13.7 Non-Monetary Exchanges

Policy Statement

Units must ensure that non-monetary exchange (NME) transactions are reported to UAFR on a timely basis at the appropriate fair market value (FMV) and must ensure that the value of the goods and/or services given do not exceed the value of the goods or services received from the external party.

Reason for the Policy

To ensure accurate reporting for the University of Illinois System’s audited financial statements and proper stewardship of system resources.

Applicability of the Policy

All units that engage in non-monetary exchange transactions.

Procedure

A non-monetary exchange (NME) occurs when the system receives something of value from an external entity in exchange for providing something of value to the external entity in return, rather than paying for it with cash or a cash equivalent.

NMEs may occur independently or may occur as a secondary aspect within other types of transactions, such as:

• Sponsorships
• Gifts-in-kind
• Reduced-cost agreements
• Trade agreements
• No-funds agreements

Examples of transactions that are not NMEs include:

To properly account for an NME, follow the steps below.

• Discounts offered by vendors for volume purchases, or due to the fact that the system is a qualifying educational institution.
  • These types of discounts are considered a normal aspect of negotiating a monetary transaction, and the system is not giving up goods or services in exchange for the price reduction in these instances.
• Trade-in of equipment to acquire new equipment.
• Nominal premiums given to donors (such as a t-shirt or coffee mug) as a thank-you acknowledgment for the donation of a gift-in-kind.

1. Determine Whether or Not a Non-Monetary Exchange (NME) Exists

NME transactions are typically recorded at the estimated fair market value (FMV) of the goods and/or services provided by the system. Potential sources of valuation include:

• Sales price of similar goods or services
• Quoted market prices in catalogues or vendor price lists
• Auction values
• Independent appraisal
• Any other external source that provides the value of an arms-length transaction involving similar goods or services.

However, if that FMV cannot be determined, then the NME transaction is recorded at the estimated FMV of the goods/services received by the system.

See below for common examples of NME transactions and how these transactions would be valued for the system’s financial statements.

Example 1: A university unit enters into an agreement to provide season tickets (valued at $2,500) to an external television station in exchange for television advertisements (valued at $2,500). In this example, the value of the NME would be $2,500 (which is the FMV of the season tickets provided by the university unit). The related accounting entry in Banner would be a $2,500 debit to an advertising services expense account code and a $2,500 credit to a ticket sales revenue account code.

Example 2: A university unit enters into an agreement to provide advertising services to an external vendor in exchange for consumable supplies (valued at $3,000). The unit in this example typically does not sell advertising services, so the value of these services is unknown. Since the value of what was provided by the unit is unknown, then the NME should be valued at the FMV of the goods/services received by the unit, which would be $3,000 in this example. The related accounting entry in Banner would be a $3,000 debit to a consumable supplies expense account code and a $3,000 credit to an advertising services revenue account code.

Example 3: A university unit enters into an agreement to provide advertisements in a conference pamphlet (valued at $1,000) to an external vendor in exchange for refreshments provided for the conference (valued at $1,000). The external vendor also made a cash payment of $5,000 to be recognized as a qualified sponsor of the conference. In this example, the value of the NME would be $1,000 (which is the FMV of the advertisement provided in the conference pamphlet), while the $5,000 qualified sponsorship payment would be processed as a donation. The related accounting entry in Banner for the NME would be a $1,000 debit to a catering expense account code and a $1,000 credit to an advertising services revenue account code.

Example 4: A university unit enters into an agreement to provide event tickets (valued at $1,500) to an external vendor in exchange for pamphlet printing services (valued at $5,000). In this example, the value of the NME would be $1,500 (which is the FMV of the event tickets), while the excess $3,500 would be reported as a gift-in-kind. The related accounting entry in Banner for the NME would be a $1,500 debit to an external printing services expense account code and a $1,500 credit to an event ticket revenue account code.

Example 5: A university unit considers entering into a sponsorship agreement with an external vendor, where the unit would provide booth space at a conference, along with advertisements in the conference materials. The FMV is $500 for the booth space and $1,000 for the advertisements. In exchange, the external vendor agrees to provide refreshments for conference attendees. However, the value of the refreshments is only $500. Since the value of what the unit is giving ($1,500) exceeds the value of what the sponsor is giving ($500), this is not a valid NME, as the system cannot give more than it receives in an NME arrangement. For this arrangement to be in compliance with policy, the unit would have to lower the value of what they are giving the sponsor by removing some of the sponsorship benefits (e.g., by removing any advertisements and only providing the booth space) to ensure the value of what the unit is giving does not exceed the $500 value of what they would be receiving from the sponsor.

2. Report the NME to UAFR

NME transactions must be reported to UAFR by completing and submitting a Report of Non-Monetary Exchanges form. These NME transactions should ideally be reported to UAFR within the same accounting period (i.e., the same month) and the same fiscal year in which the transaction occurred. UAFR will review the submitted form and will record the applicable JV in Banner on the unit’s behalf. The JV will debit an expense account code and credit a revenue account code on the applicable self-supporting fund, with no effect on cash or fund balance.