The Three Rs

Recharge, Rebill and Reimbursement

What does this document cover?

Understand the key characteristics of
each of the three Rs
Understand the underlying accounting
concepts that provide guidance on how
these activities should be recorded
Understand how to apply the accounting
procedures
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What is a Recharge?
Distinguishing Characteristics Recharge
A recharge is a charge for goods or services provided by one internal
university unit to other internal university units
Rates must be approved by the Office of Financial Analysis
These revenue generating (recharge) activities have rate structures that
include direct costs such as technicians to maintain testing equipment, office
staff to administer billing and timekeeping, supplies consumed and the cost
of equipment maintenance contracts; etc.
Units who recharge usually operate in the auxiliary fund range, and most
typically in the Internal Services Fund (52000)

Example: A Chemistry Lab analyzes samples for another academic

department
The Chemistry department charge the academic departments chartfields at
an expense account 613225 (Chemical Analysis Fees)
The Chemistry department records recharge revenue on their chartfields at
account 410000 (General Recharge Revenue)

Accounting for Recharge

Activity

Recharge activity must be billed through the

Service Unit Billing (SUB) process
Changes to the SUB process
Additional required fields (Fall 2014)

Contact Financial Operations/Shared Services for

training or questions about the SUB process
Contact the Office of Financial Analysis for
questions about recharge

What is a Rebill?
Distinguishing Characteristics Rebill
A rebill is a specific type of cost transfer:
Moving the original cost of a good/service from the unit that was originally charged
to the unit that utilized the good/service

Rebill activity is not revenue generating because the unit receiving funding is
receiving a reduction in expense
A rebill can be made between most operating funds and some nonoperating
funds
Preferred method of rebilling is through service unit billings (SUB)

Example: A central unit purchases test tubes in bulk at a discounted

rate. They charge other units for the test tubes at the purchase price.
The central department credits their chartfields for their sub-units portion of
the expense on account 618350 (Laboratory Supplies)
The central department debits the other units for their portion of the
expense on account 618350 (Laboratory Supplies)

Accounting for Rebill Activity

All rebill activity must be recorded as a reallocation
of expenses instead of revenue
Options:
Move the expense using the original expense account on
both sides of the service unit billing or journal entry
A University-wide rebill program (REBIL) has been created
to help identify rebill activity
Contra-expense accounts in the Internal Rebill range of
accounts (620200 to 620999) have been expanded to help
identify rebill activity

Contact Financial Operations/Shared Services

regarding any questions

What is a Reimbursement/Rebate
Distinguishing Characteristics Reimbursement/Rebate
Personal Reimbursement
Payment received from an individual to reimburse the university for resources used
for personal benefit
The personal use of university resources should be discouraged

Institutional Reimbursement
Payment received from another organization to reimburse the university for
resources used on their behalf or for their benefit

Reimbursements/Rebates are non-revenue generating activity because the

university is only receiving the original cost of the good or service utilized
Reimbursements/Rebates are recorded via a Cash Receipt (CR) ticket to deposit
funds back into the universitys account

Example:
Reimbursement - An employee uses their business phone to make a personal
long distance call. A Cash Receipt is used to credit the departments
chartfields (reduce expenses) at account 611250 (Long Distance)
Rebate - A department purchasing a computer is sent a $50 rebate. A Cash
Receipt is used to credit the departments chartfields at account 614390
(computers under $5,000)
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Accounting for
Reimbursement/Rebate

Reimbursements/rebates must be recorded as negative

expenses against the same account where the original
expense was incurred
Rebates are a form of reimbursement
Contact Financial Operations/Shared Services regarding any
questions

What resources are available?

Financial Operations:
www.finance.umich.edu/finops/accounting/service_unit_billings

Office of Financial Analysis:

www.finance.umich.edu/analysis