The University has implemented procedures aimed at avoiding unpaid receivables in award cost centers. Procedures have been put in place to maximize collection efforts, and improve the billing process in order to minimize write offs.
When payments are not received in responses to invoices, the sponsors are contacted. This attempt at collecting payment on time takes place throughout the life of the award and not just at the end of the award. Historically, OCG has identified the following reasons for lack of payment by a sponsor:
- Sponsor rejects reallocated expenses to award more than were transferred more than 90 days after the billing period
- Unallowable expenses per the sponsor’s terms and conditions
- Overspending in budget category when not allowed by the sponsor
- Sponsor rejects work or deliverables from the PI
- Late invoicing
- Not sending the invoices to the correct contact at the sponsoring agency
- Sponsor does not have funds to pay
- When an invoice is generated, the analyst will review the entire project for outstanding payments.
- If any payments are missing, the analyst will add the outstanding amounts as a statement on the current invoice.
- If the payment is still not received, OCG will send a reminder email to sponsor, and copy the Research Administrator (RA), Principal Investigator (PI) and Department Administrator (DA) about the missing payment. The PI is copied so they can assist as needed with collection efforts.
- If an amendment to the award is received from a sponsor for additional time and funding, before setting up the new budget and time, the existing award balance is reviewed and any outstanding payment will be requested before proceeding.
- Sponsors with outstanding payment issues are flagged in the grants management system. When negotiating new awards, the outstanding payments are requested or upfront payment for new agreements are required.
- Sponsors with outstanding payments may have the debt reported to the State Comptroller’s Office.
The University of Houston accepts funding from external entities for research and other sponsored activities. When not pre-paid, the University invoices sponsors for the direct and indirect costs associated with these activities in accordance with the sponsorship agreements. These billings are recorded as Accounts Receivable (A/R) balances in the financial system. In some cases, these costs are not reimbursed for a variety of reasons. Historically, these bad debts amount to an average of one half of one percent (0.5%) of total reimbursable expenses.
Areas at the University of Houston with sponsored projects conduct research and/or provide other services for these sponsors in accordance with the agreement between the sponsor and the institution. The Division of Research is responsible for the overall administration of sponsored projects, including billing sponsors, collections, and determination of accounts for write-off. The Accounting Services Department in the Division of Finance is responsible for running processes that recognize revenue and unbilled receivables, recording accounts receivable for both billed and letter of credit sponsored projects, identification of electronic payments to the institution for sponsored projects, recording payments received, identification of past due payments, assistance with collections, and accounting entries to write off accounts deemed uncollectible.
Successful collection of unpaid balances will involve teams and individuals from every relevant area at UH. Every effort will be made to collect unpaid balances. However, if collection efforts fail or if collection is inappropriate, each individual situation will be investigated to determine and document accountability, and the negative balance will be corrected accordingly.
- Minimizing risk of non-payment
- Deficit Prevention and Reduction - DOR
- Enhanced Accounts Receivable controls, systems, and collection activities - Research Accounting
- Defining and enforcing accountability for payment failures
- Annual disposition or write-off of negative cash balances
A. Risk Identification
In order to minimize the risk of having a cash deficit in a sponsored project, the situations that result in such deficits must be, whenever possible, identified and examined. If those situations can be avoided then the risk of accumulating a deficit is greatly mitigated. Historically, we have identified the following causes for deficits:
- Incorrect award setup in RD2K resulting in incorrect invoicing schedule
- Failure by RFS to send timely invoice
- Expenses posted or reallocated to award after final invoice or expiration of letter of credit funding mechanism
- Expenses on award exceeding budget, preventing complaint invoicing
- Payment received but incorrectly applied
- Sponsor invoiced but claims to not receive it
- Sponsor receives invoice but fails to pay due to internal mistakes or misrouting
- Sponsor rejects specific expenses on compliance grounds
- Sponsor rejects work or deliverables, refuses payment
- Sponsor receives invoice after funds have expired
- Sponsor does not have funds to pay because of reducing or ceasing operations or bankruptcy
- Sponsor funds withdrawn due to legislation or budget cuts
- Sponsor not responsive/unreachable
B. Risk Reduction Activities
The guideline is aimed at reducing some of those risks through:
- Ongoing review to ensure timely invoice generation
- Participation of RFS personnel in award setup review to ensure proper invoice scheduling
- Identification of specific financial points of contact within sponsor organization
- Electronic invoices to ensure delivery and prevent misrouting
- Allow ongoing review of invoicing and payment activity by department via the research database
- Ongoing, real-time review of payment activity by RFS
- Quick follow-up with sponsor regarding late payments
- Coordinated collection activity involving RFS, Research Accounting, the Department and the Principal Investigator (PI)
Deficit Prevention through Enhanced of Billing and follow-up Activities
Research Financial Services is in a unique position as the first responders to non-payment events by sponsors. RFS analysts have the tools, technical knowledge and sponsor contacts to initiate a dialogue with the sponsor regarding payment. The following invoice follow-up procedures will be implemented within Research Financial Services to help further minimize the risk of non-payment by sponsor. This is in addition to the normal invoicing and reporting duties of RFS.
