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Fund Management

The purpose of this chapter is to provide an overview of the fundamentals for the higher education basic fund accounting and financial reporting structure required by Generally Accepted Accounting Principles (GAAP) and to which the university is audited. This will provide a context for understanding how the PeopleSoft Finance System general ledger and chart of accounts are set up to meet these requirements, and why it is necessary to do certain things in university accounting.

GAAP

Generally accepted accounting principles (GAAP) is a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. Those conventions, rules, and procedures provide a standard by which to measure financial presentation.

The Governmental Accounting Standards Board (GASB) is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments, including public universities. In March 2009, GASB issued Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The Statement incorporates the hierarchy GAAP for state and local governments into the GASB's authoritative literature. Prior to GASB Statement 55, the GAAP hierarchy was set forth in the American Institute of Certified Public Accountants' (AICPA) Statement on Auditing Standards (SAS) No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles, rather than in the authoritative literature of the GASB. Statement 55 moves relevant portions of that SAS to the GASB literature without substantive changes.

The conventions, rules, and procedures applicable to CU are comprised of authoritative guidance from various sources such as the GASB, the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), the National Association of College and University Business Officers (NACUBO), etc. Each of these organizations issues various documents with differing levels of authority such as official statements, interpretations, implementation guides, accounting standards, etc. Statement 55 provides a GAAP Hierarchy establishing the priority of these documents so that we know what level of importance to place on each. The Statement 55 GAAP Hierarchy Summary in priority order for state and local governments, including public institutions of higher education, is:

  • Officially established accounting principles consisting of GASB Statements and Interpretations.
  • GASB Technical Bulletins and, if specifically made applicable to state and local governmental entities by the AICPA and cleared by the GASB, AICPA Industry Audit and Accounting Guides, and AICPA Statements of Position.
  • AICPA Practice Bulletins if specifically made applicable to state and local governmental entities and cleared by the GASB, as well as consensus positions of a group of accountants organized by the GASB that attempts to reach consensus positions on accounting issues applicable to state and local governmental entities. (As of the date of the Statement, such a group had not been organized.)
  • Implementation guides (Q&As) published by the GASB staff, as well as practices that are widely recognized and prevalent in state and local government.
  • Other accounting literature including GASB Concepts Statements; pronouncements referred to in the above categories of the GAAP hierarchy for nongovernmental entities if not specifically made applicable to state and local governmental entities by the GASB; FASB Concepts Statements; Federal Accounting Standards Advisory Board (FASAB) Statements, Interpretations, Technical Bulletins, and Concepts Statements; AICPA Issues Papers; International Public Sector Accounting Standards of the International Public Sector Accounting Standards Board or International Financial Reporting Standards of the International Accounting Standards Board, or pronouncements of other professional associations or regulatory agencies; Technical Information Service Inquiries and Replies included in AICPA Technical Practice Aids; and accounting textbooks, handbooks, and articles. The appropriateness of other accounting literature depends on its relevance to particular circumstances, the specificity of the guidance, and the general recognition of the issuer or author as an authority. For example, GASB Concepts Statements would normally be more influential than other sources in this category.

Higher Education Financial Reporting

For the University of Colorado, GASB Statement No. 15, Governmental College and University Accounting and Financial Reporting Models sets the basic financial statement model through June 30, 2001 (fiscal year 2001). Under the authority of this Statement, the State Controller elected to have Colorado institutions follow the AICPA Industry Audit Guide, Audits of Colleges and Universities, as amended by AICPA Statement of Position (SOP) 74-8, Financial Accounting and Reporting by Colleges and Universities. The Audit Guide was originally issued in 1973. It was updated in 1975 to incorporate SOP 74-8. The last update was issued in 1992 to include conforming changes as of May 1, 1992. The Audit Guide required three basic financial statements to be presented in a "fund group" perspective.

  • Balance Sheet
  • Statement of Changes in Fund Balance
  • Statement of Current Funds Revenue, Expenditure, and Other Changes (Current Funds Statement)

The primary purpose of the Statement of Current Funds Revenue, Expenditure and Other Changes is to provide the detail behind the summarized figures on the Statement of Changes in Fund Balance.

GASB Statement No. 35, Basic Financial Statements—and Management's Discussion and Analysis—for Public Colleges and Universities was issued in November 1999 and supersedes GASB Statement No. 15. Statement No. 35 directs public colleges and universities to follow GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments. These two statements are supplemented by the GASB Statement No. 34 Implementation Guide and the NACUBO Statement No. 35 Implementation Guide. This change is applicable to fiscal year 2002 (ended June 30, 2002) and subsequent years. Statements 34/35 require the following basic financial statements to be presented on the "entity-wide" perspective rather than the Audit Guide's "fund group" perspective.

