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Accounting for Designated Operating Funds
|Section: Accounting and Financial Reporting||Number: 05.712|
|Title: Accounting for Designated Operating Funds|
- .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 FUND BALANCE STANDARDS
- .180 INDIRECT COSTS TO BE ALLOCATED
- .190 INDIRECT COST RECOVERY LIMITATION
- .200 ACCOUNTING ISSUES
- .690 CONTACT INFORMATION
- .695 HISTORY
This policy sets forth certain basic system-wide standards for accounting for Designated Operating funds. Designated Operating funds are recorded in Banner FIS under Fund Type 12, Fund Level 1, 050000 "Designated Operating Funds."
OUS seeks to ensure that the policies and procedures related to accounting for Designated Operating funds 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
- IMD 6.500 - Fiscal Management of Auxiliary enterprises and Other Self-Liquidating Activities
Approved by the Vice Chancellor for Finance & Administration, effective March 3, 2005. Significant revisions to this policy were approved by the Associate Vice Chancellor for Finance and Administration/Controller on June 14, 2007. To allow for planning and rate adjustments, converting from the 8% overhead charge to an institutionally determined allocation of indirect costs is to be phased in and fully implemented no later than July 1, 2008.
All Chancellor's Office and institutional personnel with financial management responsibilities should be knowledgeable of this policy.
Designated Operating Funds - Designated operations (fund type 12, fund level 1 roll-up 050000) account for self-sustaining activities related to instruction, community education, public service and student aid activities. The following functions are included:
- Instruction (field trips; international education) - non-credit
- Community Education (non-credit conferences, workshops, seminars, etc., sponsored by Continuing Education)
- Public Service (non-instructional services to the general public or outside groups such as: non-credit short courses, workshops, seminars, conferences, and camps; testing and consulting services; special interest publications; theater and music activities; etc.)
- Scholarships (financial aid funds generated from fund raising activities accounted for in designated operating funds)
Designated Operating funds are accounted for in the Other Funds Non-Limited category of the OUS legislative budget.
Fund Balance: The difference between a fund's assets and liabilities. (assets-liabilities=fund balance)
Direct Costs - Costs of producing goods and services, which can be readily identified with a specific activity. For designated operating funds, these costs include salaries and benefits, and services and supplies.
Indirect Costs - Costs generally applicable to a designated operating fund that cannot be charged directly without effort disproportionate to the benefits received. Typically theses costs benefit more than one function or organization. Examples of these costs may include utilities, building maintenance, and central campus administrative services.
A. CHANCELLOR'S OFFICE
The Vice Chancellor for Finance and Administration or designee shall have oversight responsibility for this policy.
Each university Vice President for Finance and Administration or designee shall have oversight responsibility for institutional provisions set forth in this policy. They are also responsible for developing campus policies and cost allocation plans for indirect costs charged to designated operations consistent with this policy.
A. Lower Limit: Any negative fund balance as of June 30, must be eliminated by providing adequate funding to the designated operating fund by the responsible department or from other Education and General Funds expense accounts.
Exceptions: Exceptions for situations where the institution believes it is more appropriate to require the designated operating fund to eliminate its deficit through future year operations, or where the deficit condition is a normal timing difference relating to its operating calendar will be approved by the institutional Vice President for Finance and Administration or designee, and documentation justifying the exception will be retained for audit. Institutions will report exceptions to the Controller's Division as part of the annual closing of the books process. Each exception must notate plans for eliminating the negative fund balance.
By definition designated operating funds are self-sustaining, generating sufficient operating revenues to cover operating expenses, including direct expenses and the allocable portion of indirect costs borne by other units of the university.
The allocation of indirect costs should be recorded within the accounting records of the institution.
Allocation of indirect costs should be based on a process that is reasonable relative to the activity and the related costs. OUS institutions will each determine and document the rationale for allocating or not allocating indirect costs to each series of designated operating funds, and develop their own methodologies for allocating indirect cots.
For additional information for allocating indirect costs, refer to Fiscal Policy Manual 15.105 "Auxiliary Enterprise Indirect Cost Allocation."
Indirect cost recovery rates are limited to no more than the full costs (direct costs and indirect costs) of the activity being allocated.
Charging of Indirect Costs to Designated Operating Funds
- Objectives - Charging of Indirect costs:
- At each institution, each designated operating fund should be allocated its computed share of indirect costs.
- Indirect costs to a designated operating fund are considered expenses, and are recorded as an expense in the designated operating funds. The account code(s) must be specific to indirect cost charges and not confused with other types of expenses such as salaries and wages, OPE, other services and supplies, etc.
- Indirect costs to designated operating funds should be recorded at least quarterly.
- The recovery of the indirect costs should be recorded in the budgeted operating funds (fund type 11).
- The recovery of indirect costs is considered a reduction of expense and not a revenue.
- Process - Recording of Indirect cost:
Indirect costs charged to designated operating funds will be recorded in each applicable designated operating fund that rolls up to the following baseline roll-up funds:
050000 Designated Operating Funds 050001 Continuing Education (non-credit) 055000 Other Instructional Opns 057000 Public/Community Service Opns
Institutions may use the following account codes to record indirect cost charges in the designated operating funds:
Account Code 28201 - Administrative and Support Service Charge 28204 - General Administration Overhead Charge 70003 - Designated Operating Funds Administrative Costs
Indirect cost charges will be recorded in the designated operating funds at least quarterly.
Recovery of the indirect cost charge will be credited to a fund type 11 - budgeted operations fund at the institution.
recovery of the indirect cost charges to the institution will be credited to fund type 11 - budgeted operations using the following account code:
Account Code 79390 - Admin Service Reimbursement
In accordance with policy 05.650 "Accounting for Interfund Transactions", the allocation of overhead is considered an allocation of expense and is recorded as an expense debit to the designated operating funds and an expense credit to the budgeted operations funds.
Direct questions about this policy to the following offices:
|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|
3/3/05 - Approved
06/14/07 - Updated
11/10/08 - Updated
Policy Last Updated: 11/10/08
Appendix Last Updated: xx/xx/xx