UNDERSTANDING COLLEGE AND UNIVERSITY ACCOUNTING

1
UNDERSTANDING COLLEGE AND UNIVERSITY ACCOUNTING

• AN INTRODUCTION FOR
• NON-ACCOUNTANTS
• Kathleen T. McNeely
• Indiana University

2
GOAL

• To be able to understand the purpose and function
  of the different funds you hear about or work
  with, and to recognize basic financial statements.

3
MAJOR TOPICS

• Concepts of fund accounting
• Chart of accounts refresher
• Fund accounting groups
• Current
• Non-current
• Other funds
• Differences in public and private financial
  statements
• Review of financial statements

4
CONCEPTS AND DEFINITIONS
5
CHARACTERISTICS OF NOT FOR PROFIT ORGANIZATIONS
BUSINESS NOT FOR PROFIT Individuals own
it YES NO People give money and YES NOexpect
products andservices in return Profit is
primary YES NO purpose
BUSINESS NOT FOR PROFIT Individuals own
it YES NO People give money and YES NOexpect
products andservices in return Profit is
primary YES NO purpose
6
For Profit Revenues - Expenditures Net Income

• College/
• University

Resources Received
Resources Used
7
ACCOUNTABILITY

• For Profit Bottom line
• University Efficient and effective use of
  resources and monies for stated purposes

8
FUND ACCOUNTING

• Classify financial resources for accounting and
  reporting purposes in accordance with their
  intended use or purpose.

9
FUND ACCOUNTING - REPORTING

• Public colleges universities
• effective with GASB 34 35, no longer
  required to report funds.
• Private colleges universities - effective with
  SFAS 116 117, no longer required to report
  funds.

10
FUND ACCOUNTING

• Although no longer required, fund accounting
• Can still assist with financial reporting
• Is still an effective way to manage an
  institutions resources
• Will probably be around for a while

11
FUND

• Fiscal and accounting entity
• Self-balancing
• Defined by
• specific activities, or
• certain objectives, or
• special regulations, restrictions, limitations

12
Self-balancing
LiabilitiesNet Assets
Assets
13
ASSETS - LIABILITIES NET ASSETS

• Assets
• Cash and Cash Equivalents
• Accounts Receivable
• Inventory
• Investments
• Plant, i.e. buildings, equipment
• Other

• Liabilities
• Accounts Payable
• Deferred Revenue
• Notes Payable
• Bonds Payable

14
LIMITATIONS
Restrictions on use
Resources Received
Resources Used
15
LIMITATIONS ON USE

• Donor Federal Institution State

16
LIMITATIONS ON USE

• RESTRICTED Donor External entity Federal
  state
• UNRESTRICTED Institution

17
WHAT IS RESTRICTEDPublic Colleges
Universities

• LIMITED BY RESTRICTED
• Donor YES
• External entity YES
• Federal, state YES
• Institution NO, but may designate or allocate

18
WHAT IS RESTRICTEDPrivate Colleges
UniversitiesContributions
Limited by DONOR only Restricted In perpetuity
Yes-permanently restricted Until
passage of time or Yes-temporarily
restrictedoccurrence of event No donor
limitation No-unrestricted
19
QUICK SUMMARY

• Fund
• Resources-based model
• Limitations on use

20
FUND GROUPS
-x1
-y1
-x2
- hierarchical - numerical codes
-y2
-y3
21
CHART OF ACCOUNTS

• Blueprint of financial structure
• Used to classify financial transactions
• Identifies fund group, function, organizational
  unit, ledger
• Important to internal and external reporting

22
FUND CLASSIFICATIONS

• Ownership vs. agency
• Restricted vs. unrestricted
• Expendable vs. non-expendable

23
FUND GROUPS
24
Summary of Todays Topics

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

25
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

26
Audit Guide Fund Groups

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

27
Fund Groups
28
Unrestricted Current Funds
29
Fund Groups
30
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.

31
Unrestricted Current Funds

• General Funds
• Designated Funds
• Continuing Education
• Public Service
• Internal Research
• Other
• Unrestricted Scholarships
• Auxiliary Enterprise Funds
• Auxiliary
• Recharge Centers
• Hospitals

32
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.

