Principles of Regulatory Compliance

I. Policy 

Every employee who conducts transactions that affect University funds must comply with all applicable laws, regulations, and special restrictions.

To ensure compliance with applicable laws, regulations, and special restrictions, each unit head shall adopt the following principles and responsibilities.

II. Principles

Principle 1: Individuals conducting business transactions shall be personally responsible to face punitive actions resulting from blatant violations of laws, regulations or restrictions affecting the conduct of those transactions.

Principle 2: Anyone who is aware of fraudulent or illegal business transactions conducted in the name of the University shall report them immediately.

Principle 3: Each unit is responsible for the restitution of any disallowances due to noncompliance with laws, regulations or special restrictions.

Principle 4: Every employee who conducts University business transactions is responsible for staying abreast of ever-changing legal and regulatory requirements.

Principle 5: Legal and regulatory requirements, as well as any donor-imposed restrictions, shall be maintained on record with the University and be readily accessible.

III. Responsibilities 

Section 1: Financial Reporting

Financial reporting in compliance with regulatory requirements includes:

1. Following Generally Accepted Accounting Practices (GAAP), Financial Accounting Standards Board (FASB) Statements, Governmental Accounting Standards Board (GASB) Statements, and Cost Accounting Standards Board (CASB) Statements.

The basic requirements of these standards as applied at UCLA include the following:

1. Sources and uses of funds must be aggregated by the type of activity they support, and in accordance with any restrictions imposed on their use.
2. Revenue is reported when earned, and expenditures are reported when goods or services are received.
   1. In general, revenue is earned when the University provides goods or services; for example, on a cost-reimbursement research grant, revenue is earned as the costs are incurred for the conduct of the research.
   2. Likewise, expenses are incurred as the University uses goods or services; for example, when laboratory supplies are received, the University incurs the expense. Holding an invoice does not prevent the expense from being incurred.
3. Accounting principles must be applied consistently, both within fiscal years and between fiscal years. The Office of Accounting Services is charged with ensuring consistent, university-wide application of these accounting principles.
4. Transactions must be classified and recorded consistently.
5. Revenue and expenses must be recorded in the proper accounting period.

1. Reporting to sponsoring entities according to the specific reporting requirements. In general, most sponsoring entities require adherence to GAAP. Additionally, federal agencies and entities which serve as conduits for federal funds require adherence to either Office of Management and Budget Circulars (OMB) and/or Federal Acquisition Regulations (FAR). Two primary OMB circulars include:

1. OMB Circular A-21, provides the cost principles for educational institutions. These principles define allowable costs as those which are reasonable, allocable, consistently treated and in conformance with any special limitations. Circular A-21 also defines direct versus indirect costs, and provides guidelines for calculating indirect costs, and
2. OMB Circular A-110, provides uniform administrative requirements for grants and other agreements with institutions of higher education, including financial reporting requirements.

1. Making all financial reporting systems open to regular internal and external audits. External auditors must be cleared and coordinated by the UCLA Audit Coordinator.

For further information, contact the Finance Office 

Section 2: Records Retention

Maintaining financial records compliance with regulatory requirements includes:

1. Records must be maintained for a period of three years from the later of the end of the budget period or the filing of all required reports.
    
2. In cases where there is pending litigation or audits, records must be maintained until the action is concluded.
    
3. Records for equipment, loans, or similar assets must be maintained for at least three years after final disposition or pay-off.

For further information, contact the Finance Office 

 Section 3: Cash Management

Managing cash in compliance with regulatory requirements includes:

1. Excess balances of federal funds shall not be maintained,
    
2. Any interest earned on federal cash balances is remitted to the Federal Government by the Finance Office,
     
3. The Finance Office ensures that accounts holding federal funds are FDIC insured, and
    
4. Approval for new bank accounts must be obtained from the University Treasurer's Office.

For further information, contact the Finance Office 

Section 4: Expenditures

Incurring expenditures in compliance with regulatory requirements includes:

1. All employees behave ethically when conducting University business.
    
2. Encouraging the use of vendors which are small businesses and businesses owned by women, minorities, and disabled veterans.
    