  • Statement of Net Assets (SNA)
  • Statement of Revenue, Expenses and Changes in Net Assets (SRECNA)
  • Statement of Cash Flows (Cash Flows)

Operational Structure

Public colleges and universities receive resources from a variety of sources that restrict the use of the resources. These include grants and contracts from sponsors, and gifts from donors. State legislative processes also appropriate state funds to an institution. Legislators and taxpayers want to know how these funds are used to accomplish the institution's mission and to be assured that these funds are used in accordance with any appropriation requirements. Additionally, the governing board (management) of the institution will designate resources to be used for certain purposes such as student loans or capital construction. Some operations of the institution, such as Housing, are required to generate revenue sufficient to cover all of their operating expenses and debt payments. This financial environment of public colleges and universities imposes upon higher education a special stewardship obligation to be able to demonstrate that all resources were recorded and used in accordance with the directives of the outside sources providing the resources. This stewardship obligation requires an accounting system that provides for the unique identification and recording of individual resources so that they are not commingled with other resources.

Higher education accounting systems are traditionally based on a "fund accounting" structure. The Audit Guide ¶2.02 defines fund accounting as the procedure by which resources for various purposes are classified for accounting and reporting purposes in accordance with regulations, restrictions, or limitations imposed by sources outside the institution, or in accordance with directions issued by the governing board ¶2.03 defines a fund as an accounting entity with a self-balancing set of accounts for recording assets, liabilities, a fund balance and changes in the fund balance (revenue, expense and cash transfers).Separate accounts are maintained for each fund to ensure observance of limitations and restrictions placed on the use of resources. For accounting and reporting purposes, however, "funds of similar characteristics" are combined into "fund groups." ¶2.05 identifies the fund groups usually encountered in an educational institution:

  • Current funds
  • Loan funds
  • Endowment and similar funds
  • Annuity and life income funds
  • Plant funds
  • Agency funds

While Statements 34 and 35 change the external reporting orientation from the Audit Guide's fund group perspective to the entity-wide perspective, the university is still required to use its traditional fund accounting system to meet its stewardship obligations. Additionally, the use of the traditional fund groups serves management's needs to plan and manage the financial activity of the institution. Finally, while Statements 34 and 35 change the overall format of the basic financial statements, they do not define the categories of revenue and expense. However, their illustrative statements do use most of the same revenue and expense categories as those presented in the Audit Guide. So, while the Audit Guide is technically no longer GAAP, the university must still turn to it to define funds, fund groups, revenues, expenses and cash transfers that are used in the CU accounting system and in its day-to-day operations. The good news is that while Statements 34 and 35 represent one of the largest changes in higher education financial reporting history, they have minimal impact on how departments do their day-to-day accounting in the Finance System. The biggest impact is on the year-end entries that your campus controller's office make to offset some of the traditional day-to-day operational entries in order to present the university's financial statements on the Statements 34 and 35 entity-wide basis.

The discussion now turns to an analysis of the Audit Guide and how the Finance System is structured to fulfill the Audit Guide requirements.

Unrestricted Vs. Restricted Funds

All resources of an institution are initially classified as either unrestricted or restricted. This concept is applied to all of the fund groups.

The Audit Guide Statement of Position (SOP) defines this concept under Current Funds.

The Current Funds group has two basic subgroups—unrestricted and restricted. Unrestricted current funds include all funds received by the institution for which no stipulation was made by the donor or other external agency as to the purposes for which the funds should be expended. Restricted current funds are those available for financing operations, but which are limited by donors or other external agencies to specific purposes, programs, departments, or schools. Externally imposed restrictions are to be contrasted with internal designations imposed by the governing board on unrestricted funds. Internal designations do not create restricted funds, inasmuch as the removal of the designation remains at the discretion of the governing board.

The distinction between unrestricted and restricted funds is maintained through the use of separately balanced groups of accounts in order to provide acceptable reporting of stewardship to donors and other external agencies. This distinction also emphasizes to governing boards and other sources of financial support the various kinds of resources of the Current Funds group that are available to meet the institution's objectives.

Separate accounting entities may be provided for auxiliary enterprises, hospitals, and independent operations in either the Unrestricted Current Funds or the Restricted Current Funds subgroup or both, as appropriate.

