Sponsored Program Bad Debt

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Policy Code: 
Approval Authority: 
Vice Chancellor
Policy Type: 
Divisional Policy
Policy Owner: 
Administration and Finance
Responsible Office: 
Administration and Finance - 828.251.6742

I. Purpose

To establish a policy to provide for those circumstances where certain sponsors lose their ability to pay or do not honor the financial responsibility regarding their sponsorship of a project.

II. Scope

This policy applies to all Project Directors/Principal Investigators (PI/PD).

III. Policy

The University will recognize bad debts arising from sponsored program account receivables after all appropriate, internal and external collection efforts have proven unsuccessful. The Special Funds Accountant (SFA) is responsible for collecting payments on all awards, recommending the status, and continuation of projects where payment receipt is doubtful and recording the appropriate accounting entries for the bad debt. Interest will be charged by Financial Affairs to sponsored accounts deemed uncollectable.

IV. Definitions

Bad Debt – When payment for actual costs incurred on any given sponsored project is deemed uncollectable.

V. Procedure

Invoices are submitted to sponsors by the SFA. The invoiced amount is recorded as a charge to the sponsored program accounts receivable. The SFA monitors receipt of payment from sponsors.

When the recorded receivable remains unpaid after 90 days, the SFA contacts the sponsor regarding the payment. If this proves unsuccessful, additional contacts are pursued with the sponsor requesting payment, or reasons for nonpayment. Copies of all correspondence between the University and the sponsor can be shared with the award’s principal investigator.

The SFA, after consultation with the Associate Vice Chancellor (AVC) for Finance, may place a “freeze” on the award account to stop future expenditures from occurring. If the principal investigator/project director wishes to continue incurring expenditures on the award account, he/she must seek approval of their department chair and provide the SFA with a guarantee account.

If nonpayment is due to nonperformance on the part of the University (i.e. technical report not completed), the PI/PD, department chair, and program dean are contacted to solve the nonperformance problem. If the problem continues to exist, and payment is ultimately not received, the department and area are responsible for the deficiency in the award account caused by the nonpayment.

If nonpayment is due to refusal or inability of the sponsor to pay, the SFA must contact Legal Counsel to assist in its collection efforts after consultation with the AVC for Finance. If the University still does not receive payment, the department and program area will be held responsible for addressing the monetary obligations created by the sponsor’s nonpayment.