Systems and Procedures
A Division of The Corporate Controller's Office

Procedure CR2052 - Accounting for Coupons and Gift Certificates

Office of the Corporate Controller

Policy Steward facilitating procedure: Associate Vice President for Finance and Corporate Controller

Table of Contents:


GENERAL:

Auxiliary enterprises and certain other departments, utilizing both automated and paper systems, periodically desire to publish coupons in newspapers, magazines, mailers, etc., to offer a discount on services and/or merchandise. Areas may also desire to sell gift certificates upon customer request. This procedure identifies the establishment, record keeping, and accountability processes that must occur when offering such services.

PROCEDURE:

ESTABLISHMENT OF COUPON AND/OR GIFT CERTIFICATE PROGRAMS

General

Before coupons or gift certificates may be printed/released, areas desiring to offer such services must obtain permission via written request to the appropriate budget administrator (with a copy to the applicable Financial Officer), identifying the specifics of such a program. The area must be financially capable, at the time they are placed in circulation, of honoring the redemption of all coupons/gift certificates issued. Once written approval is received, implementation of the requested service may commence.

Coupons

All coupons offered must have an expiration date on them. This may be less than, but should not exceed one calendar year from the date entered on the coupon. For coupons made available in an "over the counter" fashion, dates may be hand-stamped or typed in by the issuing department (to minimize abuse, no HANDWRITTEN entry of dates is permitted). When appearing in newspapers, magazines, or other such media, expiration dates must be included at the time the coupons are published. The issuing department reserves the right NOT to honor any coupon which they feel has been altered or otherwise tampered with.

Gift Certificates

Areas desiring to limit the time within which a gift certificate can be redeemed will place an EXPIRATION DATE on their certificates. Such dates will be included at the time the certificates are printed, or hand-stamped or typed in at the time of issuance. To minimize the potential for misuse, HANDWRITTEN entries are not permissible. The issuing department reserves the right NOT to honor any gift certificate which they feel has been altered or otherwise tampered with. Expiration dates may Department be less than, but should not exceed one calendar year from the date gift (Continued) certificates are issued. For further guidelines on gift certificates, refer to "Gift Certificate Processing."

COUPON PROCESSING

Issuance

Once the request is approved, the offering department will take the necessary steps to have their coupons published/issued via newspapers, magazines, mailers, etc., so that the coupons are available to customers for their redemption.

Redeeming Coupons

At the time of redemption, the attendant on duty will render coupons received non-redeemable, thereby preventing the use of already redeemed coupons a second time. This may be accomplished by hand-stamping or writing "used", "redeemed", etc., on the coupon itself (method and appropriate verbiage determined by management). When accepting/validating coupons, care must be taken not to obliterate key information, such as processing instructions from the manufacturer. Coupons may only be used to reduce published prices, and may not be combined with other discounting offers.

Recording Coupon Redemptions

The specific methodology for recording sales involving the redemption of coupons will be dependent on the device being used to accomplish the record keeping. This may range from entry to a cash register or computer terminal to completion of a University Pre-numbered Receipt. For cash register/terminal operations, redeemed coupons will be recorded/ keyed according to the specific sales category to which they apply. The attendant will record the coupon by pressing a separate "price look-up" or "Department" key, or by performing some other type of key stroke (if a computer terminal). This is to allow the value of the coupon to be deducted from the total amount due at the time the purchase is transacted, while at the same time applying the discount on the merchandise being purchased to the proper sales category. At shift-end, the register's (terminal's) summary tape (report) will indicate the number and value of the coupons redeemed per applicable sales category for reconciliation and reporting purposes.

- OR -

The cash register/terminal must have a provision for a "coupon" key which is to be separate from all other categories, recording coupon activity only. The number of redeemed coupons and their corresponding values must be reflected on the register's (terminal's) summary tape (report) when sales are reconciled and reported at shift-end.

If an area has no cash register/terminal, the coupon value must be itemized at the time of purchase via completion of a Pre-numbered Receipts (see page 1.8 of the General Forms Usage Guide) as a reduction to the total amount due.

