College and university accounting

Types

 Private not-for-profit
o Follow FASB standards
 Public government owned
o Follow GASB standards
 Investor-owned
o Follow FASB standards
 NACUBO (national association of college and university business officers) provides additional
guidance to the standards on reporting the financial statements

Basic principles of FASB

 Adopts accrual basis accounting (includes depreciation)

 FASB 116 applies to contributions (donations)
 FASB 117 applies to classification of net assets
 Investments reported at fair value
 Collections can be reported in notes
 Fund raising expenses allocated based on purpose, audience, content

Required statements of private not for profit schools

 Statement of financial position

o Equity accounts of each type
 Private not for profit - net assets (unrestricted, temporarily restricted and
permanently restricted
 Public government owned – net assets position (unrestricted, restricted, net
investment in capital assets)
 Investor owned – owner’s equity (paid in capital and retained earnings)
 Statement of activities OR both:
 Statement of unrestricted revenues, expenses and other changes in unrestricted net assets
o No distinction between operating and nonoperating revenues (all recorded
together)
o Expenses include education and general expenses and auxiliary activities (additional
benefits, e.g. housing, food, parking, etc)
 And statement of changes in net assets
o Shows changes in temporarily and permanently restricted assets that do not show in
the previous statement
 Statement of cash flows
o Can be presented in the
 Direct method (usual format of operating, investing and financing activities)
 Indirect method (start from net income and subtract or add noncash
expenses, gains and losses, etc)
o Divided into 3 categories
 Operating (interest payments and revenues)
 Investing (long term investments, asset activities and loan receivable)
 Financing (receipt of permanently restricted contributions)
 Statement of functional expenses (voluntary)
Reporting of tuition revenues (under NACUBO guidelines)

 If it is a benefit it is recorded as an expense

 Scholarships that don’t require a service to be returned to the university are deducted from
revenues
 Expected uncollectable tuition/fees are deducted from revenues
 Tuition for summer school that come between two fiscal years, will have their revenues and
expenses split between the two fiscal years (like commercial universities do)

Split interest agreements

 Not for profit schools receive benefits that are shared with other donors
 There are five types
o Charitable lead trust fund
 Donor provides resources that generate income, which is paid to not-for-
profit schools for a period of time
 The remaining assets are paid to another party
 Recognizes receivables and temporarily restricted revenues at present value
o Perpetual trusts held by third parties
 Benefits only not-for-profit schools
 There is no remaining amount
 Present value of anticipated receipts recorded as permanently restricted
accounts when the school is established (asset and contribution revenue)
 Income received each year is treated as temporarily restricted or
unrestricted income
o Charitable remainder trusts
 Donor provides resources that generate income, which is paid to not-for-
profit schools for a period of time
 Remaining assets are also paid to not for profit school
 Assets recorded at fair value and liability set up for present value of
expected payments to the donor when it is established
 The difference between the assets and liabilities is the revenue contribution
o Charitable gift annuities
 Same as charitable remainder trust, except there is no formal trust
agreement between the two parties
 It is not fixed
o Pooled life income funds
 Donors place their money in a pool
 Income generated is split between the donors
 The remaining amount is given to the not for profit school