QUARTERLY BUSINESS OFFICERS MEETINGNOVEMBER 2018

TODAY’S AGENDA

I. Budget Updates (Susan Klatt)

II. F&A Rate Reduction Requests (Wendy Beaver & Nate Cook)

III. Risk Management Updates (Josey Bathke)

IV. HR Transaction System Redesign (Dan Schropp)

V. Tax Updates (Tom Peifer)

VI. Payment Determination (Terri Hein)

VII. Financial Security Model for AFR Applications (Selina Martin)

BUDGET UPDATES

SUSAN KLATT, DIRECTOR, FINANCIAL MGMT/BUDGET & UNIVERSITY SECRETARY, FINANCE & OPERATIONS

F&A RATE REDUCTION REQUESTS

WENDY BEAVER, EXECUTIVE DIRECTOR SPONSORED RESEARCH, VP RESEARCH OFFICE

NATE COOK, MANAGER ACCOUNTING/FINANCIAL ANALYSIS, SPONSORED PROGRAMS, VP RESEARCH OFFICE

F&A Rate Reduction Requests

Division of Sponsored Programs

November 8, 2018

What’s New: Universal Workflow Form and Approval Path

No change to UI F&A Policy

Facilities & Administrative Costs (F&A) Rate Reduction Requests

Applicable F&A Rates and F&A Rate Decision Tool

• Organized Research On Campus 52.5% MTDC

• Instruction On Campus 45% MTDC

• Other Sponsored Activities On Campus 28.5% MTDC

• All Programs Off-Campus 26% MTDC

• Corporate Funded Clinical Trials 26% TDC

• Non-profit Entities - can accept 15% TDC if full rate is not allowed

Charging F&A Costs to Externally Funded Projects

F&A reductions that are:• required by statute or codified regulations

• mandated in the sponsor’s funding announcement or solicitation

• resulting from an increase in our federally negotiated rate after a project begins

• for projects that are solely for one of the following budget categories: travel, construction, equipment, or doctoral dissertation support

F&A Rate Reduction – No Form Required

F&A Reductions for:• awards that support conferences

• new investigators transferring grants to the University from other institutions, at the prior institution’s F&A rate for a limited transition period

• awards that supplement a student services activity which the campus must provide or waivers that supplement funding for an established campus program such as for library holdings, performances, or exhibits

F&A Rate Reduction - Form Required

Awards funded by for-profit sponsors

Awards that do not provide adequate direct costs for completion of the full scope of the project

Reductions that do not provide equitable treatment to all University researchers applying to the same sponsor

Awards under which intellectual property rights do not remain with the University

Reductions based solely on precedent

F&A Rate Reduction Requests -these generally will be denied:

Form name: F&A Rate Reduction Request

https://workflow.uiowa.edu/form/faratereductionrequest Form approvals required by:

PI

DEO

Collegiate Business Officer

Requests are approved or denied by DSP

Universal Workflow Demo

New F&A Rate Reduction Request Form

Rate Reduction Request Questions –

Wendy Beaver

335-2122

Workflow Form Questions -

Nate Cook

335-2127

Questions

RISK MANAGEMENT UPDATES

JOSEY BATHKE, CHIEF RISK OFFICER, RISK MANAGEMENT OFFICE, FINANCE & OPERATIONS

TOPICS

Claims and Incident Reporting - REMINDER

NEW - Guidance for Utilizing Volunteers

Updated Drone Policy

Vehicle Use Policy Changes

INCIDENT REPORTING

All incidents affecting:

General public

Faculty, Staff and Students

Volunteers

Incident reports should be completed as soon as possible

Typically receive incident reports from:

UIPD

Building Coordinators

Faculty/Staff

CLAIM REPORTING

Claims we see:

Motor Vehicle

Property

Rental Vehicles

Theft

Liability

Claims over $5000 must be reported to RM within 48hrs

Insurance and Self-Insurance Information

NEW GUIDANCE FOR UTILIZING VOLUNTEERS

Collaboration between UHR and RM

Internal Audit prompted

Department Responsibilities

Volunteers Responsibilities

Resources available (checklist, policies, FAQ’s)

DRONE POLICY UPDATED

Still maintaining a general “NO FLY ZONE”

Pertains to University-controlled and/or University owned drones.

