OUS Fiscal Policy Manual
Accounting and Financial Reporting
| Section: Accounting and Financial Reporting | Number: 05.650 |
| Title: Accounting for Interfund Transactions |
Index
POLICY
- .100 POLICY STATEMENT
- .110 POLICY RATIONALE
- .120 AUTHORITY
- .130 APPROVAL AND EFFECTIVE DATE OF POLICY
- .140 KNOWLEDGE OF THIS POLICY
- .150 DEFINITIONS
- .160 RESPONSIBILITIES
- .170 POLICY OBJECTIVES
- .200 GENERAL
- .210 DESCRIPTION OF ACCOUNTING OF INTERFUND TRANSACTIONS
- .300 IMPACT OF INTERFUND TRANSACTIONS ON ANNUAL FINANCIAL STATEMENTS
- .350 OTHER ANNUAL FINANCIAL STATEMENT ELIMINATIONS
- .690 CONTACT INFORMATION
- .695 HISTORY
APPENDIX
NONE
POLICY
This policy sets forth certain basic system-wide requirements for administration and accounting for interfund transactions.
OUS seeks to ensure that the policies and procedures related to administration and accounting for interfund transactions are documented, communicated, clearly understood, and consistently applied.
- ORS 351.085 - Duties and Powers of Chancellor
- OAR 580-040-0005 - Delegation and Assignment of Responsibility
- IMD 6.001 - Finance and Business Affairs Accounting Policies - Assignment of Responsibility
- GASB Statement No. 14 - The Financial Reporting Entity
- GASB Statement No. 33 - Accounting and Financial Reporting for Non-exchange Transactions
- GASB Statement No. 34 - Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments
- GASB Statement No. 38 - Certain Financial Statement Note Disclosures
.130 APPROVAL AND EFFECTIVE DATE OF POLICY
Approved by the Associate Vice Chancellor for Finance & Administration/Controller on March 9, 2007.
All institutional and Chancellor's Office personnel with financial management responsibilities should be knowledgeable of this policy.
Interfund Transaction - An interfund transaction occurs when a fund has a financial transaction with another fund within the same institution or with a fund of another OUS institution or the Chancellor's Office.
A. CHANCELLOR'S OFFICE
Developing accounting and financial reporting policies related to interfund transactions.
Determining interfund elimination adjustments to be made for annual financial statements.
B. INSTITUTIONS
Determining correct accounting for interfund transactions.
- Recording interfund transactions correctly in the accounting records.
The objective of this policy is to ensure that the recording and financial reporting of interfund transactions follows generally accepted accounting principles (GAAP), specifically the guidance of the Governmental Accounting Standards Board (GASB) and the National Association of College and University Business Officers (NACUBO).
An interfund transaction occurs when a fund has a financial transaction with another fund within the same institution or with a fund of another OUS institution or the Chancellor's Office. Types of interfund transactions include the recording of:
Internal revenue
Distribution of revenue
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Allocation or reimbursement of expense
Transfer in and transfer out
Interfund loans
Fund additions and fund deductions
Recording an interfund transaction requires the careful selection of the type of interfund transaction because selection of the wrong type could result in misstating a fund's revenues and/or expenses.
Recording interfund transactions can also result in inflated revenue and expenses being reported in an institution's or OUS's annual financial statements. The revenue and expenses reported in the annual financial statements should be limited to revenue and expense from external sources, and should not be overstated by revenue and expense from internal sources. Correct accounting of interfund transactions is necessary to ensure that, at the end of the fiscal year, the Controller's Division can correctly identify the interfund transactions that must be eliminated from the annual financial statements.
This policy describes when to use each type of interfund transaction and the required accounting of each type of interfund transaction.
.210 DESCRIPTIONS AND ACCOUNTING OF INTERFUND TRANSACTIONS
The following lists each type of interfund transactions, along with a description, examples and required accounting treatment:
| Type of Interfund Transaction | Description of interfund Transaction | Examples of Interfund Transactions | Required Accounting on Interfund Transactions |
|---|---|---|---|
| Internal Revenue | Revenue earned from selling services or supplies to another OUS entity or institutional department. The revenue is internal to OUS and therefore considered "internal revenue." |
A university printing center earns OUS internal revenue from selling printing services to other institutions or departments within the same institution. | Fund earning the revenue credits the appropriate 09xxx Internal Sales/Service revenue account code. Fund being charged the expense debits the appropriate expense account code. |
| Distribution of Revenue | Revenue applicable to multiple funds that is initially received by one fund and then distributed to other funds. | Chancellor's Office initially receives state appropriations that are to be distributed to the institutions. | Fund distributing the revenue debits the appropriate 0xxxx revenue account code. Fund receiving the revenue credits the appropriate 0xxxx revenue account code. |
| Allocation or Reimbursement of Expense | Expense applicable to other fund(s) that is initially charged to one fund then allocated to other fund(s). | Chancellor's Office initially pays assessments from the State of Oregon and allocates those assessments to the institutions. Allocation of institutional overhead cost to operational units. A department charges another department for use of a copier. |
Fund allocating the expense credits the appropriate expense account code. (Account code used would be either the same expense account code that was originally used to record the expense or, for reimbursements of expenses, a 79xxx Internal Sales Reimbursement account code.) Fund being charged the expense debits the appropriate expense account code. |
| Transfers in and Transfers out | "Non-exchange" transactions between funds due to the transfer not being for result of an exchange of revenue for goods or services. "Non-exchange" transactions are further defined in GASB No. 33. | Institutional housing fund transfers a portion of its funds to debt service reserve for payment of long-term debt. | Fund making the transfer debits an expense 92xxx transfer out account code. Fund receiving the transfer credits an expense 91xxx transfer in account code. Note: the last 3 digits must match (i.e. 91001 and 92001 should be used together) |
| Interfund Loans | Loan from one fund to another fund, in accordance with OUS Fiscal Policy Manual Section 05.271: Inter-instituional and Interfund Loans. The recording of inter-institutional and interfund loans occur infrequently and only in very specific circumstances. Institutional business office should be contacted before recording inter-institutional or interfund loans. |
An institutional fund loans funds to another fund with the same institution or a fund of another institution. | Fund making the loan debits "Due From" in an A6xxx or A7xxx asset account code. Fund receiving the loan credits "Due To" in a B6xxx or B7xxx liability account code. |
| Fund Additions and Fund Deductions | Movement of a portion of one fund's assets or liabilities to another fund, without affecting the operating ledger which measures annual revenue and expense. The recording of fund additions and deductions occur infrequently and only in very specific circumstances. Institutional business office should be contacted before recording fund additions and fund deductions. |
Institutional motor pool moves a portion of its cash into an equipment replacement reserve. Cash is set aside in the reserve fund to save for the future replacement of motor pool vehicles. | Fund receiving assets or moving liabilities credits an Exxxx fund addition account code. Fund moving assets or increasing liabilities debits an Fxxxx fund deduction account code. |
.300 IMPACT OF INTERFUND TRANSACTIONS ON ANNUAL FINANCIAL STATEMENTS
The annual financial statements should be limited to reporting financial activity and financial balances resulting from external sources. To avoid overstating revenue, expense, assets, and liabilities, the annual financial statements require that internal and intra-entity activity and balances be eliminated.
