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Accounts Receivable

Index

Introduction

Accounts Receivable

Cash Receipts and Cash Application

Collections

 

Introduction

Accounting for accounts receivable, collections of accounts receivable, accounting for cash receipts and cash application for sponsored projects is generally the responsibility of Sponsored Projects Accounting.  The support of Department Administrators, and on occasion PIs, can be required with respect to certain types of awards and in other circumstances on a case-by-case basis.

Accounts Receivable

Sponsored Projects Accounting executes the accounting for sponsored project accounts receivable on the general ledger of the University through programmed accounting entries in the RPA system.  When a non-letter-of-credit invoice is generated through the RPA general ledger subsystem, revenue is credited (through the use of various revenue subcodes) to the sponsored project account number, and accounts receivable are reflected in subcode 1200 Current Accounts and Notes Receivable – Gross, in the general ledger and as recorded on the sponsored project Level Reports.  Research Accounting’s main goal in managing sponsored project accounts receivable is to maximize sponsored project revenues and cash flows while minimizing sponsored project receivables, write-offs and related financial risks.

The University’s payment terms on non-letter-of-credit sponsored project invoices are “Due Immediately Upon Receipt” on the total amount invoiced.  No discount payment terms are offered.  Not all sponsors comply with the terms of the NOA with respect to payment of University invoices.  These payment terms are not strictly enforced out of respect to the University’s and the PI’s ongoing relationship with our sponsoring agencies.  Payment of the invoice within a reasonable period of time after issuance is accepted.  Sponsoring agencies are never charged interest on any unpaid balances.

Banking Information

The University is required to provide banking information to sponsors in order for them to provide payments for sponsored projects.  Information to be provided to sponsors or incorporated into sponsored project agreements is as follows:

For Checks (U.S. Postal Service or Express Mail):

University of Pittsburgh

Attn:  371220

500 Ross Street, 154-0455

Pittsburgh, PA 15262-0001

For ACH or Wire Transfer Payments:

Bank of New York Mellon

Routing No. 043000261

Account No. 001-5510

Swift Code: IRVTUS3N

Account Type:  Checking

Email Notification:  fiscalofficer@cfo.pitt.edu

 

Cash Receipts and Cash Application

Cash received on sponsored projects in payment of University invoices is reflected in subcode 1202, Current Accounts and Notes Receivable – Payments, on the sponsored project Level Reports.

 Payment by Check

All payments made by physical check are to be made payable to The University of Pittsburgh and sent to the banking address stated above.  Checks are deposited directly into the University’s banking lockbox.  A bank lockbox provides a key internal control in that it ensures a proper segregation of duties between the accounting and physical receipt of cash.  Sponsored Projects Accounting receives an electronic copy of the checks along with all check attachments from the lockbox service to properly apply cash received to sponsored project accounts.  The University’s standard invoice requires that a copy of the University invoice be returned with the sponsor’s payment to aid in cash identification and application.

Payments Made Payable to the Wrong Legal Entity

Checks made payable to affiliates (UPMC, UPP, etc.) that are sent to the University’s lockbox and Wire Transfer or ACH Deposits intended for affiliates are comingled with University payments and are automatically cashed by the University’s bank.  In instances where this occurs, Sponsored Projects Accounting will issue a University check or wire transfer and return the funds to the payer.  Such funds are never forwarded on to the affiliate by the University.  The sponsor will have to reissue the check to the proper payee.  This ensures that the integrity of the 1099 tax reporting of all entities is properly maintained.

Physical checks made payable to affiliates but sent to University departments or Sponsored Projects Accounting should be voided and immediately the physical check should be returned to the payer to be re-issued to the proper payee.

Student Payment Center

The Student Payment Center will not accept checks that are to be credited to entity 05 sponsored project accounts.  The rationale is two-fold:

Payment by Wire Transfer or ACH Deposit

Electronic Payments received via either Wire Transfer or ACH Deposit must utilize the banking information stated above.  When the bank deducts a fee for a wire transfer, thereby reducing the total amount paid to the University, the wire fee amount is included as part of the balance due on the final invoice sent to the sponsor.  If the sponsor does not pay the wire fee, the performing department must provide an account number to be charged for the write-off of the unpaid banking fee.  

