Financial Fundamentals - PowerPoint PPT Presentation

1 / 65
About This Presentation
Title:

Financial Fundamentals

Description:

Financial Fundamentals AM 570 Overview of Fund Accounting, Revenue Sources and Use Restrictions * * * * * * Basically formula funding works by appropriating money per ... – PowerPoint PPT presentation

Number of Views:66
Avg rating:3.0/5.0
Slides: 66
Provided by: utsaEdufi
Learn more at: https://www.utsa.edu
Category:

less

Transcript and Presenter's Notes

Title: Financial Fundamentals


1
Financial Fundamentals
  • AM 570 Overview of Fund Accounting, Revenue
    Sources and Use Restrictions

2
Welcome
  • Janet A. Parker, Associate Vice President
    Financial Affairs
  • Oversight for Controllers Office
    Accounting, Payroll,
    Disbursements Travel,
    Grants Contracts Financial
    Services
  • Financial Services Capital Assets
  • Budget Planning Development
  • Management Reporting DEFINE

3
Welcome
  • Janet A. Parker, Associate Vice President
    Financial Affairs
  • Higher Education
  • Experience 3 Yrs Colorado State
    University
  • 10 Yrs University of Alaska,
    Anchorage
  • 1 Yr University of So California,
    Information Sciences Institute
  • 9 Yrs Cal State
    Univ, Long Beach
  • 4 Yrs UTSA

4
Course Objectives
  • Fund Accounting Principles
  • Revenue Sources
  • Fund Use Restrictions
  • Chart of Accounts
  • Reporting Expenses
  • How Higher Education is Funded
  • UTSA Budgeting

5
Fund Accounting Principles
  • Why fund accounting?
  • Universities have unique obligations for
    accounting and financial reporting according to
    the sources of funds received and their
    subsequent net uses than just reporting net
    income to investors.

6
Fund Accounting Principles
  • What is fund accounting?
  • Method of segregating resources into categories
    to identify both the source and use of the funds.
  • Fund accounting principles used in higher
    education require that income be reported based
    on funding source and expenditures be reported
    based on function (use).

7
Objectives of Fund Accounting
  • Accountability stewardship
  • Did we use the funds in the way instructed?
  • Have we documented that the funds were used
    properly?

8
Objectives of Fund Accounting
  • 2. Determining financial condition
  • How much can we do with the resources we have?
  • What is the value of our buildings other
    assets?
  • What is the financial impact of
    maintaining/replacing other assets?

9
Fund Accounting Principles
  • 3. Planning and budgeting
  • What should we do with the funds we have?
  • How much do we need to do the job right?

10
Fund Accounting Principles
  • 4. Evaluating organizational and managerial
    performance
  • Are we accomplishing the objectives for which we
    received the funds?
  • What did the program/activity actually cost?
  • Are we operating effectively and efficiently?

11
Fund Accounting Principles
  • 5. Determining / forecasting cash flow
  • How much cash is coming in, how much is going out
    and how much do we need for contingencies?

12
Fund Accounting Principles
  • 6. Communication
  • Are we communicating financial information to all
    with the need to know?
  • Is the financial information relevant, clear,
    reliable, timely and comparable?

13
Definitions
  • FUND
  • A segregation of resources established to control
    and monitor resources and to help ensure and
    demonstrate compliance with legal/adminstrative
    requirements.

14
Definitions
  • FUND BALANCE
  • Equity within a fund
  • Assets Liabilities Fund Equity
  • Also known as Net Assets, or Capital, or Net
    Worth.

15
Definitions
  • FUND GROUP
  • A separate entity with a self-balancing set of
    accounts consisting of assets, liabilities, fund
    balance and where appropriate, revenue and
    expenditure accounts.

