RM Accounting

Fund 999 Loss Accounting (FPPP 35)

The Uninsured Loss Fund

Subject: Fund 999 Loss Accounting (FPPP 35)

  1. Purpose:

      2. This section was developed as a guideline for the Client's risk manager in their claim accounting activities. The information in this section was gleaned primarily from FPPP 35.

  2. Background:

      3. When claim activity takes place on a Client's  office, reimbursement is most often received through one of the various commercial or self-funded insurance programs administered through the Client's Risk Management offices. The Insurance Loss Fund (Fund 999) was established to facilitate the accounting of the receipt and disbursement of proceeds from insured losses without encumbering regular departmental operating funds.

      The accounting procedures developed for the operation of Fund 999 are established in FPPP 35. According to that policy, all receipts and payments relating to the restoration of lost property shall be accounted for through Fund 999. Each institute shall maintain a record of the proceeds and expenditures for each claim submitted with monthly reconciliation.

      Expenditures made prior to receiving the insurance reimbursement can only be used for the purchase of items identical or similar in nature to the lost item or for services required to restore the property to its original state. The Client's institution risk manager shall make certain that the proceeds are used promptly and properly.

  3. Procedures:

      4. 1. Fund Operation

        After an evaluation of the loss by the Client's  risk manager and Client's Risk Management, and submission of the initial notice of loss, departments may begin incurring expenses to replace the loss. A replacement expenditure limit should be established by the Client's risk manager. The expenditure limit should be an amount relatively certain to be recovered based on the loss evaluation and prior experience. The department may issue requisitions for replacement expenditures against Fund 999 up to the amount of the expenditure limit. Those requisitions must be reviewed by the Client's risk manager to ensure similarity in nature between the lost and replacement property. When final settlement from Client's Risk Management is known, the department may use any excess settlements for completion of loss replacement.

      2. Time Limit

        Because there are a variety of circumstances involved when a loss occurs, and a wide range in the degree of loss, it is impractical to establish a strict limit for expending insurance proceeds. It shall be the responsibility of the Client's risk manager to monitor the activity of each loss account on a regular basis. The risk manager shall issue a semi- annual report to the Client's chief fiscal officer indicating departments which have not incurred any substantial expenditures against Fund 999 during the past six months. The report should include recommendations on the status of each account. If no additional expenditures are required to restore the loss, or the institution has decided not to replace the loss, the amount of unused insurance proceeds will annually be transferred to Client's Administration Accounting.

        Annually, a memo will go out from the Client's Accounting Office for reconciliation of the Client's 999 Fund. The accounting forms will be included and the Client's risk manager will be expected to complete them. Each claim for the year should be listed and clearly identified including those carried over from a previous year. Third party recoveries and claims not applicable to the UKGC Self-Funded Property Program should be segregated and specifically identified as such.

        A cash transfer or a check should accompany the 999 report form for the total amount of excess funds in closed claim files.

      3. Accounting Procedures

        The Client's risk manager will be responsible for the consistent accounting of all deposits and proceeds relating to the restoration of losses. This account should be summarized monthly to reconcile all Fund 999 activity. Preparation of interim reports on Fund 999 activity will be at the discretion of the Client'.

         

Subject: The Uninsured Loss Fund

  1. Purpose:

      2. This section was developed as a source of clarification Client's Uninsured Loss Fund (ULF). Some of the information in this section was provided from FPPP 35.

  2. Background:

      3. Client's Risk Management maintains an Uninsured Loss Fund for the benefit of all Client's Divisions. This fund was established at the system level to provide reimbursement for those loss expenses that a division incurs which are not reimbursable from any other source. The Uninsured Loss Fund is administered jointly by the Client's Risk Manager and the Client's Accounting Office. Each loss is reviewed and decided upon on an individual basis by the Client's  Risk Manager with final approval from accounting. Funding for the Uninsured Loss Fund is acquired through a number of sources within Client's Administration and from the Client's Divisions.

      Recently, the Uninsured Loss Fund, which has accumulated to a significant level over the years, has been targeted as a potential source for the loss control efforts of the Client's divisions. As part of a proposal for comprehensive loss control, the ULF would provide the seed money for funding a Client's Loss Control position as well as a Risk Management Information system.

  3. Fund Sources:

      4. 1. Overhead

        The Uninsured Loss Fund is financed with an overhead surcharge to any Client's labor charge on property loss repairs and cleanup made by the Branch or Division. This surcharge is 28% for all divisions and branches and should be applied as follows. When the Client has used its own labor costs for repairs in excess of $100, the labor amount should be separated from material costs by the Client and a factor of 1.28 should be applied to develop the total labor reimbursement amount.

        Example:

        Total Cost $350

         

         

        Material $150

         

        $150

        Labor $200 * 1.28

        =

        $256

        Claim Total

         

        $406

        Always provide this level of detail when submitting a claim.

      2. Premium Surcharges

        Potentially, as Client's system begins formalization of the loss control function at the system level, the ULF will be used to capture additional funding through the use of premium surcharges. This type of surcharge is most acceptable in those situations, such as camps and clinics, where the premium cost is transferred directly to the program user.

      3. Fund 999 Reconciliation

        As stated in Section 9, A of this document, the Client's divisions maintain a loss clearing fund which is reconciled annually by the Client's risk manager. All excess loss reimbursements are returned to Client's business Accounting where they are deposited in the Uninsured Loss Fund for future loss reimbursement.

  4. Fund Uses:

      5. When a Client is unable to pay for repair or replacement for a loss from other sources, they may request payment from the ULF. The following sources of funds should be exhausted before doing so:

        1. Collect from the insurer.
        2. Collect from the person responsible.
        3. Have the department that has suffered the loss pay.
        4. Collect from the Client's Director's (Chancellor's) Fund.

      Payment from the Uninsured Loss Fund is dependent upon the merits of the specific claim. Consideration is also given to the extent of loss control used by the Client's office and the efforts made to avoid the loss. The amount paid will reflect the amount that would have been received by the Client's office had insurance been in force. In some cases a percentage of the loss will be reimbursed dependant upon the situation.

      Requests for reimbursement from the uninsured loss fund should be made by the Client's office in the same format as a property claim. All pertinent information regarding the loss and values involved should be included (See Section 2,A).

      Note: Loss of books in shipment are no longer covered by the uninsured loss fund because of the small values involved which can most often be absorbed by the department and also because of the need for Client's divisions to pursue these losses through the shipper or the post office.

[UKGC] [Services] [Basics] [Programs] [Liability] [Miscellaneous] [Special] [Crime] [Vehicle] [Aviation Policies] [RM Accounting] [Staff RM Issues] [Loss Control] [BANK] [Coverage] [Clearing Consultants] [News] [FAQ] [Download] [Contact Us] [Copyright]