I ran my Payroll Distribution Reports for July I noticed that faculty salaries were charged to a different account number; what's changed?
We've implemented a new process to account for academic year salaries paid to faculty during July and August. Faculty who are on 9.5 month contracts are paid over 12 months beginning July 1 through June 30. Salaries and benefits paid during July and August (4 pay periods) are actually "advance payments" to faculty (paid but not yet earned). It has been RIT's practice to treat these salary advances as an "expense" (i.e., they are charged directly to a salary expense account line on the general ledger including RIT and NTID operating accounts, grants & contracts, endowment earning accounts, etc.). Effective this fiscal year (FY 2009), compensation related to academic year salaries paid in the months of July and August for regular faculty, with a contract term of less than 12 months, will be treated as a "prepaid expense". The prepaid amounts will be recognized (e.g., expensed) automatically via the regular payroll process over 19 pay dates beginning September 15 and ending June 15. The complete prepaid salary process description is available on the Controller's Office web page: http://www.rit.edu/controller/payroll/docs/faculty_prepayment.pdf
Why is this change being made?
The new process is necessary to ensure that:
- interim financial statements are accurate; and,
- the University is in compliance with effort reporting requirements for employees who work on Federal grants and contracts.
I'm a department administrator; do I have to do anything differently?
No, the actual accounting changes are being made via the regular payroll process for all faculty with a contract term less than 12 months. However, if you have budgetary responsibilities, you should be aware of this change and how treating the July and August salary payments to faculty as a prepaid expense impacts your department. You should also monitor/reconcile the balance in the prepaid account to ensure that it is declining as it should be (i.e., decreasing by 1/19th each pay period) – refer to FAQ #9 for more information.
Will faculty whose contracts are less than 12 month be directly affected by this change?
No, this change will be transparent to faculty (other than those with budgetary responsibility). They will still be paid 1/24th of their annual contract amount during each pay period beginning in July and ending in June. Only those faculty who serve in administrative positions will be impacted and then, only from a budgetary perspective.
Since NTID operates on a different fiscal year than RIT, will this process change apply to faculty who work at NTID?
Yes, it will. Since contracts for faculty who work at NTID also begin in late August and end in early June, amounts paid during the summer months are also required to be accounted for as prepaid expenses.
Where will the salary payments be charged (on the general ledger) during July and August?
Regardless of the general ledger account number on the faculty member's HR record, 100% of his/her academic year salary paid during July and August will automatically be charged to a default prepaid general ledger account number. The object code is 09045. New account combinations have been set up in each of the dean's offices departments. The balance on each of these accounts will be -0- by June 30 of each year.
Will the prepayment amounts be included on the July and August Payroll Distribution Reports?
Yes, during July and August, the advance payments will be included in the Payroll Distribution Report on object code 09045 under the appropriate dean's office department number. From September through June 15, 1/19th of the total prepaid salary amount will be expensed according to the account number (i.e., costing) on the employee's record as of that pay date. This amount will be added to the regular salary paid to the faculty member during the period and reflected on the Payroll Distribution Report on the appropriate account number.
Will this change impact benefit expenses for my department?
Since benefit expenses are calculated based on total salary expenses for the period, no benefit expenses will be charged to your department/project during July and August for regular faculty who work less than 12 months.
How will this change impact my operating budget?
No academic year salary payments will be charged to RIT and NTID operating accounts (or any other accounts) during July and August (typically 8.3% of the total salary budget would be consumed for each of the two months). However, a higher percentage will be charged for the months September – May. Over the 12-month period, 100% of the budget will be spent as it has in the past. During this transition year, NTID operating departments will not expend 100% of their faculty salary budgets (01.4XXXX.70150.XX.02008.00000) in fiscal year 2008. However, the prepaid amounts will be fully expensed during the next fiscal year.
Will the prepaid expense be included on the dean's office department statement?
Yes, a footnote has been added to the department statement that will reflect the declining balance in the prepaid account (i.e., it will reduce by 1/19th each pay period as the prepaid amount is expensed). By June 30 of each fiscal year, the balance in the prepaid account will be -0-.
How will this change affect the Quarterly Monitored Workload Reports (QMWRs) produced by SPA (to fulfill the effort reporting requirement for federal grants and contracts)?
This new process enhances the accuracy of the QMWRs. The first quarter QMWRs will not include academic year salaries paid to faculty during July and August. These payments will be spread over the academic year to reflect the actual effort of the faculty member during the corresponding period.
Will this change have any impact on salary expenses for faculty who work on summer contracts?
No, salary expenses for faculty who work on summer contracts will be treated as they have in the past. The expense will be reflected on your department/project statements during the period in which it was paid (on object code 70550).
Will this change have any impact on salary expenses for faculty who are hired to start at RIT at the beginning of the academic year (i.e., in late August)?
No, since new faculty are paid over nine months beginning September 15 and ending June 30, they are not paid in advance for their services.
Who should I call if I have questions about this new process?
Call Christa Abugasea, Director of Payroll and AP Services at ext. (585) 475-2418 or Milagros Concepcion, Assistant Controller at ext. (585) 475-5428.