1. Chapter 19 Public and Private College and University and Health Care Accounting

2. C192 College and university standard- setting uPublic universities follow GASB guidance uPrivate universities follow FASB guidance uAccounting and financial reporting standards are now very different for public and private universities

3. Public institutions College and university accounting

4. C194 GASB No. 35 uNew financial reporting model for public colleges and universities uProvides for both fund statements and entity-wide statements –Statement of Net Assets –Statement of Changes in Net Assets –Statement of Cash Flows uMany universities will report as special purpose governments engaged in business-type activities

5. C195 Fund accounting uUniversities have traditionally used fund accounting uFunds are similar to state and local government funds

6. C196 College and university funds uCurrent funds (unrestricted & restricted) uLoan funds uEndowment and similar funds uAnnuity and life income funds uAgency funds uPlant funds (four)

7. C197 Current funds: unrestricted uRevenues (tuition, grants, appropriations, etc.) uExpenditures (education, research, student aid, operations, etc.) uTransfers (mandatory & discretionary) uReport assets, liabilities, fund balances

8. C198 Current fund: restricted uRevenues arise from governmental grants and contracts, private gifts, and endowment income uExpenditures are generally for instruction, research and student aid uResources are expenditure driven

9. C199 Loan funds uAccounts for resources available for loans uResources consist mainly of gifts and unrestricted current fund transfers uAdditions to fund are recorded directly to the restricted or unrestricted fund balance uExpenditures and losses deducted directly from the fund balance

10. C1910 Endowment and similar funds uRegular or pure endowments uTerm endowments uQuasi-endowments uInvestments at fair value - “mark to market”

11. C1911 Regular and pure endowments uPrincipal specified by donor as nonexpendable uEarnings on resources invested are available for expenditure

12. C1912 Term endowments uPrincipal is expendable after a specified time period or designated event uResources are added to a unrestricted current fund, unless donor has specified another application

13. C1913 Quasi-endowments uFunds set aside by a board or controlling body uFunds usually come from unrestricted current funds, or restricted current funds if donor’s limitations are not violated uDiscretionary funds

14. C1914 Annuity funds uPeriodic payments are made to the donor or other designated beneficiary for a specific period of time uAccounted for at their market value uLiability recorded for actuarially computed present value of total payments –excess credited to Annuity Fund Balance

15. C1915 Life income fund uAll income received on contributed assets is paid to donor or other specified recipient for life uAssets recorded at market value and a credit to Life Income Fund Balance is made uLiability established immediately as income is received

16. C1916 Ending annuity and life payments uPrincipal is transferred to the donor-specified fund group, or to the unrestricted current fund revenue account uGains or losses on sale of investments treated as changes in principal –record in appropriate fund balance account

17. C1917 Plant funds uUnexpended Plant Funds –resources are used to acquire properties uPlant Fund Renewals and Replacements –resources used to keep plant in operating condition

18. C1918 Plant funds (con’t) uPlant fund for renewals and replacements –corresponds to debt service fund of a governmental unit uInvestment in Plant –similar to GFAAG and GLTDAG –controls all plant assets and liabilities except those found in the endowment fund

19. C1919 Agency funds uAgent of others –collection, custodianship, disbursement uNo fund balance

20. College and university accounting Private institutions

21. C1921 Private college & universities uApplicable FASB Statements –No. 93: Depreciation –No. 116:Contributions –No. 117:Financial Statements –No. 124:Investments

22. C1922 FASB No. 116 uSeparates transactions into exchange, nonexchange, and agency –exchange: both parties benefit –contributions: only one party benefits –agency: acting as intermediary

23. C1923 Contributions are defined as nonexchange: uRecognize contributions received and unconditional promises to give as revenues or gains in the period received. uExceptions are made for contributions of services and works of art

24. C1924 Donor restrictions uOnly the donor can restrict the use of assets uAll contributions are classified in the period received as: –unrestricted revenue –temporarily restricted revenue –permanently restricted revenue

25. C1925 Release from donor restrictions uReclassifications are used to release restrictions: –operating purpose –purchase of a fixed asset –passage of time

26. C1926 Types of contributions uCash contributions uPromises to give uReductions of liabilities uFree use of space/assets uFixed assets (buildings and/or land) Each may have donor-imposed conditions and/or restrictions.