NEW - Drone Flight Request form.

All are approved or denied by the Drone Committee.

No recreational use on campus allowed

Federal Regs changed last month – stay tuned for more!

VEHICLE USE POLICY CHANGES

MVR reviews changed to ANNUAL (formerly Semi-Annual)

Cost and time savings for the departments and campus

NEW - Required vs. Not Required to Drive

NEW – self-certification for “Not Required”

Resources for DLRS, Student Org, and Long Distance Driving

RISK MANAGEMENT CONTACT INFORMATION

430 Plaza Centre One

319-335-0010

https://uiowa.edu/riskmanagement

Risk-Management@uiowa.edu

HR TRANSACTION SYSTEM REDESIGN PROJECT

DAN SCHROPP, DIRECTOR OF UI PAYROLL OPERATIONS, HUMAN RESOURCES

HR TRANSACTION SYSTEM

Current HR Transaction System

Created in 2002 as an electronic approval application

Front-end system that gathers and relays information about employee actions – appointments, terminations, leave of absence etc….

While it current system has functioned well, processing over 1.1 million transactions over the last 15 years, the system was built on older technology and was not fully integrated with other UI open systems when developed.

The current system has approximately 1000 users who have access to initiate forms with around 600 individuals who have initiated transactions within the past year.

HR TRANSACTION REDESIGN PROJECT

HR Transaction Redesign pre-planning committee - 20 committee members

Represented 11 different Orgs and UI Health Care

Included Business Officers, SR and HR Reps and Transaction Specialists

4 teams – charge for each team was to identify and develop strategy for a design of a new transaction system/service delivery model and present their strategy at the final committee meeting.

The system should leverage current technology, integrate with other UI open systems when possible and beneficial with an emphasis on process optimization and automation.

Objectives of the new system will be to enhance efficiency, minimize errors and reduce administrative burden on departmental representatives.

HR TRANSACTION REDESIGN PROJECT

Pre-planning steps…

Identify and establish governance structure – executive steering committee, core project team, functional and advisory committees

Technical –

Application will be developed in-house – developer resources available in January/February

Mapping processes and requirements document – large project will be divided into parts

Metrics – data gathering and review

Project roadmap and timeline

TAX UPDATES

TOM PEIFER, TAX MANAGER, CONTROLLER’S OFFICE, FINANCE & OPERATIONS

TAX UPDATE

Changes to UBIT from the Tax Cuts and Jobs Act (TCJA)

Excise tax on executive compensation over $1 million (TCJA)

Sales tax -- Wayfair decision

TAX UPDATE CHANGES TO “UNRELATED BUSINESS INCOME TAX” (UBIT)

Good News

Tax rate reduced from 35% to 21%

Alternative Minimum Tax (AMT) eliminated

UBIT imposed by State of Iowa

Bad news

Separate calculations (basketing) – loss activities can’t offset income activities

Net operating losses limited

TAX UPDATE CHANGES TO “UNRELATED BUSINESS INCOME TAX” (UBIT)

Basketing and NOL Example

Year 1 Year 2Old New Old New Law Law Law Law

Activity #1 500 500 700 700Activity #2 (200) (200) 100 100Basketing limitation N/A 200 N/A 0Total Taxable UBI 300 500 800 800

Net operating loss carryforward (80)Limited to 80% of Activity #2 income

Total Taxable UBI 720

TAX UPDATE UBIT - QUALIFIED TRANSPORTATION FRINGE

Qualified Transportation Fringe Benefits

UBTI increased by the amount of expenses an entity pays or incurs to provide specified employee fringe benefits which include parking, van pool and transit passes for expenses paid or incurred after 12/31/17.

