Wayne State University Accounting 101

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Wayne State University

Accounting 101

February 16,

2011

Prepared by Tamaka Butler, Associate Controller

WSU Accounting 101

Contents

Overview – Basic WSU Accounting & Banner System

Information

WSU Chart (FOAPAL) Structure

Accounting Scenarios And the Related Journal Entries

Questions

2

WSU Accounting Overview

“Basis of Accounting”

 Wayne State University’s financial statements are prepared in accordance with Governmental Accounting Standards Board

(GASB) principles.

The day-to-day accounting is prepared using fund accounting.

Fund accounting is an accounting and reporting system commonly used by public colleges and universities to keep track of resources whose use is limited by donors, granting agencies, law, other outside individuals or entities, or by governing boards.

A fund is maintained for each specific purpose.

A fund is a self-balancing “entity” with its own set of accounts, consisting of assets, liabilities and fund balance (equity).

3

WSU Accounting Overview

“Encumbrances”

 WSU, like many public institutions, use the encumbrance system to help control expenditures as it relates to budgets. Under this system, the amount of the available balance for a given department is reduced when purchase orders or other commitments are established (i.e. POs. IRBs, Travel, etc.).

Encumbrances are not included with expenses in externally issued financial reports or reported as liabilities because the amounts are not yet owed under the accrual basis.

4

WSU Accounting Overview

“Banner”

 Banner is the integrated database system used at WSU which includes the following components: Finance, Human Resources, Student,

Financial Aid, and Alumni/Development, General.

Banner Finance houses the accounting ledgers, procurement, accounts payable, accounts receivable, endowment, fixed assets, and research accounting.

The core of Banner Finance consists of:

 General Ledger which is equivalent to the Balance Sheet

Operating Ledger which is equivalent to the Income Statement

Encumbrance Ledger which is used to reserve against available balances for anticipated expenditures and/or outstanding commitments (purchase orders, Internal Requisition Billings, etc.)

5

FOAPAL Structure - Chart of Accounts

WSU’s Chart of Account Structure consists of six elements ( FOAPAL ):

F und - Identifies source of funds and represents a self – balancing set of accounts within the general ledger

O rganization - Identifies cost centers of the University such as School, College, Division or

Department (Examples: Dean of Libraries, School of Medicine, Fiscal

Operations)

A ccount - Identifies the type of financial activity (i.e. asset/liability, expense/revenue, transfer, fund balance)

P rogram - Identifies the purpose of the transaction (Examples: Instruction, Research)

A ctivity -

L ocation -

Can be used to define separate or unique activities to help refine reporting

(limited use currently)

Identifies physical location (used in the Plant Fund only)

The Index is a six character code that serves as a shortcut to a FOAPAL string combination.

6

FOAPAL Structure

FOAPAL elements have a hierarchy coding system used in Banner for classification, budgeting and recording of financial transactions.

Several levels of hierarchy exists for "roll-up" and reporting purposes.

WSU has nine fund groups. Each fund group consists of at least one fund type. A description of the WSU

Fund groups and a listing of the fund types and their corresponding numbering sequence are included on slides 8 and 9, respectively.

7

F

OAPAL Structure – “

F

und”

WSU has the following fund groups:

Current Fund Groupings (consists of funds expendable for operating purposes):

General Fund - used to account for general operating activities related to academic and instructional programs and their administration. Principal revenue sources are state appropriations, tuition and indirect cost.

Designated Fund - used to account for funds for specific departments which are not restricted by donors or supporting agencies. Includes organized departmental activities associated with academic programs, salary reimbursements and gifts (not restricted to a specific purpose by donor).

Auxiliary Activities Fund - used to account for revenues and expenses of revenue-producing, substantially self-supporting activities that perform a service for, but are not themselves, educational or general activities.

Independent Operations Fund - used to account for revenues and expenses of separately organized operations that are owned or controlled by the University but are unrelated to, or independent of, the institution’s mission.

Expendable Restricted Fund - is used to account for funds restricted for specific purposes by external parties, contracts, or legislation.

