accounting i: introduction to university accounting accounting i: introduction to university...

Welcome!

Accounting I: Introduction to University Accounting

Susan Moore

Accounting & Financial Services

General Accounting

General Accounting Division, Accounting & Financial Services 2

Agenda

Introductions

Course objectives

TopicsAccounting ConceptsFund Accounting OverviewThe Chart of AccountsFinancial ReportingQuestions and Answers


Introductions


By the end of class, you will be able to…

Talk like an accountant Identify and classify university revenuesIdentify and classify university expensesSet up an account in DaFIS and find it in the Annual Schedules

Course Objectives


Accounting Concepts

Accounting Standards

Balance Sheet: Statement of Net Assets

Income Statement: Statement of Revenues, Expenses and Changes in Net Assets

Double Entry Accounting System

Restricted vs. Unrestricted Funds


Accounting Standards

Why have them?ReliabilityComparability

What are they?GAAP – generally accepted accounting principalsGASB – Governmental Accounting Standards BoardFASB – Financial Accounting Standards BoardNACUBO – National Association of Colleges & University Business Officers


Balance Sheet

Statement of Net AssetsAssetsLiabilitiesFund Balance

Permanent Accounts


Assets

Probable future economic benefit

What you own

Normal balance = debit


Assets

Examples:CashBuildings & Capital EquipmentPrepaid Expense/Deferred ExpenseInventoryAccounts Receivable


Liabilities

Probable future sacrifices of economic benefit arising from present obligations

What you owe

Normal balance = credit


Liabilities

Examples:Accounts PayableSalariesDeferred IncomeDebt


Exercise: Asset or Liability?

Bill for cellular phone service

Network server from Sun

Petty cash fund

Invoice to University of Nebraska for poultry diagnostic services

Purchase of textbooks for resale

Purchase of a copier on a lease-purchase agreement


Fund Balance

Net Assets

Beginning Balance + Income - Expense = Ending Balance

What you are worth

In private = retained earnings


Income Statement

Statement of Revenues, Expenses and Changes in Net Assets

Statement of how you did each yearIncome and expenses for the yearClosed at year end

Temporary Accounts


Income Statement

Revenues – Expenses = Net Income

Net Income +/- Other Fund Balance Changes

=Total Change in Net Assets


Revenues

External income to the university

Examples:State appropriationsStudent feesContracts and grantsPatient feesSales and services to outside entities


Expenses/Expenditures

Goods and services purchased to meet the mission of the university

Salaries and wagesBenefitsGoods and materialsServices


Recharges

Charge to departments for goods and services provided internally

Like income to department providing the good/serviceInternal rates = Recovery of costs incurred to provide goods/service (no profit)When recharge and expense totaled across UC, net effect is original cost


Expense Reimbursement

External payment for specific cost incurred by the university

Examples:Reimbursement by employees for personal telephone calls

Not a revenue but a reduction of expense


Liens and Encumbrances

Firm commitment or obligation placed against funds for goods or services not yet received

Reduces the balance in the fund

NOT in the Financial Statements


Double Entry Accounting

Debits always equal credits

Every transaction has 2 entries:Debit (+)Credit (-)


Debits

Generally shown as a positive (+) numberAssetsExpensesExamples:

CashEquipmentRoadsBuildingsBooks


Credits

Generally shown as a negative (-) number

Liabilities

Revenues

Examples:Student feesSale of genetically enhanced miceVacation time earned but not takenCash received before June 30th for July conference


Exercise:

DOUBLE ENTRY ACCOUNTING -

Putting it all together


For Profit vs. Not For Profit

Attribute For-Profit Business Public University

Purpose Profit for owners/shareholdersService to beneficiaries at cost, below cost or at no cost.

No Profit!

OperationsProduction and sale of products and/or services at a price to exceed cost to make and sell

•Providing services•Fund raising

Measures of successAmount of profit, return on investment, financial condition

Percent of receipts expended for stated purpose. Amount of funds obtained.

