1. Essentials of Accounting for Governmental and Not-for-Profit Organizations
Chapter 9
Accounting for Special Purpose Entities, Including Public Colleges and Universities
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Special Purpose Entities
General Purpose Governments include: States, counties, cities, towns, and villages.
Special Purpose Entities include: Fire protection districts, park districts, and public authorities.
A Special Purpose Entity may be a component unit of a General Purpose government.

3. Special Purpose Entity Reporting
If the entity is engaged in governmental and business type activities
Use general GASB 34 reporting model (chapters 3-8) and report both fund basis and government-wide financial statements
If the entity is engaged in multiple governmental activities
Use general GASB 34 model, just omit enterprise funds statements which are not applicable. Again, report both fund basis and government-wide financial statements

4. Special Purpose Entity Reporting
If the entity is engaged in single governmental activity
The entity can prepare governmental fund, government-wide statements, and reconciliation effects all on one statement
If the entity is engaged only in business-type activities
The entity can prepare enterprise fund financial statements (no need for government-wide)
If the entity is engaged only in fiduciary type activities
The entity can prepare fiduciary fund financial statements (no need for government-wide)

5. Example – Combined Balance Sheet, Statement of Net Assets(position)
General Fund
Capital Projects Fund
Total Governmental Funds
Adjustments to Government-wide
Statement of Net Assets(position)
Assets
Cash
$ ,500,000
$ ,800,500
$ ,300,500
Investments
500,000
Taxes Receivable - Gross
200,000
Interest Receivable
5,000
Prepaid Items
12,000
Capital Assets -
35,000,000
Accumulated Depreciation
(7,500,000)
Total Assets
$ ,217,000
$ ,017,500
$ ,500,000
$ ,517,500
Liabilities and Fund Balances
Liabilities
Accounts Payable
840,000
62,500
902,500
Accrued Liabilities
250,000
Deferred Property Taxes
65,000
(65,000)
Contracts payable - Retained %
700,000
Long-term Notes Payable
15,000,000
Total Liabilities
1,155,000
762,500
1,917,500
14,935,000
16,852,500
Fund Balances
Nonspendable
Assigned
Capital projects
58,000
4,038,000
4,096,000
Unassigned
992,000
Total Fund Balances
1,062,000
5,100,000
Net Assets(position)
Net Investment in capital assets
11,800,000
Unrestricted
5,865,000
$ ,665,000
Adjustments to convert to accrual

6. PUBLIC Colleges and Universities
Public Colleges and Universities are owned by a government.
Public College financial reporting is covered by GASB.
Private Colleges are not owned by a government and their reporting falls under FASB guidance -- covered in chapter 11.
Although there are more private than public colleges in the US, roughly 3/4 of the students attend public institutions.

7. Public Colleges and Universities – GASB 35
GASB 35 requires statements similar to those of special purpose governments under GASB 34.
The effect is to require colleges to use the accrual basis and record long-term assets, including infrastructure, along with depreciation.

8. Public College Financial Reports
Although public colleges may have governmental type activities, business type activities, or both
Most public colleges, will report as governmental units with “business activities only”.
Therefore they will prepare enterprise fund statements
Exception: some community colleges that have power to levy property taxes, and may prepare both fund level and government-wide statements

9. Public College Statement of Net Assets(position)
Assets and Liabilities
Are classified as current and noncurrent.
Net Assets(position) are Classified as
1) Net Investment in capital assets
2) Restricted
-- Nonexpendable and Expendable
3) Unrestricted

10. Unrestricted Net Asset Deficits
Note: Deficits in unrestricted assets are common because:
Colleges are not accustomed to setting aside funds for depreciation.
States seldom fund compensated absences in advance.

11. Public College Statement of Revenues, Expenses and Changes in Net Assets(position)
Format: Operating Revenues include:
Student Tuition net of scholarship allowances
Federal and State Grants
Auxiliary
Less: Operating Expenses
including depreciation
Plus or minus: Nonoperating Revenues and Expenses
Includes state appropriations, gifts, investment
income, interest on capital debt
Plus or minus: Capital appropriations, gift, endowment additions
Equals: Increase in net assets(position)
Plus: Beginning net assets(position)
Equals: Ending net assets(position)

12. Public College Statement of Cash Flows GASB Format
Cash flows from Operating activities must be presented using the direct method
Four Parts (described on next slide)
Reconciliation of Operating income to cash flows from operations
May also have noncash financing and investing section

13. Public College Statement of Cash Flows GASB Format
Classification of Cash Flows – GASB Format
Operating items: Excludes interest and dividend revenues and expenses
Noncapital Financing: Includes state appropriations and gifts including endowments
Capital Financing: Purchase of long-term assets and related gifts, appropriations and debt repayment including interest
Investing: Includes interest revenues, endowment and other investments kept separate