Exam 13: Colleges and Universities

What are the key reporting options available to public colleges and universities?

Austin Community College, a public institution, issues stand-alone financial statements. Although the college maintains its accounts on a fund basis, it does not include a combined fund statement of net position or statement of revenues, expenses, and changes in net position in its financial statements. Can such a practice be consistent with generally accepted accounting principles? Explain, citing specific GASB provisions or pronouncements.

In a public university setting, general administration and sponsored research are examples of revenues classified by source.

Private colleges that receive federal grants are required to apply government accounting standards set by the GASB.

The single largest source of revenues for not-for-profit universities is tuition and fees.

Investments of a public college must be reported at amortized cost.

Public colleges and universities have the option to report as a single purpose government engaging in business-like activities, including reporting on a full accrual basis.

Betterman College, a not-for-profit institution, engaged in the following transactions during its fiscal year ending June 30, 2017. REQUIRED: Prepare appropriate journal entries, indicating the types of funds (by restrictiveness) in which they would be recorded. 1. The college collected $64,800,000 in student tuition. Of this amount $4,500,000 was applicable to the summer semester, which ran from June 1 to August 30, and $300,000 was applicable to the fall semester that began the following September. 2. The college received a contribution of $2,000,000 in stocks and bonds to establish an endowed chair in chemistry. Income from the chair must be used to supplement the salary of a professor of chemistry. 3. During the year, the chemistry chair endowment earned interest and dividends of $70,000, all of which was used to supplement the salary of the chair holder. 4. The market value of the investments of the chemistry chair endowment declined by $60,000. 5. Using funds restricted for this purpose, the college purchased $300,000 of equipment for intercollegiate athletics. Intercollegiate athletics is accounted for as an auxiliary enterprise. The college charged depreciation of $60,000. 6. The annual alumni campaign yielded $2,800,000 in pledges. The college estimated that 2 percent would be uncollectible. During the year the college collected $2,400,000 on the pledges.

In January 2017, Granite Hills State University received a $500,000 government grant to be used to finance a study to determine the effects of the federal stimulus bill on the regional economy. During 2017, expenditures of $125,000 were incurred and paid on the research project. REQUIRED: 1. Record these transactions in the accounts of Granite Hills State University, and explain how the effects of the transactions should be reported in the college's financial statements. 2. Repeat requirement (1) under the assumption that the grant was to finance plant expansion.

In what ways can declines in the stock market affect the fiscal health of colleges and universities?

Private colleges and universities should account for all grants on the accrual basis as exchange transactions.

When a semester starts and ends in different fiscal years, FASB standards require not-for-profit colleges to apportion tuition and fees between the two years.

In January 2016, the Free Cancer Foundation accepted an endowment of $500,000, the income from which is restricted to promoting research related to recovery from cancer. All gains, whether realized or unrealized are available for distribution. During 2016 the market value of endowment's investment portfolio increased to $520,000. Accordingly, at year-end $20,000 was credited to a unrestricted expendable fund. During 2017 the market value of the portfolio decreased to $480,000 and the foundation spent $12,000 on qualifying projects. Owing to these events and transactions, compute: REQUIRED: What should be the reported net asset balance of the following categories during 2017 (assuming a zero beginning balance in unrestricted net assets): 1. Donor restricted 2. Unrestricted

GASB requires that tuition revenues be reported net of any uncollectible amount.

Government (public) colleges and universities must adhere to the FASB pronouncements.

Dormitories and bookstores are examples of auxiliary enterprises (business-type activities) engaged in by both private and public universities.

Tuition revenue should be reported net of tuition discounts and scholarships.

How do the three major financial statements of a public college or university differ from those of a private not-for-profit college or university?

ASU 2016-14 requires that all colleges and universities report both revenues and expenses by function.

Roberta College is a not-for-profit entity. REQUIRED: Record the following transactions for the fiscal year ended June 30, 2017. That year… a. Tuition revenue for the fall semester 2016 (August - December) was $4 million; tuition for the Spring semester 2017 (January - May) was $3.8 million; tuition for the summer semester 2017 (June 1-August 15) was $2 million. All tuition was received in cash. b. Faculty salaries for the fall semester were $3 million; for the spring semester, $2.9 million; and for the summer semester, $0.6 million. All salaries are paid at the end of the month earned. Salaries earned in summer are June $0.3 million, July $0.2 million, and August $0.1 million. c. During June, $3.2 million of tuition applicable to the fall 2017 semester was received in cash. d. During the year a wealthy benefactor pledged $1 million to the university for the fund-raising campaign to renovate the oldest building on the campus. The benefactor will deliver the cash when renovation is substantially complete. e. Fixed assets of the university have a historical cost of $120 million, an estimated salvage value of $20 million, and an estimated useful life of 40 years. f. During the year the university's college of business received notice of a $100,000 grant from the federal government to conduct a research project on the effect of different budgeting techniques on the performance of government employees. During the year the university spent $8,000 on printing questionnaires and $12,000 on faculty salaries for activities directly related to the grant. By year-end the university had not received any cash from the federal government.