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Reporting Options Available to Government Colleges and Universities

In: Business and Management

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What are the main reporting options available to government colleges and universities? Do they have to prepare fund statements? Explain.

Universities are permitted to prepare financial statements the same way corporations report special purpose entities. In other words they can report business type enterprises as SPI’s and not report the funds in fund statements. Public colleges and university must follow GASB pronouncements like other governmental institutions. They are allowed to follow the same reporting requirements as other special-purpose governments with a loophole that requires a choice in reporting. They can report as a special-purpose entity engaging in business-type activities only, governmental-type activities only, or both. The main sources of revenue for public institutions are state appropriations and grants. The AICPA reporting model is widely used.
Public colleges and universities must use the same FASB standards as other NFP entities. Governmental universities use the GASB statement no 34 to report business type activities. They use government-wide statements but do not use fund statements. They use a full accrual basis and report in consolidated financial statements. The government colleges and universities only engaged in governmental activities must present a fund statement using the structure specified in GASB statement #34.
The main reporting options for government colleges and universities according to statement no. 34 states that “a government may use an enterprise fund for any activity that charges fees to external users for goods or services” (Granof & Wardlow, 2011, p. 267). For this reason governmental colleges and universities have the option to choose to report as special purpose organizations that are participating in “(1) only in business-type activities, (2) only in governmental activities, or (3) in both” (Granof & Wardlow, 2011, p. 267). Most governmental colleges and universities have campaigned to the GASB to have the right to report as business type organizations and have chosen to report as special purpose governments that partake only in business type ventures. These governmental organizations only have to prepare a statement of net assets, revenue and expenses, and cash flows, on a full accrual basis with capital and depreciation. Explanations of the fund statements are not required, but should be included in MD&A, notes, and RSI. Special purpose governmental organizations are only obligated to report for enterprise funds.
Private institutions use FASB reporting standards. The main sources of revenue are student tuition, investments and fees. Fund statements are prepared by colleges and universities for internal purposes. The types of funds that require reporting are unrestricted and restricted current funds, loan funds, endowment funds, annuity and life income funds, plant funds, and agency funds.
Reporting as a special-purpose entity engaging in business-type activities only allows the college or university to present statements similar to an enterprise fund and would require fund statements since the nature of governmental activities is a modified accrual basis.
Statements required include statement of net assets, statement of revenues and expenses, and statement of cash flows. The college or university does not need to present fund statements because accounting would use an accrual basis.
If they elect to report as a government engaging in both business-type and governmental activities, they will have to present the full range of fund and government-wide statements. By doing this, they need to present only a statement of net assets, statement of revenues and expenses, and a statement of cash flow. These would have to be on a full-accrual basis. If they elect to report as a special purpose government engaging only in governmental activities they need also present both fund and government-wide statements, but can combine the two.

Reference:
GASB. (2012). Summary of Statement No. 54 Fund Balance Reporting and Governmental Fund
Granof, M. H., & Wardlow, P. S. (2011). Core Concepts of Government and Not-for- Profit Accounting (2nd ed.). New York, NY: Wiley & Sons

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