Chapter 19
Public and
Private College
and University
and
Health Care
Accounting
College and university standardsetting
 Public universities follow GASB guidance
 Private universities follow FASB guidance
 Accounting and financial reporting
standards are now very different for public
and private universities
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College and university accounting
Public
institutions
GASB No. 35
 New financial reporting model for public
colleges and universities
 Provides for both fund statements and entity-wide
statements
– Statement of Net Assets
– Statement of Changes in Net Assets
– Statement of Cash Flows
 Many universities will report as special purpose
governments engaged in business-type activities
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Fund accounting
 Universities have traditionally used fund
accounting
 Funds are similar to state and local
government funds
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College and university funds
 Current funds (unrestricted & restricted)
 Loan funds
 Endowment and similar funds
 Annuity and life income funds
 Agency funds
 Plant funds (four)
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Current funds: unrestricted
 Revenues (tuition, grants, appropriations, etc.)
 Expenditures (education, research, student
aid, operations, etc.)
 Transfers (mandatory & discretionary)
 Report assets, liabilities, fund balances
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Current fund: restricted
 Revenues arise from governmental grants
and contracts, private gifts, and endowment
income
 Expenditures are generally for instruction,
research and student aid
 Resources are expenditure driven
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Loan funds
 Accounts for resources available for loans
 Resources consist mainly of gifts and
unrestricted current fund transfers
 Additions to fund are recorded directly to
the restricted or unrestricted fund balance
 Expenditures and losses deducted directly
from the fund balance
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Endowment and similar funds
 Regular or pure endowments
 Term endowments
 Quasi-endowments
 Investments at fair value - “mark to
market”
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Regular and pure endowments
 Principal specified by donor as
nonexpendable
 Earnings on resources invested are available
for expenditure
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Term endowments
 Principal is expendable after a specified
time period or designated event
 Resources are added to a unrestricted
current fund, unless donor has specified
another application
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Quasi-endowments
 Funds set aside by a board or controlling
body
 Funds usually come from unrestricted
current funds, or restricted current funds if
donor’s limitations are not violated
 Discretionary funds
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Annuity funds
 Periodic payments are made to the donor or
other designated beneficiary for a specific
period of time
 Accounted for at their market value
 Liability recorded for actuarially computed
present value of total payments
– excess credited to Annuity Fund Balance
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Life income fund
 All income received on contributed assets
is paid to donor or other specified recipient
for life
 Assets recorded at market value and a
credit to Life Income Fund Balance is
made
 Liability established immediately as
income is received
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Ending annuity and life payments
 Principal is transferred to the donor-specified
fund group, or to the unrestricted current fund
revenue account
 Gains or losses on sale of investments treated
as changes in principal
– record in appropriate fund balance account
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Plant funds
 Unexpended Plant Funds
– resources are used to acquire properties
 Plant Fund Renewals and Replacements
– resources used to keep plant in operating
condition
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Plant funds (con’t)
 Plant fund for renewals and replacements
– corresponds to debt service fund of a
governmental unit
 Investment in Plant
– similar to GFAAG and GLTDAG
– controls all plant assets and liabilities except those
found in the endowment fund
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Agency funds
 Agent of others
– collection, custodianship, disbursement
 No fund balance
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College and university accounting
Private
institutions
Private college & universities
 Applicable FASB Statements
– No. 93: Depreciation
– No. 116: Contributions
– No. 117: Financial Statements
– No. 124: Investments
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FASB No. 116
 Separates transactions into exchange,
nonexchange, and agency
– exchange: both parties benefit
– contributions: only one party benefits
– agency: acting as intermediary
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Contributions are defined as
nonexchange:
 Recognize contributions received and
unconditional promises to give as revenues
or gains in the period received.
 Exceptions are made for contributions of
services and works of art
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Donor restrictions
 Only the donor can restrict the use of assets
 All contributions are classified in the
period received as:
– unrestricted revenue
– temporarily restricted revenue
– permanently restricted revenue
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Release from donor restrictions
 Reclassifications are used to release
restrictions:
– operating purpose
– purchase of a fixed asset
– passage of time
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Types of contributions
 Cash contributions
 Promises to give
 Reductions of liabilities
 Free use of space/assets
 Fixed assets (buildings and/or land)
Each may have donor-imposed conditions and/or restrictions.
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Volunteer services
 Recorded at fair market value only if they
create or enhance non-financial assets or
 Require specialized skills that would have
been purchased
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Works of art and treasures
 Optional 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
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Donor-imposed conditions
 When 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)
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Marketable securities
 Report at fair market value
 Applies to all investments
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Depreciation
 All private not-for-profit organizations
record depreciation, except for works of art
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Government grants
 Considered to be exchange transactions,
not contributions
 In private universities they are recorded as
“refundable deposits” (a liability) until
work/service is performed, then they
become revenue
 Under FASB 116 definitions, grants are not
restricted revenue
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FASB No. 117
 Minimum display requirements for three
required statements
 Flexible formats
 Report entity-wide totals for each of the three
categories of net assets
– unrestricted
– temporarily restricted
– permanently restricted
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FASB No. 117 (con’t)
 Statement of Financial Position
– assets, liabilities, net assets
 Statement of Activities
– change in unrestricted, temporarily restricted,
and permanently restricted
 Statement of Cash Flows
– operating, financing, investing
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Health care accounting
Public
and Private
Health care entities
 Hospitals, nursing homes, HMOs, etc.
 AICPA Audit Guide covers both government and
private health care organizations
 GASB Statement 34 allows reporting as special
purpose government using proprietary fund
accounting
 Public and private health care organization
reporting is similar
 Net asset reporting is slightly different
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Health care fund structure
 General funds account for resources
available for general operations
 Donor-restricted funds
– specific purpose funds
– plant replacement and expansion funds
– endowment funds
– annuities or life income funds, or loan funds
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Types of revenues
 Operating Revenue relates to principal
activity of providing health care services
– patient service revenue
– resident service revenue
– other operating revenue
 Nonoperating Revenue
– unrestricted and donor-restricted pledges,
gifts, grants, investment income
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Types of expenses
 Nursing services
 Other professional service
 General services expense
 Fiscal services expense
 Administrative services expense
 Interest expense
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Accounting for contributions
 If contribution is unconditional and
unrestricted
– other operating revenue - unrestricted (on-going
and central activities) or
– nonoperating revenue - unrestricted (peripheral or
incidental transactions)
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Accounting for contributions
(con’t)
 If contribution is unconditional and
restricted
– other operating revenue - temporarily restricted or
– other operating revenue - permanently restricted
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Volunteers and donated items
 Volunteers
– same rules as other not-for-profits
– create or enhance nonfinancial assets or
– require specialized skills and would typically need
to be purchased
 Donated Items: depending on nature of gift
– other operating revenues - unrestricted
– nonoperating revenues
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Malpractice claims
 Insurance premiums are often allocated to
administrative services expense
 If self-insured
– establish a trust account
– establish an expense and liability for estimated
claims and judgments
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Financial statements - public
 Government-wide reporting
– Statement of Net Assets
– Statement of Revenues, Expenses, and Changes in Net
Assets
– Statement of Cash Flows
 Net assets
– Invested in Capital Assets, net of related debt
– Restricted
– Unrestricted
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Financial statements - private
 Follow FASB No. 117 - entity-wide reporting
– Statement of Financial Position
– Statement of Activities
– Statement of Cash Flows
 Net Assets
– Permanently Restricted
– Temporarily Restricted
– Unrestricted
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