02 - 044 Inter-Fund Transfers - Non-Mandatory

A. SUMMARY OF ADMINISTRATIVE PROCEDURE

This procedure describes the purpose of an inter-fund transfer and defines non-mandatory as opposed to mandatory transfers (see Procedure 02-043, Inter-Fund Transfers - Mandatory). Inter-fund transfers are subject to certain restrictions imposed by Generally Accepted Accounting Principles (GAAP). Finally, this statement provides specific procedures for processing non-mandatory transfers in Banner.

1. Definition of an inter-fund transfer. An inter-fund transfer is an accounting transaction which moves fund balance (reserves) from one fund to another fund. By definition, transfers cannot occur within the same fund. There is never a net economic impact on USNH as a whole due to a transfer, since the transaction is entirely between funds. There is no external cash involved. A transfer does not increase or decrease total USNH revenues or expenses. Except for those transactions processed monthly on recurring feed entries made by central offices (for example, internal borrowing and debt service repayments, etc.), transfers should not be routine transactions. Fund accounting is the practice by which resources are maintained in separate fund accounts to provide proper stewardship over the resources entrusted to administration. If transfers among funds are routine, it means either stewardship is lacking or the funds were not properly established or budgeted.
2. Mandatory versus non-mandatory transfers. Transfers are classified as either mandatory (see Procedure 02-043, Inter-fund Transfers - Mandatory) or non-mandatory.

Non-mandatory transfers are authorized only by the governing board or administration. Unlike mandatory inter-fund transfers, there is no legally binding requirement to make the transaction. Examples include:

a. Transfers to a Plant fund for purposes of renovating or constructing fixed assets.
b. Transfers by campus central offices in support of departmental initiatives.
c. Transfers to internally designated funds to support research projects of new faculty members.

B. DETAILED OPERATING PROCEDURES

1. All inter-fund transfers must be approved by the Accounting Services department of the USNH Controller's Office as detailed below:

a. Transfers to or from an Unrestricted Undesignated Educational and General (E&G) fund and any other fund require prior approval from the Campus CFO or his/her designee, unless:

i. the transfer was part of the original budget as approved by the Trustees, or
ii. the transfer is of a type which has received previous blanket approval from the Trustees, or
iii. the transfer is to fund a grant cost sharing commitment made at the time the award is accepted, or
iv. the transfer is from Unrestricted, Undesignated E&G to Internally Designated funds for Indirect Cost Revenue credited to the account of specific Principal Investigators (PIs) for future competitive research initiatives, or
v. the transfer (or the aggregate of similar transfers) is less than $50,000.

b. Transfers to Quasi Endowment funds require USNH Treasurer approval for amounts up to $1,000,000 and Financial Affairs Committee approval for amounts over $1,000,000.  In addition all transfers out of Quasi Endowment funds require trustee approval. 
c. Transfers from Internally Designated or Auxiliary Enterprise funds to Plant funds require campus CFO written approval unless include in the approved Original All Funds Budget (OAFBUD) for the year. Transfers to Plant for annual campus Renovation and Adaption (R&A) costs, if part of the original approved budget, are exempted from CFO approval.
d. Transfers to or from Restricted Current funds or True Endowment funds generally cannot be made. Please contact the USNH Controller if you feel such an transactions is warranted.

