Accounting At Indiana University

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Accounting At Indiana University

• Kathleen T. McNeely
• Associate Vice President
• Financial Management Services

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Summary of Todays Topics

• Fund Accounting
• Definitions
• Value Added
• Allowable Activity by Fund
• Function Codes

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What is Fund Accounting?

• Fund accounting is the procedure by which
  resources for various purposes are classified by
  accounting and reporting purposes in accordance
  with activities or objectives as specified by
  donors, in accordance with regulations,
  restrictions, or limitations imposed by sources
  outside the institution, or in accordance with
  directions issued by the governing board.
• AICPA Audits of Colleges and Universities
  Industry Audit Guide

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Audit Guide Fund Groups

• Unrestricted Current Funds
• Restricted Current Funds
• Loan Funds
• Endowment and Similar Funds
• Plant Funds
• Other Funds

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Indiana University Fund Groups
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Unrestricted Current Funds
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Unrestricted Current Funds

• Include those economic resources of the
  institution which are expendable for any purpose
  in performing the primary objectives of the
  institution, i.e. instruction, research, and
  public service and which have been designated by
  the governing board for other purposes.

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Unrestricted Current Funds

• General Fund
• Designated Funds
• Auxiliary Funds
• Service Funds

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General and Designated

• General Funds are the primary unrestricted funds
  of the university. All are budgeted annually.
  Main sources of funds are student fees and state
  appropriations with matching expenditures.
• Designated Funds are institutional unrestricted
  funds that have been designated for a specific
  activity/project. Most are not budgeted and have
  a multi-year life.

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What is an Auxiliary?

• An enterprise that furnishes goods or services to
  students, faculty, or staff and charged a fee
  directly related to, although not necessarily
  equal to, the cost of the goods or services.
  Basically, an entity managed as a self-supporting
  activity.

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What is a Service Fund?

• An enterprise that furnishes goods or services to
  other internal university departments and
  charges a fee directly related to, and equal to,
  the cost of the goods or services. Basically, an
  entity managed as a self-supporting activity that
  is not allowed to make a profit.

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Unrestricted Current Funds

• General Funds (03-19)
• Designated Funds
• Continuing Education (20)
• Public Service (21)
• Internal Research (22)
• Other - the Mighty Catch-all (23)
• Unrestricted Scholarships (24)
• Auxiliary Enterprise Funds
• Auxiliary (60)
• Service (66 63)

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Grid Work

• General
• Designated
• Auxiliary Enterprises

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Unrestricted Current Funds Additions

• State Appropriations
• Student Fees
• Sales and Services
• Academic, Auxiliary Service
• Recovery of Indirect Cost

• Interest (Gains are questionable)
• Gifts
• Rent, Dividends Royalties
• Endowment Income if unrestricted
• Other Sources
• Transfers In

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Unrestricted Current Funds Deductions

• Matching Expenditures
• Salaries, Wages Benefits
• Supplies Expense
• Travel
• Capital Expenditures
• Note Payments (lease purchases)
• Interest Expense (lease purchases)
• Transfers Out

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Unrestricted Current Funds Assets

• Cash
• Investments
• Accounts Receivable
• Inventories
• Prepaid Expenses
• Due from Other Funds
• Notes Receivable

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Unrestricted Current Funds Liabilities

• Accounts Payable
• Salaries Payable
• Accrued Vacation Liability
• Deferred Revenue
• Due to Other Funds
• Notes Payable

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Restricted Current Funds
19
Restricted Current Funds

• Those funds expendable for operating purposes but
  restricted by donors or other outside agencies as
  to the specific purpose for which they may be
  expended.

20
Restricted Current Funds

• Other Restricted
• Fellowships (25)
• Scholarships (26)
• Special State Appropriations (27)
• Matching Endowments (28)
• Other Restricted (29)
• Contract and Grants (40-57)
• By agency type, I.e. federal, state, foundations,
  etc.
• Cost Share

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Grid Work

• Contracts Grants
• Other Restricted

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Restricted Current Funds - Additions

• Sales Services (Program Income)
• Interest Gains
• Gifts
• Grants Contracts
• Endowment Income
• Other Income (program income)
• Transfers In

23
Restricted Current Funds Deductions

• Matching Expenditures
• Salaries, Wages Benefits
• Supplies Expense
• Travel
• Indirect Cost Recovery
• Capital Expenditures
• Note Payments (lease purchases)
• Interest Expense (lease purchases)
• Transfers Out

24
Restricted Current Funds Assets

• Cash
• Investments
• Accounts Receivable
• Inventories
• Prepaid Expenses
• Due from Other Funds
• Notes Receivable

25
Restricted Current Funds Liabilities

• Accounts Payable
• Salaries Payable
• Deferred Revenue
• Due to Other Funds
• Notes Payable

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Loan Funds
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Loan Funds

• The loan funds (70) group consists of loans to
  students, faculty, or staff, and of resources
  available for such purposes.