33
What is a Recharge Center 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.

34
Examples of Auxiliary and Recharge Activities

• Athletics
• Residence halls
• Student unions
• Parking and transportation
• Bookstores

35
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

36
Unrestricted Current Funds Deductions

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

37
Unrestricted Current Funds Assets

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

38
Unrestricted Current Funds Liabilities

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

39
Restricted Current Funds
40
Fund Groups
41
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.

42
RESTRICTED REVENUE Private Colleges
Universities - Contribution (with Temporary
Restriction)Temporarily restricted revenue
recorded when cash received. Expenses are
unrestricted. Reclass transfers temporarily
restricted monies into unrestricted when expenses
made.
100
60
60
Reclass
Cash Received
Spent
Temporarily Restricted Revenue
Temporarily Restricted to Unrestricted
Unrestricted Expenses
43
Restricted Current Funds

• Other Restricted
• Fellowships
• Scholarships
• Special State Appropriations
• Other Restricted
• Contract and Grants
• By agency type, I.e. federal, state, foundations,
  etc.
• Cost Share

44
Restricted Current Funds - Additions

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

45
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

46
Restricted Current Funds Assets

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

47
Restricted Current Funds Liabilities

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

48
Loan Funds
49
Fund Groups
50
Loan Funds

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

51
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

52
Loan Funds Additions

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

53
Loan Funds Deductions

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

54
Loan Funds - Assets

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

55
Loan Funds - Liabilities

• Accounts Payable
• amounts due collection agencies for fees
• Refundable loan amounts

56
Endowment and Similar Funds
57
Fund Groups
58
Endowment and Similar Funds

• Endowment Funds
• Term Endowment Funds
• Quasi-endowment Funds
• Annuity and Life Income Funds

59
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.

60
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.

61
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.

62
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 designed
  beneficiaries.

63
ANNUITY AND LIFE INCOME FUNDS

• Received under deferred giving agreements
• Income to donor or designee
• lifetime or fixed period
• When contract expires, funds used as designated
  by donor

64
WHAT CAN BE SPENT?
65
Endowments and Similar Funds Additions

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

66
Endowments and Similar Funds Deductions

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

67
Endowments and Similar Funds Assets

• Cash
• Investments

68
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.

69
Endowments and Similar Funds

• Institutional spending policy
• Endowment Income is spent out of expenditure
  account
• Can be booked directly to operating account, or
• Transferred out of endowment account
• Industry calls for
• Prudence
• Rational and systematic formula

70
Plant Funds
71
Fund Groups
72
Plant Funds

• Unexpended
• Retirement of Indebtedness
• Renewal and Replacement
• Investment in Plant

73
Plant Fund Definitions

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

74
Plant Fund Definitions - continued

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

75
Construction - Additions

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

76
Construction - Deductions

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

77
Construction Assets

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

78
Construction Liabilities

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

79
Retirement of Indebtedness Additions

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

80
Retirement of Indebtedness - Deductions

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

81
Retirement of Indebtedness - Assets

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

82
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.

83
Renewal and Replacement Funds Additions

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

84
Renewal and Replacement Funds - Deductions

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

85
Renewal and Replacement Funds - Assets

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

86
Renewal and Replacement Funds Liabilities

• Accounts Payable
• Due to other Funds

87
Investment in Plant Additions

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

88
Investment in Plant Deductions

• NONE
• You will never see an expenditure in Investment
  in Plant. The only exception might be if you
  book depreciation expense in plant fund.

89
Investment in Plant - Assets

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

90
Investment in Plant Liabilities

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

91
Other Funds
92
Fund Groups
93
Other Funds

• External Agency
• Internal Agency
• 3rd party financial aid (private only)

94
Agency Funds

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

95
Financial Aid FASB Schools

• Note For private institutions, Pell grants and
  3rd party financial aid directed toward specific
  students should be shown as Agency transactions.

96
Internal Agency Funds

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

97
External Agency Funds

• Relationship with University mission
• Usually there is an agreement to sponsor
• Reimbursement to university
• Never reported as university resources

98
External Agency Funds

• Enhance institutions mission
• Federally-funded research labs
• Software publishing corporation
• Alumni associations
• Foundations

99
Higher Education Function Codes
100
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

101
Educational and General Function Codes

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

102
EDUCATIONAL AND GENERAL

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

103
EDUCATIONAL AND GENERAL

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

104
EDUCATIONAL AND GENERAL

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

105
EDUCATIONAL AND GENERAL

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

106
EDUCATIONAL AND GENERAL

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

107
EDUCATIONAL AND GENERAL

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

108
EDUCATIONAL AND GENERAL

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

109
EDUCATIONAL AND GENERAL

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

110
EDUCATIONAL AND GENERAL

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

Contd
111
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.

112
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

113
Questions on Function Codes?
114
Financial Reporting
115
FINANCIAL REPORTING

• To provide financial information useful for
  making rational decisions to allocate resources.

