Financial Services

Financial Services

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​External Cost Recovery

External Cost Recovery Flow Chart

​An External Cost Recovery is when an initial expense is incurred and then either partially or fully recovered from an external source/party.

Initial Expense = net cash outflow to the university
External Cost Recovery = net cash inflow to the university

 

Recording Transactions in the Correct Period

​Charges must be recorded in the fiscal period for which the goods are received or the services are rendered.

The primary concerns are:

  • Reporting Accuracy - External Cost Recoveries and any related operating expenses must be recorded in the University fiscal year in which they occur.
  • Compliance with Funding Limitations - Where restricted funding includes an expiry date (as it does with most Research Awards) billing for goods and services to be delivered after the expiry date is a violation of the Award Term.

Accruals

As a general rule, there should be no pre-billing for deliveries to be made (or services to be provided) beyond the fiscal period.  In addition, there should be no delay ​in billing beyond a fiscal period for goods delivered or services rendered in a previous fiscal period.  It is expected that all sales invoices and internal sales and recovery transactions will be processed by the year-end-cutoff and, therefore, it should not be necessary to accrue income.  If an accrual over $100,000 is necessary, contact Financial Services for assistance.  No amounts less than $100,000 will be accrued.

 

Taxes

​Departments are responsible to charge and collect applicable taxes on the initial expense.  For more information on taxes, go to GST/HST.

 

Collect Amounts Due

​For most invoices related to External Cost Recoveries the terms of payment are due upon receipt of the invoice.

The selling department is responsible for the collection of amounts due.  Financial Services does not contact customers, or otherwise pursue outstanding Accounts Receivable.

 

Recording External Cost Recoveries

There are two main strategies for the recording of External Cost Recoveries:

1.  Expense Recovery - This is generally referred to as the "Expense Recovery" approach, and used when it is determined that the University is ultimately responsible for 100% of the cost by managed to offset the cost through partial or total recovery.  Leave the total cost of the expense item at 100% and record the "recovery" monies received as a REVENUE item using the appropriate "490XXX" account.

Example: Expenses are recovered from KGH through the Revenue Recovery account.  In this circumstance, the Revenue Account is used because Queen's is responsible to pay the full expense.

External Cost Recovery Debit Credit Example One

2.  Cost Sharing - This is generally referred to as the "Cost Sharing" approach and used when it is determined that the University, as a whole, is ultimately responsible for only part of the cost.  Directly decrease the total cost of the expense item by recording the "recovery" monies received against the appropriate expense account, thereby reducing the total EXPENDITURES recorded for the department.

Example: Queen's Chemical Engineering shares the cost of maintaining a piece of equipment with RMC.  Although Queen's pays the full cost of the maintenance, Queen's only budgets for the 50% share.

External Cost Recovery Debit Credit Example Two

*Only Queen's portion (50%) gets expensed.