Accounting
Policies
Policy 1 - Budget Administration
State Appropriations - The University receives State appropriations
for operations and support on a year to year basis. The primary factor
in determining the appropriated support received is the enrollment
level approved by the Board of Governors of the North Carolina University
System, the North Carolina Advisory Budget Commission, and the North
Carolina General Assembly. Allocations to the University are received
in the form of a "Certified Budget" (also called the Continuation
Budget) and an "Expansion Budget". Both budgets are originally
prepared by the University Budget Office. The Continuation Budget
is verified by the Office of the President of the University of North
Carolina System and forwarded to the Office of State Budget, Planning
and Management for their verification, approval and submittal to
the North Carolina General Assembly. Upon approval of the General
Assembly, Appalachian State University receives the approved Continuation
Budget, known at this point as the "Certified Budget".
Expansion Budget monies are approved by the Board of Governors upon
the General Administration's recommendations based on the total budgeted
funds certified by the General Assembly for the University System.
Flexibility Budgeting
In the 1991 session of the General Assembly, legislation was enacted
to allow the Board of Governors of The University of North Carolina
to designate specific constituent institutions in which additional
management authority and discretion would be delegated. These institutions
are referred to as Special Responsibility Constituent Institutions
(SRCI). Appalachian State University was designated an SRCI on April
9, 1992.
The SRCI designation is not permanent, and can be lost if management
staffing standards, internal controls and safeguards are not met;
if there are significant audit exceptions or findings; or if the
mandated reversion is not met. Flexibility legislation was set to
end June 30, 1994, because of a sunset clause. The 1993 General Assembly
in the regular and reconvened sessions voted to continue Flexibility
Budgeting.
Beyond the University's control, a deterioration in the general
economic condition of the state could cause the Office of State Budget
and Management to intercede and impose its authority to negate the
flexibility until the situation has improved.
Major Provisions of the Flexibility Legislation (General Statute
116-44)
- The Board of Governors, acting on recommendations made by
the President after consultation with the State Auditor, may
designate one or more special responsible constituent institutions.
- All General Fund appropriations made by the General Assembly
for the continuation budget of a special responsible constituent
institution shall be made in a single sum for each budget code.
(Appalachian State University has only one budget code, 16080,
for these purposes.)
- Funds appropriated may be expended in the manner deemed appropriate
by the Chancellor to maintain and advance programs and services
of the institution; consistent with the directives and policies
of the Board of Governors.
- The University may carry forward into the next fiscal year unexpended
balances of general fund appropriations. Such amounts cannot exceed 2.5%
of the general fund appropriations and may be expended for one-time
costs that do not impose additional financial obligations on
the State. (Ex: Equipment, travel, capital projects - Ex: roofing.)
- Positions may be established or abolished, acting in accordance
with State Personnel policies and procedures with respect to
SPA employees and in accordance with Board of Governors policies
and procedures with respect to EPA employees.
- The Board of Governors shall require each special responsible
constituent institution to include in its institutional assessment
plan those assessment measures that are determined to be standard
measures of student learning and development in general undergraduate
education.
- The current benchmark for purchases that are required to be bid
through the State Purchasing Office is $250,000. The special
responsible constituent institution may enter into contracts for
items currently under contract at the State level, should the price
be less locally.
(For a more in depth analysis of Flexibility Budgeting, please
see the white paper on Budget Flexibility filed in the Budget Office.)
Policy 2 - Base Budget
Definition - The base budget allocated to the University at the
beginning of each fiscal year is usually the same as the previous
fiscal year's final allocation, unless non-recurring funds are specified
by the Board of Governors, or increases/reductions have been made
by the Office of State Budget, Planning and Management.
Each division within the University has an established base budget
that is automatically allocated by department at July 1 of each fiscal
year. The base budget contains only continuing allocations and all
non-recurring (one time) allocations are dropped at the beginning
of the fiscal year.
CURRENT YEAR VS. PERMANENT (Budget Adjustment/Budget Revision)
Budget adjustments or budget revisions are identified as one of
the following types:
- Current Year Transfer: Affects the budget for the current year
only; is not reflected as a component of the base budget in the following
year.
- Permanent Transfer: Changes the budget for the current year
and is reflected as a component of the base budget in the following
year; becomes a permanent component in the next biennial Continuation
Budget.
Allocations
Departmental Budgets - The "Certified Budget" is the base
budget. The Chancellor and Vice Chancellors may adjust the base budgets
as they deem necessary for their respective areas of responsibility.
The Certified Budget is submitted to, and approved biennially by
the Office of the President of the University of North Carolina System,
the Office of State Budget, Planning and Management, and the North
Carolina General Assembly. Additional increases/reductions to the
Certified Budget are passed along to each division by the University
Budget Office. The Chancellor and Vice Chancellors then allocate
the increases/reductions to the base budgets of their respective
areas of responsibility.
After the increases and reductions have been determined, the individual
responsible for each departmental budget must submit the budget allocation
form (see Appendix Statement 1) to the Chancellor or appropriate
Vice Chancellor for submission to the Budget Office. The Chancellor
or individual Vice Chancellors may submit the Budget Allocation Form
for their departments directly to the Budget Office eliminating one
step.
The budgeted amounts are verified and entered into the Financial
Records System (FRS) by the University Budget Office. The Automatic
Budget Reallocation (ABR) feature of the Financial Records System
is operational. ABR allocates budgeted funds from a budget pool to
the appropriate line item falling within the pooled range as expenditures/encumbrances
occur. (Example: expense incurs against object 2600, the system automatically
reallocates budget from budget pool 2000 to line item 2600.)
Budget pools are listed as follows:
- 1400 Temporary Wage
- 2000 Supplies and Materials
- 3000 Current Services
- 3100 Travel
- 3200 Communications
- 3300 Utilities
- 4000 Fixed Charges
- 4800 Reversion-Current Fiscal Year
- 5000 Equipment
- 5600 Library Books
Policy 3 - Budget Adjustments/Revisions
Budget Adjustments (Transfers within 2000 through 5000 pools)
Adjustments to Departmental Budgets - Any changes to an individual
department's budget in the 2000 through 5000 pools, after the base
budget is recorded in the accounting records (FRS), must be processed
through Online Budget Transfers. Submission must be made by the administratively
responsible individual, his or her proxy or an alternate (see Procedure
Statement 3). All requests must be submitted in even dollar amounts.
Budget adjustments required between departments (in the 2000 through
5000 object codes (pools) within the same purpose, (i.e., 101(01),
102(02), etc.) can only be made by representatives of the Chancellor,
Vice Chancellors, Deans, or University Budget Office.
When requesting budget adjustments, the following regulations are
mandatory:
- Budget adjustments are restricted to budget pools: 2000,
3000, 3100, 3200, 4000 and 5000 for an individual department. Vice
Chancellors and Deans may transfer between departments in the 2000
through 5000 pools but must remain within the same purpose with
exception of purposes 152(07) and 160(08), as well as 170(09) and
180(10) which are now categorized as purposes 187 and 188 respectively
for reporting to the Office of State Budget, Planning and Management.
