Auxiliary Standard Operating Procedures


SUBJECT:

Assessment of Interest Charges to Auxiliary Organizations

SOURCE:

Auxiliary Accounting, Financial Management Services

DATE ISSUED:

July 2004

DATE OF LAST REVISION:

 

March 2006

ASOP NO:

12.0

RATIONALE:

To provide guidelines on the assessment of interest charges to auxiliary organizations with cash overdrafts.

ASOP:

Auxiliary organizations are charged an interest fee on cash overdrafts occurring for at least two consecutive months. In the first month a cash overdraft occurs, the fiscal officer, director, and campus administration to which the organization reports will be notified by Auxiliary Accounting. The notification will indicate that if the overdraft persists, an interest fee will be charged to the appropriate organization. If the cash overdraft is still present in the following month, an interest fee will be charged.

 

The two types of accounts considered in the assessment are auxiliary accounts (subfund AUXENT, MCLAR, MPPLAN, MLABS, or MSERV), and accounts in the Plant Fund—Renewal and Replacement sub fund group (subfund PFRR). For each organization, the cash balances of both account types are totaled to determine the balance considered for assessment purposes. Interest fees are based on Indiana University’s annual variable rate on short-term investments, as calculated by the Office of the Treasurer.  The rate for any given month within the last year may be obtained from the Auxiliary Accounting web site. The formula used to determine the amount charged to an auxiliary unit is as follows:

 

[(Prior Month Ending Cash Balance + Current Month Cash Balance) / 2] x [(Annual Interest Rate) / 12]

 

The interest charge will be recorded by Auxiliary Accounting to the organization on a monthly basis, using a Distribution of Income and Expense document (DI). In cases where several accounts may be involved, Auxiliary Accounting will make the charge to the account that appears to be the “parent” account. For example, if the organization’s accounts are 60-xxx-00, 60-xxx-01, 60-xxx-02, 60-xxx-03, and 92-xxx-xx; the charge will be made to what appears to be the “parent” account. In this case, the charge will be made to account 60-xxx-00. In cases where a relationship between the organization’s accounts may not be as clear, Auxiliary Accounting will make a judgment call as to which account will be charged. The charges may be further distributed by the organization using the KFS Distribution of Income and Expense (DI) document at the discretion of the fiscal officer if desired.

DEFINITIONS:

Account – Identifying number for a pool of funds assigned to a specific university organization, for a specific function.

 

Auxiliary Account – An account (typically in the 60-xxx-xx or 61-xxx-xx range) that furnishes goods or services to students, faculty, staff, or the general public and charges a fee directly related to, although not necessarily equal to, the cost of the goods or services.  Fundamentally, an entity managed as a self-supporting activity.

 

Auxiliary Organizations – Indiana University departments that are fully or primarily comprised of auxiliary accounts.

 

Organization – The KFS entity that defines the aggregation of accounts considered in determining negative cash balance, this is the “reporting organization” used in auxiliary reporting.

 

Sub Fund Group The breakdown of a fund group into a number of smaller groups for reporting purposes.

RESPONSIBLE

ORGANIZATION:

 

Auxiliary Accounting, Financial Management Services