Also includes expenses for parking facilities owned or leased.

Regular corporations also lost the ability to take tax deductions for these employee benefits.

“Parity” - Congress decided the tax-exempt sector would also suffer with a similar hit to UBIT.

TAX UPDATE UBIT – QUALIFIED TRANSPORTATION FRINGE

Many unanswered questions on how to calculate.

If employee pre-tax deduction option is eliminated for parking, does that eliminate UBIT inclusion?

If a building is leased which includes spaces for parking, is an allocation required?

IRS has promised additional guidance but hasn’t indicated when.

Five different bills in Congress to repeal provision.

Estimated UBIT cost for FY19:

Estimated qualified transportation fringe costs $5.8 million x 21% = $1.2 million tax.

Parking and Transportation’s expenses analyzed to remove estimated expenses allocable to students and patients.

TAX UPDATEEXCISE TAX ON EXCESS COMPENSATION

21% excise tax imposed on applicable tax-exempt organizations of

Remuneration in excess of $1 million to any covered employee and

Any excess parachute payment paid to any covered employee

Ernst & Young project determined University is not an “applicable tax-exempt organization”

University is either an integral part of the state of Iowa, or a political subdivision so the tax does not apply.

Good news!

TAX UPDATESALES TAX – WAYFAIR

South Dakota v. Wayfair - U.S. Supreme Ct. decision

Background – Quill v. North Dakota (1992) U.S. Supreme Court ruled that a state cannot require a business to collect tax from in-state customers if the business has no physical presence in the state.

Example

Iowa based retailer with no operations in Illinois (no property or payroll) makes substantial internet sales into IL

Sales tax law is destination based – taxes where the product is shipped to

Retailer not required to collect Illinois sales tax because of Quill. Illinois customers required to self-assess and pay use tax.

Substantial non-compliance – individuals typically do not voluntarily self-assess.

TAX UPDATESALES TAX – WAYFAIR

South Dakota knowingly passed unconstitutional statute to challenge Quill.

Passed “economic nexus” law – any seller making annual sales of $100,0000 or 200 separate transactions to SD customers was required to collect and remit SD sales tax.

Wayfair challenged the statute. All of the SD courts quickly ruled the statute was unconstitutional and the U.S. Supreme Court granted certiorari.

Court ruled 5-4 in favor of SD and concluded the physical presence rule in Quill was “unsound and incorrect”.

Many states have now adopted similar “economic nexus” sales tax laws with $100k sales or 200 transaction thresholds.

TAX UPDATESALES TAX – WAYFAIR

What does this mean for the University?

Sales made by University

No impact on sales made to Iowa customers – general sales tax exemption still applies.

Out of state sales are potentially taxable if thresholds exceeded.

Working on sales tax exposure analysis by state.

Purchases made by the University

State of Iowa has adopted $100,000 or 200 transaction threshold effective 1/1/19.

More out of state vendors will attempt to charge tax. Can still purchase tax-free by providing IA exemption certificate.

TAX UPDATE

Questions?

PAYMENT DETERMINATION

TERRI HEIN, DIRECTOR OF UI PAYROLL TAX & ACCOUNTING, HUMAN RESOURCES

RESEARCH, LEARNING EXPERIENCES AND SUMMER PROGRAMS PAYMENT DETERMINATION GUIDELINES

Summer 2018 - Committee convened to review payment practices

Committee Members:

• Kathy Bialk – Student Financial Aid

• Audra Haddy – Grant Accounting Office

• Terri Hein – Payroll Services

• Kate Hilsman – Payroll Services

• Marty Miller – University Billing

• Tom Peifer – University Tax Manager

• Katie Villhauer – Payroll Services

• Cathy Wilcox – Student Financial Aid

RESEARCH, LEARNING EXPERIENCES AND SUMMER PROGRAMS PAYMENT DETERMINATION GUIDELINES

Present State:

