Basics of Accounting and Financial Management September 4, 2018 Lindsay Smith, Business Manager, Office of Legal Affairs

Plan for Today OneSource Accounting vs. Budgeting Public vs. Private Distinction Reporting Standards for Universities Accounting Basics Budgeting Basics Best Practices

OneSource Project Includes: UGA Budget Management System (Hyperion) – went live January 2018 Budget Development for FY20 will be done in Budget Management System. Be aware that Quarterly Budget Reviews are required by Departments. Email notifications will be sent regarding upcoming review deadlines. UGA Financial Management System (Peoplesoft) – went live July 2018 This includes all the day-to-day financial transactions – payments to vendors, reimbursements, etc. OneUSG Connect– go –live December 16, 2018 HCM – Human Capitol Management System Includes payroll, leave management, benefits, position management, faculty appointments, etc. Be aware that until January, some legacy systems are still in use for particular transactions including personnels. Also be aware of the upcoming blackout period for postings in UGAJobs. November 14th – December 15th.

Accounting v. Budgeting Day-to-Day v. Long Term Day-to-Day transactions Monthly Reconciliations Quarterly Budget Reviews Budgeting Long-Term Planning Multi-Year Goals Purchasing Planning Hirings, Promotions, Retirements

Distinguishing the Public Interest ACCOUNTABILITY Being obliged to explain one’s actions, to justify what one does. The requirement for government to answer to its citizenry. GASB – The obligation to report whether the government operated within appropriate legal constraints and whether resources were used efficiently, economically, and effectively. The Financial Accounting Standards Board (FASB) recognizes three distinguishing characteristics of governmental and not-for-profit organizations: Receives significant amount of resources from providers that do not expect to receive repayment or economic benefits proportionate to the resources provided. Operating purposes are other than to provide goods or services at a profit. Absence of defined ownership interests that can be sold, transferred, or redeemed in the event of the liquidation of the organization.

Distinguishing the Public Interest For-Profit Organizations Efficiency and Measurement of Profits and Losses Focus on Economic Flow of Resources Accrual Basis of Accounting Not-For-Profit and Governmental Organizations Accountability to determine most Efficient, Effective, and Equitable use of public resources. Governments report on both Economic Flow of Resources and Current Flow of Financial Resources Both Accrual and Modified Accrual Basis of Accounting

Financial reporting standards Standards Established by: Financial Accounting Standards Board – FASB Governmental Accounting Standards Board – GASB Both are designated as authoritative bodies to establish Generally Accepted Accounting Principles – GAAP Until 1999 GASB only required modified accrual accounting and fund reporting for Public Colleges and Universities. No accounting for long-term liabilities or assets

Accounting for Public Colleges and Universities Considered Special Purpose Governments GASB allows Public Universities to use only the accrual basis for reporting. Georgia law requires that all state agencies also report using the modified accrual basis. UGA’s annual financial statements include both accrual (GAAP Basis) and modified accrual accounting (Non-GAAP Basis).

UGA’s Annual Financial report

Fundamental Accounting Equation Assets = Liabilities + Equity Assets = Resources Available Cash, claims to cash (receivables), investments, land, equipment, buildings Liabilities = Amounts Owed Accounts payable, salaries payable, debt service, deferred revenue Equity = Difference of assets and liabilities as they accumulate over time

Accrual Basis of Accounting Assets = Liabilities + Net Assets Net Assets = Revenues – Expenses Revenues are recorded when earned and expenses are recorded when consumed. Revenues = inflow of economic resources Expenses = charges incurred for operation, maintenance, interest Financial Statements include Statement of Net Position, Statement of Revenues, Expenses, and Changes in Net Position, and Statement of Cash Flows These statements account for long-term liabilities and assets.

UGA’s Financial Statements

Modified Accrual Basis of Accounting Assets = Liabilities + Fund Balance Fund Balance = Revenues – Expenditures Revenues are recorded when measurable and available. Fund Balance = Difference between governmental fund assets and liabilities – the fund equity Expenditures = recorded when liabilities are incurred pursuant to authority given in an appropriation Financial Statements include the Balance Sheet and Statement of Revenues, Expenditures, and changes in Fund Balances These statements show current payments to liabilities and acquired assets for the reporting period. They are a snapshot of a particular moment in time.

UGA’s Financial statements

Fund Accounting UGA Accounting is Fund Accounting Fund = Accounting entity with a self-balancing set of accounts…segregated for the purpose of carrying on specific activities in accordance with special regulations, restrictions, or limitations. In other words, where is the $ coming from? State Appropriations Tuition Departmental Sales and Service Grants Endowments Private Donors Chart of Accounts Reference - https://onesource.uga.edu/resources/chart_of_accounts/

Expenditures How is $ spent at UGA? Purchase Order P-Card Pre-approval required for purchases over $1k For purchases under $1k it must meet one of the following conditions: Un-Planned Non-Routine Urgent Direct Charge Purchase Request (Vendor Payments)– previously Check Request Expense Request – Reimbursements to People Foundation Reimbursements Each method of purchasing has different rules of use. Each method of purchasing may follow unique approval paths within a Department or Unit. Purchases over $10k require multiple quotes. Purchases over $25k require a competitive bidding process.

What is an Encumbrance? Account used to record the estimated amount of purchase orders, contracts, or salary commitments chargeable to an appropriation. Unique to modified accrual basis of accounting. Basically, funds are set aside and deducted from your balance until they become an expenditure. Encumbrances may be released when you know the expenditure will not be made.

So What? Use these terms to inform how you analyze financial information. Financial Statements Quarterly and Monthly reports and reconciliations ACCOUNTABILITY Do you understand the information in your reports? Your signature on monthly reconciliations, p-card reconciliations, etc. indicates your review and approval. Where is the connection between your day-to-day business functions and your department/unit’s mission and purpose? And the University’s mission and purpose?

UGA’s Budget Process University’s Fiscal year follows the State’s July 1st – June 30th of each year Budget Planning Officially begins in January each year, but departments work on budgets year round. Units are required to submit planning documents for the coming fiscal year. Includes budgetary requests by units and planning for budget cuts, increases, and redirection of funds. Fiscal Year end documents and reminders for year-end budget transactions are sent in February each year.

UGA’s Budget Process Budget Development Typically takes place in April when UGA is made aware of state appropriations. Quick turnaround time – be prepared! Units allocate funds for the coming fiscal year, including any budget cuts, salary pool increases, etc. Funds allocated during budget development reflect the starting budget for the coming fiscal year.

Budgeting as a Strategic Tool Large vs. Small Budgets Flexibility Changes to sources of funding Personnel Changes during the Year Base Budget for next Fiscal Year will be based on current budget. Current budget may not reflect personnel changes during the fiscal year. Salary Savings Consider potential promotions, reclassifications, retirements, temporary workers, and terminations.

A few Best Practices Be Proactive and Don’t Make Assumptions Internal Audit is a Valuable Resource Separation of Duties Encourage Cross-Training Signature Authority