Creighton University

Accounting Policies

POLICY TITLE:

Recruitment and Other Advances

POLICY NUMBER:

GNPL 06

DATE ISSUED: 

January 1, 2000

DATE REVISED:

January 1, 2002

General Overview:

Creighton University may occasionally advance funds to individuals as an incentive to accept a position at the University or for other valid business purposes. In these situations, an agreement is required between the University and the individual (borrower) which stipulates that the amount represents a loan, and which includes the terms for repayment (or forgiveness) of the amount advanced and the corresponding interest.

Agreement:

The area Vice President, the Controller's Office and University General Counsel must review and approve the loan agreement, including the loan terms and amounts, prior to the agreement being offered to the borrower. The interest rate for these loans is to be set at the New York Prime Rate in effect at the time that the agreement is drafted plus 0.5%. The final agreement must then be signed by the borrower and approved through the normal University process prior to the disbursement of funds.

Interest Rate and Loan Schedule:

Interest on the loan will be based on the projected date of first payment, using the current New York Prime Rate plus 0.5% (which may be obtained by calling the office of the Associate Vice President of Finance) as the effective annual rate. Interest will be computed on a monthly basis and will continue to accrue on the outstanding balance until the entire amount has been repaid or forgiven.

Disbursements to the Borrower:

The request for the first and (where applicable) subsequent disbursements to the borrower must be on a University Direct Pay Request (DPR) which has been approved through normal University procedures. A copy of the signed agreement is required to be attached to the first payment request. Subsequent payments after the initial payment may be set up to be automatically paid, using a separate DPR to request the automatic payments. Note that automatic payments must be renewed with a new DPR at the beginning of each new fiscal year by the borrower's department.

Loan Repayment:

Where the loan agreement requires repayment of the loan, the collection process is to be performed by the recruiting department, including notification to the borrower of the repayment process, collection and deposit of all payments, and any follow up required to assure timely collection. Any principal or interest written off due to non-collection will be charged to the recruiting department and reported as income to the borrower. The proper accounting distribution to use in depositing the payments may be obtained from the Controller's Office.

Loan Forgiveness:

Forgiveness of the loan principal and accrued interest will occur as stipulated in the initial agreement and will be recorded as expense to the recruiting department annually. This forgiveness of debt, including interest, must be reported to the Internal Revenue Service (IRS) as income to the recruited employee and the University Payroll department is required to withhold applicable payroll taxes accordingly. Tax withholding and reporting is typically accomplished by adding 1/12th of each year's total principal and interest forgiven to each monthly paycheck of the borrower as non-cash income, during the time period that the loan is being forgiven.