Classifying Activity between General Operating and Auxiliary SelfFunded

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Classifying Activity between General Operating
and Auxiliary Self-Funded

• Higher Education Session 4

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Current Operating Fund

• Near-term economic resources for use in general
  operations (the mission-related activities of the
  institution) -- typically . . .
• Instruction
• Research
• Public service
• Related supporting services

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Current Operating Fund

• Unrestricted Fund
• General Operating Fund
• Auxiliary Enterprise and Self-funded Fund
• Restricted Fund

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Restricted Fund

• Resources received and used by institution that
  have externally established limitations or
  stipulations placed on their use

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Current Restricted Fund Revenues

• Operating
• Government Grants Contracts
• Includes initial receipt of Indirect Cost
  Reimbursements
• Private Grants Contracts
• Non-operating
• Restricted Gifts

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Unrestricted Fund

• Resources received and used by an institution
  that have no limitations or stipulations placed
  on them by external agencies or donors

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Current Unrestricted Fund Revenues

• Operating
• Tuition Fees
• Sales Services of Educational Activities
• Incidental to the conduct of instruction,
  research and public services
• Other exchange transaction revenues
• Rental revenues

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General Operating Fund

• All current unrestricted operating resources that
  are not generated or used by auxiliary
  enterprises and self-funded activities

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Current Unrestricted Fund Revenues

• Non-operating
• Government Appropriations
• Unrestricted Gifts
• Investment Income
• Miscellaneous fees or fines
• Other Internal Revenues
• Indirect cost reimbursement

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Auxiliary Enterprises and Self-funded Fund Group

• Self-supporting activities that exist to furnish
  goods or services to students, faculty, or staff,
  and that charge a fee directly related to,
  although not necessarily equal to, the cost of
  the goods or services

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Enterprises Distinction

• In this discussion, the word enterprises refers
  to the self-supporting, business-activity nature
  of auxiliaries
• No relation to the TABOR meaning of the word
  enterprises

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Expenses
Classify natural expenses within functional
classification

• Natural
• Salaries benefits
• Supplies
• Services
• Travel

• Functional
• Instruction
• Research
• Public service
• Academic support
• Institutional support
• Student services
• Student aid
• Auxiliary enterprises
• Operation maintenance of plant

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Auxiliary and Self-funded Fund Group

• The fund group is comprised of three subgroups
• Auxiliary Enterprises
• TABOR Exempt
• TABOR Nonexempt
• Self-funded Activities
• Internal Service Units

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Self Supporting Activity

• Intent is to charge fee to each customer based on
  use of goods or services
• Pays for all of its operating costs
• Occasional loss can be recovered
• Would not qualify if
• on-going financial plan includes annual material
  losses supplemented by general fund allocation

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Auxiliary Enterprises

• Distinguishing characteristics are
• Managed as an essentially self-supporting
  activity
• Services students, faculty, or staff
• Support the University function but are not
  directly related to the higher education mission

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Auxiliary Enterprises

• Auxiliary enterprises must report full costs
• Full costing means indirect costs related to each
  auxiliary enterprise as well as the costs
  directly attributable to its operations are
  included in the auxiliary enterprises expenses
• Those expenses must include both each auxiliary
  activitys direct costs and their indirect costs,
  whether charged directly as expenses or allocated
  as a proportionate share of costs of other
  departments or units

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Auxiliary Enterprises

• Examples
• Residence halls
• Food services
• Intercollegiate athletics (if essentially
  self-supporting)
• College stores
• Faculty clubs
• Parking
• Faculty housing
• Student health services (if essentially
  self-supporting and not part of a hospital)

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Auxiliary Enterprises Revenues

• Operating
• Revenues derived directly from the operation of
  auxiliary enterprises
• Auxiliary enterprises
• May include scholarship allowance
• Revenues received by auxiliary enterprises from
  other than their operations should be reported
  under their respective source categories
• Fees for good services
• May include scholarship allowance
• Sales and service of Hospitals and health clinics
  
• Gifts or grants

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Problem A

• Can an activity that exists predominately to
  furnish goods or services to students, faculty,
  or staff, and that charges a fee directly related
  to the cost of the goods or services and that
  incidentally serves the general public be
  considered an auxiliary enterprise?

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Problem B

• Should services such as copy centers, day-care
  centers, barber and beauty shops, travel
  agencies, and movie theaters be considered
  auxiliary enterprises?

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Problem C

• What are some of the institutional costs for
  which an auxiliary enterprise might be indirectly
  charged?

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Problem D

• How are the auxiliary enterprises at your
  institution charged indirect costs?
• Reduction of revenues?
• Administrative recharge?
• Indirect cost assessment?
• Other?