Internal revenue overstates total revenue and total expense in the annual financial statements. At the end of the fiscal year, the Controller's Division identifies all 09xxx internal sales/service revenue transactions and makes institution-wide and OUS-wide adjustments to remove the overstatement of revenue and expense from the annual financial statements. These interfund elimination adjustments are made for financial statement purposes only and are not recorded in the institution's accounting records.
Interfund loans overstate total assets and total liabilities in the annual financial statements. At the end of the fiscal year, the Controller's Division identifies all A6xxx and A7xxx "Due From" asset balances and B6xxx and B7xxx "Due To" liability balances, and makes institution-wide and OUS-wide adjustments to remove the overstatement of assets and liabilities from the annual financial statements. These interfund elimination adjustments are made for financial statement purposes only and are not recorded in the institution's accounting records.
.350 OTHER ANNUAL FINANCIAL STATEMENT ELIMINATIONS
The following describes other financial statement elimination entries made at the end of each fiscal year. The eliminations are made for financial statement purposes only and are not recorded in the institution's accounting records.
A. Scholarship Allowances
Institutions receive financial aid funds from the Federal Government. The financial aid funds are disbursed to students, who in turn use a large portion of those financial aid funds for payment of tuition and fees, on-campus housing and books. In the institution accounting records, these transactions result in (1) governmental financial aid grant revenue, (2) financial aid expense, and (3) tuition and fee, campus housing and/or institutional bookstore revenue.
At the end of the fiscal year, the Controller's Division follows a methodology to estimate the financial aid expense used by students to pay for tuition and fees, campus housing and books. NACUBO refers to this amount as "scholarship allowance." In the institutional and OUS-wide financial statements, the financial aid expense and the tuition and fee revenue and auxiliary enterprise revenue are reduced by the amount of the scholarship allowance.
B. Distribution of Facilities & Administrative (F&A) Cost Recoveries
The recording of the revenue, distribution and use of F&A Cost Recoveries result in the double-counting of revenue and expense on an institution and OUS-wide basis. Refer to OUS Fiscal Policy Manual section 05.553, "Accounting for Facilities & Administrative (F&A) Cost Recoveries", for additional information on accounting and financial reporting of F&A Cost Recoveries.
C. Sub-Contracts/Grants Within OUS
If an OUS institution is a sub-contractor/grantor to another OUS institution, the movement of funds from one OUS institution to another OUS institution results in a system-wide double counting of revenue and expense. To identify these revenues, the sub-grantee uses account code 03118 "OUS Institution Sub-Contract/Grants", to record the revenue received from the other OUS intuition. The institution disbursing the funds out should use a 399xx sub-grant account code to record the expense.
For the the financial statements, the Controller's Division prepares a system-wide interfund elimination adjustment to remove the overstatement of the OUS internal sub-contract/grant revenue and expense.
D. Financial Aid Administrative Cost Allowance (ACA)
Institutions receive Financial Aid Administrative Cost Allowance in conjunction with certain student federal aid programs, specifically, Perkins Loan Program, Federal Supplemental Educational Opportunity Grants (FSEOG), and Federal Work Study (FWS). The recording of the revenue, distribution, and use of the cost allowance results in the double-counting of revenue and expense on an institution and OUS-wide basis. When distributing the administrative cost allowance, institutions should debit the appropriate financial aid fund using account code 70001 "Financial Aid Administrative Costs" and credit the appropriate Budgeted Operating fund(s) using account code 03302 "Financial Aid Administrative Cost Recovery".
For the financial statements, the Controller's Division prepares an institution-wide adjustment to remove the duplicate revenues and expenses that resulted from the distribution of the ACA
Direct questions about this policy to the following offices:
| Subject | Contact |
| General questions from institutional personnel | Institution Office of Business Affairs |
| General questions from institutional central administration and Chancellor's Office personnel | Chancellor's Office Controller's Division |
03/09/07 - Approved
Policy Last Updated 03/01/07
APPENDIX
None
Appendix Last Updated: 03/01/07
