Accounting I: Introduction to University Accounting

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Accounting I Introduction to University
Accounting

• Susan Moore
• Accounting Financial Services
• General Accounting

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Agenda

• Introductions
• Course objectives
• Topics
• Accounting Concepts
• Fund Accounting Overview
• The Chart of Accounts
• Financial Reporting
• Questions and Answers

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Introductions
4
Course Objectives

• By the end of class, you will be able to
• Talk like an accountant
• Identify and classify university revenues
• Identify and classify university expenses
• Set up an account in DaFIS and find it in the
  Annual Schedules

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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

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Accounting Standards

• Why have them?
• Reliability
• Comparability
• What are they?
• GAAP generally accepted accounting principals
• GASB Governmental Accounting Standards Board
• FASB Financial Accounting Standards Board
• NACUBO National Association of Colleges
  University Business Officers

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Balance Sheet

• Statement of Net Assets
• Assets
• Liabilities
• Fund Balance
• Permanent Accounts

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Assets

• Probable future economic benefit
• What you own
• Normal balance debit

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Assets

• Examples
• Cash
• Buildings Capital Equipment
• Prepaid Expense/Deferred Expense
• Inventory
• Accounts Receivable

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Liabilities

• Probable future sacrifices of economic benefit
  arising from present obligations
• What you owe
• Normal balance credit

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Liabilities

• Examples
• Accounts Payable
• Salaries
• Deferred Income
• Debt

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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

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Fund Balance

• Net Assets
• Beginning Balance Income - Expense Ending
  Balance
• What you are worth
• In private retained earnings

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Income Statement

• Statement of Revenues, Expenses and Changes in
  Net Assets
• Statement of how you did each year
• Income and expenses for the year
• Closed at year end
• Temporary Accounts

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Income Statement

• Revenues Expenses Net Income
• Net Income /- Other Fund Balance Changes
• Total Change in Net Assets

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Revenues

• External income to the university
• Examples
• State appropriations
• Student fees
• Contracts and grants
• Patient fees
• Sales and services to outside entities

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Expenses/Expenditures

• Goods and services purchased to meet the mission
  of the university
• Salaries and wages
• Benefits
• Goods and materials
• Services

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Recharges

• Charge to departments for goods and services
  provided internally
• Like income to department providing the
  good/service
• Internal rates Recovery of costs incurred to
  provide goods/service (no profit)
• When recharge and expense totaled across UC, net
  effect is original cost

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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

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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

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Double Entry Accounting

• Debits always equal credits
• Every transaction has 2 entries
• Debit ()
• Credit (-)

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Debits

• Generally shown as a positive () number
• Assets
• Expenses
• Examples
• Cash
• Equipment
• Roads
• Buildings
• Books

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Credits

• Generally shown as a negative (-) number
• Liabilities
• Revenues
• Examples
• Student fees
• Sale of genetically enhanced mice
• Vacation time earned but not taken
• Cash received before June 30th for July conference

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Exercise

• DOUBLE ENTRY ACCOUNTING -
• Putting it all together

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For Profit vs. Not For Profit
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Restricted Resources

• Generally unique to non-profit/public
• Limitations on use
• External conditions
• Cannot restrict internally
• Examples
• Donors
• Contracts
• Federal or other governmental entities

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Unrestricted Resources

• No external conditions
• Examples
• State Appropriations
• Gifts without conditions

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Designated Resources

• Not Restricted
• Conditions placed by the University of California
  Regents, Office of the President or Chancellor
• Examples
• Faculty Research Grants
• Opportunity Funds

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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

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Fund Groups Summary

• Current
• Loan
• Endowment
• Annuity and Life Income
• Plant
• Agency

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Current Funds

• Educational and general
• Auxiliary enterprises
• Hospital
• Affiliated organizations

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Sources of Current Funds

• State appropriations
• Tuition and fees
• Grants and contracts
• Gifts
• Endowment income
• Overhead recovery funds
• Sales and services

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State Appropriations

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

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Student Fees

• Registration Fee (20000)
• University Extension
• Continuing Education

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Other Fees

• Professional Degree Fees
• Student Approved Mandatory Fees
• Course Material Fees

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Extramural Funds

• Contracts and Grants
• Gifts
• Endowment Income
• Managed by Extramural

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Indirect Cost Recovery Funds

• Educational Fund (05397)
• Garamendi Funds for research facilities
• Off-the-Top Funds (69750)
• Opportunity Funds (07427)

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Sales Service Educational Activities

• Definition
• Revenue related only incidentally to the conduct
  of teaching, research and service
• Funds (income) supports the activities

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Sales Services Auxiliary Enterprises