116
Users of HE Financial Statements

• Federal Government
• State Government
• Private Sponsors
• Media
• Analysts
• Rating Agencies
• Colleges Universities

117
OBJECTIVES

• Compare actual financial results with legally
  adopted budget
• Assess financial condition and results of
  operation
• Assist in determining compliance with laws and
  regulations
• Assist in evaluating efficiency and effectiveness

118
GASB/FASB Comparability Challenges

• Historically there have been GASB and FASB
  display differences
• On behalf of Higher Education, the Accounting
  Principles Council has initiated analysis of
  reporting and standard inconsistencies
• The inconsistencies impact financial statement
  comparability between public and private
  institutions

119
Prominent FASB/GASB Differences

• Pell Grants
• FASB Agency recognition
• GASB Revenue
• Recognition of Pledges
• Discounting of operating pledges
• Recognition of endowment pledges
• Reporting of restricted revenues
• FASB Mandates first dollar release method
• FASB Only donors can restrict
• GASB Any external party can restrict

120
Prominent FASB/GASB Differences

• Time Restrictions
• FASB Time and purpose are restrictions
• GASB Time is a condition, not a restriction
  (result is deferred revenue)
• OPEB
• FASB Accrues a liability
• GASB New standard effective 2008
• Cash Flow
• FASB Direct or indirect method, three
  categories
• GASB Direct method mandatory, four categories

121
Prominent FASB/GASB Differences

• Split Interest Agreements
• FASB Current guidance in the Not-for-Profit
  Audit Guide
• GASB Single QA Answer
• Funds held in trust by others
• FASB Reported as an asset
• GASB Not reported unless as a component unit

122
Prominent FASB/GASB Differences

• Display
• FASB must allocate depreciation, three net
  asset groups not consistent with GASB,
  unclassified balance sheet, MDA and operating
  measure are not required
• GASB no requirements to allocate depreciation,
  three net asset groups not consistent with FASB,
  classified balance sheet, mandatory operating
  measure, mandatory MDA

123
Consequences of GASB/FASB Differences

• Misinterpretation by statement users
• Comparisons between public and private statements
  difficult if not impossible
• Financial analysis significantly different
• Ratios
• Vertical analysis
• Percentages, etc.
• Debt rating agencies analysis and conclusions

124
BASICS OF ALL COLLEGES UNIVERSITIES FINANCIAL
STATEMENTS
125
MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (MFBA)

• Financial statements should be presented using
  the economic resources measurement and the
  accrual basis of accounting.

126
ECONOMIC RESOURCES

• Economic resources measurement focus, essentially
  full commercial accounting with depreciation of
  capital assets.

127
BASIS OF ACCOUNTING

• Basis of accounting refers to when revenues,
  expenditures, expenses, and transfers--and the
  related assets and liabilities--are recognized in
  the accounts reported in the financial
  statements.

128
ACCRUAL BASIS

• Revenues should be recognized in the accounting
  period in which they are earned and become
  measurable expenses should be recognized in the
  period incurred, if measurable.

129
FINANCIAL STATEMENTS FOR PUBLIC COLLEGES
UNIVERSITIES (GASB)
130
BUSINESS TYPE ACTIVITIES FINANCIALS

• Present only those financial statements and RSI
  required for enterprise funds
• MDA
• Statement of Net Assets
• Statement of Revenues, Expenses, and Changes in
  Net Assets
• Cash Flow Statement
• Notes to the Financial Statements
• RSI Other than MDA

131
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN
NET ASSETS (SRECNA)
132
SRECNA

• Operating statement for proprietary
  funds/enterprise funds/business type activity
• Revenues should be reported by major source and
  should identify revenues used as security for
  revenue bonds
• Should distinguish between operating and
  nonoperating revenues and expenses

133
SRECNA

• Should present a separate subtotal for operating
  revenues, operating expenses, and operating
  income
• Nonoperating revenues and expenses should be
  reported after operating income

134
SRECNA

• Revenues from capital contributions and additions
  to the principal of permanent and term
  endowments, special and extraordinary items, and
  transfers should be reported separately, after
  nonoperating revenues and expenses

135
SRECNA

• Revenue recognition of capital contributions,
  additions to permanent and term endowments and
  all other nonexchange revenues should be based on
  the requirements of GASB33, Accounting and
  Financial Reporting for Nonexchange Transactions
• Restricted net assets should be separated into
  expendable and nonexpendable

136
EXPENSES

• May be displayed using either natural or
  functional classification
• Many schools voluntarily provide both, one on
  face of statements and the other in the notes
• This is not required
• Must distinguish between operating and
  nonoperating

137
(No Transcript)
138
Statement of Net Assets (Balance Sheet)
139
STATEMENT OF NET ASSETS

• Assets and liabilities should be presented in a
  classified format to distinguish between current
  and long-term assets and liabilities
• May use either a net assets format-assets less
  liabilities equal net assets-or a balance sheet
  format-assets equal liabilities plus net assets

140
STATEMENT OF NET ASSETS

• Net assets should be displayed in three broad
  componentsinvested in capital assets, net of
  related debt restricted (distinguishing between
  major categories of restrictions) and
  unrestricted.