Reporting Coupon Redemptions

All income involving the redemption of coupons will be reported as GROSS income (what it would have been before deductions for the coupons redeemed). The coupons being redeemed on a given day will be reported, in total, as "discounts" (sales or fees, as applicable), on a separate line in the Accounts Credited section of the Report of Cash Receipts (ROCR) (see Exhibit "A"). Discounts against SALES income will be reported as "Sales Discounts, {applicable budget}, Fund 1005, object code 038." Discounts against FEES income will be reported as "Fees Discounts, { applicable budget}, Fund 1003, object code 023."Such totals will be entered as a NEGATIVE amount (i.e. a DEBIT) to reflect the fact that they represent a reduction to gross sales or fees of the area offering the discount. The net amount (gross income less discounts) will ultimately equal the amount of money accompanying the ROCR and deposited with the Bursar or bank.

Redeemed coupons will be retained with departmental records, ultimately filed with the Department copy of the ROCR.

Reconciliation Involving Redeemed Coupons

Coupons are a reconcilable item with respect to financial reconciliations. As such, the total of the monies received less coupons and other adjusting items, plus or minus overages/shortages must agree with the cash register/terminal's summary tape/report, or total per Pre-numbered Receipts (if a non-cash register operation). As a general guide, reconciliation of daily sale activity, including activity involving coupons, will occur in accordance with the guidelines specified in "Generic Cash Collection," Procedure CR2056. A copy of the procedure is available by contacting Systems & Procedures.

On a regular basis (at least quarterly), the Department Manager (or designee) will spot-check those ROCRs (Department copy) reporting coupon activity, confirming that the coupon total reported on the RCR agrees with the cumulative value of the coupons attached, and that the coupons have been appropriately rendered non-redeemable as discussed in "Redeeming Coupons". This review shall be evidenced by the reviewers initials and date on those ROCRs reviewed.

GIFT CERTIFICATE PROCESSING

General

Unlike coupons, gift certificates are obtainable only at the location(s) of the area offering such a service. Once the request to sell gift certificates is properly approved, the offering department will take the necessary steps to have their gift certificates printed and available to customers upon request.

While appearances may vary, all certificates must possess certain "essentials" to insure proper processing and control (Exhibit "B" displays a sample certificate, with key elements highlighted, as appropriate). Certificates must be printed in such a manner to deter forgeries, such as using a complicated design, safety paper, colored paper, etc. To aid in the control and accountability processes, certificates must be pre-numbered. Additionally, a "Department Use Only" area will be designated for authorizations necessary in validating certificate issuance, redemption, and special situations, if applicable (example: employee purchases).

To minimize transposition errors as well as potential misuse, gift certificate values must be displayed in one of the following 3 ways:

  1. PRE-PRINTED at the time of creation;
  2. HAND-STAMPED on each certificate at the time of issuance (as opposed to a hand written entry of such values, which will NOT be permitted);
  3. TYPED in at the time of issuance, the value entered both as a number and spelled out in long-hand style, in the same fashion as writing a check.

Offering this service will require the establishment of a database or gift certificate log, against which each certificate must be checked prior to redemption acceptance. Unissued gift certificates will be secured in a safe place (as determined by management) to minimize theft or misuse.

Issuance of Gift Certificates

Over the Counter Purchases

Upon customer request, the attendant will obtain a gift certificate from the supply on hand and complete the certificate. Also, the date of issuance, gift certificate number, and amount will be recorded, either manually logged or recorded via entry to the register/terminal, depending on the area's mode of operation. The sale will be recorded as discussed in "Recording Issuance of Gift Certificates." The proper amount will be collected from the purchaser, with the gift certificate and appropriate receipt being given to the customer.

Mail Order Purchases

Gift certificates may be purchased via mail order and sent to either the purchaser or recipient when the purchaser either mails a personal check/money order payable to " The Pennsylvania State University," or provides a valid credit card number. An attendant will then obtain a gift certificate from the supply on hand and complete a certificate. Also, the date of issuance, gift certificate number, amount, and method of payment will be recorded, either manually logged or recorded via entry to the register/terminal, depending on the area's mode of operation. The sale will be recorded as discussed in "Recording Issuance of Gift Certificates." Once recorded, the gift certificate will be mailed to the individual specified by the purchaser.

Employee Purchases

Individuals employed by an area offering gift certificates may also purchase such certificates. However, at the time of purchase, employees must obtain the permission of the department manager. Permission will be evidenced by his/her initials and date on the certificate. If redeemed by the employee, the employee must sign and date the certificate to acknowledge application of the certificate towards their purchase.

Recording Issuance of Gift Certificates

The specific methodology for recording sales involving the issuance of gift certificates will be dependent on the device being used to accomplish the record keeping. This may range from entry via cash register or computer terminal to the completion of a University Pre-numbered Receipt.

For cash register/terminal operations, the register/terminal must have a provision for a "gift certificate" key which is to be separate from all other categories, recording sales of gift certificates only. The number of certificates issued and their corresponding values must be reflected on the register's (terminal's) summary tape (report) for reconciliation, audit trail and general reporting purposes. If the capability has been established, entry via such a key can provide automated logging to support the issuance of certificates when entered into the register/terminal system. If such a capability does not exist, then a gift certificate log must be manually maintained to record such activity.

If an area has a cash register/terminal which does NOT have a gift certificate key nor the capability to designate such a key, gift certificate issuance will be recorded as such at the time of sale via completion of a Pre-numbered Receipt (see page 1.8 of the General Forms Usage Guide). Secondly, daily or shift-end reconciliation reports must include a line for gift certificates so that such activity can be reported and accounted for. Lastly, the numbers and values of all gift certificates issued (and any other pertinent information, as decided upon by management) will be recorded to the a gift certificate log to provide an ongoing record of gift certificate activity, from the time of issuance until such time that they are redeemed or otherwise disposed of. (Refer to "Redemption and Subsequent Processing of Gift Certificates" and "Processing Unredeemed Gift Certificates.")

If an area has no cash register/terminal, gift certificate issuance will be recorded as such at the time of sale via completion of a Pre-numbered Receipt (see page 1.8 of the General Forms Usage Guide). Secondly, the numbers and values of all gift certificates issued (and any other pertinent information, as decided by management) will be recorded via entry to the a gift certificate log to provide an ongoing record of gift certificate activity, from the time of issuance until such time that they are redeemed or otherwise disposed of. (Refer to "Redemption and Subsequent Processing of Gift Certificates" and "Processing Unredeemed Gift Certificates.")

Reporting the Sales of Gift Certificates Upon Issuance

The sale of gift certificates will be reported AT THE TIME OF ISSUANCE via the completion of a Report of Cash Receipts (see page 1.1 of the General Forms Usage Guide). The total value of the gift certificate(s) issued will be reported on a separate line in the "Accounts Credited" section, recording the total value to "Gift Certificates, {applicable budget}, Fund 1005, Object Code 034" (see Exhibit "C").

NOTE: Income received via credit card, whether it be for gift certificate sales or other goods/services, must be reported on a SEPARATE ROCR, in accordance with page 1.1 of the General Forms Usage Guide and University Policy FN07.

Redemption and Subsequent Processing of Gift Certificates

Redeeming Gift Certificates

At the time of redemption, the customer will present the gift certificate, along with the merchandise/service they desire, to the attendant on duty. The attendant must verify the legitimacy of the certificate presented. Depending on the system employed (register/terminal or manual), this may be accomplished by either (1) entering the number of the certificate into the system to cross-check the database for valid gift certificate numbers previously issued, or (2) manually checking the certificate number against the entries in the gift certificate log.

Once verified/recorded, both the attendant and the customer will sign and date the certificate to evidence the redemption. If the amount of the purchase is less than the value of the certificate, the unspent balance will be given to the customer as change. If the amount of the purchase is more than the amount of the certificate, the attendant will write the balance due on the back of the certificate, collect the amount from the customer, and record the amount as discussed in "Recording Gift Certificate Redemption." The appropriate receipt is given to the customer. The gift certificate, in either case, is retained by the attendant.

EXCEPTION: For areas having multiple locations whose registers/terminals are not tied into a central database, the REDEEMING area will note the issuing department, gift certificate number, gift certificate value and any other pertinent information (as determined by management) for certificates redeemed, but not initially issued at their location. Each month, the redeeming department will forward a memo with this information to the ISSUING department(s) so that gift certificate records at those locations may be appropriately updated. Copies of these memos will be maintained by both the issuing and redeeming areas for accountability and audit trail purposes.

Recording Gift Certificate Redemption

The specific methodology for recording the redemption of gift certificates will be dependent on the device being used to accomplish the record keeping. This may range from entry via register or computer terminal to the completion of a University Pre-numbered Receipt.

For cash register/terminal operations, the attendant will press a Gift Certificate "Redemption" key when prompted for the method of payment, the amount tendered, etc. This will (1) identify/record the action as a redemption for record keeping purposes, (2) allow the value of the gift certificate to be deleted from the total amount due and (3) record the sale to the appropriate sales category. If the amount of the purchase is less than the value of the certificate being redeemed, the difference will be reflected as "change" when entered by the attendant, and returned to the customer as change. If the amount of purchase is more than the value of the certificate, the difference will be recorded via proper keystroke to its appropriate sales category. At shift end, the number of redeemed gift certificates and their corresponding values must be reflected on the register (or terminal's) summary tape (report) for reconciliation, audit trail and general reporting purposes.

If an area has a cash register/terminal which does NOT have a gift certificate redemption key nor the capability to designate such a key, gift certificate redemption will be recorded as such at the time of sale via completion of a Pre-numbered Receipt (see page 1.8 of the General Forms Usage Guide). Secondly, daily or shift-end reconciliation reports must include a line for gift certificates so that such activity can be reported and accounted for. Lastly, the numbers and values of all gift certificates redeemed (and any other pertinent information, as decided upon by management) will be recorded to the gift certificate log to provide an ongoing record of gift certificate activity, from the time of issuance until such time that they are redeemed or otherwise disposed of. (Refer to "Redemption and Subsequent Processing of Gift Certificates" and "Processing Unredeemed Gift Certificates.")

If an area has no cash register/terminal, or the system has no gift certificate redemption key, the attendant will prepare a University Pre-numbered Receipt (page 1.8 of the General Forms Usage Guide). This will (1) document the redemption, and (2) provide support for changing the status of the redeemed certificate in the gift certificate log from "outstanding" to "redeemed."

If the amount of the purchase is less than the value of the certificate, entry to the Pre-numbered Receipt will reflect the amount of the sale, LESS the gift certificate value, resulting in the net amount due the CUSTOMER. This difference will be returned to the customer as change (see Exhibit "D-1"). If the amount of the purchase is more than the value of the certificate, completion of the Pre-numbered Receipt will reflect the amount of the sale REDUCED BY the value of the gift certificate, thus specifying the additional amount due the ISSUING DEPARTMENT (see Exhibit "D-2". This difference will be collected from the customer. In either case, gift certificates will be collected from the customer, attached to the YELLOW copy of their respective pre-numbered receipts, and retained by the attendant to facilitate the reconciliation process at shift-end.

Reporting Gift Certificates Upon Redemption

Once gift certificates are redeemed for merchandise and/or a service, the gift certificate account (fund 1005, object code 034) must be cleared for the amounts initially recorded at the time of issuance. The resultant income from the redemption of gift certificates will then be realized and recorded to its appropriate sales/fee/miscellaneous income category. Clearing of the gift certificate account will be accomplished via proper completion of the "Accounts Credited" section of that days ROCR-that is, DEBITING (i.e., a negative amount) "Gift Certificates, {applicable budget}, Fund 1005, Object Code 034" for the total value of the certificate(s) being redeemed. Likewise, the income realized will be appropriately reported by CREDITING "Sales/ Fees/ Miscellaneous (as applicable), {applicable budget/ Fund/ Object Code }" for the value of the merchandise/service (see Exhibit "E").

