This policy establishes the proper accounting treatment for transactions where one Harvard unit bills another Harvard unit for goods or services, including internal billings from academic service centers and from central service units. These internal billings must not increase total University income or expenses nor misstate the operating results of any University unit.
Reason for Policy
To ensure adherence with Generally Accepted Accounting Principles (GAAP); to promote consistent accounting treatment across the University; to ensure income and expenses are not overstated as a result of transactions that are internal to the University; and to ensure the operating results of University units are not misstated as a result of internal billing transactions.
Who Must Comply
All consolidated (meaning included in the University’s annual financial report and related financial statements) Harvard University schools, tubs, local units, Affiliate Institutions, Allied Institutions and University-wide Initiatives must comply with this policy. Non-consolidated tubs excluded from this policy are as follows:
190 Yenching Institute
295 American Repertory Theater
455 HBS Research Centers
595 HPRE 3rd Party
670 Master Trust
- Understand scope and purpose of internal billings. Service units, which include academic service centers and central service units, may charge other Harvard departments for a variety of goods and services. For example, Harvard University Information Technology (HUIT) charges departments for the cost of providing telephone services.
- For purposes of this policy, only consolidated Harvard units, meaning those units included in the University’s financial report, are considered “internal.” Internal transactions must be processed on a journal entry. Non-consolidated entities (listed above in the Who Must Comply section) are considered “external,” like other organizations or individuals outside Harvard. External transactions must be processed via the Oracle accounts payable or accounts receivable systems.
- Academic service centers, which are units within Harvard departments or centers that charge for goods or services that directly support the research or academic mission of the University, must also comply with the Office for Sponsored Programs’ Service Center Policy, which provides guidance on rate-setting, treatment of surpluses/deficits and other considerations.
- Internal billings vs. internal transfers: if the transaction is a funding transfer between units, such as support for a particular activity or a transfer of expenses between units, see the Internal Transfers Policy for guidance.
- Record internal billings correctly. All internal billing transactions must debit AND credit an expense object code. See Appendix B for detailed instructions.
- Recording credits (revenue or sales)
- Billing units use special internal billing object codes to record credits for internal sales; these codes have “INTERTUB” or “INTRATUB” in their names. For example, object code 8274 is named “Other Svcs, INTERTUB Sales^Other Svcs."
- INTERTUB and INTRATUB sales object codes are used for two different types of internal sales transactions within the University. INTERTUB sales object codes are used for internal transactions between different tubs or multi-tub schools; INTRATUB object codes are used for internal transactions within a tub or a multi-tub school. These object codes allow billing units to readily identify their “income” from internal transactions and to keep these recoveries distinct from actual operating expenses.
- The INTERTUB/INTRATUB sales object codes must be used to record internal “income” only; they must never be used to record expenses.
- Recording debits (expense or fees/charges)
- Record the debit for the internal billing in the expense object code closest to the INTERTUB/INTRATUB sales object code used to record internal “income.” The debit MUST be recorded to the same mega-object code group and ideally also in the same super-object code group, if possible. However, if the internal billing is for services or goods connected with a capital project, units must debit a construction-in-progress asset object code. The billing unit is responsible for using the correct object code. Exception: expense object codes for Space and Occupancy are in M711 and M722, but the associated recoveries are bundled together in M710, so the intra/intertub entries cannot eliminate at the mega object code level.
- Billed units must not reclassify internal billing transactions outside of the originally-charged mega object code range, to ensure both sides of an internal billing transaction net at the University level.
- The billing unit should include in the journal line description sufficient identifying information so the billed unit can research the charge; ideally this information should include a description of the charge, and the first initial/last name and Harvard phone number of a contact person. See Appendix C for details.
- Process internal billings within required time limits.
- Internal billing transactions must be processed as soon as possible after the goods or services have been provided, ideally within the same month. At a minimum, internal billings must be processed within the proper quarterly and, most importantly, fiscal year periods.
- Note that internal billing transactions recorded more than 90 days after the date that goods or services were provided should NOT be billed to sponsored funds; charges made after 90 days to closed grants must be removed. Billed units should contact the billing department directly to resolve any issues relating to late charges.
- Maintain appropriate documentation for internal billing transactions.
- Billing departments must maintain documentation detailing the nature of the goods or services provided, account coding to charge, the date the goods or services were provided, authorization from the department and individual ordering the goods or services, and contact information. Billing departments must retain the original documentation locally in accordance with the University's General Records Schedule. The documentation may take the form of a purchase order, work order or record of an online request. Billing departments should provide timely copies of this documentation to departments being charged.
- Internal billing charges to sponsored funds, like all other charges to sponsored funds, must always be allocable to the charged fund. Billed units should maintain documentation regarding the allocability of charges to sponsored awards.
Responsibilities and Contact Information
Financial deans or equivalent tub financial officers are responsible for ensuring that local units abide by this policy and the accompanying procedures.
Financial Accounting and Reporting (FAR), within the Office of the Controller, is responsible for maintaining this policy and for answering questions regarding the policy. Contact: (617) 495-8032
Service units are responsible for recording internal billing debits and credits in appropriate object codes and for providing guidance on appropriate coding to billed units.
Academic service centers: units within Harvard departments or centers that charge for goods or services that directly support the research or academic mission of the University and recover costs through charges to internal and external users.
Allocable: a concept within federal regulations for sponsored programs administration. An allocable cost is one that service relates specifically to the project being charged.
Central service units: separate operating units that are generally not part of academic tubs and that provide services to the entire University community. Examples of central service units include Harvard University Dining Services (HUDS) and Harvard University Information Technology (HUIT).
Multi-tub school: A Harvard school whose activities occur in more than one tub. An example of a multi-tub school is FAS, which consists of nine distinct tubs (e.g., FAS Core, SEAS, the College, FAS Continuing Education, Athletics, etc.). Other multi-tub schools include KSG, HBS and HMS. When using internal sales object codes, tubs that compose a multi-tub school (e.g., SEAS or the College) should use the INTRATUB sales object codes for billing transactions with other tubs within its multi-tub school, but the INTERTUB sales object codes with tubs outside of its multi-tub school.
6/30/2013: Updated format and clarified procedures; moved instructions on journal processing to Appendix C.