Kế toán, kiểm toán - Chapter 15: Accounting for colleges and universities

Accounting for Colleges and Universities Chapter15Learning ObjectivesAfter studying Chapter 15, you should be able to:Distinguish between GAAP for public and private colleges and universities (C&Us)Describe financial reporting for public and private C&UsLearning Objectives (Cont’d)Discuss accounting and reporting issues for all C&Us, such as accounting for:Assets, liabilities, and net assets/net positionRevenues and expensesCash flowsJournalize transactions for private C&Us Prepare financial statements for public and private C&UsLearning Objectives (Cont’d)Discuss issues related to C&Us, such as:Planned givingAuditingFederal financial assistanceGAAP for Colleges & UniversitiesPrivate colleges and universitiesThe FASB Accounting Standards Codification is the source of GAAPNon-GAAP guidance is provided by the AICPA Auditing and Accounting Guide, Not-for-Profit Entities, and the National Association of College and University Business Officials (NACUBO)Public colleges and universitiesThe GASB serves as the source of GAAPNon-GAAP guidance is provided by the AICPA Auditing and Accounting Guide, State and Local Governments, and NACUBOStatement of net position (see Ill. 15-1), classifying net position into: Net investment in capital assetsRestrictedUnrestrictedStatement of revenues, expenses and changes in net position (see Ill. 15-2)Statement of cash flows (see Ill. 15-3)Financial Statements for a Public C&UStatement of financial position (see Ill.15-4), classifying net assets into: Unrestricted Temporarily restrictedPermanently restricted Statement of activities (see Ill. 15-5)Statement of cash flows (see Ill. 15-6)Financial Statements for a Private C&UAssets loaned to students, faculty, and staff Provided by gifts, grants, investment income, and transfers from other funds – classify according to any restrictions imposed by contributorsWhen a loan is made (e.g., $1,000 loan) Debit CreditLoan Receivable 1,000 Cash 1,000When the loan is paid reverse the prior entry and record interest income received on the loanLoan AssetsRecording and reporting of capital assets for C&Us is similar to that of for-profit businessesFASB and GASB standards are similar GASB standards require public C&Us to report two capital asset categories not found in private C&Us reporting using FASB standardsInfrastructure, which allows for use of the “modified approach”Intangible assets (reported as a separate asset class under FASB standards)Assets—CapitalLiabilities If a C&U is required to return some or all of student deposits that are received for housing, equipment, or services, a short-term liability is recorded For example, a $100 refundable deposit was received Debit CreditCash 100 Deposits Held in Custody for Others 100Operating StatementsDifferences exist in the reporting format for privateC&Us and public C&Us using a business-type modelPrivate C&Us must report the amount of net assets released from restrictions, public C&Us do notPublic C&Us must separate operating activity from nonoperating activity on the face of the financial statements, private C&Us do notTuition and fees Federal, state, and local appropriationsFederal, state, and local grants and contractsPrivate giftsInvestment incomeAuxiliary servicesNACUBO Revenue ClassificationsRevenues—Tuition & FeesRecord Tuition & Fees (T&F) at gross amountTuition & Fees should also be reported net of tuition discounts and scholarships using a contra account For example – gross T&F was $5,000, with $250 given in scholarships Debit Credit T&F Receivable 4,750 T&F Discounts and Allowances 250 T&F—Unrestricted 5,000Revenues—Tuition & Fees (Cont’d)Refunds of T&F are direct adjustments to the T&F—Unrestricted accountAt FYE report T&F net of estimated uncollectible amountsFor public C&Us a contra-revenue account is allowable for recording and reporting estimated uncollectible amountsFor private C&Us revenue should be directly adjusted for uncollectible amounts – for example T&F—Unrestricted Allowance for Doubtful AccountsSupport Revenue(Non-exchange Transactions)C&Us receive contributions similar to other NFP organizations (see Chapter 13)These gifts are considered increases to Temporarily restricted net assets for a private C&U Restricted net position for a public C&UPublic and private C&Us record any estimates for uncollectible support revenues in the same manner as estimated uncollectible T&FGrants may be exchange transactions if the grantor receives direct benefits in the form of something of value in exchange for the grant e.g., if a university tests a product under a federal contract, but the government retains the patent (or rights) to use the productGrants considered exchange transactions are recorded as unrestricted net assets/position; whereas, non-exchange transactions are recorded as temporarily restricted net assets (private) or restricted net position (public) Support Revenue—GrantsRecognized on the accrual basisNACUBO recommended classifications:InstructionResearchPublic serviceAcademic supportStudent servicesInstitutional supportStudent aidAuxiliary enterprisesOperating ExpensesPrivate C&Us must identify program and support expenses on the face of the statement of activities or in the notes to the statementPrivate and public C&Us record expenses in the same mannerOperating Expenses (Cont’d)Statements of Cash FlowsPrivate C&Us prepare the statement of cash flows similar to for-profit entitiesPublic C&Us prepare the statement of cash flows following the GASB standard:Direct method of presentation must be usedFour categories are identified – operating, noncapital financing, capital and related financing, and investing activitiesEndowment—the donor has stipulated that theprincipal of his/her gift is not expendable as of thereporting date (permanently restricted). However thegift can be invested for the purpose of producingincome. Generally, there are two forms ofendowment:Permanent—the principal must remain intact for perpetuityTerm—the principal remains intact for a period of timePlanned Giving—EndowmentsThe C&U shares the interest and/or investment with the donor or another beneficiary There are four widely used types of split-interest agreements Charitable lead trustsCharitable remainder trustsCharitable gift annuitiesPooled (life) income fundsPlanned Giving—Split-interest AgreementsRestricted Net Assets/Position— Split-interest Agreements (Cont’d)Annuity agreements are gifts in which donors require a stipulated amount of money returned to them or other beneficiary each year. At some point in time (e.g., death) the C&U owns the assets and incomePooled (life) income agreements require that total income earned on the donor’s pro rata share of donated assets be returned to the donor or other beneficiaryUPMIFAUPMIFA is the Uniform Prudent Management of Institutional Funds Act implemented by at least 47 statesThe act provides guidance on the management of funds received for charitable purposes in the absence of donor stipulationsThree primary areas of importance are related to investment of funds, expenditures, and release or modification of restrictions on assets provided through donationC&Us are encouraged to provide qualitative measures that help assess accomplishments:Outputs, e.g., faculty productivity, number of graduates, job placementsOutcomes (effectiveness), e.g., increased knowledge of students, satisfaction of alumni, value added to students in the areas of skills and knowledgeNonfinancial Performance MeasuresC&Us that expend more than $500,000 of federal awards a year are subject to a Single AuditAuditors will use generally accepted auditing standards, government auditing standards (yellow book), and OMB Circular A-133Auditors must be sure the C&U has complied with the cost principles in OMB Circular A-21 and the cost and administrative principles in OMB Circular A-110Auditing Issues in C&UsC&Us may have institutionally related foundations for fund-raising, alumni relations, or management of assetsIn general, C&Us report related entities in the same manner as other not-for-profit entities (private C&Us) or business-type governmental entities (public C&Us)Related EntitiesPublic colleges and universities follow GASB standards Private colleges and universities follow FASB standardsColleges and universities receive a substantial amount of federal funds leading to additional compliance requirements and Single AuditsENDConcluding Comments