Vice Chancellors and Deans may submit transfers between departments
via e-mail or the memorandum type form developed by the University
Budget Office.
- Budget adjustments of this type are current year
only and are considered temporary.
- In January of each year, departments are notified
of the date for final budget transfers to be submitted for the
current fiscal year. Online Budget Transfers (Object 2000-5000
entries) are accepted until June 30.
- When an expenditure is authorized, it must be spent
from an object account that most closely describes its nature.
Funds must be available within the proper budget pool before the
entry can be processed through the University Purchasing System.
Both Online Budget Transfers and budget entries requested between
departments are processed daily; except at the normal month-end
close-out for reporting when there are no transactions processed.
Departments are notified on a monthly basis via an Over Budget
memorandum from the University Budget Office, of over-expended or
over-encumbered budget pools. Memoranda are sent to assist the department
in maintaining positive budget balance available amounts for each
pool, to warn of unexpected charges, to expose errors that should
be brought to the attention of appropriate personnel for correction,
and to properly align budgets for reporting purposes.
Budget Revisions-Flexibility
All requests for flexibility budget revision must be submitted in
even dollar amounts on the Request for Budget Revision Form developed
and provided by the University Budget Office (see Accounting
- Appendix Statement 2 or access ASU Electronic
Forms on the web). The revision
may be submitted for the current fiscal year only or for both current
year and permanent revision. The form is self-explanatory and requires
all appropriate blanks to be completed. The justification of request
must include 1) a complete explanation of the desired revision as
it relates to the enhancement of the mission of the University, 2)
specific assessment measures to be employed, 3) impact of action
on future budgets, 4) position number, title, classification, grade,
full-time equivalency (FTE), dollar amount of position originally
budgeted (if revision applicable to a position), and 5) the required
approved signatures for applicable area. When approved by the appropriate
Vice Chancellor of the requesting area, the form will be forwarded
to the Budget Office for approval and entry into the Financial Records
System. The Budget Office will enter this flexibility revision into
the State Budget Revision System via telnet through the State Information
Processing System (SIPS) in Raleigh.
Flexibility revisions become a vital component of the Annual Flexibility
Report to the North Carolina General Assembly. The following regulations
are mandatory when requesting flexibility budget revisions:
- Funds budgeted to any 1XXX object class (personnel compensation)
can be transferred between any 1XXX minor object class or to/from
any of the aforementioned budget pools via Flexibility Budget
Revision. Examples: (a) Funds budgeted to 1400 pool (Temporary
Wage) can be transferred to 1999 minor object (Other Contracted
Services) or 1400 pool funds can be transferred to 2000 budget
pool (Supplies and Materials); (b) Funds budgeted to 5000 pool
(Equipment) may be transferred to 1950 minor object (Honorariums).
- Funds may be transferred between purposes. (Example:
purpose 101 (01 accounts) instructional departments may transfer
funds to the Library - purpose 151 (06 accounts).
- Revisions involving objects 1110, 1210 or 1310 must include
position number, title, classification, grade, FTE, and annual
salary of the position.
- Revisions must be submitted on the Request for Budget
Revision Form with the appropriate approval signatures displayed.
- Departments are notified of the final date for budget
revisions to be submitted for the current fiscal year.
These changes may be either for current fiscal year only (temporary
revision) or a permanent revision (becomes a component of the Continuation
Budget); these revisions are processed upon request.
Receipt-Support within State Appropriated Funds-Budget Revisions
Departments which are supported by State Appropriation that gain
any portion of receipt-support must submit a Request for Budget Revision
to utilize the excess receipts. The revision must be submitted in
even dollar amounts on the request for Budget Revision Form developed
by the Budget Office (see Accounting, Appendix
Statement 2). The
request should be completed to show whether the revision is for the
current year (temporary) or permanently (receipts will be collected
indefinitely). The form must include: the required approval signatures,
a complete justification of the desired revision, how the receipts
were acquired, and exactly how the funds are to be expended if the
revision is approved. If establishment of a receipt-supported position
is requested, the following information is required: position number,
title, classification, grade, full time equivalency (FTE), and annual
salary of the position. When approved by the Chancellor/Vice Chancellor
of requesting area, the form will be forwarded to the University
Budget Office. The University Budget Office will submit the budget
revision to the Office of State Budget, Planning and Management in
Raleigh for approval. The revision will be entered into the State
Budget Revision System via telnet through the State Information Processing
System (SIPS) in Raleigh. If approval is granted by The Office of
State Budget, Planning and Management, the University Budget Office
will process the entry into the Financial Records System.
Example: (a) A seminar that will be attended by paying participants
with monies deposited to a revenue object (a revenue object always
begins with zero).
Prepare a Request for Budget Revision Form to increase the appropriate
revenue object (0XXX) budget and increase the appropriate expenditure
object budget pool (example: 3000 to cover the expense of printing
materials for seminar).
Example: (b) Collections for copier charges
Prepare a Request for Budget Revision Form to increase the revenue
object (0XXX) budget and increase the appropriate expenditure object
budget pool (example: 2000 to cover expense of supplies for copier).
The following regulations are mandatory when requesting budget
revisions involving receipts for approval by the Office of State
Budget, Planning and Management in Raleigh:
- Sufficient receipts to cover the amount of the requested
increase must be deposited to the proper revenue object within
the requesting department's account.
- Budget revisions must be submitted on the Request
for Budget Revision Form with the appropriate approval signature(s).
The Budget Revision form can be accessed on the web under Electronic
forms.
- In January of each year,
all departments are notified of the date for final budget revisions to
be submitted for the current fiscal year.
The revision may be either for current fiscal year only (temporary)
or permanent (becomes a component of the Continuation Budget); these
revisions are processed upon request.
Policy 4 - Non-Appropriated Budgets
Source of Operating Funds - The University receives no State appropriation
to operate residence halls, food services, bookstore, student union,
health services, student publications, and other student activities
not directly related to the instructional program. The operating
funds for these functions are derived entirely from student fees
and receipts from the sale of services.
Areas Involved - Operations largely dependent on receipt-supported
funds must begin each fiscal year with an approved balanced budget
projection. The two general areas within the total University budget
that are affected by this policy include receipt supported activities
within the State appropriated areas and all auxiliary functions and
subsidiary operations (Institutional Trust Funds). Budgets should
be developed for all funds.
