Payroll Suspense Process

Payroll Suspense Process

Effective July 1, 2005 the Controller’s Accounting Office (CAO) implemented a new Payroll suspense process. This change was made to improve the review and clearing of suspense items and to ensure that suspense items are cleared in a timely manner. The implementation of the new process is a phased approach, and will be fully in place by March 2006.

Where Should a Person’s Salary Be Charged?

An employee or student’s salary should always be charged to the cost object(s) related to where he/she is working in the following order of preference:

1. Active cost object

2. Pending WBS cost object, set up by OSP

3. Payroll suspense cost object of the department or lab where the employee or student is working.

Suspense cost objects are intended to be temporary holding places for salary expenses that encounter an exception condition during payroll processing, e.g., an invalid or terminated cost object.For research projects awaiting funding, it is preferable to collect pre-award salary expenses in a pending WBS cost object set up by OSP.That way the salaries are directly charged to the project the employee or student is working on, and the department does not need to transfer salaries from payroll suspense when the award is received.

If research funding is not ultimately received, the department will need to transfer the salaries from the pending WBS to the department’s unrestricted general or discretionary funds. This transfer would also have to be done if the salaries were charged to department payroll suspense, but it may be more difficult to identify which costs to move.

Why Do Suspensed Payroll Charges Need to Be Cleared in a Timely Manner?

Salary and related EB in department suspense cost objects are unfunded. Because they are unfunded, the costs are held on the Institute’s General Ledger as assets. However, proper accounting practice requires suspensed salaries to be shown as expenses, not assets, on Institute financial reports unless the costs support specific asset such as a building or capitalized software. Therefore, CAO makes an adjustment to reflect all suspensed salary charges as expenses on Institute financial reports.

In addition, CAO periodically clears old suspensed charges to general cost objects in order to match the expense to a funding source. If other funding is received, the department may transfer the cleared salary expense to a research cost object by submitting a request for late salary distribution transfer, with supporting documentation.

The risk of anticipated funding not coming through is the same whether the expense is held in a pending WBS, department general or department suspense.The clearing of suspensed charges to department general after a period of time (3-6 months depending on the month the expense was charged to suspense) is an indicator to the department that there may be increased risk associated with funding the expense.

Overview of New Process

The following is an overview of the new Payroll Suspense Process:

• CAO has set up a new payroll suspense cost object for each department (SAP org unit) that has employees. New cost objects were set up even for departments with existing suspense cost objects to make it easier to distinguish between FY2006 and prior year charges, and to be able to work down prior year balances in existing suspense cost objects without new charges hitting.

• The supervisor/addressee for the suspense cost object is the same as the DACCA recipient unless the department requests a different supervisor/addressee. Please send requests to for supervisor or addressee changes to cao-cost-objects@mit.edu.

• Only payroll salary and wages expenses and the related GLs listed below can be charged to the new payroll suspense cost objects. SAP will block all other charges:

1. 422310 – Tuition-RA-not MTDC
2. 422311 – Tuition-Other-not MTDC
3. 422315 – Fellowship Stipends-not MTDC

Note: A complete list of GL accounts, including salary and wages GLs is available at http://web.mit.edu/cao/www/GLaccounts/

• Payroll charges that go into suspense for any reason will be charged to the suspense cost object belonging to the employee’s home department, the SAP HR org unit attached to the employee’s appointment.

• In cases when salary charges for an appointment authorized by another DLC go into suspense, it is up to the eSANDI administrator ( eSDS administrator after July 1, 2006) of the home department to transfer the suspensed charges to the appropriate suspense depending on where the individual is actually working. SAP will use the suspense cost object of the HR Org Unit attached to the appointment.This will provide visibility of suspensed charges to the administrator in the DLC or lab responsible for clearing the charges.

• DLCs will receive the DACCA for their payroll suspense cost object and are responsible for monthly review and timely clearing of outstanding charges, within 60 days after the end of the quarter in which the suspense postings were made.

• CAO will clear old outstanding items from suspense four times a year starting in March 2006. The CAO transfer of charges in March 2006 will include outstanding items for the first 6 months of FY2006 (July 2005 – December 2005). After this initial transfer, the following schedule will be followed:

• Uncleared charges will be transferred to the department cost center that is assigned to the suspense cost object, per the “CostCenter for Write-offs” spreadsheet. Requests to change the cost center used for write-offs may be sent to payroll-suspense@mit.edu

• CAO will notify any department with balances that will be cleared, two weeks before the clearing entries are made. Clearing entries will be made by the middle of the notification month.

Old Payroll Suspense Cost Objects

Outstanding items in payroll suspense cost objects that were in use prior to July 1, 2005 were not transferred to the new cost objects.For any old payroll suspense cost objects with remaining balances:

• Payroll will continue to review the old suspense cost objects and send monthly memos to DLCs.

• Payroll will work with the DLCs, OSP and other areas of CAO to clear all remaining items from the old suspense cost objects by June 30, 2006.

• Once a suspense cost object is cleared, CAO will close it.

Questions

If you have questions, please send email to payroll-suspense@mit.edu.