2. Transactions which are not transfers.

a. Budget moves are not accounting entries at all. When additional budgeted funds are required in a Banner account and are being used from another account within the same fund, this is a budget move, not an inter-fund transfer. The current budget and spending authority is modified through journal vouchers using budget class codes.  Increases and decreases in expense or revenue budgets within undesignated, unrestricted current educational and general funds do not usually require funds to be transferred by Accounting Services. If an inter-fund transfer is required in these cases, the USNH Budget Office or Campus Finance Office handles the budget move and the Controller's Office handles the inter-fund transfer.
b. Internal allocations (Internal Vouchers). These are instances where the actual expense incurred is shared by more than one department, fund or campus. In these cases, all costs are paid to vendors from one account to manage the cost of operating the department, project or event. Then periodic (usually monthly or quarterly) accounting entries are made to allocate the costs to the department benefiting from the expense. Examples of this type of activity are telecommunications, administrative service charges to auxiliary enterprises, and facility service support charges to auxiliaries. Transfer codes are not needed for internal allocations. Instead, the 76 series of account codes are used for both the debit and credit so the integrity of total USNH expenses within each expense grouping may be maintained.
c. Purchases with multiple sources of funding. Occasionally, departments charge an entire purchase to one fund, planning to recoup a portion of the cost from other funds at a latter date. When this accounting entry occurs, it is an allocation of costs not a transfer. It should not be accomplished with transfer codes. Instead, the journal entry (JV) should debit and credit the appropriate expense object code as charged on the original purchase order (PO) or invoice (INV). The PO/INV should be referenced on the JV either in the description field or in the document reference number field. This method should be used only in circumstances where it is not possible to charge each source directly on the original PO/INV.

It is far more preferable to charge the specific FOAPAL of the source(s) of the funds on the PO when the item is initially ordered. There can be multiple funds referenced including both restricted and unrestricted funds on a single PO. By charging the specific FOAPAL on the original PO/INV, USNH's fiduciary responsibility for the proper management and use of funds is more easily proven since payments to vendors for specific purchases can be readily seen by reviewing the Banner online invoice distribution accounting form (FAAINVE). By charging another account initially, the transaction trail is more difficult to follow.
3. Reporting requirements. Transfers are reported in summary and in detail as part of the year end financial audit work papers.  All reporting on inter-fund transfers is dependent on the proper coding of inter-fund transfer transactions in Banner. These transactions can materially misstate fund balances classifications if not coded correctly in Banner. Therefore, careful attention to the detailed operating procedures which follow is required.
4. How to use the transfer code listing. The proper codes are determined by the purpose of the transfer. Locate the purpose in the title of the account code. The "revenue credit account code listed under the first column labeled "ACCT CODE" under the title "Transfers In (Credit)" is the account code you will use for the credit side of the entry. The account code listed under the fourth column under the heading "Transfers Out (Debit)" labeled "ACCT CODE" will be used for the debit side of the entry - REGARDLESS OF THE FUND AFFECTED.

Example: Assume a transfer is needed from the General funds to Plant funds to help fund a major new construction project. The purpose of the transfer is to fund a capital project. The correct codes are:

For Capital projects not R&R 

Debit - 8O1039 Credit - 8I1039

The JV should debit the account code 8O1039 and credit the appropriate plant fund using account code 8I1039.

5. Proper supporting documentation. As with all documents to be processed through Banner, proper supporting documentation is essential. This is especially true for inter-fund transfers since approvals are centrally held. To process the document as quickly as possible, all information a reader of the document should reasonably need to know to authorize this document should be included in the document text field or attached to the document through the Banner Document Management System. Simply put, proper supporting documentation means adequate (but not excessive) relevant documentation (e.g., document text, calculations, report totals, external invoices, contracts, etc.) that explains the transaction so an uninformed reader can understand the transaction.
6. All entries for transfers must balance. That is, the transfer debits must equal the transfer credits and all the lines must be valid transfer codes.
7. Banner documents to use for non-mandatory transfers. All non-mandatory transfer documents, except those processed as part of an automated Banner feed, should be prepared and entered into Banner via a JV document using a rule code beginning with JE. A non-mandatory transfer is not an original receipt of funds, therefore it should not be on a CR (Cash Receipt class code). Nor is it a legitimate expenditure, therefore it should not be on any kind of a purchasing or payment document.
8. Processing time required. Transfer transactions require time to secure approvals before they can be posted within Banner. This can only occur when these procedures are followed and proper documentation accompany the document. Omitting documentation of approvals outside of Banner or relevant documentation will slow the approval process. Please allow enough time. To facilitate the processing turnaround time required on these documents the following should be addressed prior to forwarding the documents to the Controller's Office:

a. Make sure there is sufficient available fund balance to process the document.
b. All supporting documentation must be attached. (See B.5 above)
c. All required approvals have been secured and documented in the available text fields. (See B.1 above)


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