Preparation - The primary responsibility for this procedure rests
with individual managers working through appropriate coordinators,
supervisors and the Budget Office. The proposed budget should reflect
the administrator's best estimate of the financial operation of the
programs for which he or she is responsible. The estimates should
be primarily based upon historical data and realistic projections
for either growth or expansion based upon enrollment changes, program
changes, price increases, etc. The budget will be prepared in a format
consistent with that maintained in the Budget Office including the
budgeted pools mentioned under the Base Budget section of the RESOURCE
MANUAL and also individual receipt line items. Where applicable,
reserves should be carried forward and projected in the proposed
budget. The preparation process should involve interaction with the
Budget Office and other appropriate personnel. Budgets should be
established by July 1 of each fiscal year.
Budget estimates should be reviewed monthly when the departmental
budget reports are received from the Controller's Office or as required
to maintain positive budget balances available in FRS.
Policy 5 - Account Numbers
The object of this material is to provide an explanation of the
account numbering system of Appalachian State University. The statement
is arranged to facilitate reference and account number identification
as well as to provide a broad explanation of the format and content
of the University's Chart of Accounts.
The account coding system:
- Provides uniformity in the coding of accounts throughout
the University.
- Provides greater capability for generating financial
information for management reports, cost analysis, etc.
- Provides a method to meet the record keeping requirements
of the Office of State Budget and granting agencies as well as
to generate more meaningful information for improved budget and
expenditure reporting.
- Creates a sound base for the University's accounting
systems and the development of an effective program utilizing electronic
data processing equipment.
The account numbering system used by Appalachian State University
is based on the Uniform Chart of Accounts for the Consolidated University
of North Carolina. All the constituent institutions of the Consolidated
University use this uniform chart as a basis for their accounting
systems. It is designed to provide (1) uniformity in reporting the
budget and expenditures to the Consolidated Central Administration
and the Office of State Budget; and (2) flexibility to fit the particular
needs of each institution.
The account numbers appear on all financial reports produced by
the automated accounting system and are used on personnel and payroll
forms, procurement requests, purchase orders, travel forms, and other
documents of a financial or budgetary nature affecting the University
accounts. The account numbers provide a means of interpreting and
classifying data into an abbreviated and condensed format.
To maintain standard coding of information and avoid unnecessary
duplication of numbers and effort, all deletions and additions to
the Chart of Accounts must be approved by the Assistant Controller
for State Funds.
Information and assistance in the coding of accounting transactions
can be obtained by contacting the Controller's Office.
Account Number Format
Each account number in the Chart of Accounts contains 12 digits
which are grouped into four principal segments as follows:
XX-X-XXXXX-XXXX
- Object
- 5-Digit Account
- Ledger
- Budget Symbol
Standard meaning has also been assigned to each number within a
segment as is explained later.
The segments are arranged in an order that facilitates accounting
and financial management within the framework of the State budgetary
procedures, as well as other funds administered by the University.
Identification of the proper fund is of primary importance in fund
accounting. All fields of information in the account number must
be entered in the sequence presented above.
Budget Symbol (XX-x-xxxxx-xxxx)
The two digit Budget Symbol represents a major accounting division
or entity at the University. Each State appropriated fund administered
through the Office of State Budget has been assigned a separate budget
symbol as well as other accounting entities administered on a local
or federal basis. A list of budget symbols and their description
follows:
01 - 17 Academic Budget
Budget symbols 01 - 17 include all of those departments, activities,
and programs which receive their support (totally or partially)from
the State of North Carolina through appropriations, and which are
subject to the Executive Budget Act. It corresponds to Budget Code
16080 as assigned by the Office of State Budget.
19 Overhead Receipts
Budget Symbol 19 includes the receipt and disbursement of those
monies that are considered to be Overhead Receipts and are subject
to the Executive Budget Act. It corresponds to Budget Code 26080
as assigned by the Office of State Budget.
21 - 26 Auxiliary Budget
Budget Symbols 21 - 26 include those auxiliaries and the administration
of those auxiliaries that are operated for the benefit of the students
(Food Services, Health Services, Housing Services, and Laundry Services),
and which are subject to the Executive Budget Act. It corresponds
to Budget Code 56080 as assigned by the Office of State Budget.
39 - 50 Capital Improvements
These budget symbols include those building projects financed
through State Capital Improvement Budgets and are subject to the
Executive Budget Act.
51 - 53 Trust Gifts, Devices, and Bequests
This major category of budget symbols includes all monies, or the
proceeds of other forms of property received by the University as
gifts, devices, or bequests that are neither presumed nor designated
to be gifts, devises, or bequests to the Endowment Fund of the University.
The budget symbols in this category are:
53 NDEA/NDSL/Perkins
Budget Symbol 53 includes only those activities of the NDEA/NDSL/Perkins
Account.
53 Student Loan Fund
Budget Symbol 53 includes only those activities of the Student
Loan Fund.
51 Scholarship Fund
Budget Symbol 51 includes only those activities of the Appalachian
State University Scholarship Fund.
52 Trust Investment Income
Budget Symbol 52 includes only that income received in this budget
symbol and then transferred to the other symbols as specified.
52 Consolidated
This budget symbol includes all money collected and disbursed
on behalf of the University's receipt supported academic programs
that are properly categorized in one of the other budget symbols.
52 Overseas Study
This budget symbol includes all monies used for activities of
the Overseas Study programs.
52 Student Account Charges
This budget symbol includes only those activities in Trust funds
for academic departments that have sales and services charged
to Student Accounts Receivable and credited to "Due to Other Codes."
55 Federal Contracts and Grants
This major category of budget symbols includes all monies received
by the University pursuant to grants from or contracts with the
United States Government or an agency or instrumentality thereof.
The budget symbols in this category are:
55 Special Grants - NIH
Budget Symbol 55 includes only activities of those grants financed
by the National Institute of Health.
55 Federal Special Grants - Not NIH
Budget Symbol 55 includes only activities of those grants financed
by the United States Government excluding the National Institute
of Health.
55 Work-Study
Budget Symbol 55 is used for money received for Work Study.
55 Supplemental Educational Opportunity Grant (SEOG)
Budget Symbol 55 includes money received for Supplemental Educational
Opportunity Grants.
55 National Institute of Health (NIH)
Budget Symbol 55 includes all monies received from and disbursed
on behalf of the National Institute of Health.
55 HHS Grants
55 Office of Ed Clearing
56 - 57 Non-Federal Contracts and Grants
This major category of budget symbols includes monies received
by the University pursuant to grants from, or contracts with
any State agencies, any political subdivision of the State, any
other states or nations or political subdivisions thereof or any
private entities whereby the University undertakes, subject to
terms and conditions specified by the entity providing the monies,
to conduct research, training or public service programs or to
provide financial aid to students. Currently there is only one
budget symbol under this major category:
56 Special Grants
Budget Symbol 56 includes all money received from Special Grants
financed from state or local grantors.
57 Special Grants
Budget Symbol 57 includes all money received from Special Grants
financed from private grantors.
58 Student Extra-Curricular Activities
Budget Symbol 58 is used for money collected by the University
to support extracurricular activities of students of the University.