Interest and relationshipsCustomer satisfaction is essential; management subject to investor control

Contributors/tax-payers are essential; management subject to political control

Accounting standardsFinancial Accounting Standards Board (FASB)

Governmental Accounting Standards Board (GASB) and Financial Accounting Standards Board (FASB)


Restricted Resources

Generally unique to non-profit/public

Limitations on useExternal conditionsCannot restrict internally

Examples:DonorsContractsFederal or other governmental entities


Unrestricted Resources

No external conditions

Examples:State AppropriationsGifts without conditions


Designated Resources

Not RestrictedConditions placed by the University of California Regents, Office of the President or ChancellorExamples:

Faculty Research GrantsOpportunity Funds


Fund Accounting Overview

Tracks the receipt and use of resources by the source of the funds

Defines the “color” of the money

Used by all Higher Education institutions


Fund Groups Summary

Current

Loan

Endowment

Annuity and Life Income

Plant

Agency


Current Funds

Educational and general

Auxiliary enterprises

Hospital

Affiliated organizations


Sources of Current Funds

State appropriations

Tuition and fees

Grants and contracts

Gifts

Endowment income

Overhead recovery funds

Sales and services


State Appropriations

General Funds (19000-19XXX)Appropriations from State General Fund as part of annual State budget processUC General Funds


Student Fees

Registration Fee (20000)

University Extension

Continuing Education


Other Fees

Professional Degree Fees

Student Approved Mandatory Fees

Course Material Fees


Extramural Funds

Contracts and Grants

Gifts

Endowment Income

Managed by Extramural


Indirect Cost Recovery Funds

Educational Fund (05397)Garamendi Funds – for research facilitiesOff-the-Top Funds (69750)Opportunity Funds (07427)


Sales & Service: Educational Activities

Definition: Revenue related only incidentally to the conduct of teaching, research and service

Funds (income) supports the activities


Sales & Services: Auxiliary Enterprises

Residence halls

Student union

Parking and transportation

Bookstore

Athletics

Revenues Must Cover Expenses


Match Revenue to the Source

1. Sale of genetically enhanced mouse

2. “Autopsies of the Rich and Famous” continuing medical education

3. Faculty research grant

4. Sale of parking decal

5. Grant from National Science Foundation

A. Auxiliary

B. General Funds

C. Sales and Services- Educational Activites

D. Contracts and Grants

E. Student Fees

Answers: 1-C, 2-E, 3-B, 4-A, 5-D


Other Fund Groups

Loan

Endowment

Plant

Agency


Loan Funds

Resources loaned to students, faculty or staff

Interest usually charged

Principal must be repaid


Endowment and Similar Funds

Endowment funds

Term endowment funds

Quasi-endowment

Earnings (interest) moved to current funds to spend


Plant Funds Subgroups

Unexpended

Renewals and replacements

Retirement of indebtedness

Investment in plant


Agency Funds

Funds held for othersStudent organizations Other third-party

At year-endIncome less expenses = Cash (Asset)Cash held for others = Liability

The money does not belong to UC


Identify the fund source …

…by the OP Fund Number!


OP Fund Numbers

5 digits

Identifies the source of the revenue

Restricted vs. non restricted


Use of Funds

Instruction

Research

Community Service


Current Funds Expenditures

Expenditures defined by:Higher Education Function Code (HEFC) and

Uniform Accounting Structure (UAS)

Applied to all Higher Education institutions


Current Funds Expenditures

Expenditure CategoriesEducation and GeneralAuxiliary (Self Supporting)Hospital


Education and General

InstructionGeneral AcademicDepartmental ResearchContinuing EducationUniversity Extension



Research – Sponsored ProjectsPrincipal InvestigatorPeriod of performanceSet scope of workReporting requirements