Engage in numerous research, learning experiences (REU’s), and summer programs

Inconsistent payment methods:

From year to year

Across campus

Based on funding source

Based on immigration/citizenship status

RESEARCH, LEARNING EXPERIENCES AND SUMMER PROGRAMS PAYMENT DETERMINATION GUIDELINES

Future State:

Consistent payment methods

Tools to determine payment type, payment process, and government reporting requirements:

Flowchart

Guidelines document

Payment database

University of IowaFellowships, Scholarships, and Reimbursement Payment Guidelines (UI Student)

UI wants to make a payment to a UI

Student

Will UI exercise control bydirecting and supervisingthe activity performed?

Will UI determine activity to be performed based on UI needs? Or

would the UI pay another individual to perform these same functions?

Yes.

Payment will be for services and will be considered employee compensation. Process

payment through HR Transaction System.Reported on an IRS W‐2 form at year‐end.

UI Student will be theprimary beneficiary ofan educational activity.

No

Will the payment be a travel or other expensereimbursement?

No

YesProcess payment through Accounts Payable as a Travel Expense Voucher (TEV) or other expense

reimbursement. No gov’t tax reporting.Yes

Process as fellowship stipend through HR Transaction System. No gov’t tax reporting. Reportable income determined by recipient.

Fellowship

Yes

Process through MAUI Scholarship workflow as a

scholarship payment.Reported on IRS from

1098T at year‐end

Scholarship

This flowchart does notapply to:

‐Students who are not currently enrolled at the University of Iowa.‐Prizes‐Foreign national payments.

Further evaluation required. No

(1)This determination flowchart is not all inclusive. Determination is based on specific facts & circumstances. Each instance must be determined individually.

(2) Contact Payroll Services for guidance on payments to non‐resident aliens

No

Based on facts and circumstances, determine if the payment is a fellowship or

scholarship. Examples of scholarships include tuition awards. Examples of fellowships include miscellaneous

payments to be used for incidentals such as housing, food, and travel.

November 5, 2018 Page40

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University of IowaFellowships, Scholarships, and Reimbursement Payment Guidelines (Non-UI Student)

UI wants to make a payment to a Non‐UI

student

Will UI exercise control by directing and supervising the

activityperformed?

Will UI determine activity to be performed based on UI needs? Or

would the UI pay another individual to perform these same functions?

Yes.

Payment will be for services and will be considered employee compensation. Process payment through HR

Transaction System. Reported on an IRS W‐2 form at year‐end.

Non UI Student will be the primary

beneficiary of an educational activity.

No

Will the payment a travel or other expensereimbursement?

No

YesProcess payment through Accounts Payable as a Travel Expense Voucher (TEV) or other expense

reimbursement. No gov’t tax reporting.Yes

No

Yes

This flowchart does not apply to:

‐Students who are currently enrolled at theUniversity ofIowa.‐Prizes‐Foreign national payments.

Further evaluation required. No

(1)This determination flowchart is not all inclusive. Determination is based on specific facts & circumstances. Each instance must be determined individually.

(2) Contact Payroll Services for guidance on payments to non‐resident aliens

Based on facts and circumstances, determine if the payment is a fellowship or scholarship.

Examples of scholarships include tuition awards.Examples of fellowships include miscellaneous

payments to be used for incidentals such as housing, food, and travel.

Process through AccountsPayable as a non‐servicesevoucher. Reported on anIRS Form 1099 at year‐end

Award

Process as fellowship stipend through the HR Transaction system. No gov’t

tax reporting. Reportable income determined by the recipient.

Fellowship

November 5, 2018 Page41

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FINANCIAL SECURITY MODEL FOR AFR APPLICATIONS

SELINA MARTIN, UNIVERSITY CONTROLLER, FINANCE & OPERATIONS

PAST COMMUNICATION & ENGAGEMENT…

Quarterly Business Officers Meeting

(April 2017)

Reporting Tools Advisory Committee (2018)

• February 2018 – Security Model Demo

• March 2018 – Security Model Survey

• April 2018 – Functionality, Reports & Security Delegation

WHY DID WE BUILD A NEW SECURITY MODEL?

