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Appendix E
3Q Processing Manual For User Departments

Overview of 3Q Processing in Payroll

According sponsored agency agreements, the University can only charge a grant or contract during the months that the faculty member is actually expending effort on the project, that is, during the period "in residence." The Payroll System’s automated way of handling this requirement is often referred to as "3Q", or "accrual processing." This process sets aside money during each payroll the faculty member is "in residence," to cover salary during the months when the faculty member is not in residence. Accrual processing ensures that salary charges reflect the dollars earned during the time period worked, AND that the employee is paid the contract salary in 12 equal installments.

An employee whose appointment begin date is 7/1, but whose period of residence is 10/1 through 6/30, actually earns their entire annual salary after providing 9 months (3 Quarters) of service. The employee therefore earns salary at the rate of 11.111% per month. However, the University pays the employee’s annual salary over the entire calendar year (8.333% paid per month). The difference between the 1/9 and 1/12 amounts (2.778% of the annual salary) is called the ACCRUAL AMOUNT.

Example: The faculty member described above is paid 100% from 4-xxxxx. The table below summarizes the complicated 3Q accounting process that would occur for this individual during the entire fiscal year. Please note the following:

1) 100% of the employee’s salary is charged to 4-xxxxx-1000, the salary subaccount.

Percent of Annual Salary Charged, Ledger 4-xxxxx (%)
Accrual subaccount

Salary subaccount

[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Month
debits
credits
   
Jul.
8.333
 
---
---
Aug.
8.333
 
---
---
Sept.
8.333
 
---
---
Oct.  
(2.778)
2.778
8.333
Nov.  
(2.778)
2.778
8.333
Dec.  
(2.778)
2.778
8.333
Jan.  
(2.778)
2.778
8.333
Feb.  
(2.778)
2.778
8.333
Mar  
(2.778)
2.778
8.333
Apr.  
(2.778)
2.778
8.333
May  
(2.778)
2.778
8.333
Jun.  
(2.778)
2.778
8.333
     
25.00%
75.00%

2) Looking at the table in a slightly different way, the employee is actually paid 1/12 (8.333%) of annual salary each month.

Percent of Annual Salary Charged, Ledger 4-xxxxx (%)
Accrual subaccount

Salary subaccount

[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Jul.
8.333
 
---
---
Aug.
8.333
 
---
---
Sept.
8.333
 
---
---
Oct.  
(2.778)
2.778
8.333
Nov.  
(2.778)
2.778
8.333
Dec.  
(2.778)
2.778
8.333
Jan.  
(2.778)
2.778
8.333
Feb.  
(2.778)
2.778
8.333
Mar  
(2.778)
2.778
8.333
Apr.  
(2.778)
2.778
8.333
May  
(2.778)
2.778
8.333
Jun.
_____
(2.778)
2.778
8.333
 
25.00%
   
75.00%

3) When "in residence," 1/12 amount and accrual amount charged to salary subaccount.
4) When "out of residence," employee is paid from the -1099 (-1199) subaccount only.
5) When "in residence," a credit equal to accrual amount appears on subaccount -1099: that is, the center two columns cancel each other out.

Note that, when a faculty member stays at the University during the entire period of residence, the accrual account balances to zero. However, in the above example, if the individual leaves anytime before completing nine months (3 quarters) of service, they owe the University money. In the tables that follow, we will show this using real dollar figures for the fictitious faculty member John J. Schmidt, who earns $120,000 per year.

In Case #1, Dr. Schmidt leaves the University on September 30. He has been paid 25% of his annual salary, but none of it has been charged to the regular salary subaccount. Thus, he has been OVERPAID by 25% of his annual salary, or $30,000:

Actual Salary Charged, Ledger 4-xxxxx
Accrual subaccount
Salary subaccount
[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Month
debits
credits
   
Jul.
10,000
 
---
---
Aug.
10,000
 
---
---
Sept.
10,000
 
---
---
 
-------------
-------------
---------------
---------------
  $30,000   0.00 0.00

In Case #2, below, Dr. Schmidt leaves on March 31. He has completed two quarters, and thus has earned 66.67% (two-thirds) of his annual salary, or $80,000.

Actual Salary Charged, Ledger 4-xxxxx
Accrual subaccount
Salary subaccount
[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Month
debits
credits
   
Jul.
10,000
 
---
---
Aug.
10,000
 
---
---
Sept.
10,000
 
---
---
Oct.  
(3,333.33)
3,333.33
10,000
Nov.  
(3,333.33)
3,333.33
10,000
Dec.  
(3,333.33)
3,333.33
10,000
Jan.  
(3,333.33)
3,333.33
10,000
Feb.  
(3,333.33)
3,333.33
10,000
Mar  
(3,333.33)
3,333.33
10,000
     
---------------
---------------
      $20,000 $60,000

However, as of March 31, he has been paid a total of 75% of annual salary, or $90,000. Thus, Dr. Schmidt has been overpaid by 8.33% ($10,000, or one month) annual salary.

Actual Salary Charged, Ledger 4-xxxxx
Accrual subaccount
Salary subaccount
[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Month
debits
credits
   
Jul.
10,000
 
---
---
Aug.
10,000
 
---
---
Sept.
10,000
 
---
---
Oct.  
(3,333.33)
3,333.33
10,000
Nov.  
(3,333.33)
3,333.33
10,000
Dec.   
(3,333.33)
3,333.33
10,000
Jan.  
(3,333.33)
3,333.33
10,000
Feb.  
(3,333.33)
3,333.33
10,000
Mar  
(3,333.33)
3,333.33
10,000
 
-------------
   
---------------
   $30,000     $60,000

In Case #3, a different faculty member’s appointment period begins 10/1, and her period of residence is 10/1-6/30. The situation is slightly different than Dr. Schmidt’s: while in residence, funds are "saved up" to pay salary while out of residence (July through September).

Actual Salary Charged, Ledger 4-xxxxx
Accrual subaccount
Salary subaccount
[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Month
debits
credits
   
Oct.  
(3,333.33)
3,333.33
10,000
Nov.  
(3,333.33)
3,333.33
10,000
Dec.  
(3,333.33)
3,333.33
10,000
Jan.  
(3,333.33)
3,333.33
10,000
Feb.  
(3,333.33)
3,333.33
10,000
Mar  
(3,333.33)
3,333.33
10,000
Apr.  
(3,333.33)
3,333.33
10,000
May  
(3,333.33)
3,333.33
10,000
Jun.  
(3,333.33)
3,333.33
10,000
Jul.
10,000
---
---
---
Aug.
10,000
---
---
---
Sept.
10,000
---
---
                 
  $30,000     $90,000

Below, the faculty member leaves on March 31. She has completed two quarters of service, and has thus earned 66.67% of their annual salary, or $90,000. However, she has only been paid a total of 50% of her annual salary. If no adjustments are made, she will be underpaid by 16.67% of her annual salary, or $20,000.

Actual Salary Charged, Ledger 4-xxxxx
Accrual subaccount

Salary subaccount

[either -1099, or -1199]
[Charge Line Item #1]
[Charge Line Item #2]
Month
debits
credits
                         
Oct.    
(3,333.33)
3,333.33
10,000
Nov.  
(3,333.33)
3,333.33
10,000
Dec.  
(3,333.33)
3,333.33
10,000
Jan.  
(3,333.33)
3,333.33
10,000
Feb.  
(3,333.33)
3,333.33
10,000
Mar  
(3,333.33)
3,333.33
10,000
          $60,000

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