Sent on April 1, 2020 to Chief Financial Managers, RRC Contacts, EFS Cluster Directors, and the Internal/External Sales listserv.
Financial Guidance to Recharge Centers related to COVID-19
As requirements related to the novel coronavirus (COVID-19) response continue to evolve, questions have been raised specific to recharge centers activities. Guidance provided by several units applies to recharge centers. The Controller’s Office actively collaborates with the University Budget Office, Sponsored Projects Administration, and other support units on systemwide communications. To assist recharge centers, specific guidance has been augmented for a couple of systemwide communications.
Tracking Costs Related to the COVID-19
A new ChartField 2 (CF2) code has been set up to track costs the University incurs related to responding to the impacts of COVID-19. Costs recorded using the CF2 code 1000018130 / Description = COVID-19 should be those over and above what is budgeted and expected by the unit and should only include those related to activities specifically tied to COVID-19. The types of costs recorded in the new CF2 code will vary from unit-to-unit. Examples are anticipated to include: additional staffing or supplies, cancellation fees, student and other refunds, maintenance of labs/facilities, etc. Costs could be related to travel, attending/hosting a conference, reduced operations, evacuation, facilities management, program cancellations, etc. Existing employees’ time spent on responding to COVID-19 should not be tracked or recorded in the new CF2 code. See the 3/18/20 memo Funding Guidelines - Costs Related to the Coronavirus (COVID-19) for more details.
It is very important that the University be able to track at an institutional level reliable information on these costs. This CF2 enables the University to take advantage of federal or state support if possible, and can help identify where the financial impacts are the most serious. For expenses incurred as a direct result of COVID-19, the use of CF2 1000018130 (COVID-19) is required. Unfortunately, that means that the CF2 chartfield is no longer available for recharge center specific reporting. Fund, Program, DeptID, CF1, and Fin EmplID values can and should be used as usual. If it is necessary to track the COVID-19-related expenses by the specific events or activities for which the recharge center would normally have used a CF2, create a separate spreadsheet or log outside of EFS for that level of expense tracking.
A chart was created that provides accounting guidance for payroll related expenses impacted by COVID-19. This material is a companion to any guidance issued by the Office of Human Resources and the University Budget Office. Sponsored Projects Administration, the University Budget Office, the Controller’s Office, and the Office of Cost Analysis contributed to this guidance.
Recharge centers will need to review and follow the guidance provided.
Additionally, it is likely that some units will experience revenue loss compared to budget during FY20, specifically associated with cancellation of or reductions in activities and services. All units, including auxiliaries, should use whatever methodologies are most appropriate to the situation to track and document these losses. To analyze the impact and potential support, toward the end of the fiscal year the University Budget Office will be in contact with units about how to summarize and verify these situations.
For recharge centers, the prior 1-3 year(s) activity during the same time period is a good indicator.
Sources of Funding – Increased/Unanticipated Costs and Revenue Losses
Any unit experiencing increased/unanticipated costs associated with COVID-19 should record those expenses in the appropriate chartstrings (as indicated above) under item 1. The particular funding source selected at the chartstring level will vary based on the unit, the activity, and the resources available. Work with your college Chief Financial Manager to understand the options and see the 3/18/20 memo Funding Guidelines - Costs Related to the Coronavirus (COVID-19) for more details.
In most cases, recharge centers will probably continue to incur expenses in the specific chartstring and experience a drop in both internal and external sales revenue.
Planning for Next Year Rates
The guidance above will allow recharge centers the ability to understand the FY20 net operating surplus/deficit with/without COVID-19 impacts. Recharge centers with an operating deficit prior to COVID-19 impacts will have a larger financial challenge to overcome than those with an operating surplus prior to COVID-19 impacts. Typically, at the time of creation of the next year's rates, recharge centers carry forward the surplus/deficit and are incorporated in the next year's rates. Recharge centers should critically review their FY20 activity and work with their department and/or college financial leadership to determine the best course action. Recharge centers with deficits greater than 15% may need to spread the deficit out over a couple of years, fund their deficit from a subsidy, increase the current subsidy or a combination of several options. Plans for deficits greater than 15% must be approved by the Chief Financial Manager and the Controller.