58 Other Auxiliaries
This major category of budget symbols includes money received
from or for the operation of the University for any of its self-supporting
auxiliary enterprises, except student auxiliary services for
housing, food, health, and laundry. Budget symbols included in
this major category are:
59 Campus Center
Budget Symbol 59 includes all activities of the Plemmons Student
Union and its associated programs.
59 Central Stores
Budget Symbol 59 includes only those activities of the Appalachian
State University Warehouse.
59 Printing
Budget Symbol 59 includes only those activities of the Appalachian
State University Printing and Publications located in W. Kerr
Scott Hall.
59 Rental Property
Budget Symbol 59 includes only those activities associated with
non-student housing rental properties of the University.
59 Center for Continuing Education Support
Budget Symbol 59 includes those non-academic business activities
of the University's Center for Continuing Education that were
created solely to support the academic endeavors of the Center
for Continuing Education.
59 Tuition and Room Advance Special Fund
Budget Symbol 59 includes the receipt of all deposits for tuition
and room advances, and the transfer to the appropriate fund.
59 Motor Pool Operation
Budget Symbol 59 includes only those activities of the Appalachian
State University Motor Pool.
61 Funds on Deposit
This budget symbol includes all receipts, disbursements and funds
on deposit with the University. These funds are not the property
of the University.
82 - 85 Non-State Funds
Budget Symbol 82 - 85 includes any University activity which
does not use the State Treasury as their point of deposit and expenditure,
but has a need to utilize some aspect of Appalachian State University's
Purchasing and Cash Disbursements System. This budget symbol
was created mainly to allow these activities to use the State's
purchasing system.
92 Appalachian State University Foundation, Inc.
This budget symbol includes all funds, receipts, disbursements
and equity of the Appalachian State University Foundation, Inc.
See Foundation Chart of Accounts for details.
76 University Bookstore
This budget symbol includes the business operations of the University
Bookstore.
90 New River Light and Power
Budget Symbol 90 includes only those activities of the New River
Light and Power Company.
81 Student P.E. Revenue Fund
Budget Symbol 81 includes only those activities of the Student
P.E. Revenue Fund.
94 Endowment Income
Budget Symbol 94 includes only those activities of the Endowment
Income Fund.
93 Endowment
Budget Symbol 93 includes only those activities of the Endowment
Fund.
98 Investment in Plant Funds - Fixed Assets
Budget Symbol 98 includes University Fixed Assets only.
99 Reserved
77 Appalachian State University Athletics
This budget symbol includes all funds, receipts, disbursements
and equity of the Appalachian State University Athletic Association
and Appalachian Athletic Camps. See Appalachian State University
Athletics Chart of Accounts for details.
Ledger (xx-X-xxxxx-xxxx)
There are two ledgers used in the Accounting System. The General
Ledger is the section of the Accounting System and Chart of Accounts
in which all balance sheet accounts appear (assets, liabilities,
fund balances.) The General Ledger number is 0. The Subsidiary Ledger
is the section of the Accounting System and Chart of Accounts in
which all the revenue and expenditure accounts are maintained. Subsidiary
Ledger numbers are 1 - 9.
Ledgers
0 General Ledger
1 Current Unrestricted State Funds
2 Current Unrestricted Special Funds
3 Proprietary Funds
5 Current Restricted C & G Funds
6 Current Restricted Scholarship Funds
7 Loan & Endowment Funds
8 Plant Fund
9 Agency Funds
Department (xx-x-XXXXX-xxxx)
The Department code identifies the specific University administrative
unit (academic department, office, section, division, etc.) responsible
for the budget account. Each administrative unit of the University
has been assigned a unique department number for this purpose.
Object (xx-x-xxxxx-XXXX)
The Object code element of a budget account number identifies either
the type of expenditure for an expense account or the source of revenue
for a revenue account.
Expenditure Objects:
Expenditures identify the various natural usages of monies in supporting
the diverse programs and operations of the University, and are classified
by object class, major object, minor object, and subsidiary object.
In this standardized chart of accounts the broadest standard classification
of expenditures is by object class, e.g., SUPPLIES. Object Classes
are divided into major objects, e.g., Office Supplies. Some major
objects are divided into minor objects. Some minor objects are further
divided into subsidiary objects. Conversely, subsidiary objects summarize
into minor objects, minor objects summarize into major objects, and
major objects summarize into object classes. This can be illustrated
as follows:
X000 OBJECT CLASS
XX00 Major Object
XXX0 Minor Object
XXXX Subsidiary Object
The expenditure objects extend from the 1000 class object to the
8000 class object. For detailed listing, refer to Appendix
Statement 5, Expenditure Object Code Listing, and Appendix
Statement 6, Expenditure Object Code Definitions.
Revenue Objects:
Revenues identify the various means of financing the diverse programs
and operations of the University, and are classified by major source,
minor source, and subsidiary source. The broadest standard classification
of revenues by source is the major source, e.g., REGULAR TERM TUITION.
Most major sources are divided into minor sources, e.g., Resident
Tuition, Regular. Some minor sources are further divided into subsidiary
sources. Conversely, subsidiary sources summarize into minor sources,
and minor sources summarize into major sources. This can be illustrated
as follows:
XXOO MAJOR SOURCE
XXXO Minor Source
XXXX Subsidiary Source
Policy 6 - Accounting Terminology
A basic understanding of certain accounting terminology as it applies
to the University's accounting system is helpful in understanding
the information presented in this section and in dealing with the
Controller's Office. The remainder of this statement discusses terms
that are basic to the understanding of the University's accounting.
Budget Account Number
A budget account number is a twelve digit number assigned to a
general ledger, subsidiary expenditure or revenue account for identification
purposes. Refer to Policy Statement 5, Account
Numbers, for a detailed
description of the account numbering system at the University.
Budget
A department's budget is the amount of money allotted to it (for
each Account Number) for the fiscal year (July 1 - June 30). All
budget amounts for expenditure accounts have debit balances. All
budget amounts for revenue accounts have credit balances.
Encumbrance
An encumbrance is the amount of money a department has contracted
to spend through procurements and purchase orders. Once the department
has contracted to make the purchase, the money becomes obligated
or encumbered. Encumbrances have debit balances and can never be
less than zero.
Liquidation
Liquidation is the paying of an encumbrance. When checks are written
to pay encumbrances, the encumbrance amount is reduced or liquidated.
Amounts liquidated will appear as credits in the encumbrance column
and as debits in the expenditure column.
Expenditure
Expenditures are amounts paid from each account. All expenditures
are debits. If there is an expenditure refund or a correction, the
entry will be a credit and reduce the total expenditure balance.
Transaction
A transaction is any entry made in the accounting records except
those affecting the budget or encumbrances. The following are a few
examples of accounting transactions:
- Posting of a check in payment of supplies or services.
- Cancellation of a check.