16
Six Basic Fund Groups
  • CURRENT FUNDS
  • PLANT FUNDS
  • ENDOWMENTS SIMILAR FUNDS
  • ANNUITY AND LIFE INCOME FUNDS
  • LOAN FUNDS
  • AGENCY FUNDS

17
Current Funds
  • A group of funds expendable for operating
  • purposes in support of the institutional
  • mission expected to expended in the near
  • term.
  • Unrestricted
  • Restricted
  • Designated

18
University Fund Groups
  • State Funds
  • Designated Funds
  • Auxiliary Enterprise Funds
  • Restricted Funds
  • Plant Funds
  • Loan Funds
  • Agency Funds

Major Capital projects are not part of the
operating budget
These are not part of the operating base budget.
19
Current Funds at UTSA
  • Fund 14 Educational and General
  • Technically unrestricted although some
    appropriations may be restricted
  • by Education Code or the General Appropriations
    Act
  • Revenue Sources
  • State appropriations
  • Statutory tuition
  • Student fees
  • State paid benefits
  • Texas Higher Education Coordinating Board
    transfers
  • Designated funds transfer

20
State Funds
  • General Revenue - State Appropriations
  • Formula Funding
  • Special Items
  • Group Health Insurance / Proportional Benefit
    Cost Sharing
  • GR-Dedicated
  • Statutory Tuition
  • Lab Fees and Private Music Instruction
  • Texas Higher Education Coordinating Board (THECB)
    Transfers
  • Texas Grant
  • Work-study
  • Performance Incentive Funding
  • Texas Research Incentive program (TRIP)

21
Educational General Funds at UTSA
  • Sources of Funds
  • General Revenue State Appropriations
  • General Revenue-Dedicated Statutory
    Tuition Certain Fees
  • THECB Transfers Texas Grant Work Study,
    Higher Education Incentive Funds
  • Designated Funds 48.2M of the FY
    2010 EG budget is a transfer from
    designated tuition other revenue

State Funds
Local Funds
22
Current Funds at UTSA
  • Fund 19 Designated funds
  • Technically unrestricted although some fees or
    transfers may
  • be restricted by policy
  • Revenue Sources
  • Designated tuition
  • Student fees
  • Facilities Administrative overhead recovery
  • Transfers from statutory tuition to fund Texas
    Public Education Grants
  • Miscellaneous revenue

23
FY 2011 Designated Fund Revenue Sources
24
Designated Tuition (DT)
  • Tuition collected locally not considered a
    funding source for the formula
  • Before 2003 was the same rate as Statutory
    tuition until the Texas State legislature
    deregulated DT to make up for declining state
    revenue
  • Rates are approved by the Board of Regents (not
    legislature) and vary by institution
  • FY10 120.85 / SCH
  • FY11 131.75 / SCH
  • FY12 142.75 / SCH

25
Designated Tuition (DT)
  • Used for need-based financial aid
  • 20 of the amount collected from paid resident UG
    and 15 from resident GR over 46/SCH is set
    aside for student financial aid.
  • Very important revenue stream to support UTSAs
    growth given the amount of state funds received
    per FTE Student as compared to other UT
    institutions

26
Mandatory Incidental Fees
  • New fees and or changes to fee amounts are
    approved
  • for 2 years by Board of Regents in Spring
  • New rates go into effect the 2nd year of the
    budget biennium (odd years).
  • Revenue must be spent in accordance with the
    approved purpose and Texas Education Code.
  • Mandatory Fees
  • Paid by all students.
  • New fees and/or fee rate changes must be approved
    by the Board of Regents (BoR)
  • Incidental or College/Course Fees
  • Assessed when good/service is used or based on
    enrollment in a course or college.
    College/course fees are part of the Total
    Academic Cost formula.