3. Federal restrictions are obeyed, including:

1. federal funds cannot be used to support political activities of any kind,
2. no person shall be excluded from or discriminated against because of race, color, national origin, sex, age or physical impairment,
3. no officer, employee or agent shall be involved in a contract that where they or their immediate family or partner has a vested interest, and,
4. accepting payments (kick-backs) to secure contracts is prohibited.

1. All University Human Resource policies and regulations are followed.
    
2. In addition, when purchasing goods and services for the University, the following requirements apply:

• The Purchasing Director, authorized buyers or specified University departments must execute the purchases of:

1. real estate and construction projects,
2. the services of independent consultants,
3. legal services,
4. debt service, or
5. any purchases where payment terms exceed seven years. 

• The authority to purchase goods and services with a value under $2,500 does not provide the authority to issue, approve or execute contracts and licenses.
• Any person who makes unauthorized purchases shall be responsible for the payment of all charges incurred.
• Purchases exceeding $2,500 must be conducted through the Purchasing Department. The Purchasing Department must maintain documentation of solicitations made to vendors, vendor responses, sole source justifications, and the contracts awarded.
• The Director of Purchasing must authorize the purchase of narcotics, dangerous drugs, ethyl alcohol, and radioactive or other hazardous materials.
• Goods and services for individuals or for non-University activities shall not be made using University credit, purchasing power or facilities. If purchased items appear to be of a personal nature, they must be properly documented.
• When pooled purchase orders or commodity agreements exist, goods and services shall not be purchased from other sources, unless special delivery dates or unusual specifications preclude the use of these sources.
• Purchases cannot restrict fair trade practices.
• Contractors must pay laborers and mechanics employed by them at wages no less than the prevailing wage rate, as it is defined by the Secretary of Labor, where applicable.
• Unnecessary or redundant purchases must be avoided.

1. Equipment purchased with funds from federal awards involves the following additional requirements as specified in OMB Circular A-110:

1. a description of such assets be maintained in the University's equipment inventory records, 
2. a physical inventory be conducted at least once every two years, 
3. property owned by the federal government be identified as such, 
4. people responsible for federally-owned equipment know the basic requirements for the use and disposition of such equipment, and 
5. an inventory report be submitted annually. This report is submitted by the Office of Accounting Services.

1. Actions which affect a person's compensation must adhere to the following additional requirements:

1. providing the Payroll Office through input to the on-line system with all the data needed to process that person's paycheck, including:
   1. name,
   2. Social Security number,
   3. tax withholding forms,
   4. pay rate,
   5. terms of appointment,
   6. appointment end date,
   7. title code,
   8. hiring department code and name, and
   9. Full Accounting Unit (FAU) to be charged;
       
2. updating such information so that checks may be issued in a timely manner; 
3. ensuring that other payroll information is updated accurately and timely that affects such items as:
   1. Medicare,
   2. OASDI,
   3. retirement plans, and
   4. voluntary withholdings such as insurance, various employee benefit programs, and credit union payments;
4. adhering to all time keeping requirements whether for compensation or allocating charges to federal awards; and
    

5. ensuring compliance when payments are made for unusual circumstances, such as housing allowances, car allowances, foreign subsistence when assigned to work in a foreign country, etc. 

For further information, contact the Finance Office

Section 5: Tax Laws and Regulations

To comply with tax regulations, appropriate personnel must be informed of the various taxing authority requirements applicable to their operations. In general, taxes applicable to University operations include:

1. Income tax on income-producing activities which constitute a regularly carried on trade or business that is not related to the furtherance of educational activities. Consequently, employees who are engaged in such activities must:

1. Maintain information that supports whether or not a particular activity is subject to income tax,
2. Notify the Finance Office of any income taxable activities and complete the various questionnaires and worksheets prescribed by the Office of Accounting Services, and,
3. Account for all taxable income earned in an income producing fund approved by the Finance Office which is responsible for the actual completion of the Form 990-T Exempt Organization Business Income Tax Return.

