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Revenues and Expense Recoveries

The process of identifying, budgeting, managing and reporting of revenues and expense recoveries spans a number of sections in the GTFM. This page summarizes the processes and provides links to important sections in this area:

Why is the Distinction Between Internal and External Important?

Internal and External Transactions

Budgeting

Payment Terms

Accounts Receivable, Collection Responsibilities and Uncollected Amounts

HST- University Sales

 

Why is the Distinction between Internal and External Important?

All transactions, regardless of whether they are considered “internal” or “external”, must comply with certain financial management objectives (e.g. timely recording of transactions and adequate supporting documentation). See the sections Internal Revenues and Internal Expense Recoveries and External Revenues and External Expense Recoveries for more information on financial management objectives.

The ability to track and report on “external” financial transactions separately from those considered “internal” is important for:

  • University external financial reporting, so that:
    • revenues and expenses are not overstated due to the inclusion of “internal” financial transactions, and
    • the UofT’s annual financial statements are prepared in accordance with Canadian Generally Accepted Accounting Principals (GAAP).
  • Faculties and Divisions, so that:
    • analysis can be done to assess how much of the reported revenue is being generated from increased cash flows versus the “reallocation” of existing cash flows among internal units.

Generally speaking, a financial transaction is considered “external” to the University if there is a net impact on cash flows or if there is a net impact on the net income position of the University as a whole; everything else is considered “internal”.

 

Internal and External Transactions

These two sections provide guidelines for the financial management and processing of revenue and expense recovery transactions depending on whether the transaction is considered “external” or “internal”. The sections include definitions of external and internal, types of internal and external transactions, financial management objectives, accounting for such transactions, and how to obtain additional assistance.

 

Budgeting

Once decisions have been made to sell goods or services or recover expenditures, the unit will need to determine how it wants to track revenue/recoveries and budget accordingly. For information on budgeting guidelines and policies, refer to the Budgeting section. Also, it is important to be aware of the issues surrounding the processing of internal revenues and internal expense recoveries and external revenues and external expense recoveries when setting up your departmental budgets.

Payment Terms

The unit needs to make fundamental decisions regarding how external customers pay for sales of goods and services, including whether the unit will require cash payment, provide debit card or credit card facilities, accept incoming wire transfers, will grant credit, or a combination of these payment methods.

For internal transactions, the “payment” is made via the system (FIS). The selling department uses a specific transaction for internal revenue/recoveries. “Payment” is made when the transaction is processed. See the Payment Terms section for additional guidance.

 

Accounts Receivable, Collection Responsibilities and Uncollected Amounts

Credit may be granted to external customers. The section Accounts Receivable, Collection Responsibilities and Uncollected Amounts covers the areas of accounts receivable, issuing “credit invoices”, collection responsibilities, and what happens in the event there are uncollected amounts.

HST – University Sales

Refer to the HST – University Sales page which summarizes the HST impact on sales to external parties.  If you have any additional questions, contact the Manager, Accounting Services at 978-8185.

Last revision September 2010