Noncurrent Fund Groupings:

Student Loan Fund - is used to account for transactions related to university and federal student loans (excludes activity from the Direct Loan Program)

Plant Fund - used to account for transactions relating to investments in physical properties, indebtedness incurred in the financing there of and reserves for maintenance, replacement, and unexpended plant fund.

Endowment and Related Funds – are used to account for money and investments received where the donor has indicated the principal be held in perpetuity or the Board of Governors has elected to treat such gifts as endowments, with only the income being expended.

Agency Fund - is used to account for amounts withheld from payroll and amounts held in custody for students, Universityrelated organizations and others.

8

F

OAPAL Structure – “

F

und”

FUND ST RUCT URE

Fund

General

Designated

Expendable Restricted

Federal

State

Other Governmental

Private Grants & Contracts

Salary Reimbursement

Donations

Endowment Beneficiaries

Central Accounting Funds

Auxiliary Activities

Independent Operations (WDET )

Student Loan Funds

University Loans

Federal Loans

Endowments

True

Term

Funds Functioning As Endowment

Annuity & Life Income

Plant

Unexpended Plant

Repair & Replacement Reserve

Debt Service

Investment in Physical Plant

Agency

Fund

Type

Le ve l 2

11

12

21

23

24

25

27

28

29

2A

37

39

51

59

60

63

66

69

70

73

75

77

90

Fund No.

11xxxx

12xx or 13xx

21xx, 22x, 2Mx

23xxx

24xxx

25xxx

27xxx

28xxx

29xxx

2Axx

37x

39x

51xx or 55xx

59x

60xxx

63xx

66xxxx

69xx

70xxx

73xx

75xx

77xx

9xxx

Indexes

1XXXXX

22XXXX

3XXXXX

3XXXXX

3XXXXX

4XXXXX

4XXXXX

4XXXXX

4XXXXX

4XXXXX

227,228XXX

2278XX

05XXXX

059XXX

060,061XXX

063XXX

066,067XXX

069XXX

Curr/NonCurr

Current

Current

Current

Current

Current

Current

Current

Current

Current

Current

Current

Current

Non-current

Non-current

Non-current

Non-current

Non-current

Non-current

770,771,772XXX

773XXX

Non-current

Non-current

075XXX Non-current

077, 078, 079XXX Non-current

99XXXX Non-current

BK BKxx Bank Funds

Funds are sequentially numbered within each fund type.

9

F

OAPAL Structure – “

F

und”

Sub-funds roll up to the fund types and are sequentially numbered as follows:

Auxiliary Activities

Housing

Housing Admin

Housing Apts

Sherbrooke

DeRoy

Housing Residence Halls

Ghafari (North) Hall

South Hall

Student Center

South End

Press

37 (fund type)

372

373

374

375 ro ll-up fund fo r all H o using funds

3721

3722 ro ll-up fund fo r A pts

37221

37222

3723 ro ll-up fund fo r D o rms

37231

37232

10

F

O

APAL Structure – “

O

rganization”

• Organization codes identify the cost center of the School, College, Division or Department

• Rollup organization codes are used to summarize data by reporting unit.

Hierarchy

University

Executive Level

SCD Rollup

SCD Sub-Rollup

Department Rollup

Individual Department Rollup

Subunit Rollup

Individual Subunit

11

F

O

APAL Structure – “

O

rganization”

The first two digits of an organization code (SCD Sub Rollup level 4 - Individual Sub unit level 8 of the hierarchy ) represents the School/College/Division (S/C/D).

