Mary Catherine Gaisbauer

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Colorado Public College and University Accounting

• Higher Education Session 1 - Overview

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Overview of Agenda

• Current Funds
• Classifying Activity between General Operating
  and Auxiliary Self-Funded
• Restricted/Sponsored Program Activity
• Plant Funds
• Loan and Agency Funds
• Revenue Recognition for TABOR Purposes
• Financial Statements

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Remember

• Accountants arent boring
• we just get excited about
• boring things!

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Objectives of Accounting

• Help managers effectively allocate and use
  resources
• Help readers accurately evaluate financial
  position
• Assure proper application of GAAP

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Key Terminology

• GAAP Generally Accepted Accounting
  Principles
• GASB Governmental Accounting Standards
  Board
• FASB Financial Accounting Standards
  Board
• AICPA American Institute Of CPAs

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Key Terminology

• NACUBO National Association of College
  University Business Officers
• FARM Financial Accounting Reporting
  Manual
• CUBA College University Business
  Administration

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Key Terminology

• State of Colorado Higher Education
• CHEASC Colorado Higher Education Accounting
  Standards Committee
• FAC Financial Advisory Committee
• SC0 State Controllers Office
• OSA Office of State Auditor
• CCHE Colorado Commission on Higher Education
• COFRS States general ledger system
• TABOR Tax-payers Bill of Rights

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Operational Objectives

• Institutions of Higher Education--
• Tuition fees only one component of revenue
• Restrictions placed on how revenues are used
• Multiple missions

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Resource Restrictions

• Resource providers often direct how resources
  will be used
• Accountability important
• Purpose and time restrictions
• Separately monitored

• What are the various types of resources you are
  familiar with?

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Accountability

• Institutions are specifically accountable for
• restricted resources - compliance

Institutions are generally accountable
for effective use of all resources
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Fund Accounting

• Segregates Resources According To
• Sources
• Restrictions

A separate accounting entity
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Fund Accounting

• The convention by which resources for various
  purposes are classified, accounted for and
  reported in accordance with
• Activities or objectives as specified by donors
• Regulations, restrictions, or limitations imposed
  by sources outside the institution
• Directions issued by the governing board

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Fund Definition

• A fund is an accounting entity with a
  self-balancing set of accounts for recording
  assets, liabilities, a fund balance, and changes
  in the fund balance
• Separate accounts are maintained for each fund to
  insure observance of limitations and restrictions
  placed on the use of resources

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Resource Groupings

• Current Operations
• Unrestricted
• Restricted
• Loan Programs
• Endowment and Similar Activities
• Capital (Plant) Activities
• Agency Operations

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Current Operations

• 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 Operations

• Unrestricted
• what does this mean?
• Restricted
• what does this mean?

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Loan Programs

• Loans to Students/Faculty/Staff
• Source of funds may be either
• Federal
• Donor
• Institutional
• Revolving Basis

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Endowment and Similar Activities

• Resources are held and invested to produce
  revenue that is spent to support the
  institutions programs or operations

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Endowments

• Three Principal Categories
• True Endowments
• Term Endowments
• Quasi-endowments
• Resources Functioning as Endowments

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Capital (Plant) Activities

• Acquisition or construction of Long-Lived Assets
• Renewal and Replacement of Existing Assets
• Debt Service/Retirement of Debt

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Agency Accounts

• Institution holds resources as custodian or
  fiscal agent
• No institutional equity liability equal to
  resources held
• Recorded on balance sheet

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Net Assets

• Definition
• Institutional equity
• Assets less liabilities
• Fund balance

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Fund Accounting

• Even though no longer
• externally report funds
• in financial statements
• as a result of
• GASB Statements No. 34/35
• Still a Great Tool!

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Net Assets

• Classes
• Invested in capital assets, net of related debt
• Restricted for
• Nonexpendable
• By purpose
• Expendable
• By purpose
• Unrestricted

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Designation of Net Assets

• Governing board may internally designate
• the use of unrestricted resources

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Transfers of Net Assets

• Transfers are either
• Mandatory
• Non-mandatory (voluntary)

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Basis of Accounting

• Accrual
• Revenues when earned
• Expenditures when material or services are
  received
• Encumbrances are not reported as expenditures or
  liabilities

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Account Classification Structure

• Compatible with organization structure
• Consistent with financial reports
• Systematic, logical
• Capable of expansion

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Chart of Accounts

• Corresponds to fund types and net asset classes
• Revenue/Expense codes
• Asset/Liability codes
• Flexible to meet reporting needs
• Financial statements
• Management reports
• Regulatory reporting

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Chart of Accounts

• Assets
• Increased by debits
• Decreased by credits
• Normally debit balance
• Cash Equivalents
• Receivables
• Property, Plant Equipment

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Chart of Accounts

• Liabilities
• Increased by credits
• Decreased by debits
• Normally credit balance
• Payables
• Long Term Debt
• Deferred Revenue

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Chart of Accounts

• Net Assets
• Increased by credits
• Decreased by debits
• Normally credit balance

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Accounting Entry

• DEBITS - left side of an account
• CREDITS - right side of an account

• ACCOUNTING EQUATION
• Assets Liabilities Net Assets
• or
• Assets - Liabilities Net Assets

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Problems
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• 1. The objectives of accounting for public
  colleges or universities are to provide
  information that will help
• a. managers increase the economic wealth of the
  institution
• b. managers effectively allocate and use
  resources
• c. others who wish to evaluate the financial
  operations of the institution
• d. b and c only
• e. a and b only

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• 2. Which of the following is not normally
  associated with a higher education institutions
  accounting practices?
• a. Institutions use available resources to
  provide goods and services to meet a social need
• b. Institutions are concerned with the proper
  effective use of resources in accordance with
  GAAP
• c. Institutions carefully match expenses with
  related revenues for each period for a strict
  determination of net income
• d. Resource providers often direct how resources
  are to be used

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• 3. Expenditures of higher education institutions
  may be restricted
• a. by persons or organizations outside the
  institution as to specific uses
• b. to limit the use of principal only after a
  specified time period
• c. by the institutions governing board
• d. a and c only
• e. a and b only

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• 4. Current operations include economic resources
  of a college or university that are expendable
  for
• a. the chief missions of the institution
• b. current operations of the institution
• c. unrestricted and restricted purposes
• d. all of the above
• e. a and b only

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• 5. Which of the following pairs of statements do
  not present basically the same financial
  information?
• a. Statement of Revenues, Expenses and Changes in
  Net Assets/Statement of Activities
• b. Balance Sheet/Statement of Net Assets
• c. Statement of Activities/Statement of Cash
  Flows
• d. Income Statement/Statement of Activities
• e. Statement of Net Assets/Statement of Financial
  Position

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FAC Resources

• http//www.sco.state.co.us/FAC/fac_index.htm
• COFRS Chart of Accounts
• Accounting Models
• Guidebook
• HE Accounting Standards

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HE Accounting Standards

• Basic Accounting Reporting Structure
• Tuition Fee Accounting
• Recording Reporting of Indirect Costs
• Non-Exchange Transactions
• Capital Asset Reporting
• Cash Short-term Investments
• Reporting Standard Financial Aid Scholarship
  Allowances

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Higher Education Accounting Standards

• State Appropriations
• Recording Internal Service Center Activity
• College Work Study Programs
• Financial Statement Disclosures
• Reporting Disclosures of Related Foundations
  Corporations
• Financial Statement Presentation
• Compensated Absences for Annual Sick Leave