Classifying Activity between General Operating and Auxiliary Self-Funded: Classifying Activity between General Operating and Auxiliary Self-Funded Higher Education Session #4


Current Operating Fund: Current Operating Fund Near-term economic resources for use in general operations (the mission-related activities of the institution) -- typically . . . Instruction Research Public service Related supporting services


Current Operating Fund: Current Operating Fund Unrestricted Fund General Operating Fund Auxiliary Enterprise and Self-funded Fund Restricted Fund


Restricted Fund: Restricted Fund Resources received and used by institution that have externally established limitations or stipulations placed on their use


Current Restricted Fund Revenues : Current Restricted Fund Revenues Operating: Government Grants & Contracts Includes initial receipt of Indirect Cost Reimbursements Private Grants & Contracts Non-operating: Restricted Gifts


Unrestricted Fund: Unrestricted Fund Resources received and used by an institution that have no limitations or stipulations placed on them by external agencies or donors


Current Unrestricted Fund Revenues: Current Unrestricted Fund Revenues Operating: Tuition & Fees Sales & Services of Educational Activities Incidental to the conduct of instruction, research and public services Other exchange transaction revenues Rental revenues


General Operating Fund: General Operating Fund All current unrestricted operating resources that are not generated or used by auxiliary enterprises and self-funded activities


Current Unrestricted Fund Revenues: Current Unrestricted Fund Revenues Non-operating: Government Appropriations Unrestricted Gifts Investment Income Miscellaneous fees or fines Other Internal Revenues: Indirect cost reimbursement


Auxiliary Enterprises and Self-funded Fund Group: Auxiliary Enterprises and Self-funded Fund Group Self-supporting activities that exist to furnish goods or services to students, faculty, or staff, and that charge a fee directly related to, although not necessarily equal to, the cost of the goods or services


Enterprises Distinction: Enterprises Distinction In this discussion, the word “enterprises” refers to the self-supporting, business-activity nature of auxiliaries No relation to the TABOR meaning of the word enterprises


Expenses: Expenses Natural Salaries & benefits Supplies Services Travel Functional Instruction Research Public service Academic support Institutional support Student services Student aid Auxiliary enterprises Operation & maintenance of plant Classify natural expenses within functional classification


Auxiliary and Self-funded Fund Group: Auxiliary and Self-funded Fund Group The fund group is comprised of three subgroups: Auxiliary Enterprises TABOR Exempt TABOR Nonexempt Self-funded Activities Internal Service Units


Self Supporting Activity: Self Supporting Activity Intent is to charge fee to each customer based on use of goods or services Pays for all of its operating costs Occasional loss can be recovered Would not qualify if – on-going financial plan includes annual material losses supplemented by general fund allocation


Auxiliary Enterprises: Auxiliary Enterprises Distinguishing characteristics are: Managed as an essentially self-supporting activity Services students, faculty, or staff Support the University function but are not directly related to the higher education mission


Auxiliary Enterprises: Auxiliary Enterprises Auxiliary enterprises must report full costs Full costing means indirect costs related to each auxiliary enterprise as well as the costs directly attributable to its operations are included in the auxiliary enterprise’s expenses Those expenses must include both each auxiliary activity’s direct costs and their indirect costs, whether charged directly as expenses or allocated as a proportionate share of costs of other departments or units


Auxiliary Enterprises: Auxiliary Enterprises Examples: Residence halls Food services Intercollegiate athletics (if essentially self-supporting) College stores Faculty clubs Parking Faculty housing Student health services (if essentially self-supporting and not part of a hospital)


Auxiliary Enterprises Revenues: Auxiliary Enterprises Revenues Operating: Revenues derived directly from the operation of auxiliary enterprises Auxiliary enterprises May include scholarship allowance Revenues received by auxiliary enterprises from other than their operations should be reported under their respective source categories Fees for good & services May include scholarship allowance Sales and service of Hospitals and health clinics Gifts or grants


Problem A: Problem A Can an activity that exists predominately to furnish goods or services to students, faculty, or staff, and that charges a fee directly related to the cost of the goods or services and that incidentally serves the general public be considered an auxiliary enterprise?


Problem B: Problem B Should services such as copy centers, day-care centers, barber and beauty shops, travel agencies, and movie theaters be considered auxiliary enterprises?


Problem C: Problem C What are some of the institutional costs for which an auxiliary enterprise might be indirectly charged?


Problem D: Problem D How are the auxiliary enterprises at your institution charged indirect costs? Reduction of revenues? Administrative recharge? Indirect cost assessment? Other?


