost Reimbursable Invoices are created The invoice amount will be transferred from unbilled AR (account 114090) to billed AR (account 114050) at the operating unit level. Invoicing is processed weekly for DHHS awards. Invoicing is processed monthly for all other LOC non-dhhs awards. Invoicing for non-loc cost reimbursable awards is completed monthly. Concurrence is requested on the final invoice of the award. Notification of any outstanding invoices to vendors is also requested. Invoices are created for the amount of expenses only, it does not include encumbrances or pre- encumbrances. When the payment is received it is applied to the billed AR. 14
Revenue = 27,509.57 Expenses = 27,509.57 Equity = 0 Unbilled accounts receivable = 27,509.57 15
Non-Grants Module Contracts Expenses are incurred General ledger entry is recorded for the expense to debit the expense account (5xxxxx) and credit cash at the project level. This process is completed nightly. Invoices are created monthly Debit to AR (accounts 114120 or 114145) at the operating unit level. Credit to revenue (accounts 4xxxxx) at the project level. Flat fee same amount each month. Cost reimbursement based on allowable expenses per the contract. Fee for Service based on invoice prepared by department. When the payment is received it is applied to the appropriate AR account. Appears the same in the financial statements as a cost reimbursable or fixed award. 16
Case_Study: Industry Sponsored Clinical Trial AR Billing Email notification from Project Set Up (PSU) that the clinical trial project has been established and is ready to use. Receive a notice that IRB has been approved. Review contract and invoice sponsor for all initial fees that can be invoiced IRB fee (Full or expedited review), Admin fee Any one-time start up fees When the money for the initial invoice is received it will be recorded as revenue The IRB fee - account 430040 in the IRB class. The remainder of the payment received will be recorded as direct revenue (411010) and indirect revenue (411030) in the clinical trial project established by PSU. 17
Case_Study: Industry Sponsored Clinical Trial Department As the department enters patient related data into the case report forms/electronic database, payments from the sponsor will be generated for work performed. Payments will be recorded as revenue, PS accounts 411010 or 411030, in the clinical trial project established by PSU. 18
Revenue/cash = 37,369.14 Less expenses = 16,603.87 Equity = 20,765.27 19
Where to Find Financial Information PeopleSoft Grants Module Account Status Inquiry Screen Available spending authority Reflects the budget that has been loaded less any expenses incurred, encumbrances or pre-encumbrances obligated to the project to date Does not reflect the money or payments you have received from the sponsor. Financial Datamart View revenues and expenses Project Ledger Summary by Project Years provides summary information Project Detail Transaction by Project Years provides the detail for the project Balance Sheet by Sub Fund balance sheet activity Ask your Trusted Requestor for access 20
Payment Information All payments made via checks should be sent to a UTMB lockbox account per IHOP- Policy 4.4.13 Cash Handling and Reporting http://www.utmb.edu/sacs/report/sources/ihop_4_4_13.pdf Payments made via check should be made payable to The University of Texas Medical Branch at Galveston and sent to the Research Services lockbox at the address below: UTMB Office of Sponsored Programs PO Box 4786-750 Houston TX 77210-4786 For electronic payments please contact Gayle Praker at extension 69465. 21
Payment Information (cont.) If you receive a check directly from a sponsor Make a copy for your records Ensure that the PI name, CON number, project number, protocol number, and any other information that will help identify where the money belongs is on the check stub. Forward the check and a completed Deposit Form For Lockbox to Gayle Praker at route number 0156 for deposit into the Research Services lockbox. http://www.utmb.edu/accounting/forms/grts_deposit.xls Any payments in foreign currency will be delayed 30 to 60 days due to the conversion time. The converted amount will be applied to the award. Any wires received from a sponsor may be reduced by the wire fee. Copies of checks and documentation received from the bank is sent via email to the departmental contacts for each department. This email should be received within 2 business days of the payment posting. 22
Contact Information Name Primary Responsibility Extension Email Glenita Segura Manager 69460 gsegura@utmb.edu Larry Copado Non-GM contracts 69494 locopado@utmb.edu Hehua (Hope) Liu Fixed 71346 heliu@utmb.edu Jim Lombardo Reports 69450 jjlombar@utmb.edu Gayle Praker Payments 69463 gpraker@utmb.edu Candy Quintanilla Cost Reimbursable Manual invoicing Ben Robertson or Cost Reimbursable - Neil Santana LOC Xiaoying Prepaid (Sharon)Wang 69452 71324 or 69453 71345 clquinta@utmb.edu bgrobert@utmb.edu nlsantan@utmb.edu xiawang@utmb.edu 23