1. Sales and use tax on certain sale and purchase transactions as required by the California State Board of Equalization. Purchases made for resale are generally exempt in cases where the seller obtains evidence from the purchaser such as a certificate of resale. Otherwise:

• Units that conduct sales activities must charge sales tax and properly account for sales tax collected by coding related deposits against sales tax payable account numbers designated by the Finance Office, and
• Units making purchases must include a provision for such taxes when making orders. Further they must ensure these payments have been included on their invoice payments or through other charging methods used by the Office of Accounting Services which is responsible for the actual filing and remitting of sales and use tax payments.

1. Federal and State income taxes assessed on University employee base salary and wages, supplemental pay, undocumented reimbursements, and various allowances (such as car and housing) in accordance with the Internal Revenue Code and California Revenue and Taxation Code. In this process:

1. The Payroll Office is responsible for withholding taxes on compensation based upon the individual's Form W-4, Employees Withholding Allowance Certificate on file. They are also responsible for remitting the actual tax payments to the Federal and State governments, completing the required quarterly tax returns, and for distributing Forms W-2 Wage and Tax Statements to employees.
2. Units on campus are responsible for submitting accurate and timely data to payroll for the completion of these forms, and determining whether individual's are to be considered employees or contractors for tax purposes.

1. Other important tax considerations include that:

1. Income paid to payees outside the university (such as payment of fees, commission, rents, and royalties) or University employees (such as prizes and awards) must accumulated and reported as taxable income. In this process:
   1. Units must provide tax identification numbers when processing these type of payment transactions, and
   2. The Office of Accounting Services is responsible for reporting this information to the payees via annual reporting forms such as the Forms 1099, W-2, or 1042S.
2. The University is generally exempt from paying property taxes. When necessary, the Office of Accounting Services will file the exemption reports and claims to receive refunds of such taxes paid on leased property.

For further information, contact the Office of Accounting Services 

Section 6: Reporting Fraudulent or Illegal Acts

Properly reporting fraudulent or illegal acts includes:

1. Individuals conducting business on behalf of the University are personally responsible for the consequences of any violations of laws, regulations or special restrictions which they commit.
    

2. Individuals conducting business on behalf of the University must do so for the benefit of the University. Where a potential for personal gain exists, this potential conflicts of interest must be reported immediately, and be carefully evaluated before any financial transactions are allowed to occur.

3. Individuals conducting business on behalf of the University must not benefit financially in any way from the conduct or course of that business. This includes both personal benefit and any benefit accruing to a close relative.

4. Any person who suspects that fraud or illegal activities are taking place in their unit must report that suspicion immediately to their immediate supervisor. If the employee believes that this supervisor is involved, or is otherwise uncomfortable reporting in this manner, they must immediately notify the Internal Audit Department. Supervisors to whom such reports are made must review them, and if they have merit, report them to the next level of management or to the Internal Audit Department.

For further information, contact Internal Audit 

Section 7: Response and Resolution of Audit Findings

Responding to audit findings includes ensuring that:

1. The central UCLA Audit Coordinator is notified prior to commencement of any audit or review.

2. A full investigation of the facts is conducted to ensure accuracy of any findings.

1. If a finding is in error, full documentation must be sent immediately to the UCLA Audit Coordinator. 
2. If a finding is valid, corrective action must be taken immediately to correct the deficiency and ensure the situation does not recur. 
3. Where findings result in disallowances, units must cover the disallowances with other unit funds. If a unit does not take prompt action, central accounting units may step in to take action. 

Where findings result in extrapolated disallowances, the Chancellor will review the circumstances and decide upon an appropriate allocation of the disallowance.