- When an invoice is generated, the analyst will run the receivables report and match payments against sent invoices.
- If any payments are missing, the analyst will prepare an “overdue payment” attachment to the invoice. This attachment will include:
- Statement that the listed invoice has not been paid. Standard language will be used.
- A list of unpaid invoices, listing:
- Invoice number
- Invoice date
- Invoice amount
- Payment received, if any (if partial payment has been made)
- Amount owed
- Statement will include language to pay promptly to avoid corrective action.
- The RFS analyst will initiate attempts to contact appropriate sponsor representative via email or telephone.
Initial Collection Efforts
DOR will make the initial attempts at collection if any invoices are delinquent by more than 90 days:
- Analyst will send an email to notify RA, PI and DA about the missing payment.
- Email will request help in collecting.
- All parties will share information in order to affect payment. This may include exchange of sponsor contact information, deliverables confirmation, etc.
- As a last resort, the PI will be asked to communicate with their sponsor program people/collaborators to help ensure payment.
Accountability and Remediation
If all collection and resolution attempts are unsuccessful, cash deficits in a sponsored cost center must be resolved within a maximum of three years of award expiration. A review is performed to determine accountability for the deficit. The Accountability Matrix lays out the methodology that will be used. The UH party found to be accountable will be responsible for covering the deficit using its own funds.
If the PI/Department/College is found to be accountable for the deficit, the deficit must be resolved via expenditure transfers from the sponsored cost center to a local departmental cost center.
The Division of Research will be held accountable for cash deficits in the following cases:
- Failure to invoice, unless sponsored cost center is over budget
- Errors in award setup resulting in drawdown failure or non-submission of required institutional reports.
- Other accounting/processing errors that are the responsibility of DOR.
If DOR is found to be accountable for the deficit, sufficient funds will be transferred from DOR sources to cover the deficit.
The PI/Department/College will be held accountable for the deficit in the following cases:
- Non-payment by sponsor is due to failure of the PI to provide required results, reports or deliverables to the sponsor in a timely manner
- Non-payment due to rejection of results, reports or deliverables by sponsor
- Non-payment due to unallowable expenses as determined by sponsor
- Deficits due to expenses posted or reallocated to the sponsored cost center after the final invoice has been submitted.
- Delayed submission of final invoice due to lack of timely approval of final invoice by PI or Department or other departmental action
- Inability to submit invoice or report due to expenses exceeding the budgeted amounts
The sponsor is responsible for the deficit if all award conditions have been met and payment is not made.
These will be submitted for Institutional write-off. The write-off action does not forgive or remove the debt - all debt will continue to be outstanding. In these cases, the university reserves the right to take action against the sponsor to recover the debt, including but not limited to:
- Disqualification of sponsor from doing any further work with the university.
- Reporting debt to the State Comptroller’s Office.
- Imposition of sanction and/or penalties, as authorized by senior management.
- Legal action to recover owed funds.
This accountability model is shown in the Research Funds Collection Tree.
The determination of which recourses to pursue will be determined by the Senior Vice President for Administration and Finance, in consultation with DOR, University Counsel, and the PI, as appropriate.
Private Sponsor Risk Assessment
Preventing cash shortage is a process that begins well before the first invoice is sent to a sponsor. It is a comprehensive system of checks, reviews and ongoing risk assessments that all work together to minimize the possibility of non-payment by sponsor. The process begins with a pre-evaluation of the sponsor using existing facts and keeping in mind the nature of the funds in question. The aim is to rate the sponsor by assigning them into a risk category based on their history with UH. That risk category will determine whether UH will accept the award as well as any special payment provisions that UH will impose.
|Risk Level||Private For-Profit||Private Non-Profit||Foundations||Other Universities|
|High (Advanced payment for each segment of the research)||Newly established business and small entrepreneur that offers no upfront pay||Past nonpayment for award where PI provided full deliverables||High deliverables in agreements with terms that resembles a contract and not a grant||Late Payers|
|Medium (Requires three month advance pay)||No prior history of work or payment with UH but offers at least half in upfront pay||Late pay or slow paying sponsors||Newly established foundations no prior work with sponsor||High deliverables stated in agreement terms an condition|
|Low (Continue business as usual)||Consistently pays on time and prior history||Large corporations, established reputations with good payment history||Up-front payment and terms and/or terms and conditions that resembles a donation||Payment received in a timely manner to match each invoice sent|
|DND||Do Not Do business with - Sponsors that previously have exhibited ill will or fraudulent tendencies|
Revised: May 11, 2015