Self-funded Activities: Self-funded Activities Distinguishing characteristics are: Managed as an essentially self-supporting activity Services students, faculty, or staff Directly related to the higher education mission


Self-funded Activities: Self-funded Activities Examples (if essentially self-supporting): Continuing Education Extended Studies Conferences Drug testing center Research support operations University press department


Self-Funded Activities Revenues: Self-Funded Activities Revenues Operating: Revenues derived from activities that exist to provide instructional and laboratory experience for students through sales Tuition and fees Sales and services of educational activities Revenues received by self-funded activities from other than their operations should be reported under their respective source categories Miscellaneous operating revenues Gifts or grants


Problem E: Problem E


Slide27: Are these scenarios Self-Funded Activities?


Internal Service Units: Internal Service Units Activities whose primary purpose is to provide goods and services to other internal units on a fee for service basis


Internal Service Units: Internal Service Units Characteristics: Self-supporting units that operate on a break-even basis for those goods and services offered to the other units Provide, to a lesser extent, the same goods and services to faculty, staff, students, and related entities Typically provide goods and services at an institutional level, thereby excluding activities that serve units within the same department Exception for Federal cost reporting


Internal Service Unit Revenues: Internal Service Unit Revenues Operating: Revenues derived from sales and services to internal units Internal service center revenues Incidental revenues derived from sales and services to general public Miscellaneous operating revenues


Problem F: Problem F


Slide32: Are these activities Internal Service Units?


Internal Service Units: Internal Service Units For financial statement purposes, Activity of Internal Service Units must be eliminated Expenses incurred should be netted against revenues since the predominance of transactions is internal So where does what is left over go?


Problem G: Problem G


Slide35: Institutions A and B have a division within their Facilities Management Department that does general maintenance of and small repairs on the interior and exterior of all campus buildings. They also have a second division that does all major remodeling which is defined as changes to existing structures that will cost $2,500 or more. Institution A funds both divisions from their general operating budget for the Facilities Management Department who prioritizes change requests and fills them until their budget runs out. Institution B does not fund its remodeling division but rather the division directly charges the departments submitting the change orders for the work done.


Slide36: What kind of entity is the remodeling division at each of these institutions? In what fund and functional classification will the activity of the remodeling division at Institution A be reported? In what fund and functional classification will the activity of the remodeling division at Institution B be reported? Is there a difference? Why?


Problem H: Problem H


Slide38: Is this an Auxiliary Enterprise, Self-funded activity, or Internal Service Unit? Institution URABUTE requires cosmetology students to provide haircuts to the public as part of their educational training. The students use the institution’s classroom facilities to provide the haircuts and instructors are present to offer assistance and guidance. The activity is a required part of the cosmetology program and provides an instructional experience. There is no fee charged for the haircut.


Problem I: Problem I


Slide40: Do any of these scenarios create an Auxiliary Enterprise, Self-funded Activity, or Internal Service Unit? Same situation as Problem I, except that…


Problem J: Problem J


Slide42: Is this an Auxiliary Enterprise, Self-funded activity, or Internal Service Unit? The RAG School of Communications publishes a quarterly newspaper. Students in the journalism program receive credit for managing and editing the newspaper. Students and others submit articles for publication. The school’s copy center prints the newspaper for no charge. It is distributed throughout the campus.


Slide43: Is this an Auxiliary Enterprise, Self-funded activity, or Internal Service Unit?


Problem K: Problem K


Slide45: Do any of these scenarios create an Auxiliary Enterprise, Self-funded Activity, or Internal Service Unit? The RAG student government publishes a quarterly newspaper.


Problem L: Problem L


Slide47: Gates University has a computer lab available to its students. Is it an Auxiliary Enterprise, Self-funded Activity, or Internal Service Unit if…


Slide48: Gates University has a computer lab available to its students. Is it an Auxiliary Enterprise, Self-funded Activity, or Internal Service Unit if…


Slide49: Gates University has a computer lab available to its students. Is it an Auxiliary Enterprise, Self-funded Activity, or Internal Service Unit if…


Problem M: Problem M


Slide51: Classify the following revenues as general operating fund, auxiliary enterprises and self-funded fund, or restricted fund revenues:


Problem N: Problem N


Slide54: Classify the following expenses as general operating fund, auxiliary enterprises and self-funded fund, or restricted fund expenses:


Slide55: Classify the following expenses as general operating fund, auxiliary enterprises and self-funded fund, or restricted fund expenses:


Resources: Resources HE Accounting Standard No. 17 http://www.sco.state.co.us/highed/standard.htm FAC Guidebook http://www.sco.state.co.us/FAC/fac_index.htm