The first question to ask about every revenue dollar is whether it is an unrestricted or restricted resource. For example, has the resource provider limited the institution's use of the funds for a specific purpose such as financial aid, a specific program such as a sponsored project or a capital construction project, a specific department, a specific school, or a specific campus?

A good test to use in determining whether or not revenue is restricted is to ask if the resource provider has the right to object and demand a return of the funds if the university were to use the funds, for example, to pay the salary of an accountant at the Anschutz Medical Campus. If the answer is yes, then these funds are restricted in some way and therefore are restricted funds. If the answer is no, and the Board of Regents is free to direct the use of the funds for any legal purpose, then these are unrestricted funds.

If the restrictions are such that the funds can only be used for Loan Fund or Plant Fund purposes, then the funds must be reported as revenue of those respective fund groups. It is inappropriate to report funds with loan fund or plant fund purpose restrictions as revenue of the current funds (with a cash and fund balance transfer to the other funds), since according to the restrictions these funds are not available to fund current operating expenses.

The concept of unrestricted vs. restricted funds is critical and carries through into the Net Asset section of the GASB 34 and 35 entity-wide Statement of Net Assets.

Although these are entity-wide perspective statements, there is still a certain amount of fund accounting carried over in order to provide these categories of net assets.

The mandate to maintain restricted funds separately from unrestricted funds prohibits the university from doing cash transfers between these funds.

Fund and Fund Groups

The focus of the Audit Guide and a fund accounting system is the proper classification of resources, or revenue. Therefore, the key to higher education fund accounting is a thorough understanding of the proper accounting for all revenues. Once the revenue is properly accounted for in the correct fund, and therefore in the correct fund group, then the expenditure of that revenue naturally follows.

  • Fund
  • Fund Groups
  • Agency Funds
  • Plant Funds
  • Loan Funds
  • Current Funds

Fund

The first building block of a fund accounting system is defining what constitutes a fund. Remember, the Audit Guide ¶2.03 defines a fund as an accounting entity with a self-balancing set of accounts for recording assets, liabilities, a fund balance and changes in the fund balance (revenue, expense, and cash transfers).

In the PeopleSoft Finance System a fund is a unique combination of the three chartfields of either the fund/organization/program or the fund/organization/project. Each unique combination is most commonly referred to as a "FOPP" or "FOPPS," but can also be referred to as a combo, speedtype, or fund. Each of these unique FOPPS is a fund set up to account for a unique activity's resources and use of those resources, separate from the accounting for all other resources and activities of the university. Each FOPPS then uses the accounts from the Chart of Accounts to classify the assets, liabilities, fund balance, revenues, expenses, and cash transfers of that fund. The revenue, expenses and cash transfers are used to report the change in fund balance of that FOPPS from one period to the next. Each FOPPS is a self-balancing set of records for that unique activity's financial transactions.

A FOPPS is set up when required by provider restrictions such as for each sponsored project or gift, or when desired to uniquely account for the allocation of unrestricted resources for a designated purpose such as general operations. The resources of the FOPPS can be a budget allocation, revenue, a cash (and fund balance) transfer in, or a combination of these.

Fund Group

The second building block is to define the purpose of each fund group and to identify each fund to its proper fund group. The Audit Guide illustrative statements present the following fund groups and subgroups.

  • Current funds
    • Unrestricted
    • Restricted
  • Loan funds
  • Endowment and similar funds
  • Annuity and life income funds
    • Annuity funds
    • Life income funds
  • Plant funds
    • Unexpended
    • Renewals and replacements
    • Retirement of indebtedness
    • Investment in plant
  • Agency funds

CU uses the PeopleSoft Finance System Fund chartfield to identify its fund groups and thereby assign each FOPPS to the proper fund group or subgroup.

  • Current Funds
  • Loan Funds
  • Plant Funds
  • Agency Funds.

All endowments (Fund 60) are accounted for at the system level and not at the campus level. Thus, endowments are not included in this discussion.

The following table shows how the PeopleSoft Finance System funds are identified to the Audit Guide fund groups and how the PeopleSoft Finance System funds are grouped under the CU financial statements fund groups.