• Residence halls
• Student union
• Parking and transportation
• Bookstore
• Athletics
• Revenues Must Cover Expenses

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Match Revenue to the Source

• Sale of genetically enhanced mouse
• Autopsies of the Rich and Famous continuing
  medical education
• Faculty research grant
• Sale of parking decal
• Grant from National Science Foundation

• Auxiliary
• General Funds
• Sales and Services- Educational Activites
• Contracts and Grants
• Student Fees

Answers 1-C, 2-E, 3-B, 4-A, 5-D
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Other Fund Groups

• Loan
• Endowment
• Plant
• Agency

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Loan Funds

• Resources loaned to students, faculty or staff
• Interest usually charged
• Principal must be repaid

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Endowment and Similar Funds

• Endowment funds
• Term endowment funds
• Quasi-endowment
• Earnings (interest) moved to current funds to
  spend

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Plant Funds Subgroups

• Unexpended
• Renewals and replacements
• Retirement of indebtedness
• Investment in plant

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Agency Funds

• Funds held for others
• Student organizations
• Other third-party
• At year-end
• Income less expenses Cash (Asset)
• Cash held for others Liability
• The money does not belong to UC

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Identify the fund source
by the OP Fund Number!
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OP Fund Numbers

• 5 digits
• Identifies the source of the revenue
• Restricted vs. non restricted

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Use of Funds

• Instruction
• Research
• Community Service

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Current Funds Expenditures

• Expenditures defined by
• Higher Education Function Code (HEFC) and
• Uniform Accounting Structure (UAS)
• Applied to all Higher Education institutions

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Current Funds Expenditures

• Expenditure Categories
• Education and General
• Auxiliary (Self Supporting)
• Hospital

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Education and General

• Instruction
• General Academic
• Departmental Research
• Continuing Education
• University Extension

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Education and General

• Research Sponsored Projects
• Principal Investigator
• Period of performance
• Set scope of work
• Reporting requirements

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Education and General

• Public Service
• Community service
• Cooperative extension services
• Outreach

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Education and General

• Academic Support
• Academic administration
• Course and curriculum development
• Libraries

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Education and General

• Student Services
• Admissions
• Student records
• Student health services

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Education and General

• Institutional Support
• Executive management
• Fiscal and business operations
• General administrative and logistical services

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Education and General

• Operation and Maintenance of Plant
• Building maintenance and custodial services
• Landscape and grounds maintenance
• Major repairs and renovations

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Education and General

• Scholarships and Fellowships
• Student grants
• Trainee stipends
• Tuition and fee waivers

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Auxiliary Enterprises

• Provide goods and services to students, faculty
  and staff
• Charge a fee directly related to costs
• Managed as a self supporting activity

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Hospital

• Direct patient care
• Health care supportive services
• Hospital administration
• Hospital physical plant operation

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Reserves

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

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Expenditure Classification
MULTIPLE CHOICE QUESTIONS

• Breast Cancer Research Program Award "Regulations
  of Estrogen Response by Corepressors"
• Organized Research
• Instruction
• Academic Support

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Expenditure Classification

• Utilities purchased by facilities for recharge to
  campus units.
• Academic Support
• Student Services
• Operation and Maintenance of Plant

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Expenditure Classification

• Approved research project budget that includes
  graduate student stipend.
• Organized Research
• Scholarships and Fellowships
• Academic Support

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Expenditure Classification

• New faculty start up costs including research
  equipment and furniture.
• Organized Research
• Academic Support
• Instruction

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Expenditure Classification

• Seminar on Pests and Pest Management given by the
  Cooperative Extension Master Gardeners.
• Organized Research
• Public Service
• Instruction

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Chart of Accounts

• A systematic measurement of the source and use of
  funds.

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What is the Chart of Accounts?

• Blueprint for the accounting system
• Sorts and classifies transactions
• Allows for identification of
• Restricted vs. Unrestricted
• Purpose or use of funds
• Ownership vs. Agency
• The keys to the kingdom

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Chart of Accounts

• Full Accounting Unit (FAU)
• Chart
• Account
• Object
• Optional fields (in DaFIS)
• Sub account
• Sub object
• Project

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Full Accounting Unit - Chart

• 2 Locations
• UCD Campus
• Systemwide
• UCD Campus Charts
• 3 - Campus
• S - School of Medicine
• H - Teaching hospital (UCDMC)
• Systemwide
• L - Agricultural Natural Resources (ANR) and
  Multiple Research Units (MRU)

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Full Accounting Unit - Account

• DaFIS Account
• 7 character alphanumeric
• Tied to
• OP Fund Number (fund source)
• OP Account Number (account purpose)
• Account attributes
• Describes the purpose the owner of the account
• Contains the financial attributes to properly
  record and report transactions

