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Introduction
With a few exceptions, vacation costs are recorded on the cash basis of accounting. This means that the vacation is recorded as an expense in the departmental fund-area-orgs when the employees are paid. Costs are charged to federally sponsored accounts to the extent the costs are allocable to the project and allowable by the sponsor. Refer to Administrative Policy Charging of Direct and Indirect Costs, for more information in this area. Since the payroll system does not distinguish between pay for hours while working and pay for earned vacation, the vacation pay portion of a normal paycheck is not identified as such. Vacation payouts (upon termination) are identified as a separate pay type in the biweekly payroll system, beginning April 29, 1996.

Earning and Reporting Process
The general provisions for vacation leave for full and part-time Civil Service employees, and a description of how vacation with pay is earned and reported is described in Section 2 of Rule 11, Authorized Leaves of Absence, of the Civil Service Rules.

The general provisions for vacation leave for bargaining unit employees are covered in each bargaining unitÕs contract.

The vacation earning process for academic and professional and administrative employee classifications is described in the Academic Staff Vacation Policy.

Individuals with non A-term appointments (less than 12-month academic appointments) do not earn vacation.

Payment Process
Vacation is earned and accumulated at the salary rate in effect at the time it is earned, but is paid out at the current salary rate of the employee.

Vacation payments, including payouts at the time of termination of University employment, are charged to an account within the employee's current department, regardless of where the employee was assigned at the time the vacation was earned.

Employees who move from one department to another retain their years of service credit and are entitled to take unused vacation leave with them. The former department is responsible for transferring an amount representing the accumulated vacation balance to the new employing department to cover the cost of unused vacation leave to which the employee is entitled. The amount transferred is based on the employee's previous daily rate of pay.

Unused accumulated vacation paid to an individual that is terminating employment at the University is paid on the regular payroll system for those individuals normally paid on the regular system and on the biweekly payroll system for those individuals normally paid on the biweekly system. The biweekly payroll system identifies vacation payouts as such and thus fringe benefits applied against this vacation payout include the following components, effective October 1996:

• Unemployment Compensation
• FICA
• Medicare

The regular payroll system does not contain pay types and thus cannot identify vacation payouts as such. Therefore, the full applicable fringe benefit rate, except for the retirement component (MSRS) for civil service, is applied against the amount of the vacation payout when it is paid on the regular payroll system.

Fiscal Year-end Accrual Process
Vacation earned and accumulated also vests with the employee. This means that the University incurs a liability at the time the employee earns the vacation to pay the employee the amount of unused vacation accumulated while employed at the University. Each June 30, the University's fiscal year-end, Accounting Services estimates the total amount of vacation liability the University to its employees, and recognizes this cost in its annual financial statements. Generally, the cost is not allocated to individual departmental accounts for financial reporting purposes. The financial statements of the University are presented on the accrual basis in accordance with accounting principles outlined in the American Institute of Certified Public Accountants' audit guide, Audits of Colleges and Universities, and guidelines suggested by the National Association of College and University Business Officers.

Certain units have been granted exception to this policy and record vacation under a full accrual process, i.e., the vacation is recorded as a cost to the departmental account as it is earned rather than when it is paid. Accounting Services is responsible for granting exception to this policy and maintenance of the list of the units to which this applies.