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Self-funded Activities

• Distinguishing characteristics are
• Managed as an essentially self-supporting
  activity
• Services students, faculty, or staff
• Directly related to the higher education mission

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Self-funded Activities

• Examples (if essentially self-supporting)
• Continuing Education
• Extended Studies
• Conferences
• Drug testing center
• Research support operations
• University press department

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Self-Funded Activities Revenues

• Operating
• Revenues derived from activities that exist to
  provide instructional and laboratory experience
  for students through sales
• Tuition and fees
• Sales and services of educational activities
• Revenues received by self-funded activities from
  other than their operations should be reported
  under their respective source categories
• Miscellaneous operating revenues
• Gifts or grants

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Problem E
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• Are these scenarios Self-Funded Activities?

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Internal Service Units

• Activities whose primary purpose is to provide
  goods and services to other internal units on a
  fee for service basis

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Internal Service Units

• Characteristics
• Self-supporting units that operate on a
  break-even basis for those goods and services
  offered to the other units
• Provide, to a lesser extent, the same goods and
  services to faculty, staff, students, and related
  entities
• Typically provide goods and services at an
  institutional level, thereby excluding activities
  that serve units within the same department
• Exception for Federal cost reporting

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Internal Service Unit Revenues

• Operating
• Revenues derived from sales and services to
  internal units
• Internal service center revenues
• Incidental revenues derived from sales and
  services to general public
• Miscellaneous operating revenues

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Problem F
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• Are these activities Internal Service Units?

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Internal Service Units

• For financial statement purposes,
• Activity of Internal Service Units
• must be eliminated
• Expenses incurred should be netted against
  revenues since the predominance of transactions
  is internal

So where does what is left over go?
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Problem G
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• Institutions A and B have a division within their
  Facilities Management Department that does
  general maintenance of and small repairs on the
  interior and exterior of all campus buildings.
  They also have a second division that does all
  major remodeling which is defined as changes to
  existing structures that will cost 2,500 or
  more. Institution A funds both divisions from
  their general operating budget for the Facilities
  Management Department who prioritizes change
  requests and fills them until their budget runs
  out. Institution B does not fund its remodeling
  division but rather the division directly charges
  the departments submitting the change orders for
  the work done.

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• What kind of entity is the remodeling division at
  each of these institutions?
• In what fund and functional classification will
  the activity of the remodeling division at
  Institution A be reported?
• In what fund and functional classification will
  the activity of the remodeling division at
  Institution B be reported?
• Is there a difference? Why?

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Problem H
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• Is this an Auxiliary Enterprise, Self-funded
  activity, or Internal Service Unit?
• Institution URABUTE requires cosmetology students
  to provide haircuts to the public as part of
  their educational training. The students use the
  institutions classroom facilities to provide the
  haircuts and instructors are present to offer
  assistance and guidance. The activity is a
  required part of the cosmetology program and
  provides an instructional experience. There is
  no fee charged for the haircut.

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Problem I
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• Do any of these scenarios create an Auxiliary
  Enterprise, Self-funded Activity, or Internal
  Service Unit?
• Same situation as Problem I, except that

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Problem J
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• Is this an Auxiliary Enterprise, Self-funded
  activity, or Internal Service Unit?
• The RAG School of Communications publishes a
  quarterly newspaper. Students in the journalism
  program receive credit for managing and editing
  the newspaper. Students and others submit
  articles for publication. The schools copy
  center prints the newspaper for no charge. It is
  distributed throughout the campus.

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• Is this an Auxiliary Enterprise, Self-funded
  activity, or Internal Service Unit?

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Problem K
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• Do any of these scenarios create an Auxiliary
  Enterprise, Self-funded Activity, or Internal
  Service Unit?
• The RAG student government publishes a quarterly
  newspaper.

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Problem L
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• Gates University has a computer lab available to
  its students.
• Is it an Auxiliary Enterprise, Self-funded
  Activity, or Internal Service Unit if

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• Gates University has a computer lab available to
  its students.
• Is it an Auxiliary Enterprise, Self-funded
  Activity, or Internal Service Unit if

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• Gates University has a computer lab available to
  its students.
• Is it an Auxiliary Enterprise, Self-funded
  Activity, or Internal Service Unit if

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Problem M
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• Classify the following revenues as general
  operating fund, auxiliary enterprises and
  self-funded fund, or restricted fund revenues

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(No Transcript)
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Problem N
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• Classify the following expenses as general
  operating fund, auxiliary enterprises and
  self-funded fund, or restricted fund expenses

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• Classify the following expenses as general
  operating fund, auxiliary enterprises and
  self-funded fund, or restricted fund expenses

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Resources

• HE Accounting Standard No. 17
• http//www.sco.state.co.us/highed/standard.htm
• FAC Guidebook
• http//www.colorado.gov/dpa/dfp/sco/FAC/fac_index.
  htm