Recent discussions held with business officers identified the need for changes to the current internal cost recovery process. To ensure accurate institutional budget to actual variance reporting, the structure of the internal cost recovery accounts will change.
An internal cost recovery occurs when one Queen’s University unit recovers expenses that were incurred through an external party and then allocated between other Queen’s University departmental units. In this circumstance, the initial expense would result in a net cash outflow to the University, but the cost recovery would not result in a net impact on the cash flows or net income of the University.
All recoveries from a source within Queen’s University, including ancillaries, are internal cost recoveries. These recoveries relate to expenses that have been incurred by one unit, to an external party, whereby that unit is now ‘recovering’ part or all of that cost from another unit internal to the University.
The department paying for the expense that was initially recorded because of a transaction with an external party to the University should record the expense to the appropriate expenditure account. An internal cost recovery account, in the same expense budget node as the original expense, should be used to record the recovery.
In the above example, all expense accounts in range 606001-606008 will roll up to the budget node 606000.
Example 1: Fund 10000, Dept. 11170 is recovering printing charges from Fund 80501, Dept. 11170.
Example 2: Fund 10000, Dept. 44301 is recovering maintenance charges from Fund 10000, Dept. 11540.
|Credit:||10000||44301||660019||-$5,000||ICR-Renovations & Alterations|
Should you have any questions regarding use of internal cost recovery accounts: