Overview

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This KBA is to be used when Faculty elect to designate Academic Enrichment Funds.  The process in in place to ensure IRS tax regulation compliance with constructive receipt funding.

General

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Q: What is an Academic Enrichment Fund?

A:  An Academic Enrichment Fund (AEF) is a mechanism that allows departments to set aside certain types of income to support academic, research, and professional development activities for faculty. Faculty can directly charge expenses or request reimbursement for business-related expenses from these funds at their discretion.

Q: What is Constructive Receipt?

A: Constructive Receipt is an IRS regulation that considers income to be received—and thus taxable—once it is made available to an individual, even if they have not yet accessed or withdrawn the funds. As a result, if a faculty member has unrestricted access, those funds are considered taxable income, even if they have not yet been physically accessed.

Q: Why is classification of Academic Enrichment Funds important?

A:  When faculty earn outside income, their department may allow them to deposit these funds into an AEF account. Once in the AEF account, these funds can only be used for academic, research, and professional development purposes—they cannot be used for personal compensation. This restriction helps prevent the funds from being subject to constructive receipt rules.

Q: How does Faculty distinguish Academic Enrichment Funds?

A: All Projects where Faculty have elected to designate Academic Enrichment Funds, Project setup is critical in PADUA:

• The Project Class Category Code must be Academic Enrichment Fund (AEF).  
• The Project Manager for the Project must be the Faculty personnel who received the AEF funds.
• Refer to How to Update Project & Award Data Using PADUA

Q: Are there any additional restrictions for this AEF Project Class?

A:  Yes

• Once a faculty member allocates funding to an Academic Enrichment Fund project, these funds cannot be used for personal compensation of the Faculty member who received the Funds.  Although, compensation can be paid to other staff on the Project.
• Funding/resources should not be transferred out of the Project once Funds are elected as AEF.

Q: How do we monitor and ensure compliance?

A:  An Exception Report is being developed to assist departments in reviewing and correcting potential misuse, with implementation expected in the coming months.  The report will:

• Tracks fund balance transfers under 77400E to prevent potential misuse.
• Captures faculty payroll expenses 50000A associated with AEF projects.