Audit Guide and Finance System Structure

Financial Statement Fund Group

Current Funds
Unrestricted
10 - General Fund State Appropriated Funding
11 - ICR (Indirect Cost Recovery)
20 - Auxiliary TABOR Enterprises Auxiliary & Self-funded Activities
26 - Auxiliary Other Exempt
28 - Auxiliary Internal Service Centers
29 - Auxiliary Non-Enterprises
Restricted
30 - Grants and Contracts Restricted Fund
31 - Grants and Contracts
34 - Gifts
Loan Funds
50 - Loan Funds Student Loan Funds
Plant Funds
71 - Capital Construction Unexpended
72 - General Fund Renewal & Replacement
78 - Auxiliary Renewal & Replacement
73 - Retirement of Indebtedness Retirement of Indebtedness
74 - Investment in Plant Investment in Plant
Agency Funds
80 - Agency Funds Restricted Fund

In addition to these funds, CU also has Fund 99: GASB 34-35 Reporting. This fund is used solely for entries to adjust the Audit Guide fund group perspective into the GASB 34/35 entity-wide perspective. Most of these entries arise from showing activities between the various fund groups that would result in inflating revenues and expenses if they were not offset. Examples are:

  • Unrestricted current fund indirect cost revenue equal to restricted current fund indirect cost expense
  • Investment in plant fund addition for the retirement of indebtedness (ROI) equal to the ROI fund deduction for retirement of indebtedness.
  • Capital asset purchases in the current funds equal to additions to plant in the investment in plant fund when the capital asset is added to that fund.

Agency Funds

The Audit Guide ¶10.19 says the agency fund group consists of funds held by an institution as custodian or fiscal agent for others such as student organizations, individual students, or faculty members. Agency funds should be accounted for as a separate fund group although, if immaterial in amount, they may be reported as assets and liabilities of current funds. Transactions of agency funds represent charges or credits to the asset and liability accounts and are not transactions of unrestricted or restricted current funds.

Agency funds are used to deposit funds that do not belong to and are not under the control of the Regents, but rather are private funds that belong to the depositor. CU is essentially providing a banking function for the depositor, and these funds are then disbursed at the direction of the depositor. The most common uses of agency funds are for:

  • Independent student organizations
  • External entities that have a business presence on campus and have a need to charge internal services such as telephone, copying and printing, etc.
  • Funds sent to the university and held to be applied to a specific student's bill at a later date e.g., third party payment of a student's bills.

Funds deposited by the depositor should be recorded using a revenue account. Expenditures of funds should be recorded using expense accounts. The revenues and expenses will be used to report the cash inflows and outflows from agency funds on the GASB 34 and 35 Statement of Cash Flows.

Since agency funds are private (i.e. non-university) funds, the use of these funds does not represent university business and the revenue/expense is not reported in the Statement of Changes in Fund Balance or the Statement of Revenue, Expenses, and Changes in Net Assets. The FOPPS fund balance is not reported in the fund balance or net assets of the university, but rather it is reported as a liability, Deposits Held In Custody, on the balance sheet and Statement of Net Assets. CU has chosen to combine the balance sheet accounts with the Restricted Current Fund reporting on the balance sheet.

Since agency funds represent entities external to the institution, all business dealing with agency fund FOPPS should be approached in the same manner as dealing with any other private individual or business. For example, agency fund operations do not have access to CU procurement services as this would extend to private entities state agency privileges such as tax exemption, higher education discounts, state contract discounts, etc. It is inappropriate for private entities to benefit from state agency status. Interdepartmental cash transfers cannot be made to or from agency fund FOPPS. To do so would be the same as providing a gift to a private entity. Payments to CU departments from charges made to agency fund FOPPS should be accounted for the same as a cash payment from an external entity.

Plant Funds

The Audit Guide ¶9.01 says that the plant fund group consists of

  • Funds to be used for the acquisition of physical properties for institutional purposes but unexpended at the date of reporting;
  • Funds set aside for the renewal and replacement of institutional properties;
  • Funds set aside for debt service charges and for the retirement of indebtedness on institutional properties; and
  • Funds expended for, and thus invested in, institutional properties.

Loan Funds (Fund 50)

The Audit Guide ¶7.01 says the loan fund group consists of loans to students, faculty, or staff, and resources available for such purposes. The terms of the loan agreements usually specify that the funds operate on a revolving basis, i.e., payments of principal and interest are loaned to other individuals. Some loan funds are created on a temporary basis and require that repayments and interest be returned to the grantors. The grants may also designate that the obligations to repay all or part of the loan will be forgiven under certain circumstances. Some gift agreements may also designate the curriculum and geographical domicile of the student borrowers and the financial status of borrowers.

Resources for the loan fund are:

  • Donations from private sources restricted to loan funds
  • Designated appropriations of governmental agencies
  • Income and gains from the investment of loan funds
  • Grants restricted to loan funds
  • Interest charged on outstanding loans
  • Payment of principal on outstanding loans
  • Cash transfers in from other funds groups.

