A. Introduction

These procedures specify the records and reports which at a minimum must be prepared and retained to substantiate payroll, service, supplies, equipment, and other costs charged to University expenditure accounts. The substantiating documents must be retained for review by internal, external, and governmental auditors for the periods specified in the UC Records Retention Schedule. Although some original forms may be retained in a central office or electronic system, for certain financial transactions departments are required to retain approvals, or other documentation supporting transactions initiated by the department.

B. Types of Costs or Charges

Financial transactions which charge budgets for costs can be categorized as:

1. Direct charges or payment of original transactions.
2. Recharges between departments for provision of goods or services.
3. Adjustments to expenditures already recorded.

These financial transactions apply to salary and wage costs (payroll), and other expenditures (non-payroll).

Generally, costs should be charged directly to the account to which they pertain. Direct charges of original payroll transactions are effected through appointment forms or time reporting forms for salary and wage expenses. For purchases from vendors and other external payments, such as travel and honoraria, direct charges are effected by an invoice, a travel document, or other disbursement form.

C. Salary and Wage Costs (Payroll)

All charges to University accounts for salaries and wages must be fully supported by appropriate updates to the employee data base (EDB). Notifications of EDB updates must be routed to all offices required in accordance with University post-authorization policies.

1. Documentation Required

   Originating units/departments are to maintain the following input documents affecting individuals' gross pay and payroll distribution:

   1. Payment Documents
      • Departmental Employee Data Gathering Form/Worksheet
      • Sabbatical Leave of Absence Form (UCIPAY4)
      • Leave of Absence Form (UPAY5)
      • Personnel Activity Report (UCSA 0001-9)

      Post Authorization Notifications (PAN) for the following payroll adjustment actions:

      • Payroll Time Reductions (RX transactions)
      • Payroll Late-Time Reports (LX transactions)
      • Additional Pay Reports (EDAP transactions)
      • One-Time Payment Authorization (EDFT transactions)
   2. Other Supporting Documentation Required for:
      1. Academic Employees
         1. An approved copy of the Sabbatical Leave of Absence (UCIPAY4) or Leave of Absence (UCIPAY5) form for absences of more than seven calendar days, with salary (except sick leave and vacation supported by accrued balances), and for any number of calendar days when the leave is without salary. If an academic employee is a Principal Investigator (PI) of an extramural award (grant, contract, cooperative agreement), most awards require that a substitute PI be named and approved by the sponsor prior to the PI going on a leave or being absent from the campus for a period of three or more months. In addition, a copy of the approved leave form should be forwarded to the Office of Research Administration.
         2. Records showing absences of seven days or less, except sick leave and vacation supported by accrued balances.
         3. Records showing accrual and usage of sick leave and vacation for appointees eligible to accrue sick leave and/or vacation.
      2. Staff Employees

         Daily attendance records, records identifying the account/fund to which the employee's time is chargeable, sick leave accrual and usage records, and vacation accrual and usage records showing the vacation hour accruals an employee has on each fund from which he/she is paid must be maintained for all staff employees.

2. Expenditure Adjustments (Payroll Transfer of Expense)
   1. Payroll expenditure adjustments or transfers can be made only under one of the following situations:
      • to correct an erroneous recording (for example, the original source transaction was charged to an incorrect account, fund, sub, or object).
      • to reflect a change in the original decision for the recording of salary expense.
   2. Transfers of payroll expense are initiated by use of an online Payroll Expenditure Transfer (see Payroll/Personnel Online System Manual - Time Reporting) originating from the department or unit requesting the transfer. Cost transfers affecting contract and grant funds require additional documentation and justification as described in Section 701-18.

      Transfers of payroll expense occur when an EDB update is prepared too late for the Accounting Office to make payment on a newly designated account/fund. Therefore, the charge for that particular month will be incorrectly charged to an old account/fund, resulting in the need to generate a Payroll Expenditure Transfer to transfer the charge to the newly authorized account/fund.

      Departments must exercise extreme care in this area and analyze payroll charges on a timely and current basis. Cost transfers need to be prepared within 120 days following the appearance of the original charge in the General Ledger. If, because of unavoidable circumstances, a transfer of payroll expense is to be made beyond the 120-day period, a full explanation including a well documented account of all events leading to the late adjustment must be provided.

      Transfers affecting federal grants and contracts may require revision of the Personnel Activity Reporting (PAR) form or preparation of a late PAR (see Section 701-19). All transfers of payroll expense must be supported by an approved EDB update.

D. Other Expenditures and Purchases (Non-Payroll)

1. Documentation Required

   Although some original forms may be retained in a central office or electronic system (e.g., transfers of expense, financial journals), for certain financial transactions departments are required to retain approvals, or other documentation supporting transactions initiated by the department. Such documentation includes signatures authorizing recharge purchases, acknowledgement of receipt of goods, etc. Further, the department is the designated office of record for certain other transactions, such as Palcard purchases (see UC Records Retention Schedule).

2. Direct Expenditures

   Direct expenditures other than for salaries also occur when University funds are expended for the purchase of goods, services, and for making reimbursements. Examples of these would be supplies, equipment, services for honoraria and consultants, and reimbursement for travel and other expenses.

3. Recharges

   Recharges are entered against a department's budget by various service units such as Storehouse, Fleet Services, Facilities Management, duplicating units, shops, and others. Since these services are within the campus structure, no cash disbursement takes place. Charges to the requesting department and credits to the service/recharge unit are processed through the Departmental Recharge System (DRS) maintained by Administrative Computing Services; through Accounting's FS Online Recharge System (TOER); or through a service/recharge unit's own billing subsystem. A Table of Current Recharge rates, based on consideration of competitive prices, is published by the Budget Office.

4. Expenditure Adjustments (Non-payroll Transfer of Expense)
   1. Once an expense entry has been recorded in the General Ledger, expenditure adjustments or transfers can be made only under one of the following conditions:
      • to correct an erroneous recording, such as when the original source transaction debited an incorrect account, fund, sub, or object.
      • to record a change in the original decision for the use of the goods or services.
      • to redistribute charges such as copying machine costs and usage, telephone charges, mail charges, and office supplies which are billed to a single account/fund within an organization. Departments should maintain internal records of such usage in support of adjustments and distributions.
   2. A non-payroll expenditure adjustment/transfer of expense is initiated by using the online Transfers of Expense. The transaction should contain an explanation and justification complete enough to satisfy an auditor. Cost transfers in contract and grants funds require additional documentation and justification as described in Section 701-17.