Public ServiceCommunity serviceCooperative extension servicesOutreach



Academic SupportAcademic administration Course and curriculum developmentLibraries



Student ServicesAdmissionsStudent recordsStudent health services



Institutional SupportExecutive managementFiscal and business operationsGeneral administrative and logistical services



Operation and Maintenance of PlantBuilding maintenance and custodial servicesLandscape and grounds maintenanceMajor repairs and renovations



Scholarships and FellowshipsStudent grantsTrainee stipendsTuition and fee waivers


Auxiliary Enterprises

Provide goods and services to students, faculty and staff

Charge a fee directly related to costs

Managed as a self supporting activity


Hospital

Direct patient care

Health care supportive services

Hospital administration

Hospital physical plant operation


Reserves

Used to accumulate funds from the net revenue of self supporting activities for the purchase of new equipment, buildings and other capital projects


Expenditure Classification

1. Breast Cancer Research Program Award "Regulations of Estrogen Response by Corepressors"

A. Organized ResearchB. InstructionC. Academic Support

MULTIPLE CHOICE QUESTIONS



2. Utilities purchased by facilities for recharge to campus units.

A. Academic SupportB. Student ServicesC. Operation and Maintenance of Plant



3. Approved research project budget that includes graduate student stipend.

A. Organized ResearchB. Scholarships and FellowshipsC. Academic Support



4. New faculty start up costs including research equipment and furniture.

A. Organized ResearchB. Academic SupportC. Instruction



5. Seminar on Pests and Pest Management given by the Cooperative Extension Master Gardeners.

A. Organized ResearchB. Public ServiceC. Instruction


Chart of Accounts

A systematic measurement of the source and use of funds.


What is the Chart of Accounts?

Blueprint for the accounting system

Sorts and classifies transactions

Allows for identification of: Restricted vs. UnrestrictedPurpose or use of fundsOwnership vs. Agency

“The keys to the kingdom”


Chart of Accounts

Full Accounting Unit (FAU)ChartAccountObject Optional fields (in DaFIS)

Sub accountSub objectProject


Full Accounting Unit - Chart

2 LocationsUCD Campus Systemwide

UCD Campus Charts3 - CampusS - School of MedicineH - Teaching hospital (UCDMC)

SystemwideL - Agricultural & Natural Resources (ANR) and Multiple Research Units (MRU)


Full Accounting Unit - Account

DaFIS Account7 character alphanumeric

Tied to:OP Fund Number (fund source)OP Account Number (account purpose)

Account attributesDescribes the purpose & the owner of the account Contains the financial attributes to properly record and report transactions


DaFIS Account Attributes

Organization4 character alphanumericEvery DaFIS account is tied to an organizationNormally the unit incurring the transactions in the account



OP FUND5 digits that identifies the fund source of the DaFIS account.Assigned by Award document, OP, Extramural or General AccountingOP funds grouped into sub funds – a general classification of the fund source



OP Account6 digits that identify the transaction classification

Balance sheet = 1XXXXXRevenue accounts = 2XXXXXExpense accounts = 4XXXXX to 79XXXXAgency accounts = 8XXXXX


Building an OP Account


OP Accounts

First 2 digits = Higher Education Function Code

Second 2 digits are the School/College

Last 2 digits are the Department


OP Accounts

OP Account also hasAccount Group Code (Account Group)Uniform Accounting Structure Code (UAS)Academic Discipline (Acad Disc)National Science Foundation Code (NSF POS)Annual Report Code (Report Code)Organization Code (ORGN)


OP Accounts

Why?REPORTING

Financial statementsSurveysManagement DecisionsState government budget decisionsFunding agencies


OP Accounts – UAS Code

UAS Code is similar to the HEFC. Provides a uniform presentation of expenses across all university campuses

See Annual Schedule B


OP Accounts – Annual Report Code

Annual Report Code – used to describe major programs in Schedule C and Schedule C – Overhead