Current Funds (Funds 10, 11, 20, 26, 28, 29, 30, 31, 34)

The current fund discussion is taken primarily from the Audit Guide Statement of Position (SOP).

The Audit Guide SOP page 51 says that the current funds group includes those economic resources of a college or university that are expendable for the purpose of performing the primary missions of the institution—instruction, research and public service—and which are not restricted by external sources or designated by the governing board for other than operating purposes. The term current means that the resources will be expended in the near term and that they will be used for operating purposes.

Basically, the current funds are the default funds. If a dollar of resources does not meet the requirements for reporting directly in the Agency Fund, the Loan Fund or one of the Plant Fund subgroups, then by default it belongs in one of the current funds subgroups. As stated earlier, the key to current funds accounting is a thorough understanding of the proper accounting for revenues. Once the revenue is properly accounted for in the correct fund, and therefore the correct fund group, then the expenditure of that revenue naturally follows.

Education and General Functions (EPC Codes)

Expense Purpose Codes (EPC) identifies the reason for the expense or the revenue, such as instruction, research, academic support, etc.

  • Instruction (1100)
  • Instruction Capital Grant (1150)
  • Research (1200)
  • Research Capital Grant (1250)
  • Public Service (1300)
  • Public Service Capital Grant (1350)
  • Academic Support (1400)
  • Academic Support Capital Grant (1450)
  • Student Services (1500)
  • Student Services Capital Grant (1550)
  • Institutional Support (1600)
  • Institutional Support Capital Grant (1650)
  • Operation of Plant (1700)
  • Operation of Plant Capital Grant (1750)
  • Scholarships and Fellowships (1800)
  • Internal Service Centers (2100)
  • Non-ISC Sales Between Departments

Instruction (1100)

This category should include expenditures for all activities that are part of an institution's instruction program, with the exception of expenditures for remedial and tutorial instruction which should be categorized as student services. Expenditures for credit and noncredit courses for academic, occupational, and vocational instruction, and for regular, special, and extension sessions should be included in the instruction function. Conferences are not included in this category, as they are classified as public service.

Expenditures for departmental research and public service that are not separately budgeted should be included in this classification. The instruction category excludes expenditures for academic administration when the primary assignment is administration, for example, academic deans. However, expenditures for department chairs, in which instruction is still an important role of the administrator, are included in this category.

Instruction Capital Grant (1150)

This EPC should be used for all capital equipment purchased for instruction purposes using grant funds.

Research (EPC 1200)

This category should include all expenditures for activities specifically organized to produce research outcomes, whether commissioned by an agency external to the institution or separately budgeted by an organizational unit within the institution. Subject to these conditions, the research category includes expenditures for individual and/or project research as well as those of institutes and research centers. This category does not include all sponsored programs (training grants are an example) nor is it necessarily limited to sponsored research, since internally supported research programs, if separately budgeted, might be included in this category under the circumstances described above. Expenditures for departmental research that are separately budgeted for research are included in this category.

Research Capital Grant (1250)

This EPC should be used for all capital equipment purchased for research purposes using grant funds.

Public Service (1300)

This category should include funds expended for activities that are established primarily to provide non-instructional services beneficial to individuals and groups external to the institution. These activities include community service programs (excluding instructional programs) and cooperative extension services. Included in this category are conferences, institutes, general advisory services, reference bureaus, radio and television, consulting and similar non-instructional services particular to sectors of the community.

Public Service Capital Grant (1350)

This EPC should be used for all capital equipment purchased for public service purposes using grant funds.

Academic Support (1400)

This category should include funds expended primarily to provide support services for the institution's primary missions—instruction, research, and public service. It includes (1) the retention, preservation, and display of educational materials—for example, libraries, museums, and galleries; (2) the provision of services that directly assist the academic functions of the institution, such as demonstration schools associated with a department, school, or college of education; (3) media, such as audiovisual services and technology such as computing support; (4) academic administration (including academic deans but not department chairmen) and personnel development providing administrative support and management directions to the three primary missions; and (5) separately budgeted support for course and curriculum development. For institutions that currently charge certain expenditures—e.g. computing support—directly to the various operating units of the institution, such expenditures are not reflected in this category.

Academic Support Capital Grant (1450)

This EPC should be used for all capital equipment purchased for academic support purposes using grant funds.