- Posting of monthly payroll charges to their respective
budget accounts.
- Expenditure refunds.
- Posting of warehouse or other on-campus charges.
- Posting of sales tax.
- Expenditure adjustments to correct coding or classification
errors.
Unexpended Balance
The unexpended balance of an expenditure account is the amount
of budgeted money that is remaining to be expended or spent. The
unexpended balance is found by subtracting year-to-date expenditures
from the budgeted amount.
Example
Budget = $2,000
Minus Year-To-Date = 500
Unexpended Balance = $1,500
A debit unexpended balance represents money that is remaining to
be spent. A credit balance represents the amount that a department
has overspent its budget.
Unencumbered Balance
The unencumbered balance of an expenditure account is the "free" (available
to encumber or spend) amount of budgeted money that is remaining
for use by the department. The unencumbered balance is found by subtracting
the year-to-date expenditures and encumbrances outstanding from the
budgeted amount.
Example
Budget = $2,000
Minus Year-to-date expenditures = 500
Minus Encumbrances Outstanding = 250
= $1,250
A debit unencumbered balance represents money that is available
to be obligated and spent. A credit unencumbered balance represents
the amount of money that a department has over obligated or over
encumbered its budget.
Policy 7 - Funds Verification and Encumbrance Control
All types of procurement requests are verified by the Controller's
Office for the following requirements before obligation or payment
of funds:
- There are three or less correct account numbers.
- Academic, auxiliary, trust, and non-state fund codes
are not mixed.
- There is enough unobligated money remaining in the appropriate
account to pay the procurement.
Requests not meeting these requirements are returned to the originating
department. The originating department may then wish to submit a
request for budget revision, use another source of funds, if available
or forego the purchase.
Approved procurement requests for which a purchase order will be
issued are forwarded to the Purchasing Office for processing. (Detailed
information on the purchasing process is available in the Purchasing
Section of this manual.) When the purchase order is written, the
amount of the order is automatically recorded in the accounting records
for the appropriate budget account to show that funds have been obligated.
The same is also true for change orders written. This process is
called encumbering, and the amount recorded is referred to as an
encumbrance. Such a system of encumbrance control reasonably assures
the Controller that an account will not be over-expended.
Approved procurements written for the purpose of having a check
drawn are not encumbered, but are placed in line for payment if they
meet the three listed requirements.
Policy 8 - Budget and Expenditure Reports
Departments whose accounting records are maintained in the Controller's
Office are able to access the monthly report - FBM091. This report
includes all activity that occurred during the month (see ACC
Proced 7 - Installing DRAS).
Account Statement in Whole Dollars
The first column of this report identifies the subcode (object code);
the second column shows a description of the object; the third column
shows original and revised budget information; the fourth column
shows actual transaction for the current month and for year-to-date;
the fifth column shows open commitments (status of encumbrances);
the sixth column shows the balance available (budget minus transactions
year-to-date and encumbrances); and the seventh column shows the
percentage of the expended and encumbered amount compared to the
total budget. This report is rounded off to whole dollars.
Report of Transactions
The first column of this report identifies the subcode (object code);
the second column shows a description of the transaction; the third
column shows the date of the transaction; the fourth column shows
the entry code (transaction code); the fifth column shows the first
reference number - the purchase order and journal entry numbers are
shown in this column; the sixth column shows the second reference
number - the check number is shown in this column as well as a departmental
requisition number for encumbrances; the seventh column shows the
journal entry offset account when journal entries are made; the eighth
column shows budget entry amounts; the ninth column shows transaction
amounts for expenditures and revenue accounts; the tenth column shows
encumbered and unencumbered amounts; the eleventh and twelfth columns
show the batch reference number and the batch date that the transaction
is posted. Activity is reported in numerical order by revenue and
expenditure objects; each object shows a summary total. A summary
total is shown for the entire departmental activity year-to-date.
Items not Reflected on Departmental Financial Reports
When reviewing the departmental financial reports, the reviewer
must keep in mind that any entries made after the end of the month
are not reflected on the financial statements. To arrive at the true
financial position of the department, the financial report must be
adjusted by any entries made since the date of the report, purchase
orders issued, purchase orders paid, and transfers requested, etc.
Policy 9 - Intra-Campus Billing
The Intra-campus Billing System is provided for departments on
campus which provide services or supplies for other University departments.
It allows a department to sell its goods or services on a 30-day
credit basis, invoice at the end of each month, and receive payment
without having to handle any cash.
Departments which regularly sell some type of goods or services
to other departments can obtain pre numbered invoices from the Controller's
Office. The invoices are issued in a block of sequential numbers
and must be signed for when they are received. For internal control
purposes it is the department's responsibility to account for all
invoices issued to it.
As soon as possible after the end of each month, the selling department
prepares invoices for charges made to other departments during the
preceding month. The first (white) and third (yellow) copies of the
invoices are to be submitted to the Controller's Office no later
than the fifteenth of the month following the sale or completion
of work. The second (pink) copies are sent to the individual department
along with any backup for the charges. The fourth (blue) copies should
be retained by the selling department for its records.
When checks are written or journal entries are processed for intra
campus invoices paid through the Controller's Office, they are charged
to the expenditure codes and deposited to the receipt codes indicated
on the invoice. A validated Cashier's receipt is issued when the
money is deposited. The yellow copy is sent back to the seller indicating
that money has been deposited into a receipt account or that expenses
have been reimbursed to an expense account. The blue copy is kept
by the department doing the charging.
The selling department should match the Cashier's receipt copies
with the blue copies of invoices issued. The results will indicate
which bills remain outstanding.
The buying department should match all yellow Cashier's receipt
copies with the blue copies of invoices received. The results will
indicate which bills remain outstanding.
Billing errors should be settled between the buyer and the seller.
Any necessary adjustments to accounting records should be requested
by the selling department.
Policy 10 - Departmental Bookkeeping
Departments can review/print reports on their budgets and expenditures
after the close of each month's accounting records. Online inquiry
to the accounting system is available to all departments and requires
DRAS software for access to the departmental accounting records.
It is extremely important that each department have some system to
account for departmental funds and spending between published reports
and as a check on posting accuracy (see ACC
Proced 7 - Installing DRAS).
Any system that will provide the following current information
will serve the purpose of a departmental bookkeeping system:
- Budget amount
- Expenditures to date
- Encumbrances outstanding
- Unexpended balance
- Unencumbered balance
The only items encumbered through the University accounting system
are purchase orders. However, it is to the department's advantage
to encumber all known obligations in the departmental bookkeeping
records. This practice will give the department a more realistic
unencumbered balance to use when planning for additional obligations
or expenditures.
On-line inquiry to the accounting system is available to any department
that has the required computer equipment and connection to the main
computer. Departments wishing to use on-line inquiry should request
a sign-on code from the Controller's Office.