S/C/D List

01 – UNIVERSITY LIBRARIES

02 – EDUCATION

03/12 – LIBERAL ARTS & SCIENCES

07 – LAW

14 – HONORS

15 – NURSING

09 – VICE PRESIDENT FOR RESEARCH

10 – HEALTH & PHYSICAL EDUCATION

13 – SOCIAL WORK

16 – BUSINESS ADMINISTRATION

20 – EDUCATIONAL OUTREACH

04 – FINE, PERFORMING & COMMUNICATION ARTS

05 – ENGINEERING

06 – MEDICINE

08/18/19 – PHARMACY & HEALTH SCIENCES

25 – COMPUTING & INFORMATION TECHNOLOGY

30 – SECRETARY OF THE UNIVERSITY

31 – PRESIDENT

32 – VICE PRESIDENT FOR ACADEMIC AFFAIRS

33 – VICE PRESIDENT FINANCE & BUSINESS ADMINISTRATION

37 – GOVERNMENT AFFAIRS

42 – FACILITIES PLANNING & MANAGEMENT

43 - BUSINESS OPERATIONS

73 – EXECUTIVE VICE PRESIDENT AND CHIEF OF STAFF

75 - OFFICE OF BUDGET, PLANNING & ANALYSIS

78 - WOMEN'S COMMISSION

82 - FISCAL OPERATIONS/INVESTMENT, DEBT & RISK MANAGEMENT

86 - DEVELOPMENT & ALUMNI AFFAIRS

87 - MARKETING & COMMUNICATION

88 - GENERAL COUNSEL

92 - STUDENT SERVICES & UNDERGRATUATE AFFAIRS

98 - CENTRAL ACCOUNTS

46 - PUBLIC SAFETY

47 - INTERNAL AUDIT

48 - LABOR RELATIONS

49 - HUMAN RESOURCES

12

F

O

APAL Structure – “

O

rganization”

Sub-orgs are sequentially numbered 1-9 and A-Z

For example:

Library 01 (Dept. Code)

Library Adm. 01 A1

Library Office of Dean 01 A11

Library Associate Dean 01 A12

Library External Affairs 01 A13

13

FO

A

PAL Structure – “

A

ccount”

Account T ypes

The account types represent the high level financial statement classifications and are used to group like types of account codes.

Assets

Liabilities

Control Accounts

Fund Balance

Federal Loan Funds Cumulative Total

Revenues

Labor/ Fringe Benefits

Direct Expenditures

Transfers

Fund Additions

Fund Deductions

Account Type

Level 1

10

20

30

40

42

50

60

70

81

90

95

Each account code is classified by its corresponding account type .

Example:

Direct Expenditures 70 (account type level 1)

72 General Expenditures

Supplies

Office Supplies

Research & Lab Supplies

Computer Software

(account type level 2)

7216

72161

72162

72163

14

FOA

P

AL Structure – “

P

rogram”

Program Codes

Program codes are used for financial reporting purposes to classify expenditures by functional purpose.

Description

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

Operation and Maintenance of Plant

Scholarship and Fellowships

Auxiliary Enterprises

Program Code

1X

2X

3X

4X

5X

6X

7X

8X

9X

All expenditure transactions in the current funds must have one of the above program codes to allow for proper classification in the University's financial statements

A detailed definition of the functional expense categories is included on the following slide.

15

FOA

P

AL Structure – “

P

rogram”

Financial Statement Functional Expense Categories

Instruction - Includes expenditures for all activities that are part of the institution’s instruction program. Expenditures for both credit and noncredit activities are reported in this functional category. This function excludes expenditures for academic administration where the primary assignment is administration (i.e., academic deans). However, expenditures for departmental chair, since instruction is still an important role of the administrator, should be included in this category.

Research - Includes all funds expended for activities specifically organized to produce research outcomes and commissioned by an agency either external to the institution or separately budgeted by an organizational unit within the institution. This function does not contain all sponsored programs (such as training grants), nor does it contain sponsored research only, since internally supported research programs should be included in this function. It includes only expenditures for specifically budgeted departmental research.

Public Service - Includes funds budgeted specifically for public service and expended for activities established primarily to provide noninstructional services beneficial to groups external to the institution. Such activities include seminars, projects and various organizational entities established to provide services to particular sections of the community.

Academic Support - Includes expenditures for activities carried out primarily to provide support services that are an integral part of the operations of one of the institution’s three primary programs: instruction, research and public service. It includes the retention, preservation, and display of materials and the provision of services that directly assist the academic functions of the institution. This function includes the media and technology (i.e., computing support) employed by the three primary programs as well as the administrative support operations that function within the various academic units (which includes the development of future instructional activities).