27
Current Funds at UTSA
  • Fund 18 Service Centers
  • Breakeven charge back operations when
    authorized to provide
  • goods services for internal customers cost
    principles must be
  • followed for OMB Circular A-21 compliance. All
    customers must be
  • charged the same rate.
  • Technically, unrestricted.
  • Revenue Sources
  • ALL FUNDS

28
Current Funds at UTSA
  • Fund 29 Auxiliary Enterprises
  • An auxiliary enterprise is an entity that exists
    predominantly to furnish
  • goods or services to students, faculty, or staff,
    and that charges a fee
  • directly related to, although not necessarily
    equal to the cost of the goods
  • or services. The general public may be served
    incidentally by some
  • auxiliary enterprises. We also refer to them as
    self-supporting and are
  • technically unrestricted.
  • Revenue Sources
  • Revenues recovered from charges for goods or
    services.
  • Mandatory student fees Athletics, University
    Center Recreation Center.

29
Current Funds at UTSA
  • Fund 26 Sponsored Grants Contracts
  • Restricted usage based on agreement between
    sponsor and UTSA.
  • Usage of federal funds are subject to OMB
    Circular A-21 compliance and
  • other restrictions in federal law that may apply.
  • Revenue Sources
  • Federal
  • State
  • Local
  • Private

30
Current Funds at UTSA
  • Fund 30 Gifts
  • Technically restricted, however usage may be for
    discretionary
  • purposes based on intentions of the donor.
  • Revenue Sources
  • Private
  • Distributions of Endowments invested by UTIMCO

31
Plant Funds at UTSA
  • Fund 36 Plant Funds
  • Used to record construction or acquisition of
    capital assets - normally
  • exceeding 100,000 in total. Will also include
    renewal replacement
  • projects.
  • Revenue Sources
  • Designated funds (Cash)
  • Bond Financing
  • Private (Donations)
  • Grants Contracts (Sponsored programs)
  • Distributions from Permanent University Fund
  • Auxiliary Enterprise Revenue
  • NEVER STATE APPROPRIATIONS

32
Agency Funds at UTSA
  • Fund 41 Agency Funds
  • Used to record funds held by UTSA for outside
    groups that
  • have a close relationship with the university.
    These funds
  • do not belong to UTSA and are not reported in our
  • financial statements.
  • Revenue Sources
  • Student clubs and organizations
  • 3rd Party vendors who need to use campus services
    e.g. Follett

33
Loan Funds
  • Fund 32 Loan Funds
  • Are used to record activity on funds available
    for
  • loans to students.
  • Revenue Sources
  • Texas Public Education Grants (technically
    sourced from statutory tuition)
  • Federal/State programs
  • Gifts

34
Transfers within a fund group (Intrafund
Transfers)
  • Intrafund transfers are generally allowed but may
    be prohibited between certain revenue sources.
  • Is the use of the revenue restricted?
  • Will the transfer affect reporting?

35
Intrafund Transfers
  • When allowed, intrafund transfers can be
    permanent or temporary.
  • Temporary transfers affect the current year only.
  • Permanent transfer permanently move monies from
    one budgeted account to another.
  • You cant process a permanent transfer if the
    account has no available original budget.

36
Transfers between Funds (Interfund Transfers)
  • Can we transfer money between fund 14 EG and
    fund 19 Designated?
  • Yes, but only if the account you are transferring
    from / to doesnt have any usage restrictions.
  • Example between two accounts funded by
    Designated Tuition is okay but between a state
    appropriated Special Item and a student fee
    account is not okay.

37
Fund Swapping
  • Because the EG fund has a budgeted transfer from
    designated funds, we facilitate authorized
    transfers between 14 and 19 accounts by
    swapping funds.
  • Process managed by the Budget Office
  • Eliminates the need to process multiple interfund
    transfers (that require several steps to record.)

38
Interfund Transfers
  • Can we transfer money between fund 14 EG and
    fund 29 Auxiliary Enterprises?
  • NEVER

39
Interfund Transfers
  • Can we transfer money between fund 14 EG and
    fund 18 Service Centers?
  • Yes, as a funding source to pay for goods or
    services used by the 14 account or to refund for
    goods or services returned or incorrectly billed.

