Interdepartmental Billing

Policy Overview
For a variety of reasons, UIS must charge other Harvard units for goods and services provided to them. Examples of such goods and services include telephone, network, DLS, and CAMail, among others. Internal billing transactions must not result in an increase in total University income and expenses nor misstatement of the operating results of any University unit. Therefore, internal billing for goods and services between units must be accounted for in accordance with the procedures set forth in this policy to ensure:

• Adherence with Generally Accepted Accounting Principles (GAAP)
• Consistent accounting treatment across the University
• Income and expenses are not overstated as a result of transactions that are internal to the University
• The operating results of University units are not misstated as a result of internal billing transactions

Customer Definitions
There are several types of entities to which UIS units provide goods or services. Each customer will fall into one of the categories below:

1. Internal entities, including other tubs or departments within our own tub (UIS/OAS)
2. External entities, including affiliate entities and individuals not on the University general ledger system

Creating the Billing Transaction
The following procedures relate to charges for goods or services provided to internal entities (other Harvard units) and not to transactions that are billed to external entities (parties outside of Harvard). If the transaction is a funding transfer between units, such as support for a particular activity or a transfer of expenses between units, please refer to the University’s Internal Transfers Policy for the appropriate accounting guidance. The procedures below will help employees who work with customers to establish an interdepartmental billing transaction:

Basic Guidelines
Internal billing transactions must not result in an increase in total University income and expenses.To prevent this, internal billing transactions must not charge an expense object code (6000-8889) to one unit while crediting an income object code (4000-5999) to another unit. All internal billing transactions must debit and credit expense object codes (6000-8889).

Customer Expense Codes used by central service units
With University-wide charges from central service units (like UIS), the appropriate object codes for tub charges are predefined to ensure consistent accounting treatment across the University. For example, UIS telephone billings to Harvard units are charged to a specified set of telephone object codes, which includes the range from 8510 to 8516. Please refer to the UIS Customer Object Code Card for recommended expense object codes used by UIS units.

Choosing Object Codes
When choosing the debit/charge code for an internal billing transaction, the object code should be in the same range of object codes – specifically, the same “super-object” code group. The INTERTUB sales/recovery object code should be credited and an expense object code in the same super-object code group should be charged/debited. If using object codes in the same super-object group is not feasible (i.e., if there is no sufficiently specific available code in the selected super-object code range), the object codes must, at a minimum, be in the same “mega-object” code group.

For example, when UIS charges customers for CAMail, it credits the sales/recovery object code of 8093. The preferred offsetting charge/debit is 8096, as both are in the same “super-object” code group of S809. However, expense object code 8250 would also be allowed, as it would still roll up to the “mega-object” code group of M802, but this is not preferred.

Because of the need to classify these transactions in the same super- or mega-object code group, it is important that customer departments be instructed not to reclassify charges received from other units to a different object code.

An exception to this guidance on processing internal billing transactions occurs when service units perform services or provide goods connected with a capital project. In these instances, an INTERTUB sales/recovery object code or the appropriate expense recovery object code, should be credited, and a construction-in-progress asset object code should be charged/debited.

What to Communicate to Customers
When taking an order for products and/or services, UIS staff should ensure that the 33-digit billing code provided by the customer includes an object code that is allowed for those services. If the customer still insists on using an object code that is not preferred/allowed, it is important to explain the University policy to the purchaser, or contact your financial partner with assistance in explaining the policy.

Timeliness of Transactions
Internal billing transactions should be processed as soon as possible after the goods or services have been provided. In particular, internal billings must be processed within the proper quarter and, most importantly, fiscal year periods.

Internal Billing transactions that are more than three months in arrears since the date that goods or services were provided may not be billed, and every effort must be made to bill departments within the same fiscal year that goods or services were provided.

Recording the Revenue Transaction
The following procedures will assist financial employees in processing an interdepartmental billing transaction:

INTERTUB "Sales" Object Codes
While it is necessary not to overstate University revenues and expenses, this rule creates a problem for billing units who would like to be able to view receipts from other University units as revenue or sales. To meet this need, “sales” object codes have been created in the expense object code range to record credits for internal sales of goods and/or services. These object codes are referred to as “INTERTUB” sales object codes; these words appear directly in the object code name. For example, object code 8252 is named “Client Contract Svcs, INTERTUB Sales of Technical Services”.

These object codes may be used by billing units to record their recoveries (i.e., credit their expenses), thereby allowing billing units to readily identify their “income” from internal transactions and to keep these recoveries distinct from actual operating expenses. In addition, for internal reporting purposes only, billing units can generate a “Service Unit Changes in Net Assets Budget Report” that allows both their internal and external sales to be displayed in the revenue section of their internal operating statement.

The INTERTUB sales object codes should never be debited/charged for expenses. The service units should also not use the INTERTUB sales object codes to charge a department for goods or services (i.e., they should never be used to charge a department for expenses).

Processing Internal Billings
Internal billings are processed as journals and can be one of the following types:

• Journal feed
• ADI journal
• Manual journal

Internal Billing Batch & Journal Naming Conventions
To aid departments in researching internal billing transactions that were charged to them, the following data must be included in an internal billing journal:

Batch/journal name requirements:

• Preparer’s tub acronym (UPPERCASE)
• Preparer’s initials (UPPERCASE)
• Brief description of the journal’s purpose
• Date that the goods and/or services were provided

Example:
UIS JAD TPC Internal Billings 05-01-06

Journal Line Description Requirements
Journal line descriptions should provide the department being billed with enough information to easily understand the charges. The following elements are required for all journal line descriptions:

Journal line description requirements:

• Billing unit – tub (and org if appropriate) acronym (UPPERCASE)
• Provider’s reference number, if relevant (it may be an invoice or job number, depending on the service unit’s practice)
• Billing unit contact person’s name (first initial, last name – without any punctuation)
• Billing unit contact person’s phone number
• Brief description of the transaction
• Date that the goods and/or services were provided

Example:
UIS 8468 J Doe 5-1234 Q3 CAMail Billing 3 Accounts 3-31-06

The journal line description is limited to 240 characters in both ADI and manual journal entries. However, it is best to be as concise as possible when creating these descriptions.

Documentation for Internal Billing Transactions
Billing departments must maintain documentation detailing the nature of the goods or services provided, account coding to charge, the date the goods or services were provided, authorization from the department and individual ordering the goods or services, and contact information.  It is recommended that billing departments provide a copy of this documentation to the department being charged, and they must locally retain the original documentation in accordance with the University's document retention policies. Such documentation may take the form of a purchase order, work order or record of an online request.

Timeliness of Transactions
Internal billing transactions should be processed as soon as possible after the goods or services have been provided. In particular, internal billings must be processed within the proper quarter and, most importantly, fiscal year periods.

Internal Billing transactions that are more than three months in arrears since the date that goods or services were provided may not be billed, and every effort must be made to bill departments within the same fiscal year that goods or services were provided.

External Billing Procedures
Transactions that will be billed to external entities follow the same procedures as above with the following exceptions:

• The object code used to recognize the revenue will be in the 5000 object code range
• Invoicing and customer communications may differ
• PO is required
• Payment is made via a check sent to Harvard’s lockbox
• Collection activity is required (i.e., A/R is tracked and bad debt may result)

For More Information
Please see the University Internal Billing Transactions policy for additional information