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SAP FICO Business Blueprint | http://sapdocs.info

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11/20/2015

Questions:

Q: 1) Describe the procedure you use to justify and approve starting a new project.

A:Sponsored projects and agency funds: A project account is established by the campus
business office or centrally by the UWA Controller's Office when (1) an award document is
received from the pre-award office, or (2) an approved (by Department Head or Dean)
Advance Account Request Form is received from the academic department. The UTK
campus business officer approves the establishment of all new projects by signing. A budget
is required for activating a project for posting of charges for those projects with an instruction,
research, or public service function. The UWA Controller's Office has final authority to
release a project to become active (ready for posting). The budget is electronically
transmitted from the pre-award office. A notification letter is sent to interested users - this is
usually the Principal Investigator, Responsible Person (usually the Department Head),
departmental business manager, and campus business manager when the project is
established in the General Ledger.

Centers/Chairs: Same as G&C except we know we must set up new projects each year. No
tie to pre-award system

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Gift accounts: After a gift is received, a gift account is established either at a campus
business office or at the UWA Controller's Office through an approved request form by the
Development Office at UTK or a campus business officer. A notification letter is sent to
interested users - this is usually the Principal Investigator, Responsible Person (usually the
Department Head), departmental business manager, and campus business manager when
the account is established in the General Ledger.

Loans: When a new program is initiated by the Federal Government or a gift to establish a
loan fund is received, the campus business office or Controller's Office begins the setup of
the new accounts.

Plant funds: Describe capital budget process here.

Endowments/Trusts: The signed MOA justifies the starting of a new project.

Endowment Processes:

The Development Office creates a Memorandum of Agreement (MOA) document to formalize
the donor agreement. They also deposit gift funds received from donor. The gift funds are
generally deposited into the UTK Restricted Gifts Suspense Fund, but there are times when
they are deposited into other B accounts. Development has the donor sign the MOA and
sends it through the contract review process. Pam reviews and approves the MOA and
sends the MOA back through the contract review process. The Vice President's signature is
then obtained and the completed MOA is returned to Pam for processing.

Pam sets up the endowment F accounts based on the MOA information. If the funding is
greater than $15,000, Pam requests the Controller's Office to create an R and B account to
be used for expenditures and for crediting income. If the funding is less than $15,000, any
earnings will be reinvested in the endowment F account until balance of endowment reaches
$15,000. Once the balance of the endowment reaches $15,000 (or other specified amount),
B and R accounts are requested. Pam also prepares a Journal entry to move the funds out
of the UTK Restricted Gift Suspense Fund, or specified B Account, into the endowment
account.

Pam also enters accounts onto the CIP subsystem. This tells the system what account to
credit income to, what percentage of income to credit to each account, etc. This subsystem
also allows Pam to make any changes to accounts credited (example - when account
reaches $15,000 balances, credit accounts must be changed)

If accounts do not meet the minimum endowment of $15,000 within a specified period, a
journal voucher is processed to close the endowment account and move the principal to a
restricted account that is designated for use based on the original MOA. Gains/losses are
recognized at this time.

Upon a donor's request, a new, separate and distinct endowment may be created from an
existing endowment.

A process has been established to pool cash in the Consolidated Pool, as indicated below:

1.On a monthly basis, a report (outbound interface file) is generated from the Controller's
Office that shows the amount of each new gift and/or reinvested funds that were received
that month and deposited to the endowment accounts. (The information for this report
comes from CV's or JV's)

2.An internal investment program run that sweeps this cash into the Pooled Asset
accounts. This program generates a journal file to post to the 29 accounts (asset
accounts).

(Steps 3-6 below are done in the CIP internal system)

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3.Hiliah calculates the total market value of the pool, and Pam balances this market value
back to the bank. Based on this market value and amount of cash pooled in item 2, and
total number of shares in the Pool, a market value per share is calculated. The formula
for this calculation is total market value less cash pooled for month divided total number
of shares as of previous month (includes additions/deletions during month).

4.A program is run to distribute shares purchased to the pooled asset accounts. The
number of shares purchased is determined by amount of gift to endowment divided by
market value per share determined in item 3.

5.A program is run to post the shares purchased to the pooled asset accounts.

6.A report is run to show each endowment's Book Value based on the Pool BV unit price,
Number of Shares and Equivalent Shares (i.e., weighted average number of shares due
to adjustments for funds that were held only for a partial quarter).

Income Distribution

1.On a quarterly basis, income is distributed based on the equivalent number of shares that
each endowment owns. The amount distributed is 5% of a 3-year moving average of
pool market values as of December 31.

2.The Pool subsystem creates a Journal Entry that distributes the income based on the
number of equivalent shares each endowment owns.

3.An interface is run to post the Journal Entry distribution created in Step 2 to each
designated B, I, or P account and each reinvested F account. The income is taken out of
the Undistributed Income on Invest Pool account. In addition, a manual report is supplied
to the Treasurer each quarter to show the activity in the Undistributed Income on Invest
Pool account.

Trusts (Life Income)

Each trust is generally treated as a separate fund (see exception of Pooled Income Fund A),
and each fund is set up as a group of G accounts. The fourth and fifth digit of the current
account number indicates the types of assets such as stocks (20), bonds (22), CDs (04) real
estate (48), and fund balance (99).

To participate in the Trust Pooled Income Fund A, a minimum of $10,000 must be given, and
the funds are invested as a pool. When the amount given is at least $50,000, then the funds
are invested separately.

There are approximately 300 trusts. The types of trusts include:
Unitrust - where x% of market value is paid out
Unitrust with net income - where x% of market value is paid out subject to net income
Unitrust, net income with make-up - where x% of market value is paid subject to net income,
and where any past shortages due to net income restrictions are made up when the current
net income for that period allows.
Annuity trusts - a percentage or set dollar amount is paid out over a set term.
Lead trusts - where UT has rights to the generated interest income, but the remaining
principal reverts back to the donor or designated beneficiaries upon termination of the trust.
(Note: Lead trusts are set up using the Agency P account.)
Remainder trusts - where UT has rights to the remaining principal but not the income (unless
specified in the trust document that UT is a beneficiary during the life of the trust).
Life Income - where UT pays out earnings to the donor/designated beneficiaries throughout
his/their life.

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Q: 2) Do you simulate different project alternatives in support of the decision on executing a
project? (If yes, consider using the project simulation.)

A:No.

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