The same Annual Report Code can be used for more than one OP account


OP Accounts - Organization

Each OP Account is “owned” by an organization

Expenditures associated with an OP account reported under the school or college of the OP account


OP Accounts - Organization

Check your OP Account organizations to make sure they are reporting to your school/college

Resources:DS226 Annual Report Codes by OrganizationTP – Reference Tables – Account

Click on OP Account and any attribute


DaFIS Account - Recap

Identifies:Source of Funds – OP FundUse of Funds – OP Account

Higher Education FunctionSchool/College Major programs

Account owner


Full Accounting Unit - Object

4-character alphanumeric

Every transaction must have an object code

AttributesDescribes the activity and type of the financial transaction

Summarized and reported on the Financial Report


DaFIS Object Attributes

Object Consolidations4-character alphanumericSummary object code used for budget documents

Examples:BLSH (Balance Sheet)INCO (Income)SUBG (General Assistance)SUB3 (Supplies & Expense)



Object TypeCategorizes each transaction for financial statement presentation.Examples:

AS (Assets)LI (Liability)FB (Unexpended balance)IN (Income)EX (Expense)



Other Object Code AttributesObject LevelObject Sub Type

Used mostly for ad hoc reporting


Balance Sheet Object Codes

Always used in balance sheet accountsInventories (0470)Unexpended balance (0000)

Sometimes used in expense accounts At year-end, moved to balance sheet accounts, then reversed in new year

Account Receivable (0299)


Revenue Object Codes

Can be used in revenue accounts (IN) or expense accounts (EX)

Examples:Income = 0060Campus assessments/NUD = 0066, 0068, 0076Over/short cash = 0056

No income in General Funds


Expense Object Codes

More than 5,000 expense object codes

Hospital & School of Medicine have most specific object codes

Examples:7xxx Series – Services8xxx Series – Supplies9xxx Series – Equipment Expenses


Optional FAU Fields

Allow departments to meet internal reporting needs

Sub accountSub objectProject

Not used in external reporting


Financial Reporting

Who Cares?ManagementUniversity of California Office of the President (UCOP)Regents, State legislatorsOther Stakeholders (Donors, Creditors)External Users (Other universities, researchers, analysts)


Financial Reporting

Two Major ReportsAnnual ReportAnnual Financial Schedules


Annual Report

Financial Condition of the university

Management discussion and analysis

Comparable to other public universities

Used to determine the value of a potential investment (donors and creditors)


Annual Financial Schedules

Schedule A Revenues by fund source

Schedule B Expenses by Uniform Accounting Structure and Academic Discipline

Schedule C Expenses by School/College, Higher Education Function and Annual Report Code

Schedule D Expenses by fund source


Annual Financial Schedules

Uses:Overhead distribution (Schedule C – Overhead)Research expendituresComparability of revenues/expenses to other UC campuses and other universities


Test your knowledge !!


To review…

An asset is…A. What you ownB. CashC. Accounts receivableD. All of the above


To review…

A liability is…A. Office suppliesB. Accounts payableC. Prepaid expensesD. None of the above


To review…

Fund balance is…A. Same as unexpended balanceB. Accumulation of net revenuesC. Debt on new buildingD. A & B above


To review…

University Fund Groups do not include…A. CurrentB. AgencyC. PutnamD. Plant


To review…

Sources of current fund revenue include…A. Retirement party donationsB. Revenue from sale of sweet potato cropC. Nonresident undergraduate tuitionD. B & C above


To review…

True or False:

OP accounts classify expenses by Higher Education Function.

TRUE


To review…

What financial reports are used by external stakeholders…

A. Annual financial reportB. Annual financial schedulesC. Decision Support transaction reportD. A & B above


Now you can…

Speak the language of accountingIdentify and classify university revenuesIdentify and classify university expensesSet up an account in DaFIS and find it in the Annual Schedules


Time for…

accounting i: introduction to university accounting accounting i: introduction to university...

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