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Fund Accounting


Determining financial condition. Planning and budgeting. Objectives of Fund Accounting ... financial condition and operating results. Financial Statements ... – PowerPoint PPT presentation

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Title: Fund Accounting

Fund Accounting
  • Jim Corkill
  • Sandra Featherson
  • Accounting Services Controls
  • November 2007

  • Goals/Objectives
  • Definitions
  • Fund Groups
  • Budgeting
  • Profit vs. Non-Profit Organizations
  • Financial Statements

  • Concepts of fund accounting
  • Understanding the various fund groups
  • How are we different than a profit organization?

What is Fund Accounting?
  • A method of segregating resources into categories
    (i.e., funds), to identify both the source of
    funds and the use of funds.

Objectives of Fund Accounting
  • Demonstrating accountability and stewardship
  • Determining financial condition
  • Planning and budgeting

Objectives of Fund Accounting
  • Evaluating organizational and managerial
  • Determining/forecasting cash flow
  • Communication

  • Fund A fund is a segregation of resources
    established to control and monitor resources and
    to help ensure and demonstrate compliance with
    legal/administrative requirements.

  • Fund Balance Equity within a fund.
  • Assets Liabilities Fund Equity
  • Fund Assets Fund Liabilities Fund Balance
  • Assets Claims Against Assets Fund Balance
  • The fund balance may also be known as Net Assets,
    Capital, or Net Worth.

Chart of Accounts
  • How do we track the sources and uses of funds?

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

Fund Groups
  • Six basic fund groups
  • Current Fund
  • Plant Fund
  • Endowment Similar Funds Group
  • Annuity Life Income Group
  • Loan Fund
  • Agency Fund

Current Fund
  • Group of funds expendable for operating purposes
    in support of the institutions mission expected
    to be expended in the near term.
  • Unrestricted
  • Restricted
  • Designated Funds

Current Fund
  • Unrestricted Funds Includes all funds received
    in which a donor or other external agency has not
    specified the purpose(s) for which the funds
    should be expended.
  • Examples
  • General funds
  • Reg. Fee funds
  • Unrestricted gifts

Current Fund
  • Restricted Current Funds Includes funds
    available for financing operations, but that are
    limited to specific purposes, programs, or
    departments specified by donors or external
  • Examples
  • Federal funds for contracts grants
  • Work Study funds
  • Endowment income

Current Fund
  • Designated Current Funds Unrestricted funds the
    governing body designated for a special purpose.
  • Examples
  • Special State Appropriations
  • Tobacco Research
  • Breast Cancer Research

Scenario 1
  • For each of the fund numbers and titles
    listed, mark the fund either
  • a) Restricted
  • b) Unrestricted
  • c) Designated
  • For each transaction, assign the
    appropriate fund number.

Plant Fund
  • The plant fund group is used to record
    acquisition of assets, replacement of assets, pay
    off debt, and record the investment in assets
    (equity). There are four subgroups of plant
  • Unexpended Plant Funds
  • Renewal and Replacement
  • Retirement of Indebtedness
  • Investment in Plant

Plant Fund
  • Unexpended Plant Fund Used for recording
    construction or acquisition of long-lived assets.
    This includes items such as
  • Land and building acquisition
  • Construction of new facilities
  • Renovation
  • Remodeling

Plant Fund
  • Renewal and Replacement Used for extraordinary
    repairs and maintenance or equipment replacement.
  • Retirement of Indebtedness Used to record the
    accumulation of funds and disbursement for
    repayment of long term debt for assets.

Plant Fund
  • Investment in Plant Used to record the equity of
    campus assets. This subgroup in plant should
    reflect the total amount of resources expended
    for additions to assets.

Discussion 1
  • For each transaction or situation, name the
    correct fund (Current or Plant) where it should
    be recorded.

Endowment Similar Funds
  • This fund group is used to record donations to
    the University which require that the principal
    is invested and only the interest income is
    expendable. Interest income earned on these
    funds is returned to the campus and expended in
    the current funds group.

Endowment Similar Funds
  • There are four types of endowments
  • 1)True Endowments (or Permanent Endowments)
  • Donors have stipulated that the principal of the
    gift is to remain in perpetuity and is to be
    invested for the purpose of producing present and
    future income.

Endowment Similar Funds
  • Four types of endowments, contd
  • 2)Funds Functioning as Endowments
  • The governing board of the institution, rather
    than the donor or other external agency, has
    determined that funds (usually a gift) are to be
    retained and invested as an endowment.
  • Large amounts - usually 50,000.