Student Services (1500)

This category should include funds expended for offices of admissions and registrar, and also those activities whose primary purpose is to contribute to the student's emotional and physical well-being and to his intellectual, cultural, and social development outside the context of the formal instruction program. It includes expenditures for student activities, cultural events, student newspapers, intramural athletics, student organizations, intercollegiate athletics (if the program is operated as an integral part of the department of physical education and not as an essentially self-supporting activity), supplemental educational services to provide matriculated students with supplemental instruction outside the normal academic program (remedial instruction is an example), counseling and career guidance (excluding informal academic counseling by the faculty), student aid administration, and student health service (if not operated as an essentially self-supporting activity).

Student Services Capital Grant (1550)

This EPC should be used for all capital equipment purchased for student services purposes using grant funds.

Institutional Support (1600)

This category should include expenditures for: (1) central executive-level activities concerned with management and long-range planning of the entire institution, such as the governing board, planning and programming, and legal services; (2) fiscal operations, including the investment office; (3) administrative data processing; (4) space management; (5) employee personnel and records; (6) logistical activities that provide procurement, storerooms, printing, and transportation services to the institution; (7) support services to faculty and staff that are not operated as auxiliary enterprises; and (8) activities concerned with community and alumni relations, including development and fund raising.

Appropriate allocations of institutional support should be made to auxiliary enterprises, hospitals, and any other activities not reported under the Education and General heading of expenditures. CU uses the General Administrative Recharge (GAR) and General Infrastructure Recharge programs (GIR) to allocate a portion of the institutional support and operation and maintenance of plant General Fund costs to all auxiliary and self-funded revenue sources. This is done at the time the auxiliary and self-funded sources are spent, whether from the current funds (2x) or plant funds (78). GAIR is not charged on cash transfers among these funds. The GAR and GIR programs further mandate that auxiliary and self-funded resources not be commingled with General Fund resources, otherwise they would lose their identity and GAIR could not be charged. Hence, CU has created R&R Fund 78 specifically for auxiliary and self-funded operations, and has implemented the restriction prohibiting the transfer of cash from an auxiliary/self-funded (2x) FOPPS to the General Fund.

Institutional Support Capital Grant (1650)

This EPC should be used for all capital equipment purchased for institutional support purposes using grant funds.

Operation of Plant (1700)

This category should include all expenditures of current operating funds for the operation and maintenance of physical plant, in all cases net of amounts charged to auxiliary enterprises, hospitals, and independent operations. It does not include expenditures made from the institutional plant fund accounts.* It includes all expenditures for operations established to provide services and maintenance related to grounds and facilities. Also included are utilities, fire protection, property insurance and similar items. NACUBO has recently added safety and security expenditures to this category. These were previously included in the institutional support category.

* Under the Audit Guide there was an expenditure line called Expended for Plant Facilities to report plant fund expenditures. This expenditure line was abolished under the GASB 34/35 reporting. Therefore, any non-capitalized expenditures in the plant funds now must be categorized under the appropriate function. As a result, effective July 1, 2001, a control was put in place in the Finance System to only allow the use of fixed assets expense accounts (810000-812499) in the 7x Funds. ABS will use the primary function of the department to assign an EPC to the R&R FOPPS to categorize any non-capitalized expenses that might be left in these FOPPS.

Operation of Plant Capital Grant (1750)

This EPC should be used for all capital equipment purchased for operation and maintenance of plant purposes using grant funds.

Scholarships and Fellowships (1800)

This category (also referred to as financial aid) should include expenditures for scholarships and fellowships in the form of outright grants to students selected by the institution and financed from current funds, restricted or unrestricted. It also should include trainee stipends, prizes and awards, except for those trainee stipends awarded to individuals who are not enrolled in formal course work, which should be charged to instruction, research, or public service as appropriate. If the institution is given custody of the funds, but is not allowed to select the recipient of the grant, (for example, the federal Basic Educational Opportunity Grants program or ROTC scholarships), the funds should be reported in the agency funds group rather than in the current funds group.

The recipient of an outright grant is not required to perform service to the institution as a consideration for the grant, nor is the recipient expected to repay the amount of the grant to the funding source. When services are required in exchange for financial assistance, as in the College Work-Study Program, the charges should be classified as expenditures of the department or organizational unit to which the service is rendered. Aid provided to students in the form of tuition or fee remissions also should be included in this category. However, remissions of tuition and fees granted due to faculty or staff status, or because of family relationship of students to faculty or staff, should be recorded as staff benefit expenditures in the appropriate functional expenditure category.