28
Loan Funds

• Gift Agreements specify revolving
• Many are temporary and require repayment of
  principal interest
• Some specify forgiveness of repayment under
  certain conditions
• Specific restrictions can exist
• Geographic
• Financial status

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Grid Work

• Loans

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Loan Funds Additions

• Interest
• Gifts
• Endowment Income
• Other Sources
• Government advances
• Transfers In

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Loan Funds Deductions

• Student Loan Expenditures
• Collection fees
• Write-offs of loans
• Administrative collection costs
• Refunds to grantors
• Transfers Out

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Loan Funds - Assets

• Cash
• Investments temporary
• Due from other Funds
• Notes Receivable
• Face value
• Allowance for doubtful loans

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Loan Funds - Liabilities

• Accounts Payable
• amounts due collection agencies for fees
• Refundable loan amounts
• Due to other Funds

34
Endowment and Similar Funds
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Endowment and Similar Funds

• Endowment Funds (80)
• Term Endowment Funds (82)
• Quasi-endowment Funds (81)
• Annuity and Life Income Funds (83-85)

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Endowment Funds

• Endowment funds are funds with respect to which
  donors or other outside agencies have stipulated,
  as a condition of the gift instrument, that the
  principal is to be maintained inviolate and in
  perpetuity and invested for the purpose of
  producing present and future income which may
  either be expended or added to principal.

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Term Endowment Funds

• Term endowment funds are similar to endowment
  funds except that, upon the passage of a stated
  prior of time or the happening of a particular
  event, all or a part of the principal may be
  expended.

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Quasi-endowment Funds

• Sometimes called funds functioning as endowments,
  quasi-endowments are funds which the governing
  board of an institution, rather than a donor or
  other outside agency, has determined are to be
  retained and invested. Because they are
  internally designated, the governing board has
  the right to decide at any time to expend the
  principal.

39
Annuity and Life Income Funds

• Funds contributed to an institution subject to
  the requirement that the institution periodically
  pay the income earned on the assets to designated
  beneficiaries.

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Grid Work

• Endowments and Similar Funds

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Endowments and Similar Funds Additions

• Interest Gains
• Losses
• Gifts
• Other Income
• Income from Asset Farm Activity, Rental, etc.
• Transfers In

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Endowments and Similar Funds Deductions

• Supplies Expense
• Payouts on life income funds
• Transfers Out

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Endowments and Similar Funds Assets

• Cash
• Investments

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Endowments and Similar Funds - Liabilities

• NONE
• The mission of these funds is to make money, not
  spend it. Therefore, there tends to be no
  liabilities since there are no deductions.

45
Endowments and Similar Funds

• Institutional spending policy
• Endowment Income booked directly to operating
  account
• This is IU specific
• Industry calls for
• Prudence
• Rational and systematic formula

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Plant Funds
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Plant Funds

• Construction (90)
• Retirement of Indebtedness (91)
• Renewal and Replacement (92)
• Investment in Plant (95)

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Plant Fund Definitions

• Construction
• Funds for acquisition of physical plant
• Sometimes called Unexpended Plant
• Retirement of Indebtedness
• Indebtedness incurred for plant expansion

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Plant Fund Definitions - continued

• Renewal Replacement
• Funds set aside for replacement of renewable
  property
• Desktop computer replacement
• Investment in Plant
• Location of all assets that have been capitalized
  and related to debt

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Grid Work

• Construction
• Retirement of Indebtedness
• Renewal Replacement
• Investment in Plant

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Construction - Additions

• Additions
• State Appropriations
• Interest Gains
• Losses
• Gifts
• Grants federal and state
• Bond Revenue
• Transfers In

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Construction - Deductions

• Supplies Expenditures
• Expendable equipment
• Capital Expenditures
• Predominantly building capitalization
• Transfers Out

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Construction Assets

• Cash
• Investments
• Accounts Receivable
• Prepaid Expense
• Due from other Funds

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Construction Liabilities

• Accounts Payable
• Due to other Funds
• Notes Payable
• Bonds Payable

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Retirement of Indebtedness Additions

• Interest and gains
• Losses
• Gifts
• Grants
• Transfers In
• Mandatory
• Voluntary

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Retirement of Indebtedness - Deductions

• Supplies Expense
• Trustees fees and expenses
• Note Payments
• Bond Payments
• Interest Payments

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Retirement of Indebtedness - Assets

• Cash
• Investments
• Funds on deposit
• Accounts Receivable
• Due from other funds
• Notes receivable

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Retirement of Indebtedness - Liabilities

• NONE
• Retirement of Indebtedness usually does not have
  any liabilities. Predominantly this is true
  because there are no operating expenditures
  involved in the fund group, nor any long term
  debt.