Policy 11 - Contractual Obligations of University Services
As the University provides services to persons and agencies outside
the campus community, procedures are necessary to insure the protection
of the University and its employees. Provisions are herein provided
for the development of contracts and the collection of accounts receivable.
These policies and procedures also accommodate contracts and arrangements
between on-campus agencies.
Contracts
University personnel contracting to provide services to individuals,
businesses, or governmental agencies, where the service to be provided
has a fair market value in excess of $1000 must have a written contract/agreement
signed by the administrative officers of the University and the buying
agency. In addition to the signature of the director of the department
providing the service, the contract must also include the signature
of the Vice Chancellor for Business Affairs. Policies and procedures
as outlined in Administrative Memorandum No. 104 from General Administration
relative to consulting should be followed. The contract agreement
should specify in detail the services to be provided and the conditions
of payment. All contracts will be reviewed to insure that provisions
of the Umstead Act are not violated.
Obligations and services less than $1000 should be approved or
sanctioned by procurement through the appropriate Vice Chancellor.
As specified for contracts in excess of $1000, policies and procedures
as outlined in Administrative Memorandum No. 104 from General Administration
relative to consulting should be followed.
Billing Procedure
Using the auxiliary billing procedures, University departments
will invoice for services rendered on a regular and systematic basis.
Departments must provide a copy of each invoice to the Controller's
Office. It is the responsibility of the Controller's Office to collect
accounts, and this will often require the assistance of the billing
department. At least two times each year, the department should contact
the Controller's Office to determine that the departmental accounts
and the Controller's accounts are in balance. Where applicable, the
provisions of Administrative Memorandum Nos. 127 and 132 relative
to collections from state employees will be followed.
Policy 12
- Collection and Write-off of University Accounts Receivable
Accounts receivable that are delinquent sixty (60) days or more
should be considered in arrears. At the time accounts are determined
to be in arrears, the customer should be notified that his account
is past due. Copies of notices should be kept on file to document
possible write-off or collection procedures. If standard forms are
used, the dates that notices were mailed will be satisfactory documentation.
Those not collected after three (3) reminders may be handled in one
of the following ways:
Students who have left Appalachian State University and have outstanding
balances on the Student Accounts Receivable account, are mailed statements
for two consecutive months. If there is no response to the statements
a follow-up letter is mailed. If there is no response to the letter,
the account, if $500.00 or more, is referred to the State Attorney
General. If the account is between $50.00 and $499.99, it is referred
to one of the State contracted collection agencies for collection.
Those accounts under $49.99 are coded uncollectible. If after two
years there has been no activity, these accounts are submitted to
the Vice Chancellor for Business Affairs for permission to write-off.
After the Attorney General's Office has exhausted their collection
efforts, they will approve the write-off of uncollectible accounts
of $500 or more. The Student Accounts Receivable Office refers all
these accounts ($50.00 or more) to a state contracted collection
agency for collection efforts before write-off procedures are instigated.
Appalachian State University Faculty or Staff
A list including full name, social security number, due date, amount
owed, and a description of the service provided should be forwarded
to the University Controller requesting that the amounts be withheld
from employee payroll checks. A payroll deduction check for the total
amount to be withheld will be deposited to the appropriate receipt
codes.
Departments will be notified of the amounts deposited by the Controller's
Office.
Appalachian State University Students
A list including full name, social security number, due date, amount
owed and a description of the service provided should be forwarded
to the Controller requesting that the amounts be placed on the student's
accounts receivable. The Controller will add the charges to the student's
account and appropriately notify the student and the department.
A check for the amounts added to accounts receivable will be written
and deposited to the appropriate receipt codes at the end of the
year. Departments will be notified of the amount deposited by the
Controller's Office.
Non-University Related Accounts/Other Receivables
A list of uncollectible non-university customer accounts should
be prepared periodically (at least annually) and submitted to the
appropriate dean or director and in turn to the appropriate vice
chancellor to determine if legal action is to be taken or if the
account is to be written off as uncollectible. The Chancellor must
approve recommendations for legal action. Legal action is intended
to identify any action requiring the services of a local attorney
and/or involvement in local court proceedings. In the case of collection
or write-off procedures, the list will be submitted to the Controller
who will acquire the approval of the Vice Chancellor for Business
Affairs and handle the collection or write-off as specified below.
The accounts receivable of New River Light and Power Company, and
student organizations funded through the student allocation fund
do not apply to this procedure.
The Controller will have the option of either writing off these
accounts or turning them over to the University's collection agency.
The department will be notified of those accounts written off and
of amounts collected less collection fees. Those not collected by
the collection agency will be written off.
- Accounts Between $50 and $1000:
The Controller will have the option of either writing off these
accounts, turning them over to the University's collection agency,
or turning them over to the North Carolina Attorney General. The
department will be notified of those written off and of the amounts
collected less collection fees. Those not collected will be written
off.
The Controller will have the option of turning these accounts over
to the University's collection agency or to the North Carolina Attorney
General for collection. Those determined to be uncollectible will
then be presented to the University Board of Trustees for approval
to write off. Upon approval, the Controller will write off the accounts.
The department will be notified of those written off.
Student Accounts Receivable Maintained in the Controller's Office
These accounts will be subject to the same write-off procedures
as those outlined above for non-university related customers.
Write-off Records Maintained
A list of all University accounts written off will be filed in
the Controller's Office. All student accounts over $5.00 that have
been written off are stored on the computerized Accounts Receivable
System to prevent these persons from receiving future University
services. Any account collected after the write-off procedure will
be credited to the appropriate departmental account.
Policy 13 - Disbursements
Payment of University obligations are scheduled to deliver prompt
reimbursement to all vendors when a transaction has been properly
completed. The University schedules payments of obligations in a
manner to take advantage of all available discounts and closely monitors
actual due dates on invoices to avoid premature payments.
Deposits for statutory withholding from employees pay will be made
no later than the official deadline and no earlier than one working
day prior to the official deadline.
Policy 14 - Requesting Payments Through a University Procurement
Request
In the interest of better cash management and reduced operating
costs, no Purchase Order will be required for certain services where
the desired service is not rendered until payment is made. These
services are not procured through the University's purchasing function
but instead are paid directly by the University Controller. These
services should be procured using the University's Procurement Request
form and may be used for requesting payments for:
University membership dues,subscriptions to publications,personal
service contracts (see RESOURCE MANUAL Purchasing Policy 23 for definition),registration
fees required for employee education, andcertain University insurance
policy premiumpayments.
A Procurement Request form should be prepared for each membership,
subscription, service, class/conference, or policy and submitted
directly to the Controller's Office along with application form,
subscription brochure, contract, registration form or other appropriate
order form. Dues and subscriptions should be paid in the fiscal year
in which the service begins. Personal service contracts should be
paid after the service has been performed.
See Accounting Procedure 6 for directions on preparing the University
Procurement Request.