In addition to defining financial aid expenses by the EPC assigned to programs and projects, these expenses are also reflected in student aid expense accounts 770000-772499. These accounts must only be used if there are no services required in exchange for the support. If services are required in any form, then that payment should be reflected as a type of salary expense or an employee benefit expense. For financial reporting purposes, all expenses in this range of accounts are classified on the Scholarship and Fellowship line regardless of the EPC on the program or project in which they are booked. All other expenses of the program or project are then classified according to the EPC assigned to that program or project. For example, Athletics programs are assigned EPC 2000, auxiliary enterprise. If any student aid expenses (accounts 770000-772499) are booked in the Athletics programs, those expenses will be classified on the Scholarship and Fellowship line of the financial statements. All other expenses of the Athletic programs (salaries, benefits, operating expense, travel, etc.) will be classified on the Auxiliary Operating Expenditure line.

EPC 1800 must only be assigned to programs and projects where all expenses in that program or project are considered to be financial aid. For example, if there is a training grant whose purpose is to provide financial support to a student in the form of stipend payments, tuition payments, paying for books and perhaps costs of doing research on a thesis or dissertation, then that project should be assigned EPC 1800. All expenses of that project would then be classified as scholarship and fellowships even though the appropriate natural classification of the individual expenses charged to the project was used.

Internal Service Centers (2100)

An internal service center (ISC) is an entity created primarily to provide goods/services to other institutional departments or organizational units. Incidental sales to the public are permitted. Some ISCs have a substantial amount of sales to the public, such as electricity sales to Public Service Company by Co-generation and long distance service sales to students by Telecommunication Services. In these situations, looking at the customer base and revenues streams for each does not provide a clear-cut decision regarding whether to classify the entity as an ISC or an auxiliary enterprise. Therefore, professional judgment must be used to determine the primary reason the entity was created. In each of these two cases, the entity was created primarily to provide services to institutional departments and organizational units. Therefore, management's intent was to create an ISC, which is how these two entities are classified.

The Audit Guide SOP page 53 says that interdepartmental transactions between service departments and storerooms and other institutional departments or offices should not be reported as revenues of the service departments, but rather as reduction of expenditures of such departments, since these transactions are essentially interdepartmental transfers of costs.[i] The billed price of services and materials obtained from service departments and central stores by offices and departments of the institution should be accounted for as expenditures of those offices and departments, just as if they had been obtained from sources outside the institution. Any difference between costs and billed prices as recorded in the service department accounts, whether debit or credit, should be reported under the Institutional Support expenditures classification.

All ISCs are accounted for in the Auxiliary Internal Service Center Fund (Fund 28), except for Cogeneration and Telecommunication Services which are in Fund 20 due to their TABOR Enterprise designation. Therefore, all Fund 28 FOPPS should have an EPC of 2100, and no FOPPS outside of Fund 28 (with the exceptions of Cogeneration and Telecommunication Services) should have an EPC of 2100.

While the SOP requires that ISC sales not be reported as revenue, but rather as a reduction of expense, ISC managers need to be able to track their revenue separate from their expenses. Therefore, revenue accounts 380000-389999 have been established specifically for ISC sales to other departments or offices. Sales to private individuals such as students, faculty, staff, businesses, or Agency Fund FOPPS are true revenue to the institution, and must be recorded as miscellaneous revenue in accounts 325000-334999. It would be inappropriate to use the auxiliary revenue accounts for these sales, even the long distance sales to students, because these entities are not classified as auxiliary enterprises. The purchasing FOPPS will record expense in an expense account as if the purchase had been made from an outside vendor.

In order to meet the reporting requirement, the university's financial reports combine the Interdepartmental (IN) revenue and expense account amounts of ISCs on the Institutional Support expenditures category.

Non-ISC Sales Between Departments

To further understand the concept of non-ISC sales between departments, this section will look at non-ISC sales in the context of all internal sales.

Occasionally one department will provide services to another department for a fee, or will sell unneeded supplies or equipment to the other department, even though neither department is a designated as an ISC. These sales can be just occasional, casual business transactions between departments, or they can be part of one department's role and mission, as is the case with Facilities Management. Facilities Management is designated as an Operation and Maintenance of Plant department (EPC1700) and not an ISC (EPC2100). Their role and mission is to maintain the physical plant of the campus. Since Facilities Management has the staff and expertise needed for their role and mission, they also offer to do work on a fee basis at the request of departments. Just like the activities of an ISC, these interdepartmental transactions must be recorded in a way so as to not inflate the revenue and expense of the institution through internal business activity.

Interdepartmental sales and purchases of goods and services (payment between FOPPS for goods/services provided) occur in one of three contexts.

