Internal Service Entities/Chargebacks

Original Issuance Date: May 28, 1975
Last Revision Date: August 12, 2025

The purpose of this policy is to standardize the methods of accounting for internal and external sales and services for University of Wisconsin (UW) System internal service departments. This policy is based on nationally accepted accounting standards for higher education as outlined in the National Association of College and University Business Officers’ (NACUBO’s) Manual for Accounting for College and University Business Administration and the American Institute of Certified Public Accountants (AICPA) Industry Audit Guide for Colleges and Universities.

Senior Associate Vice President for Finance

This policy applies to all UW System internal service departments and their transactions. This policy does not include Revenue Producing Activities. Institutions should follow their respective local policy.

Institutions must adhere to this UW System policy. They may not tailor the policy to their institutions.

The Universities of Wisconsin have established internal service entities which sell and/or provide services to other departments or institutions within the Universities of Wisconsin. The institutions also sell and provide services to entities external to the Universities of Wisconsin. Consistent methods of accounting for internal and external sales and services need to be established.

Internal Service Entities: Departments which sell and/or provide services to other departments, to other institutions within the UW System, and/or to external entities.

Internal Service Delivery: Business process in Workday to track the sale of goods and services to other departments or to other institutions within the UW System that allows for proper accounting elimination of both revenues and expenses within various financial reports.

External Entities: Entities that are not part of the UW System.

Internal service entities are defined as entities which exist primarily to provide goods or services to other academic or administrative units of the institution (e.g., printing, central stores, duplicating centers, fleet operations, physical plant, etc.). Most of the activities of internal service entities are categorized as General Administration and Logistical Services included under Institutional Support (Function FN0100) of the Uniform Chart of Accounts.

Credits for interdepartmental transactions of internal service entities or storerooms which provide services to the institution or between institutions within the UW System should be coded to internal service delivery revenue with the appropriate revenue category in the servicing department.

Sales and services of an auxiliary enterprise (e.g., union, bookstore, residence hall, student center, conference center, etc.) to another department or auxiliary enterprise should be included as revenues of the auxiliary enterprise. Auxiliary enterprises are entities existing to furnish goods or services to students, faculty, or staff, charging fees directly related to, although not necessarily equal to, the cost of the goods or services. Only those activities coded to Auxiliary Enterprises (Function FN0800) in the Uniform Chart of Accounts should be included. Sales and services of auxiliary enterprises to another department or auxiliary enterprise must be coded to internal service delivery revenue with the appropriate revenue category to the auxiliary enterprise.

Accounting for the cost of the services and materials obtained from the internal service entities shall be coded to internal service delivery expense with the appropriate spend category. Cost of services and materials that are obtained from an external entity shall be coded to the appropriate spend category that most closely describes the goods or service rendered. Items purchased as inventory by Central Stores should be coded to merchandise for resale. There is, however, a distinction in the class codes for printing/duplicating purchased internally and externally.

Internal service delivery revenues may only be used by the selling department if the sales/services are to a department within the same institution or between institutions within the UW System:

4750 Internal Service Delivery (Revenue)

Example for Heat (Internal):

Auxiliary: 6750 Internal Service Delivery Expense – SC00040 Heating – Steam, Hot Water, or Air

GPR: 4750 Internal Service Delivery Revenue – RC00181 Heat

General Purpose Revenue (GPR) Funded- Sales and activities of GPR funded departments to individuals or entities external to the UW System must be coded to external service delivery ledger account and appropriate revenue category.

Program Revenue (PR) Funded- Sales and services of PR funded departments to individuals or entities external to the UW System must be coded to the appropriate revenue ledger account and revenue category that most closely describes the goods or service rendered.

Receipts due to the return of materials previously recorded as an expenditure should be coded as a credit to the original disbursement ledger account and spend category. If the charge is to a current year General Program Operations (GPO) fund, the credit should also be to that fund. If the charge occurred in the prior year to a GPO fund, the credit should be to Fund 131.

GPR external sales may only be used by the selling department if the sales/services are to an individual or entity external to the UW System and the selling department is GPR funded.

4751 GPR External Sales

Example for Heat (External) and GPR funded:

1300 Accounts Receivable Customer Accounts

4751 GPR External Sales RC00181 Heat

Sales and services not falling within the above definitions should be coded to the appropriate revenue ledger account and revenue category.

None listed.

Revision 4: August 12, 2025
Revision 3: April 1998
Revision 2: June 3, 1997
Revision 1: April 8, 1988
First Approved: May 28, 1975

August 2030