Endowment Similar Funds
  • Four types of endowments contd
  • 3)Funds Held in Trust by Others
  • These are funds derived from private gifts and
    bequests that are held in trust for investment by
    outside trustees, and the University is
    designated as the income beneficiary.

Endowment Similar Funds
  • Four types of endowments contd
  • 4)Living Trusts, Annuity Trusts, and Unitrusts
  • These are donations where the terms stipulate
    that income must be paid to a designated
    beneficiary for a specified period, which in most
    cases is the duration of the beneficiarys life.
    At the end of the specified payment period,
    income from these funds reverts to the University.

Annuity Life Income Funds
  • Annuity Institution is obligated to pay
    stipulated amounts periodically to the donors
    beneficiary. When the agreement terminates, the
    remaining funds become property of the

Annuity Life Income Funds
  • Life Income Established when a college/
    university is the trustee and remainder for a
    charitable remainder trust. Income and expenses
    are paid to beneficiary for life. Principal
    returns to the institution when beneficiary dies.

Scenario 2
  • Your department has received a 150,000 gift to
    be used for operating expenses for the Biology
    department. The chair asks you to make a
    recommendation about turning it into an
    endowment. What do you need to consider to make
    the recommendation?

Loan Fund
  • Used to record activity on funds available for
    loans to students, faculty, and staff.
  • Examples include
  • Student Financial Aid Loan Fund
  • Faculty Home Mortgage Loan
  • Staff Emergency Loan Fund

Agency Fund
  • Used to record funds held by the University for
    outside groups who have a close relationship with
    the University.
  • Funds in the Agency Fund group do not belong
    to the Regents and are not reported in the UC
    Financial Statements.

Agency Fund
  • Examples
  • Scholarship funds
  • Fraternities and sororities
  • The UCSB Foundation
  • UCSB Alumni Association

Agency Fund
  • Accounting for Agency Accounts
  • Transactions are recorded as a balance sheet
    item, not as income and expense.
  • To keep their accounting activity separate, a
    special account series is used.

Agency Fund
  • Accounting for Agency Accounts
  • During fiscal closing, any balances in these
    agency accounts are transferred to a balance
    sheet payable account.
  • Agency accounts affect the campus STIP earnings.
    Therefore, the accounts should have a positive
    or zero balance at all times.

Financial Transfers Between Fund Groups
  • Mandatory
  • Non-Mandatory
  • Temporary
  • Permanent

  • Budgets are the most widely used method for
    control in colleges universities.
  • Fund accounting assists in budget control by
    providing information to enable
  • Managers to keep expenditures within
  • Demonstration of compliance with funding

  • Budget entries are the reverse of financial
  • Revenue entries are budgetary debits.
  • Appropriations to expenditure accounts are
    budgetary credits.

  • In managing available resources in a non-profit
    organization, we need to recognize future
    commitments of resources prior to an actual
  • Encumbrances (or liens) are used to reflect these
    commitments in the accounting system and attempt
    to prevent overspending.

  • When the order/services are received and the
    University is invoiced, the original encumbrance
    entry is cancelled, and the expense and related
    cash payment is recorded.

Profit vs. Non-Profit Organizations
  • Profit Organizations Accounting emphasis is on
    profit determination.
  • Non-Profit Organizations Accounting emphasis is
    on controlling funds and showing the sources and
    uses of funds.

Profit vs. Non-Profit Organizations (Historically)
  • Profit Organization
  • Generally have only one accounting/business
  • Encumbrances are not used.
  • Accounting information on costs and revenues can
    usually be readily aggregated.
  • Non-Profit Organization
  • Have a multitude of accounting/business entities
    (various funds).
  • Encumbrances are used.
  • Accounting information is segregated and can be
    difficult to aggregate.
  • Budgeting.

Profit vs. Non-Profit Organizations
  • Profit Organization
  • Basic Financial Statements
  • Balance Sheet
  • Income Statement
  • Statement of Cash Flows
  • Statement of Stockholders Equity
  • Non-Profit Organization
  • Basic Financial Statements
  • Statement of Net Assets
  • Statement of Revenues, Expenses, and Changes in
    Net Assets
  • Statement of Cash Flows

Financial Statements
Purpose To communicate financial condition and
operating results.
  • Internal Users
  • Managers
  • Analysts/Internal Auditors
  • Executive Campus Mgmt.
  • Office of the President
  • Regents
  • External Users
  • External Auditors
  • Creditors/Lenders
  • State Government
  • Other Colleges
  • Granting Agencies

Financial Statements
  • What do users want to know?
  • Is the institution financially healthy?
  • Is the institution financially better off or not
    at the end of the year than it was at the
  • How does the institution compare with others?
  • Can the institution repay debt it may be taking

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