Internal Service Center Sales (IN)
    • The selling department is a formal Internal Service Center (ISC) in a Fund 28 FOPPS as discussed above.
Auxiliary Enterprise Interdepartmental Sales
    • Auxiliary Enterprises are established to sell goods and services to outside parties, but will have miscellaneous sales to other University departments as discussed above.
Other Interdepartmental Revenue (ID)
    • The selling department is another type of university department in either Fund 10, 20, 26, or 29 (i.e., not an Internal Service Center or an Auxiliary Enterprise). Departments in these FOPPS were set up for purposes other than to provide goods/services to other departments, but will occasionally do so. In other words, this category refers to those miscellaneous transactions providing goods or services from one department to another, e.g., sale of manufactured chemicals, sale of a professor's time to conduct a study, facility repair services, housing services, police services, etc. Note: FOPPS in Funds 28, 30, 31, 34, 50, 71, 72, 73, 74 and 78 cannot be selling departments for other interdepartmental sales (ID). The selling FOPPS will record revenue for other interdepartmental revenue (ID) in accounts 390000-399999 (Other ID Revenue).

The purchasing FOPPS must use an expense account from the designated list of Other Interdepartmental Expense accounts (Other ID Expense accounts). Departments cannot use just any expense account from the full chart of accounts.

Each internal sale and purchase determined to be ID revenue must use the designated ID accounts in order to identify both sides of these transactions and thus report them on the university's financial statements and in the state's accounting system in a manner that does not inflate total revenue and expense resulting from internal sales. The department recording the transaction (usually the selling department) is responsible for ensuring the designated ID accounts are used on both the selling and purchasing FOPPS.

Fund Management - Transfers

Transfers are the movement of cash and fund balance from one fund to another. No goods or services are provided in exchange for the cash transfer. Remember that the Audit Guide ¶2.03 defines a fund as an accounting entity with a self-balancing set of accounts for recording assets, liabilities, fund balance, and changes in the fund balance. A portion of the assets is cash, and there are occasions when management wants to move cash and fund balance from one fund to another fund without involving a sale of goods or services between the two FOPPS. Examples include funding a new program for start-up costs, funding a capital construction project, or funding a renewal and replacement reserve. Transfers are further classified as mandatory or voluntary (or non-mandatory).

Mandatory Transfers

Mandatory transfers include transfers from the current funds group to other fund groups arising out of (1) binding legal agreements related to the financing of educational plant, such as amounts for debt retirement, interest, and required provisions for renewals and replacements of plant not financed from other sources and (2) grant agreements with agencies of the federal government, donors, and other organizations to match gifts and grants to loan and other funds. Mandatory transfers may be required to be made from either unrestricted or restricted current funds.

  • Mandatory transfer use accounts 990000-994999.

Voluntary Transfers

Voluntary transfers include those transfers from the current funds group to other fund groups made at the discretion of the governing board (management) to serve a variety of objectives, such as additions to loan funds, additions to quasi-endowment funds, general or specific plant additions, voluntary renewals and replacements of plant, and prepayments on debt principal. Voluntary transfers also may involve the re-transfer of resources back to the current funds. Cash and fund balance transfers should not be done by moving revenue or expense.

  • Voluntary transfers use accounts 995000-999999.

Restrictions on Transfers

Cash transfers are not permitted between all fund combinations. For example, the transfer of cash from the restricted current fund to the unrestricted current fund changes the nature and financial reporting of that cash. The transfer of cash between an agency fund and any other fund is never allowed, since agency funds represent an outside, private interest, and the processing of gifts to the university is guided by various administrative policies.

The following table shows the fund combinations where it is allowable to make cash transfers. To use this table, identify the fund of the FOPPS that is going to give up the cash (the From fund) on the left hand side of the table. Next, identify the FOPPS that is going to receive the cash (the To fund) along the top row of the table. If the intersection of these two funds says Yes, then a cash transfer is allowable between the two FOPPS. If the intersection is blank, then a cash transfer is not permitted between the two FOPPS.

Cash Transfer Table

TO FUND

10

11

20

26

28

29

30

31

34

50

71

72

73

74

78

80

99

10

BJE

yes

yes

yes

yes

yes

yes

yes

11

201

yes

yes

yes

yes

yes

yes

yes

F

26

yes

yes

yes

yes

yes

yes

yes

R

28

yes

O

29

yes

yes

yes

yes

yes

yes

yes

M

30

31

F

342

yes

yes

U

50

N

71

yes

yes

yes

yes

yes

yes

yes

yes

yes

D

72

yes

yes

yes

yes

73

yes

yes

yes

yes

yes

yes

yes

yes

74

78

yes

yes

yes

yes

yes

yes

yes

80

yes

99

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