Old security model was not built for financial applications

New principles for new security model

Automation & system integration

Leverage existing roles & tie to access to applications & tools

Better controls related to terminations/transfers

Flexible to add applications for other areas

WHAT WILL YOU USE THE NEW FINANCIAL SECURITY MODEL FOR?

1. View your own access

2. Request access for yourself or your staff

3. View specific individual’s access

4. View access for all staff within your college or unit

WHERE WILL YOU ACCESS THE NEW SECURITY MODEL?“FINANCIAL SYSTEMS TOOLS” (FST) IN SELF SERVICE

New FST…(new security tool)

Old FST…(no security tool)

FINANCIAL ROLES IN “ROLES APPLICATIONS”

Business Officers category • Business Officer

• Department Administrator

• Sub-department Administrator

Department Executive Officer category• DEO

INSTITUTIONAL ROLES

• Account Owner/PI

• Account Reviewer

• Secondary Reviewer #1

• Secondary Reviewer #2

• PI Dept Research Administrator

• Co-Investigator

• Co-Investigator Dept. Research Administrator

• Alternate Research Administrator

WHOKEY ROLES

• EFR Portal• GLDSS Reports• Request for GL CF/WK• WhoKey Admin• FST

Additional approval required (FST)

Additional approval required

(Secondary Security)

verify against financial reports

unique approval path

no approval

Why do we need Access Groups?

ACCESS PAGE

User Information

Access Groups

My University Financial Roles

My Applications

Application Roles

Available Applications(apps you don’t have access to but are eligible for based on Access Group below)

(apps you have access to)

(apps where you are assigned a financial role)

(roles for the specific “My Application” you have selected above)

SCREENSHOTBUSINESS OFFICER’S OWN ACCESS PAGE ….

What can a Business Officer do here?

1. View your Financial Roles & Access Groups

2. View applications that you are eligible for but do not have access to.

3. Request or remove access to specific applications

4. Request specific roles within an application

SCREENSHOTUSER WHO HAS EXISTING “ROLE” + TRANSACTIONAL APPLICATION ACCESS…

What can a Business Officer do here?

1. View Financial Roles & Access Groups2. View applications that user is eligible

for but does not have access to.3. Request or remove access to specific

applications 4. Request specific roles within an

application

SCREENSHOTUSER WITH NO “ROLE” + TRANSACTIONAL APPLICATION ACCESS…

What can a Business Officer do here?

1. View Financial Roles & Access Groups2. View applications that user is eligible

for but does not have access to.3. Request or remove access to specific

applications 4. Request specific roles within an

application

SECURITY REPORTS

Reports that will be replaced:

1. All existing reports in GLDSS Secondary Security

2. Reports emailed to you by Tammy Buchmayer

Reports in GLDSS Secondary Security:

Reports in FST: NEW!

FINANCIAL SECURITY MODEL - IMPLEMENTATION PLAN

November 8

• Business Officers Meeting

• Email details to Business Officers & delegates roles

November 9

• Email to GLDSS Secondary Security

(admin & work roles)

November 13

• Production Release

Nov 28/Dec 6

• Optional Training Sessions Future

Plans

Training Session #1 November 28th

• East Campus: PBB – W401, 1:30 - 2:30 PM

Training Session #2 December 6th

• West Campus: CDD -- Remboldt Room, 10:00 - 11:00 AM

INFORMATION & REMINDERS

Business Processes Series2019 MEETINGS1st QuarterJanuary 31st, 9:00-11:00, W401 PBB

2nd QuarterMarch 21st, 9:00-11:00, CDD, Remboldt

3rd QuarterJune 13th, 9:00-11:00, W401 PBB

4th QuarterOctober 24th, 9:00-11:00, CDD, Remboldt

Financial Sub-certification 2.0