59
Renewal and Replacement Funds Additions

• Interest and gains
• Losses
• Gifts
• Grants
• Transfers In
• Mandatory
• Voluntary

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Renewal and Replacement Funds - Deductions

• Supplies and Expense
• Expendable Equipment
• Maintenance of RR Items
• Capital Expenditures
• Transfers Out very seldom

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Renewal and Replacement Funds - Assets

• Cash
• Investments
• Funds on Deposit
• Accounts Receivable
• Due from other Funds

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Renewal and Replacement Funds Liabilities

• Accounts Payable
• Due to other Funds

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Investment in Plant Additions

• NONE
• You will never see a revenue in Investment in
  Plant. There is never cash activity

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Investment in Plant Deductions

• NONE
• You will never see an expenditure in Investment
  in Plant.

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Investment in Plant - Assets

• Capital Assets
• Land
• Buildings
• Moveable Equipment
• Cataloged Library Acquisitions
• Improvements to Land
• Accumulated Depreciation

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Investment in Plant Liabilities

• Notes Payable
• Bonds Payable
• Only debt that matches the capital assets

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Other Funds
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Other Funds

• Clearing
• External Agency
• Internal Agency

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Clearing Accounts

• An Indiana University Concept
• Interim accounts that should close out to 0- at
  the end of each accounting period
• All activity is ok as long as it is closed out
• Used and abused

70
Agency Funds

• Funds held by an institution as custodian or
  fiscal agent for others such as student
  organizations, individual students, or faculty
  members.

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Internal Agency Funds

• Temporary Holding Accounts
• Examples
• FICA
• Federal Taxes
• State Taxes
• Reported as Unrestricted at June 30

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External Agency Funds

• Relationship with University mission
• RC agreement to sponsor
• Contract required
• With employees
• Without employees
• Reimbursement to university
• Never reported as university resources

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Questions
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Higher Education Function Codes
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What are function codes needed for ?

• IPEDS
• Facilities and Administrative Rate
• Internal management of how dollars are spent
• Some states require reporting by function
• Institutions can report expenses in the operating
  statement by function instead of natural
  classification

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Educational and General Function Codes

• Instruction
• Research
• Public Service
• Academic Support
• Student Services
• Institutional Support
• Operation and Maintenance of Plant
• Scholarships and Fellowships

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EDUCATIONAL AND GENERAL

• INSTRUCTION
• General Academic
• Vocational/Technical
• Continuing Education
• Remedial

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EDUCATIONAL AND GENERAL

• RESEARCH
• Individual
• Project
• Institutes and research centers
• NOT equivalent to sponsored research

79
EDUCATIONAL AND GENERAL

• PUBLIC SERVICES
• Community service
• Cooperative extension services
• Public broadcasting services
• not primarily instructional

80
EDUCATIONAL AND GENERAL

• ACADEMIC SUPPORT
• Libraries
• Museums and galleries
• Educational media
• Academic computing

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EDUCATIONAL AND GENERAL

• ACADEMIC SUPPORT Contd
• Ancillary support
• Academic administration
• Academic personnel development
• Course and curriculum development

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EDUCATIONAL AND GENERAL

• STUDENT SERVICES
• Student services administration
• Financial aid administration
• Student records
• Admissions

83
EDUCATIONAL AND GENERAL

• STUDENT SERVICES, cont
• Counseling and career guidance
• Social and cultural development
• Student health services

84
EDUCATIONAL AND GENERAL

• INSTITUTIONAL SUPPORT
• Executive management
• Fiscal and business operations
• General administration and logistical services
• Administrative computing
• Public relations/development

85
EDUCATIONAL AND GENERAL

• OPERATION AND MAINTENANCE OF PLANT
• Physical plant administration (and planning)
• Building maintenance
• Custodial services
• Utilities

Contd
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EDUCATIONAL AND GENERAL

• OPERATION AND MAINTENANCE OF PLANT
• Landscape and grounds maintenance
• Major repairs and renovations
• Note Not an expenditure category for private,
  must allocate out to all other functions.

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EDUCATIONAL AND GENERAL

• SCHOLARSHIPS AND FELLOWSHIPS
• Grants
• Trainee stipends
• Prizes and awards
• Tuition and fee waivers
• NO exchange of services, used as designated by
  donor

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Questions on Function Codes?