Policy 15
- Check Request Procedure Policy
Delegation - Each department must request authorization to use the
Check Request Procedure. The Check Request Authorization form is
available by calling 2110. The Chairman, Dean, or Director may delegate
this authorization to specified departmental personnel. Each individual
so authorized to use the procedure must be held accountable for unauthorized
purchases or improper practices. Repeated misuse of the procedure
may result in withdrawal of the Check Request Procedure delegation
from the Department. See ASU RESOURCE MANUAL, Purchasing, Policy
24.
Purpose of Procedure - The Check Request Procedure may be used
to facilitate departmental procurement of domestic supplies and/or
materials required from off campus sources.
The Check Request Procedure cannot be used for the following:
Restrictions on Use -
- Orders $1,500 or more (including tax, delivery, and costs to
place the item into operation). Orders may not be split to avoid
this threshold.
- Food, Beverages and Flowers
- Contracted Personal Services.
- Research Gases/Radioactive Materials
- Purchases from Overseas Vendors
- Advertising
- Items carried in University Warehouse. These items must be ordered
from the warehouse. Items carried by the warehouse are available
through Gopher/ASU Policies and Procedures/Warehouse.
- Reoccurring monthly charges (phone, internet, copier charges, etc.)
- Any items listed on State Term Contracts must be purchased from
a State Contract Vendor. This information is available by:
Accessing State Contracts
From the Appalachian State University home page:
- Click on: faculty/staff resources
- Under Computing & Technology, click on: State
Purchase and Contracts
- Under Term Contracts, select: Term
Contracts and Awarded Vendors
- Select the appropriate search option to locate the contract you
are seeking.
This information is also available on the Internet at http://www.state.nc.us/PandC.
You may call the Purchasing Office for guidance.
- Prepaids must be handled through the Purchasing
Department.
- First aid supplies approved by Safety Office.
The Controller's Office is charged with oversight of the Check
Request Procedure to ensure compliance with University policies and
State purchasing laws and regulations.
A feedback memo will be sent on each Check Request which does not
appear to be in full compliance. Replies to these inquiries are needed
to support the University's files for audit purposes.
Repetitive non-compliances will be referred to the appropriate
Department Head.
- Purchases from the University Bookstore -
The procurement form should be used as authorization for the Bookstore
to charge purchases to the departments.
Additional Information - Reference: ASU Resource Manual
Purchasing Section and Accounting Section
Policy 16
- Purchasing Through Petty Disbursing Funds
As a result of the increasing costs of issuing procurement requests,
purchase orders and checks, petty disbursing funds have been established
for small purchases and emergency purchases.
Petty disbursing funds are available for use by University departments
and areas under University control. All areas are required to follow
the same procedures when using petty disbursing funds.
The fund should not be used to cash personal checks for employees
or students, for any type of loan to any person, nor to pay a person
for services rendered. This procedure does not replace the routine
purchasing procedures. However, if the purchase meets the criteria
outlined in Items 1 through 7 below, this procedure may be used in
lieu of the regular purchasing procedures.
Requirements For Use of Petty Disbursing Fund - The Central Petty
Disbursing Fund may be used when:
- There is a need for items that can be purchased locally
at an economical price.
- The University Warehouse is out of the items.
- The reimbursement amount is $75.00 or less per item with
a $100.00 total purchase price.
- The budget account to which the purchase is being charged
is maintained by the Appalachian State University Controller's
Office.
- The purchase of first aid supplies must be approved by
the Safety Officer before reimbursement will be made by the Controller's
Office.
- Requests for reimbursement must be submitted for payment
within thirty calendar days from the date of purchase.
- Designated Appalachian State University employees may
be reimbursed for the one-pair-per-year safety shoes they are allowed
by NC Statutes if all other conditions of this procedure are
met.
NOTE: Employees may only be reimbursed for the cost of the shoes
purchased up to the State of North Carolina allowed maximum, regardless
of the cost of the shoes shown on the invoice. The maximum amount
that may be reimbursed is $80 as of June 1, 2003.
Location of Fund - A Petty Disbursing Office is located in the Cashier's
Office in the John E. Thomas Academic Support Building and the Controller's
Office located in the Business Affairs Annex on the State Farm Road.
Questions Concerning Purchases - If there is any question about
a purchase being legitimate, the Petty Disbursing Officer should
be asked for a clarification prior to the purchase.
Consider Total Cost - Offices contemplating the use of this procedure
should consider the total cost of procuring the items. Personnel
costs must be kept to a minimum.
Unauthorized Purchases - The University cannot be responsible for
the purchase if it does not meet the established purchasing regulations
and as stated above.
Necessary Form - When the use of the small purchase procedure is
contemplated, a Petty Disbursing Slip should be completed. Petty
disbursing slips may be acquired from the Central Warehouse by warehouse
requisition.
Information Required Before Purchase - The petty disbursing slip
must have the following information filled in before the purchase
is made:
- Date
- Quantity of items
- Description of items
- Maximum cost
- Requesting department
- Account number to which the purchase will be charged
- Signature of person authorized to expend from that account.
Acceptable Paid Invoice/Receipt
Complete Description - The receipt must set forth a complete description
of materials purchased. Cash register tapes will be accepted if they
itemize and clearly identify the items purchased. The store name
must be stamped on the receipt if it is not pre-printed.
Receipts must be executed by typewriter, in ink or by indelible
pencil. It is preferred that the signature of the vendor clerk be
in ink; however, a legible signature in pencil is acceptable.
Original Receipts - Receipts must be originals. The only exception
is in cases when firms use standard business forms and issue their
receipts on standard carbon copy forms which have imprinted thereon "Customer's
Invoice" or like designation.
Positive Evidence of Payment - The receipt must be positive evidence
of payment.
- Petty disbursing receipts, when executed by a firm or
corporation, should bear the official "Paid" stamp of
the firm; or, if the name of the firm is written on the receipt,
it should bear the signature of the clerk issuing the receipt or,
if the name of the firm is affixed by a rubber stamp, the initials
of the clerk issuing the receipt will be acceptable. The receipt
must be made out to Appalachian State University.
- When vendor's printed invoice forms are used as receipts,
the invoice must clearly indicate that it has been paid, either
by being stamped with the official "Paid" stamp of the
firm that contains the name of the firm, or by being marked "Paid" and
signed or initialized by the clerk. All invoices must be made
out to Appalachian State University.
Reimbursement for Purchase
Conditions of Purchase - After the purchase is made, the petty
disbursing slip and paid invoice/receipt must be presented to the
Petty Disbursing Officer. If the purchase meets the following conditions,
the Petty Disbursing Officer will fill in the amount paid, date paid,
and sign the slip:
- Purchase meets the purchasing regulations.
- The receipt is acceptable.
- The purchase is approved by the person responsible for
the budget account.
- The balance in the account will cover the purchase.
- Request submitted for payment within thirty calendar
days from the date of purchase.