Student Services - Includes all funds expended for admissions, registrar activities, and activities whose primary purpose is to contribute to students’ emotional and physical well-being and to their intellectual, cultural, and social development outside the context of the formal instruction program.

Institutional Support - Includes all funds expended for activities whose primary purpose is to provide operational support for the day-to-day functioning of the institution, excluding expenditures for physical plant operations.

Operation and Maintenance of Plant - Includes all expenditures of current funds for the operation and maintenance of the physical plant, net of amounts charged to auxiliary enterprises. It does not include expenditures made from the Plant Fund. It includes all expenditures for operations established to provide services and maintenance related to campus grounds and facilities including utilities, property insurance, fire protection and similar items.

Scholarships and Fellowships - Includes monies given in the form of outright grants and trainee stipends to individuals enrolled in formal coursework, either for credit or non-credit.

Auxiliary Activities – Includes expenditures relating to the operation of auxiliary enterprises, whether charged directly as expenditures or allocated as a proportionate share of costs of other departments or units.

16

Accounting Scenarios And the Related

Journal Entries

 Scenario 1 – Accounting for a Purchase Order from requisition to vendor payment

Scenario 2 – Accounting for certain Endowment Fund transactions

A new gift

Quarterly distributions

Scenario 3 – Accounting for certain Plant Fund transactions

Transfer of funding for a new account

Construction in Progress (CIP)

Scenario 4 – Accounting for medicare payments between WSU, State of

Michigan, DMC and UPG

17

SCENARIO 1

Accounting for a Purchase Order:

From Requisition to Vendor Payment

1. Create a Requisition (Req# R01077002) for annual Hardware Maintenance in the amount of $1,483.83.

2. Establish Purchase Order (PO# P0501596) for Requisition R01077002 and liquidate the

requisition.

3. Invoice (Inv# I0628629) received for the annual maintenance related to Purchase Order

P0501596. a) Liquidate encumbrance b) Record expense and accounts payable liability

4. Invoice I0628629 approved for payment and a check is generated. a) Reduce claim on cash (cash balance) and accounts payable liability in related

fund. b) Record impact to bank fund.

18

SCENARIO 1 – Accounting for a Purchase Order:

From Requisition to Vendor Payment

FUND: 113100 FUND: BK53

1.

2.

3a.

Encumbrance Ledger

Establish Req

Establish PO

Increase

Commitment

(reserve available balance)

+

1,483.83

1,483.83

Decrease

Commitment

(release reserve on available balance)

-

(1,483.83) Liquidate Req

(1,483.83) Liquidate PO

3b.

4a.

4b.

dr

Claim on Cash cr

1,483.83

General Ledger

Accounts Payable dr cr

1,483.83

1,483.83

(Component of Fund Balance)

Expense Control dr

1,483.83

cr

Claim on Cash dr

1,483.83

cr

General Ledger

General Disbursements

Fifth Third Bank Account dr cr

1,483.83

Operating Ledger

3b.

Expense dr

1,483.83

cr

19

SCENARIO 2 – Accounting For Certain Endowment Fund Transactions

1.

Check received for the Drs. White Endowed Scholarship Fund (Endowment

Index/Designation 060382, Fund 60163M) a) Record deposit to the Bank b) Record Gift in Development (transaction feeds from Banner Development to

Banner Finance).

2. Record quarterly endowment income distribution from the Common Trust Fund (Fund

699) to the Drs. White Endowed Scholarship Fund Index 477133 ($1,000 used for example).

20

SCENARIO 2 – Accounting For Certain Endowment Fund Transactions

Drs. White Endowed Scholarship Fund (60163M) Common Trust Fund (699) Comerica Bank Fund (BK10)

Claim on Cash dr cr

1a.

1b. 25,000.00

2.

General Ledger

(Component of Fund Balance)

Revenue Control dr cr

25,000.00

Claim of Cash dr cr

Operating Ledger

Undistributed Income

(account 153031) dr cr

General Ledger

Claim on Cash dr cr

25,000.00

Gift Bank Account dr cr

25,000.00

1,000.00

1,000.00

Drs. White Endowed Scholarship Index 477133 (Fund 290ZR)

Operating Ledger

1b.

