The Three R

1
The Three Rs

• Recharge, Rebill and Reimbursement

2
What does this document cover?

• Understand the key characteristics of each of the
  three Rs
• Understand the underlying accounting concepts
  that provide guidance on how these activities
  should be recorded
• Understand how to apply the accounting procedures

3
What is a Recharge?

• Distinguishing Characteristics Recharge
• A recharge is a charge for goods or services
  provided by one internal university unit to other
  internal university units
• Rates must be approved by the Office of Financial
  Analysis
• These revenue generating (recharge) activities
  have rate structures that include direct costs
  such as technicians to maintain testing
  equipment, office staff to administer billing and
  timekeeping, supplies consumed and the cost of
  equipment maintenance contracts etc.
• Units who recharge usually operate in the
  auxiliary fund range, and most typically in the
  Internal Services Fund (52000)
• Example A Chemistry Lab analyzes samples for
  another academic department
• The Chemistry department charge the academic
  departments chartfields at an expense account
  613225 (Chemical Analysis Fees)
• The Chemistry department records recharge revenue
  on their chartfields at account 410000 (General
  Recharge Revenue)

4
Accounting for Recharge Activity

• Recharge activity must be billed through the
  Service Unit Billing (SUB) process
• Changes to the SUB process
• Additional required fields (Fall 2014)
• Contact Financial Operations/Shared Services for
  training or questions about the SUB process
• Contact the Office of Financial Analysis for
  questions about recharge

5
What is a Rebill?

• Distinguishing Characteristics Rebill
• A rebill is a specific type of cost transfer
• Moving the original cost of a good/service from
  the unit that was originally charged to the unit
  that utilized the good/service
• Rebill activity is not revenue generating because
  the unit receiving funding is receiving a
  reduction in expense
• A rebill can be made between most operating funds
  and some nonoperating funds
• Preferred method of rebilling is through service
  unit billings (SUB)
• Example A central unit purchases test tubes in
  bulk at a discounted rate. They charge other
  units for the test tubes at the purchase price.
• The central department credits their chartfields
  for their sub-units portion of the expense on
  account 618350 (Laboratory Supplies)
• The central department debits the other units for
  their portion of the expense on account 618350
  (Laboratory Supplies)

6
Accounting for Rebill Activity

• All rebill activity must be recorded as a
  reallocation of expenses instead of revenue
• Options
• Move the expense using the original expense
  account on both sides of the service unit billing
  or journal entry
• A University-wide rebill program (REBIL) has been
  created to help identify rebill activity
• Contra-expense accounts in the Internal Rebill
  range of accounts (620200 to 620999) have been
  expanded to help identify rebill activity
• Contact Financial Operations/Shared Services
  regarding any questions

7
What is a Reimbursement/Rebate

• Distinguishing Characteristics
  Reimbursement/Rebate
• Personal Reimbursement
• Payment received from an individual to reimburse
  the university for resources used for personal
  benefit
• The personal use of university resources should
  be discouraged
• Institutional Reimbursement
• Payment received from another organization to
  reimburse the university for resources used on
  their behalf or for their benefit
• Reimbursements/Rebates are non-revenue generating
  activity because the university is only receiving
  the original cost of the good or service utilized
• Reimbursements/Rebates are recorded via a Cash
  Receipt (CR) ticket to deposit funds back into
  the universitys account
• Example
• Reimbursement - An employee uses their business
  phone to make a personal long distance call. A
  Cash Receipt is used to credit the departments
  chartfields (reduce expenses) at account 611250
  (Long Distance)
• Rebate - A department purchasing a computer is
  sent a 50 rebate. A Cash Receipt is used to
  credit the departments chartfields at account
  614390 (computers under 5,000)

8
Accounting forReimbursement/Rebate

• Reimbursements/rebates must be recorded as
  negative expenses against the same account where
  the original expense was incurred
• Rebates are a form of reimbursement
• Contact Financial Operations/Shared Services
  regarding any questions

9
What resources are available?

• Financial Operations www.finance.umich.edu/finop
  s/accounting/service_unit_billings
• Office of Financial Analysis www.finance.umich.e
  du/analysis