The Petty Disbursing Officer will refer to the most current General
Ledger Status Report to determine if money is available and if authorization
is valid.
Copy to Department - The original disbursing slip and receipt will
be retained by the Petty Disbursing Officer, and the reimbursement
money will be given to the purchaser. The purchaser must sign the
petty disbursing slip to verify receipt of the money and then return
the duplicate to the person responsible for the budget in his or
her department. When these charges appear in departmental expense
accounts, they will be labeled "Petty Cash" in the description
column.
Policy 17
- Backup Withholding Requirements Policy
The IRS 3406(a) requires payers under certain circumstances to
withhold 28% for gambling winnings, and 31% for vendor payments as
backup withholding taxes on payments of interest, rents, royalties,
commissions, non-employee compensation, and certain other payments.
Payments subject to backup withholding are defined in IRS sections
6041, 6041(a), 6042(a), 6044, 6045, 6049(a), 6050A, and 6050N.
Backup Withholding is required under three circumstances:
- Backup withholding is required when the agency requests
a Taxpayer Identification Number (TIN) from a vendor and one
is not provided. The agency must backup withholding on any payments
made to this vendor. Once backup withholding begins, the agency
must continue to withhold until the vendor provides his or her
TIN.
- The IRS sends the agency a first B Notice (CP2100) and
the vendor does not respond within 30 days to the agency's request
for certification of the TIN. The agency must begin to backup withhold
on any payment made to this vendor. Backup withholding continues
until the vendor provides a TIN certified on IRS Form W-9.
- The IRS sends the agency a second B Notice within a three
year period. The agency must begin backup withholding immediately.
Backup withholding continues until the IRS notifies the agency
to stop withholding. This notification may be an IRS Letter 147C
or SSA Form 7028.
IRS CP2100 Notices - Each year the IRS issues CP2100 Notices for
prior year information returns that contained missing, incorrect
and/or currently not issued taxpayer identification numbers. For
instance, the 1992 CP2100 Notice was issued in October, 1993 and
the 972CG Notice of Proposed Assessment which was based on these
mismatches was issued in December 1994. Upon receipt of this CP2100,
IRS procedure requires each agency/recipient to compare their records
with the information furnished by the IRS.
There are two separate procedures that must be followed depending
on whether the CP2100 listing agrees or disagrees with your records.
Procedures to Follow Once You Receive a CP2100 From the IRS
For account information that does not agree with your records,
check to see if you gave the correct information on your return,
if you changed the information after you filed, or if the IRS changed
the information when processing the return. In these instances, you
do not have to respond to the IRS, but you do need to do the following:
- If you did not put the correct information on the return,
correct your records and include that information on any future
information returns that you file. Do not send a "B" Notice
to the payee.
- If your information changed after you filed your return
include that information on any future information returns you
file. Do not send a "B" Notice to the payee.
- If the IRS changed your information, note in your records
and take no further action.
For account information that agrees with your records, you must
determine whether this is the "first" or "second" time
within three calendar years the IRS has notified you that the TIN
is incorrect. You must have procedures in place at your agency/university
that allow you to determine whether this is the first or second notification
since the procedure that you are required to follow is different
for each notification.
First Notice
- Send the first "B" Notice, a copy of Form W-9,
and an optional reply envelope to the vendor within 15 business
days from the date of the CP2100 notice or the date you received
it (whichever is later). Date the "B" Notice no later
than 30 business days from the date of the CP2100 notice or the
date you received it. The outer envelope must be clearly marked "IMPORTANT
TAX INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT
ENCLOSED".
- Allow the payee 30 calendar days to provide you with
a newly signed Form W-9. Keep this W-9 for your records. Please
note, once the IRS has informed you that the TIN of a vendor does
not match, a telephone call is not sufficient documentation that
you have followed procedures.
- Update your record with the corrected information received
from the vendor and include it on any future information returns
you file.
- Begin backup withholding on payments made to vendors
who do not respond within 30 business days from the date of the
CP2100.
Second Notice
- Send the second "B" Notice and an optional reply
envelope to the vendor within 15 business days from the date
of the CP2100 or the date you received it (whichever is later).
Date the "B" notice
no later than 30 business days from the date of the CP2100 notice
or the date you received it. The outer envelope must be clearly
marked "IMPORTANT
TAX INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN
DOCUMENT ENCLOSED". Do not send a Form W-9.
- The vendor must contact the Social Security Administration
(SSA) to have a social security number validated or the Internal
Revenue Service (IRS) to validate an employer identification
number (EIN).
- Allow 30 business days from the date of your request
to receive either SSA Form 7028, Notice to Third Party of Social
Security Assignment from the SSA or a copy of IRS Letter 147C from
the vendor.
- Begin backup withholding on payments made to payees if
you don't receive SSA Form 7028 or IRS Letter 147C within 30 business
days. You must continue to backup withhold until you receive
either validation.
Depositing and Reporting Backup Withholding - It is the agency's
responsibility to deposit and report backup withholding. Once funds
are withheld, the withholding agent must deposit the money using
the same rules as those used for employment taxes. See the general
instructions for information on when the taxes must be deposited
(IRS Circular E or IRS Forms 941 or 945). It will vary from quarterly
to semi-weekly depending on size of the deposit to be made. Most
deposit situations will require that a deposit be made by the fifteenth
day of the following month in which backup withholding occurred.
Withheld taxes are deposited in a federal reserve bank using a Form
8109 Federal Tax Deposit Coupon. IRS Form 945 Annual Return or Withheld
Federal Income Tax must be used to report backup withholding. This
return is due by January 31 of the following calendar year.
Miscellaneous Backup Withholding Information - The Backup Withholding
rules apply to taxable grants or agricultural payments reported on
Form 1099-G; it does not apply to any other Form 1099-G type payment.
Backup withholding rules apply even if the amount is less than $600
per year.
At present time the backup withholding rate is 31% of the payment
amount.
Once begun, you must continue to withhold until the payee provides
a TIN. Do not refund the amounts you withheld before the TIN was
provided. You will reflect these amounts on Form 1099-MISC; the payee
will get credit for the withholding just as employees get credit
for the wages withheld from their paychecks.
If you are required to withhold but fail to do so, you are liable
for the amount you should have withheld. You are relieved of that
liability only by obtaining an affidavit (Form 4669) from the payee
stating that the payee included the payment on a tax return.
Obtaining a Form W-9 allows you to stop withholding (at least until
the second B Notice), but it does not relieve you of liability for
missing withholding.
The Office of the State Controller's policies for Materials Management
contains a discussion on the specialized processing of 1099 information,
including backup withholding. Agencies on NCAS/DBS accounting system
should refer to those policies for a discussion of how the new system
handles these payments. Agencies and universities on other operating
systems should adopt procedures to handle this reporting requirement
consistent with the capabilities of their system.
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