2.

dr

Revenue cr

25,000.00

Claim on Cash dr cr

General Ledger

(Component of Fund Balance)

Revenue Control dr cr

1,000.00

1,000.00

Operating Ledger dr

Revenue cr

1,000.00

21

SCENARIO 3

Accounting For Certain Plant Fund Transactions

1.

Receive request to establish new Unexpended Plant Fund account for Parking Structure 1-Major Repair

(Index 771486, fund 70GLA) with funding from the following: a) $100,000 - Auxiliary index 227601, fund 3781

(Note: T-accounts not shown for Auxiliary Fund activity) b) $5,675,000 - Plant Fund Reserve index 773033, fund 730C

2. At year-end, record CIP for capitalizable expenditures for the fiscal year for the Parking

Structure 1 Major Repair in the corresponding "Investment" in Plant fund Parking Structure 1 index (078320, fund 777V).

( Note: As part of this process, Accounting staff will analyze the unexpended account to identify non capitalizable costs included in expense (internal transfers from other Plant Fund accounts) to determine the appropriate amount of CIP.)

22

SCENARIO 3 – ESTABLISH NEW PLANT FUND ACCOUNT & RECORD

CONSTRUCTION IN PROGRESS (CIP)

Parking Structure I Major Rep FY10 Index (771486) - Unexpended Plant Fund (70GLA)

Operating Ledger dr

Claim on Cash cr

1a.

100,000.00

1b.

5,675,000.00

General Ledger

(Component of Fund Balance)

Expense Control dr cr

5,675,000.00

i nterfund tra ns fer from 773033

Pl a nt Res erve

(Component of Fund Balance)

Transfer Control dr cr

100,000.00

from Auxi l i a ry dr

Transfers cr

100,000.00

tra ns fer from a uxi l i a ry

(a ccount 8514) dr

Expense cr

5,675,000.00

i nterna l tra ns fer from Res erve

(a ccount 785)

1b.

dr

Claim on Cash cr

5,675,000.00

Parking Improvement Reserve Index (773033) - Repair and Maintenance Reserve Fund (730C)

General Ledger Operating Ledger

Expense Control dr cr

5,675,000.00

Expense dr

5,675,000.00

(account 785) cr dr

2.

5,093,651.00

CIP cr

Parking Structure 1966 Index (078320) - Investment in Plant Fund (777V)

General Ledger

Capital Expenditure * dr cr

5,093,651.00

* For Financial Statement purposes the credit to capital expenditures (in Investment in Plant Fund) is offset by the capitalizable expenditures which are

incurred and recorded in the Unexpended Plant Fund (not shown in this example).

23

SCENARIO

4 State of Michigan/DMC/UPG- Medicare Payments

1.

WSU receives payment from DMC (usually via wire) for their portion of the Medicare payment

2.

a) Record impact to the bank fund b) Reduce unbilled receivable in index 224650, fund 130M31

WSU submits payment to the State of Michigan based on amount requested from UPG (includes DMC &

UPG portion) via wire a) Record increase to unbilled receivable in index 224650, fund 130M31 b) Record impact to bank fund

3.

UPG reimburses WSU for their portion of the payment via wire a) Record impact to bank fund b) Reduce unbilled receivable in index 224650, fund 130M31

Note: Wayne State treats this transaction as pass through activity. Therefore, there is no income statement impact.

24

SCENARIO – 4 State of Michigan/DMC/UPG- Medicare Payments

Med AEF - Master Index (224650) - State of Michigan DSH Activity Fund (130M31)

General Ledger

FUND: BK10

General Ledger

Claim on Cash dr

2a.

2b.

1a.

1b.

200,000.00

3a.

3b.

2,709,159.38

cr

2,909,159.38

Unbilled Accounts Receivable dr cr

2,909,159.38

200,000.00

2,709,159.38

dr

Claim on Cash cr

200,000.00

Comerica EFT Concentration dr

200,000.00

cr

2,909,159.38

2,709,159.38

2,709,159.38

2,909,159.38

25

February 16,

2011

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