27. C1927 Volunteer services uRecorded at fair market value only if they create or enhance non-financial assets or uRequire specialized skills that would have been purchased

28. C1928 Works of art and treasures uOptional if going into a collection that will be held for research or public exhibition and, if sold, the proceeds will be used to acquire other collectibles

29. C1929 Donor-imposed conditions uWhen condition is met recognize revenue: –conditional donations of cash or property are credits to “refundable advances” –conditional pledges are not recorded until condition is met (footnote disclosure only)

30. C1930 Marketable securities uReport at fair market value uApplies to all investments

31. C1931 Depreciation uAll private not-for-profit organizations record depreciation, except for works of art

32. C1932 Government grants uConsidered to be exchange transactions, not contributions uIn private universities they are recorded as “refundable deposits” (a liability) until work/service is performed, then they become revenue uUnder FASB 116 definitions, grants are not restricted revenue

33. C1933 FASB No. 117 uMinimum display requirements for three required statements uFlexible formats uReport entity-wide totals for each of the three categories of net assets –unrestricted –temporarily restricted –permanently restricted

34. C1934 FASB No. 117 (con’t) uStatement of Financial Position –assets, liabilities, net assets uStatement of Activities –change in unrestricted, temporarily restricted, and permanently restricted uStatement of Cash Flows –operating, financing, investing

35. Health care accounting Public and Private

36. C1936 Health care entities uHospitals, nursing homes, HMOs, etc. uAICPA Audit Guide covers both government and private health care organizations uGASB Statement 34 allows reporting as special purpose government using proprietary fund accounting uPublic and private health care organization reporting is similar uNet asset reporting is slightly different

37. C1937 Health care fund structure uGeneral funds account for resources available for general operations uDonor-restricted funds –specific purpose funds –plant replacement and expansion funds –endowment funds –annuities or life income funds, or loan funds

38. C1938 Types of revenues uOperating Revenue relates to principal activity of providing health care services –patient service revenue –resident service revenue –other operating revenue uNonoperating Revenue –unrestricted and donor-restricted pledges, gifts, grants, investment income

39. C1939 Types of expenses uNursing services uOther professional service uGeneral services expense uFiscal services expense uAdministrative services expense uInterest expense

40. C1940 Accounting for contributions uIf contribution is unconditional and unrestricted –other operating revenue - unrestricted (on-going and central activities) or –nonoperating revenue - unrestricted (peripheral or incidental transactions)

41. C1941 Accounting for contributions (con’t) uIf contribution is unconditional and restricted –other operating revenue - temporarily restricted or –other operating revenue - permanently restricted

42. C1942 Volunteers and donated items uVolunteers –same rules as other not-for-profits –create or enhance nonfinancial assets or –require specialized skills and would typically need to be purchased uDonated Items: depending on nature of gift –other operating revenues - unrestricted –nonoperating revenues

43. C1943 Malpractice claims uInsurance premiums are often allocated to administrative services expense uIf self-insured –establish a trust account –establish an expense and liability for estimated claims and judgments

44. C1944 Financial statements - public uGovernment-wide reporting –Statement of Net Assets –Statement of Revenues, Expenses, and Changes in Net Assets –Statement of Cash Flows uNet assets –Invested in Capital Assets, net of related debt –Restricted –Unrestricted

45. C1945 Financial statements - private uFollow FASB No. 117 - entity-wide reporting –Statement of Financial Position –Statement of Activities –Statement of Cash Flows uNet Assets –Permanently Restricted –Temporarily Restricted –Unrestricted