40
Interfund Transfers
  • Can we transfer money between fund 30 Gift and
    fund 19 Designated accounts?
  • NEVER

41
Interfund Transfers
  • Can we transfer money between fund 29 Auxiliary
    Enterprise and 36 Unexpended Plant fund accounts?
  • Yes, when these revenues are funding capital
    projects, e.g. new parking garage.

42
Interfund Transfers
  • Can interfund transfers be permanent?

43
  • Questions about fund accounting,
  • revenue sources or related subjects?

44
Chart of Accounts
  • DEFINE Account structure users assign
  • expenditures to a 10 digit code
  • FF-XXXX-XX-SS
  • 1st 8 digits referred to as a BUDGET GROUP
  • FF Fund (e.g. 14-)
  • XXXX-XX Unique identifier (e.g. 0240-00)
  • SS Subaccount (e.g. -50 MO) to group expense
  • classifications

45
Chart of Accounts
  • Other chartfields
  • Object codes detailed expense categories for
    reporting
  • NACUBO program codes functional expense
    classifications tied to budget groups and or
    subaccounts
  • Unit codes groups multiple budget groups to an
    organizational area or manager

46
Reporting Expenses Functional Expense
Classifications
  • A functional expense classification is a method
    of grouping expenses according to the purpose for
    which the costs are incurred.
  • The classifications tell why an expense was
    incurred rather than what was purchased.
    Reporting expenses this way helps stakeholders
    understand the various mission-related activities
    and their relative importance.

47
Reporting Expenses Functional Expense
Classifications
  • Primary functional expense classifications -     
  • Instruction
  • Research
  • Public Service
  • Academic Support
  • Student Services
  • Institutional Support
  • Scholarships and Fellowships
  • Auxiliary Enterprises
  • Operations Maintenance of Plant

48
Reporting Expenses Natural Expense
Classifications
  • A natural expense classification is a method of
    grouping expenses according to the type of costs
    that are incurred.
  • The classifications tell what was purchased
    rather than why an expense was incurred.

49
Reporting Expenses Natural Expense
Classifications
  • Included are
  • Salaries Wages (can be further broken into
    categories of employee types)
  • Employee Benefits
  • Utilities
  • Supplies
  • Travel
  • Scholarships and fellowships
  • Services

50
Fund Accounting Financial Reporting
  • UT System requires regular monthly annual
  • financial reports
  • Annual Financial Report
  • Balance Sheet
  • Statement of Revenues, Expenses Changes in Net
    Assets
  • Statement of Cash Flows
  • Miscellaneous Supporting Schedules
  • Annual Sources Uses
  • Analysis of Financial Condition

51
Fund Accounting Financial Reporting
  • UTSAs FY 2009 AFR
  • http//www.utsa.edu/financialaffairs/controller/do
    cs
  • DF/annualRpt09.pdf
  • Other Key UT Financial Reports
  • http//www.utsystem.edu/cont/internal_reports.htm

52
Financing Higher Education in Texas Legislative
Primer (4th Edition, January 2009)http//www.lbb
.state.tx.us/Higher_Education/HigherEd_FinancingPr
imer_0209.pdf
  • Texas public systems serve 90 of the 1.2
    million students enrolled in higher education
  • 35 general academic teaching institutions
  • 50 community junior college districts
  • 1 technical college with 4 main campuses
  • 3 lower division state colleges
  • 9 health related institutions

53
Formula Funding in Texas
  • Tool used since 1950 to allocate most of the
    funds for public universities (not community
    colleges).
  • Intended to provide the majority of instructional
    costs based on semester credit hour enrollment
  • 62 of all state appropriations for general
    academic institutions are allocated via 2 funding
    formulas and 2 supplements.
  • Not intended as restricted budget line item
  • Universities may allocate to a college or
    department more or less than the amount earned
    through the formula.