Payment in Stock

 

Certain companies and foundations sometimes fund sponsored projects in the stock of their company or the company that endowed their foundation.  It is preferable that the University be paid in U.S. dollars and not in stock.  Payment in stock should be avoided due to the risk inherent in fluctuating stock prices and related stock sale fees and commissions that can reduce the funding allocation to the sponsored project.  Our business is to educate students, conduct research and perform public service activities, not to speculate in financial markets.

 

That said, when the University has no choice in the matter, the stock that is electronically transferred to the University is immediately sold (never held) by the Office of Finance, and the proceeds credited to the sponsored project by Sponsored Projects Accounting net of all stock sale and transfer fees and commissions.  If the proceeds from the stock sales are insufficient to fund the entire work scope of the sponsored project, the sponsored project cost overrun will be charged to the performing department by Sponsored Projects Accounting at the end of the sponsored project.

 

Payment in Foreign Currency

 

It is preferable that the University be paid in U.S. dollars.  Payment in foreign currency should be avoided due to the risk inherent in foreign currency translation fluctuation and related foreign currency conversion fees and commissions that can reduce the funding allocation to the sponsored project.  Our business is to educate students, conduct research and perform public service activities, not to speculate in foreign currency markets.

 

If international sponsors refuse to pay the University in U.S. dollars, then the foreign currency payments sent to the lockbox are converted to U.S. dollars by the banking vendor, and the proceeds credited to the sponsored project by Sponsored Projects Accounting net of all foreign currency conversion fees and commissions.

 

If the funds converted to US Dollars result in the University receiving less than the amount due per the sponsored project agreement, the difference is included as part of the balance due on the final invoice sent to the sponsor.  If the sponsor does not pay the foreign currency exchange rate difference, the performing department must provide an account number to be charged for the write-off of the amount that was short-paid due to the currency conversion.

 

If the funds converted to US Dollars result in the University receiving more than the amount due per the sponsored project agreement, the difference can be added to the sponsored project budget to be expended on project-related expenditures.

 

Payment in Cash

 

The University is never paid in physical cash on sponsored projects.  There are occasions when, as part of a sponsored project, departments obtain cash for participant payments utilizing the We-Pay System.   Any excess cash not distributed must be credited back to the sponsored project.  Cash should be converted to a Cashier’s Check by the department at a local bank and then forwarded to Sponsored Projects Accounting for deposit back to the sponsored project account through the University’s lockbox system.  Mellon Bank no longer accepts cash deposits from the University through its lockbox system.  Cash should also not be delivered to the Sponsored Projects Accounting Department.

 

Student Payment Center

 

Excess cash should also not be taken to the Student Payment Center.  The Student Payment Center will not accept miscellaneous cash deposits that are to be credited to entity 05 sponsored project accounts.  Similar issues arise as those delineated above under Payment by Check. 

 

Payment by Credit Card

 

Sponsored Projects Accounting and the University do not accept credit card payments on sponsored projects.  The only accepted payment methods are delineated above.  This is due to the fact that Sponsored Projects Accounting works business-to-business, does not work directly with the public and therefore is not a cash point of the University like the Student Payment Center, University Food Service or the Bookstore and does not have access to the systems, controls and the resources to process credit card payments or accept cash payments.  In addition, all University activity under the entity 05 sponsored project ledger must be supported by written grant, contract or other written form of agreement.  There is a high risk that a credit card form of payment may not be accompanied by a properly executed and negotiated form of agreement that would increase the risk of performance on the part of the University and the PI.

 

Holding Account

 

Sponsored Projects Accounting makes every effort to identify payments on sponsored project accounts receivable upon receipt.  Payments are received related to sponsored project accounts that sometimes cannot be matched to a particular invoice or sponsored project account.  This can occur due to the following:

  • payments can be received by the University prior to receipt of a NOA and related sponsored project account activation
  • payments can lack the information needed to properly identify the payment to a particular sponsored project account or invoice
  • partial payments can be made that do not match a particular invoice total and follow-up must occur with the payer

 

Accordingly, Sponsored Projects Accounting maintains and monitors a sponsored project holding account in the general ledger as a short-term repository for these unidentified payments.  Sponsored Projects Accounting works on this account continually to ensure payments are identified and cleared in as timely a manner as possible.  Copies of our holding account activity are also provided to Institutional Advancement on a monthly basis to ensure that no payments representing gift transactions are inadvertently being held in the Sponsored Projects Accounting holding account.