141
STATEMENT OF NET ASSETS

• When permanent endowments or permanent fund
  principal amounts are included, restricted net
  assets should be displayed in two additional
  componentsexpendable and nonexpendable.
  Nonexpendable net assets are those that are
  required to be retained in perpetuity.

142
STATEMENT OF NET ASSETS

• Capital contributions should not be displayed as
  a separate component of net assets.
• Designations of net assets should not be reported
  on the face of the financial statements.

143
CASH FLOW STATEMENT
144
STATEMENT CLASSIFICATIONS

• Operating Activities
• Noncapital Financing Activities
• Capital and Related Financing Activities
• Investing Activities

145
OPERATING ACTIVITIES

• Direct reporting method prescribed
• Accrual data must be converted into cash basis. A
  reconciliation indirect method of this
  conversion must be presented at the bottom of the
  statement
• Inflows reported by major type
• Outflows reported by payment type

146
NOTES TO THE FINANCIAL STATEMENTS
147
NOTES TO THE FINANCIAL STATEMENTS

• Integral part of the basic financial statements
• Communicates information that is essential for a
  fair presentation of the financial statements not
  displayed on the face of the financial statements
  (GASB 34, p.39, 113)

148
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• Measurement focus basis of accounting used
• Definition of cash equivalents
• Application of FASB pronouncements after 11/30/89
• Asset capitalization policy together with assets
  useful lives
• Defining operating and non operating revenues
• Policy regarding the use of restricted or
  unrestricted resources when an expense is
  incurred when both unrestricted and restricted
  net assets are available

149
NOTES TO THE FINANCIAL STATEMENTS

• Capital assets and long-term liabilities reported
  by major class
• Capital assets and long-term liabilities reported
  in SRECNA
• Major classes
• Grouped by depreciable/non depreciable assets
• Capital acquisitions/dispositions

150
NOTES TO THE FINANCIAL STATEMENTS

• Beginning/end of the year balances with separate
  accumulated depreciation
• Current year depreciation with amounts allocated
  to each program, if any
• Provide description of collections
• Explanation of the collection assets not
  capitalized

151
LONG-TERM LIABILITIES

• Bonds, notes, loans, lease, payable and
  compensated absences, claims and judgements
• Beginning/end of the year balances
• Increases/decreases
• Current year obligation displayed as a separate
  column

152
ENDOWMENTS - DONOR RESTRICTED

• Amount of net appreciation available for
  expenditure
• How are these amounts reported in net assets
  display
• Law regarding ability to spend net
• appreciation
• Policy for authorizing and spending
• investment income (GASB 34, p.42, 121),
• Spending-rate
• Total-return policy

153
SEGMENT INFORMATION

• Types of goods or services provided by the
  segment
• Identifiable activity pledged for revenue bonds
  by each segment
• Condensed statements (GASB 34, p.42, 122)
• SNA
• SRECNA
• Statement of Cash Flows

154
MANAGEMENTS DISCUSSION AND ANALYSIS (MDA)
155
MANAGEMENTS DISCUSSION AND ANALYSIS (MDA)

• The basic financial statements should be preceded
  by MDA
• MDA is required supplementary information and
  therefore is subject to a lower level of audit
  than the financial statements and the notes
• MDA should provide an objective and easily
  readable analysis of the financial activities
  based on currently known facts

156
COMPARATIVE ANALYSIS - FUTURE

• Comparison of current-year results to prior year
• Emphasis should be on current-year
• Both positive and negative results should be
  discussed
• Although not mandatory, graphs, charts and tables
  are encouraged.
• GASB 34, p. 6, 9

157
MDA REQUIREMENTS

• General rather than specific
• Report only the most relevant information
• Avoid boilerplate discussion
• A brief discussion of the basic financial
  statements
• How the financial statements relate to each other
• Significant differences in the data
• Data provided should reinforce analysis and
  results of operations