54
State Appropriations Formula Funding
  • Instructional and Operations (I/O) Formula
    (84.1M/yr)
  • Based on Weighted SCH (Base Year)
  • Teaching Experience Supplement (2.35M /year)
  • Additional weight of 10 to undergraduate SCHs
    taught
  • by tenured or tenure track faculty
  • Small Institution Supplement (under 5,000
    enrollment)
  • Infrastructure Support Formula (15.8 M/yr)
  • Based on utility cost square footage of EG
    space
  • for Operation Maintenance of Plant
    (Facilities)
  • UTSA received lt15.8Mgt less than the biennial
    amount recommended by THECB

84.2
15.8
Based on actual amounts allocated in the current
biennium (2010-2011)
55
State Appropriations Formula Funding
  • Formula Strengths
  • Cost based (but not fully funded)
  • Emphasizes instructional mission
  • Consistent, fair (hold harmless funding)
  • De-politicizes the award of funding to higher
    ed
  • Formula Weaknesses
  • Funding delayed for fast growing institutions
    adjustments occur every 2 years
  • Motivates creation of graduate programs and
    higher cost programs
  • Doesnt reward quality or student success
  • Validity of weighting not demonstrated

56
Texas State Budget Cycle
  • Legislature convenes every 2 years for 140 days
    in odd numbered calendar years beginning January
    2nd
  • 2009 81st Legislative Session for FY10 and 11
    Budgets
  • 2011 82nd Legislative Session for FY12 and 13
    Budgets
  • State budget is allocated once every two years
    Fiscal Year begins Sept. 1st through August 31st
  • Appropriation is generally flat in the 2nd year
  • Numerical reference is the trailing year of the
    biennium
  • Example FY10 is 9/1/09 through 8/31/10
  • Budget 101 A Guide to the Budget Process in
    Texas http//www.senate.state.tx.us/SRC/pdf/Budget
    101-2009-web.pdf

57
General Appropriations Act (GAA)
  • GAA details each agencys biennial budget
    allocations includes
  • State revenues only
  • Certain restrictions on use of state funding
  • Reporting other requirements
  • http//www.lbb.state.tx.us/Bill_81/6_FSU/Bill-81-6
    _FSU_0909.pdf
  • Academic institutions
  • Direct appropriations from funding formula are
    lump sum and discretionary
  • Most non-formula appropriations have restricted
    uses
  • Special Items Higher Education Group
    Insurance


58
General Appropriations Act (GAA)
  • Specifies how state funds are allocated, not how
    they must be spent.
  • Institutions are not bound to spend
    appropriations within a specified strategy some
    exceptions include
  • TRB Debt service
  • Research Development must be used per Ed Code
    62.091
  • Higher Ed Group Insurance
  • Limitations General Revenue can not fund
  • Construction
  • Auxiliary Enterprises e.g. Athletics, Parking,
    etc.

59
General Appropriations Act (GAA)
UTSA was allocated a cut of 8,766,319 over this
biennium, 4.4 of net General Revenue excluding
ARRA and TRB funding.
60
General Appropriations Act (GAA)
61
General Appropriations Act (GAA)
62
Legislative Appropriations Request (LAR)
  • Budget Request prepared by each agency during the
    Summer (of an even year) prior to legislative
    session
  • Performance budget tied to goals, objectives,
    strategies and measures
  • Does not include formula funding for higher
    education
  • Joint Budget Hearings
  • Result in draft budget bill (General
    Appropriations Act) filed in both houses of the
    legislature
  • Comptrollers Biennial Revenue Estimate
  • Revenue sources, projections, economic outlook,
  • detailed accounting of state treasury

Legislature can not appropriate an amount greater
than anticipated revenue!

63
University Budget Process
  • University Strategic Resource Planning Council
    (USRPC) Recommends Budget Changes
  • Council on Management Operations (CMO) Endorses
    President Approves
  • Draft Budget Document Prepared
  • UT System Budget Hearings
  • Board of Regents Approval
  • http//www.utsa.edu/financialaffairs/budget/

64
Operating BudgetFiscal Year 2011
Revenue Sources 500.1 Million (Gross)


65
THE END!
  • Questions and Answers?
Write a Comment
User Comments (0)
About PowerShow.com