Reconciliation of Gift Certificate Sales

Gift certificates are a reconcilable item with respect to financial reconciliation. As such, detail records supporting gift certificate activity must agree with its corresponding register tapes/terminal reports or Pre-numbered Receipt totals (if a non-cash register operation). On a regular basis (at least quarterly), management will monitor gift certificate activity through spot checking of the various logs and/or issuance and redemption reports, verifying the accuracy of such reports to daily sales detail. This review will be evidenced by the reviewing supervisor's initials and date on the documents reviewed.

For further information regarding reconciliation of daily sales activity, including activity involving gift certificates, refer to the guidelines set forth in "Generic Cash Collection," Procedure CR2056. Copies are available by contacting Systems and Procedures.

Processing Unredeemed Gift Certificates

For gift certificates which expire before being redeemed, departments will submit to Accounting Operations a Request for Journal Voucher (Exhibit "F") DEBITING the Gift Certificate account {applicable budget}, Fund 1005, Object Code 034) for the total amount of those certificates which have expired, and CREDITING "Sales/Fees/Miscellaneous (as appropriate), {applicable budget/fund/object code }." Upon receipt of the department copy of the resultant Journal Voucher, the department will take the necessary steps to change the status of these gift certificates on departmental records from "outstanding" to "expired." Documentation supporting these actions should be retained in an "expired" file for proper audit trail.

Disposition of Unsold Gift Certificates

In the event that unsold gift certificates expire, or such a service is discontinued, the department supervisor will prepare a "Certificate of Disposition" (see Exhibit "G") specifying the number of certificates being disposed of, the numerical sequence, the values of the unissued gift certificates being voided, etc. The unissued certificates will then be destroyed by the Department Manager, in the presence of one other employee. The Department Manager and the witnessing employee will affirm that the gift certificates were disposed of by signing and dating the Certificate of Disposition. Signed copies will be forwarded to the area's budget administrator and Financial Officer. To minimize inadvertent or unauthorized redemptions after this event, the appropriate notations will be made to the areas gift certificate log, identifying the certificates destroyed. Additionally, validated copies of the Certificate of Disposition will be posted at the register area and/or retained in the gift certificate log, as applicable to the area's method of operation.

AUDIT COORDINATION - FINANCIAL AND PROCEDURAL

The Financial Officer is responsible for ensuring that procedures pertaining to the accountability and safeguarding of all cash receipts, cash funds, and other assets are established and followed in accordance with approved University policies and procedures. Regular audits relating to advances, cash, travel, equipment accountability, and other expenditures provide a means to protect University assets. The Financial Officer is responsible for working with Internal Audit when audits are being performed in the administrative area, as well as performing an annual audit that is submitted to the Assistant Controller.

RECORD RETENTION, DISPOSITION AND DESTRUCTION:

Record retention must be managed in accordance with Policy AD35 - University Archives and Records Management, and records schedules approved by the Records Management Advisory Committee, Office of General Counsel, and Office of the President. These retention requirements are the University's retention criteria, either derived or based upon federal, state, and local statute or regulations, industry standards, and business needs. Retention beyond recommended time periods require justifiable reasons and warrant review by the Records Management Officer or designee. All documents must be maintained in such a manner so as to provide ease of access for review, and to provide a suitable audit trail for all transactions.

Upon expiration of a stated period of time, documents must be discarded and/or destroyed, unless permission granted by Records Management Officer or designee to retain the records. Archival records created more than 20 years prior to the current date must be reviewed before destruction. Units should also contact the University Archivist before discarding any document which may be of permanent or historical value to the University. To safeguard the privacy of individuals, documents that contain salary information, personally identifiable information (PII), or student records must also be shredded. See Policy AD53 - Privacy Policy and AD22 - Health Insurance Portability and Accountability Act for additional information regarding privacy and the protection of an individual's personal information. For documents that must be shredded, departments may arrange for Blue Bag service by contacting the Blue/White Shredding Program of the Office of Physical Plant. Exceptions to the practice are as follows:

Additional questions may be directed to the University Archivist or the Records Management Officer.

EXHIBITS:

CONTACT INFORMATION:

For questions, additional details, or to request changes to this procedure, please contact the Associate Controller

CROSS REFERENCES:


Procedure Status:

Date Approved: 09-20-91

Most recent changes:

Revision History