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DaFIS Account Attributes

• Organization
• 4 character alphanumeric
• Every DaFIS account is tied to an organization
• Normally the unit incurring the transactions in
  the account

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DaFIS Account Attributes

• OP FUND
• 5 digits that identifies the fund source of the
  DaFIS account.
• Assigned by Award document, OP, Extramural or
  General Accounting
• OP funds grouped into sub funds a general
  classification of the fund source

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DaFIS Account Attributes

• OP Account
• 6 digits that identify the transaction
  classification
• Balance sheet 1XXXXX
• Revenue accounts 2XXXXX
• Expense accounts 4XXXXX to 79XXXX
• Agency accounts 8XXXXX

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Building an OP Account
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OP Accounts

• First 2 digits Higher Education Function Code
• Second 2 digits are the School/College
• Last 2 digits are the Department

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OP Accounts

• OP Account also has
• Account 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)

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OP Accounts

• Why?
• REPORTING
• Financial statements
• Surveys
• Management Decisions
• State government budget decisions
• Funding agencies

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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

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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

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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

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OP Accounts - Organization

• Check your OP Account organizations to make sure
  they are reporting to your school/college
• Resources
• DS226 Annual Report Codes by Organization
• TP Reference Tables Account
• Click on OP Account and any attribute

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DaFIS Account - Recap

• Identifies
• Source of Funds OP Fund
• Use of Funds OP Account
• Higher Education Function
• School/College
• Major programs
• Account owner

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Full Accounting Unit - Object

• 4-character alphanumeric
• Every transaction must have an object code
• Attributes
• Describes the activity and type of the financial
  transaction
• Summarized and reported on the Financial Report

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DaFIS Object Attributes

• Object Consolidations
• 4-character alphanumeric
• Summary object code used for budget documents
• Examples
• BLSH (Balance Sheet)
• INCO (Income)
• SUBG (General Assistance)
• SUB3 (Supplies Expense)

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DaFIS Object Attributes

• Object Type
• Categorizes each transaction for financial
  statement presentation.
• Examples
• AS (Assets)
• LI (Liability)
• FB (Unexpended balance)
• IN (Income)
• EX (Expense)

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DaFIS Object Attributes

• Other Object Code Attributes
• Object Level
• Object Sub Type
• Used mostly for ad hoc reporting

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Balance Sheet Object Codes

• Always used in balance sheet accounts
• Inventories (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)

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Revenue Object Codes

• Can be used in revenue accounts (IN) or expense
  accounts (EX)
• Examples
• Income 0060
• Campus assessments/NUD 0066, 0068, 0076
• Over/short cash 0056
• No income in General Funds

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Expense Object Codes

• More than 5,000 expense object codes
• Hospital School of Medicine have most specific
  object codes
• Examples
• 7xxx Series Services
• 8xxx Series Supplies
• 9xxx Series Equipment Expenses

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Optional FAU Fields

• Allow departments to meet internal reporting
  needs
• Sub account
• Sub object
• Project
• Not used in external reporting

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Financial Reporting

• Who Cares?
• Management
• University of California Office of the President
  (UCOP)
• Regents, State legislators
• Other Stakeholders (Donors, Creditors)
• External Users (Other universities, researchers,
  analysts)

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Financial Reporting

• Two Major Reports
• Annual Report
• Annual Financial Schedules

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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)

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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

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Annual Financial Schedules

• Uses
• Overhead distribution (Schedule C Overhead)
• Research expenditures
• Comparability of revenues/expenses to other UC
  campuses and other universities

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Test your knowledge !!
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To review

• An asset is
• What you own
• Cash
• Accounts receivable
• All of the above

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To review

• A liability is
• Office supplies
• Accounts payable
• Prepaid expenses
• None of the above

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To review

• Fund balance is
• Same as unexpended balance
• Accumulation of net revenues
• Debt on new building
• A B above

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To review

• University Fund Groups do not include
• Current
• Agency
• Putnam
• Plant

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To review

• Sources of current fund revenue include
• Retirement party donations
• Revenue from sale of sweet potato crop
• Nonresident undergraduate tuition
• B C above

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To review

• True or False
• OP accounts classify expenses by Higher
  Education Function.
• TRUE

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To review

• What financial reports are used by external
  stakeholders
• Annual financial report
• Annual financial schedules
• Decision Support transaction report
• A B above

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Now you can

• Speak the language of accounting
• Identify and classify university revenues
• Identify and classify university expenses
• Set up an account in DaFIS and find it in the
  Annual Schedules

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Time for
Questions ???
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Thank You !