 

Collections

Collections on sponsored project accounts receivable are mainly the responsibility of Sponsored Projects Accounting.  To facilitate the conversion of University sponsored project accounts receivable into cash, Sponsored Projects Accounting employs the following resources:

Delinquent Notices

 

Sponsored Projects Accounting sends delinquent notice letters to sponsors, 1st, 2nd and 3rd notifications, with progressively sharper wording to encourage sponsors to make required payments.  A final Sponsored Projects Accounting payment demand letter is sent prior to requesting the assistance of the University’s Office of General Counsel.

 

PI Assistance on Collections

 

Normally Sponsored Projects Accounting is responsible for collection of accounts receivable on University sponsored projects and requires no assistance by the PI on collection matters related to their projects.  However, due to the PI’s relationship with the sponsor and technical background that is not possessed by Sponsored Projects Accounting, the PI can be called upon on occasion to assist in the collection process.  The PI’s contribution to the collections process due to their valuable relationship and expertise is a great resource to Sponsored Projects Accounting.

Office of General Counsel Assistance on Collections

If payments are still not received, and a dialog is still not opened up with the sponsor after the above actions are initiated, the Office of General Counsel (OGC) is contacted and a legal payment demand letter is sent to the sponsor that states that a legal action will be taken if required payments are not made.  Legal actions then proceed from that point depending on the response.  Although the OGC can be called upon to provide legal support with respect to collection matters on sponsored projects, OGC cannot be called upon to compensate for the University’s inability to perform or business decisions or risks that end in a sponsor’s refusal to pay.  Matters in which OGC can assist can include:

  • Drafting Legal Payment Demand Letters
  • Drafting Repayment Plan Agreements
  • Negotiating settlement of disputes between the University and its sponsors
  • Taking legal actions in a court of law to secure payment on outstanding sponsored project debt obligations, depending on materiality, for which the sponsors are at fault and not the University

 

Small Start-Up Firms

 

On occasion and due to a lack of financial liquidity, certain sponsors have trouble reimbursing the University for the costs of sponsored project work performed.  This typically occurs on sponsors who are small, venture capital based, start-up firms.  PIs and Department Administrators must be vigilant when doing business with these firms to ensure such firms have the financial capacity to fund the sponsored project, and the University does not end up providing additional venture capital to these sponsors that is never recovered.  Sponsored Projects Accounting will notify the PI and the Department Administrator as soon as we believe that we are encountering difficulties collecting payments from these small, start-up firms.  The Department Administrator should monitor an increasing balance in the net balance between subcodes 1200 and 1202 on their Level Reports as well for early identification of a sponsor having difficulty paying the University.  Due to the University’s budgeting structure, upper campus Departments bear the financial burden of these organizations’ inability to pay.

 

Repayment Plan Agreements

 

In an effort to ease the financial burden on these small, venture capital based start-up firm sponsors and collect on their unpaid balances, the University will utilize a tool known as a repayment plan agreement when the situation warrants.  The repayment plan agreement is offered only when all other collection efforts have failed.  The repayment plan is written by the Office of General Counsel and offers the sponsor the opportunity to repay the University in smaller, more affordable increments over an extended period of time.  Sponsors have responded favorably to this interest free option afforded by our University. 

 

University’s Failure to Perform

 

Sometimes in the process of collecting on University sponsored project accounts receivable, sponsors can make a perceived or real claim that the University is failing to perform on the project in some manner such as not providing timely progress, financial, human and animal subject and other data reporting, publications, scientific samples, or other deliverables required by the terms and conditions of the award; or different interpretations of project work scopes.  Often times, these matter can be resolved quickly with the sponsoring agencies and outstanding payments are made to the University by the sponsors.  On occasion, these issues cannot be resolved.  When it is determined that an issue represents a failure to perform on behalf of the University, the performing department must provide an account to be charged for the write-off of the funds that the sponsoring agency refuses to reimburse.  There is no financial reserve carried on the financial statements of the University to absorb the costs of the University’s failure to perform on sponsored projects.