158
MDA MINIMUM REQUIREMENTS

• Total assets, distinguishing between capital and
  other assets
• Total liabilities, distinguishing between
  long-term liabilities and other liabilities
• Total net assets, distinguishing
• Invested in capital assets, net of related debt
• Restricted amounts
• Unrestricted amounts

159
MDA MINIMUM REQUIREMENTS

• General Revenues, by major source
• Total Revenues
• Total Expenses
• Excess before contributions to
• Term and permanent endowments
• Permanent fund principal
• Special and extraordinary items
• transfers

160
MDA MINIMUM REQUIREMENTS

• Contributions
• Special Extraordinary Items
• Transfers
• Change in Net Assets
• Ending Net Assets

161
MDA MINIMUM REQUIREMENTS FINANCIAL POSITION

• Overall financial position and results of
  operations to assist in assessing whether
  financial position has improved or deteriorated
• Reasons for significant changes from prior years
• Important economic factors that significantly
  affected operating results

162
MDA MINIMUM REQUIREMENTS BALANCES

• Significant changes and reasons for changes in
  net assets
• Significant changes and reasons for changes in
  availability of funds
• Restriction changes
• Commitment changes
• Other limitations.

163
MDA MINIMUM REQUIREMENTS CAPITAL

• Significant Capital Asset Activity
• Significant Long-Term Debt Activity
• Capital Expenditure Commitments
• Changes in Credit Ratings
• Debt Limitations affecting Plans

164
MDA ANALYSIS KNOWN FACTS

• A description of currently known facts,
  decisions, or conditions that are expected to
  have a significant effect on financial position
  (net assets) or results of operations (revenues,
  expenses, and other changes in net assets).
• GASB 34, p. 8, 11.h
• AGAIN, GASB 36, restricts MDA to 11

165
QUESTIONS/DISCUSSION ON GASB STATEMENTS
166
Financial Statements for Private Colleges and
Universities (FASB)
167
SFAS 116 117 overview

• Effective fiscal years beginning after 12/15/94
  (12/15/95 for small universities)
• SFAS 116 addresses issues of recognition
  measurement
• SFAS 117 establishes standards for
  general-purpose external financial statements
• Determines how to report - but doesnt prescribe
  or prohibit any particular format.

168
Types of Statements

• Statement
• Financial Position
• Activities
• Cash Flow

• Purpose
• Current Status (Balance
  Sheet)
• Detailed Sources
• Uses, Transactions
• Cash Receipts Cash
• Payments

169
Statement of Financial Position (Balance Sheet)
170
Statement of Financial Position Minimum
Requirements include

• Total amount of assets, liabilities, net assets
• Total amount of each class of net assets
  (unrestricted, temporarily restricted,
  permanently restricted) based on existence or
  absence of donor-imposed restrictions

171
Statement of Financial Position Minimum
Requirements include

• Information regarding types of restrictions on
  net assets (usually in notes)
• Information regarding liquidity (e.g. by
  providing classified balance sheet)

172
Statement of Activities
173
Statement of Activities Minimum Requirements
include

• Amount of change in total net assets
• Amount of change in each of the 3 classes of net
  assets
• All revenues, expenses, gains, and losses for the
  period - classified by and reported in the class
  of net assets they affect
• Revenues reported as increases in unrestricted
  net assets unless their use is restricted by
  explicit donor stipulation or by law

174
Statement of Activities Minimum Requirements
include

• Expenses reported as decreases in unrestricted
  net assets
• Reporting expenses by function either in the
  statement or in the notes
• The amount of expired donor-imposed restrictions
  that increase one class of net assets and
  simultaneously decrease another class of net
  assets

175
Statement of Cash Flows
176
Statement of Cash Flows Minimum Requirements
include

• Total changes in cash and cash equivalents
• Total amount of net cash provided by or used for
  investing, financing, operating activities
• Interest paid on indebtedness
• Significant non-cash financing and investing
  activities
• Reconciliation of change in total net assets to
  net cash provided by or used for operating
  activities

177
Notes to the Financial Statement
178
Footnotes required by SFAS 116 SFAS 117 or
suggested as being informative

• Summary of significant accounting policies
• Nature of restriction/limitations on net asset
  balances
• Net assets released from restrictions
• Expenses by classification

179
Footnotes required by SFAS 116 SFAS 117 or
suggested as being informative

• Unconditional and conditional promises to give
• Collections policies
• Appreciation of endowment investments
• Contributed services details

180
QUESTIONS/DISCUSSION ON FASB STATEMENTS
181
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