|OVERVIEW - FUND ACCOUNTING
This chapter is intended to provide information on general College
accounting practices. It is not intended to serve as an authoritative
source of accounting policy.
The College issues financial statements in accord with Generally
Accepted Accounting Principles (GAAP). Publications including
the AICPA Audit Guide are routinely furnished to the Regional
Business Office by the Office of the Assistant Treasurer. These
publications provide the basis for College accounting policy.
Questions on accounting for College financial activity may be
directed to the Office of the Assistant Treasurer.
Fund accounting is a manner of organizing and managing the accounting
by which resources are classified for financial accounting and
reporting. This is in accordance with activities or objectives
as specified by donors, regulations, restrictions, or limitations
approved by sources outside the institution, or with directions
issued by the State Board of Trustees.
A fund is a self balancing group of accounts consisting of assets,
liabilities, revenues, expenditures, and fund balance. Each fund
is separated in the financial records of the College and is limited
to a specific use. This separation ensures the integrity of the
individual funds and provides the necessary fiscal control over
each fund group.
A fund group may be divided into two types of funds, Restricted
and Unrestricted. Restricted Funds are those funds that are provided
by donors or external agencies for specific purposes, programs
or departments. Unrestricted funds are those funds that the College
has the flexibility to designate the use of, in its operation
of the College.
Currently, Ivy Tech Community College of Indiana operates the following fund groups:
- Current Funds
- Loan Funds
- Endowment and Similar Funds
- Plant Funds
- Agency Funds
I. Current Funds
The current fund group accounts for those economic resources
which are expendable for the purpose of performing the primary
mission of the College and which are not restricted by external
sources or designated by the State Board of Trustees for other
than operating purposes. This fund group contains three basic
sub groups. They are Unrestricted, Restricted and Auxiliary.
||Unrestricted Current Funds
- Operations Fund
The operations fund accounts for the general operation of
the College in fulfilling its mission. The Operations Fund
includes the following examples of assets, revenue, expenditures,
liabilities, and the fund balance.
ASSETS - includes object classes of cash, investments,
and accounts receivable.
REVENUE - includes object classes of tuition and fees,
state appropriations, overhead recoveries and investment
EXPENDITURES - includes object classes of equipment, consumable
supplies, salaries and wages, utilities, leases and employee
LIABILITIES - includes object classes of accounts payable
and accrued expenses.
FUND BALANCE - includes object classes that are allocated
||Restricted Current Funds
Restricted Current Funds are those available for financing operations,
but which are limited in use by external agencies and other donors
to specific purposes, programs, or functions.
- Sponsored Program Funds (Reference: COPM 1.61 and
FMM, Section L)
5) Private Grants and Contracts
Sponsored Program Funds noted above relate to specific
grants, contracts and agreements between the College and
external "Public" governmental entities, or
"Private" organizations or individuals funded
for the particular restricted purpose specified. Each
of these individual programs is categorized by fund, according
to the governmental entity or type of private organization
that has entered into the agreement with the College.
Sponsored Program Funds have the following assets, revenues,
expenditures, liabilities and fund balances:
ASSETS - includes object classes of cash and accounts
REVENUES - includes restricted current funds to the extent
that such funds were expended for operating purposes.
EXPENDITURES - includes expenses incurred as determined
LIABILITIES - includes object classes of deferred credits
accrued and/or assessed liabilities.
FUND BALANCE - Allocated
- Financial Aid Funds (Reference: Section F)
Ivy Tech Community College of Indiana offers various federal, state, and
local financial aid assistance to its student body. These
programs are designed to assist those students with a financial
need to attend Ivy Tech Commnity College of Indiana. While operating these
programs, the College accepts a fiduciary responsibility to
the granting agency. The College is responsible for administering
these programs according to the granting agencies' regulations
and sound management policies.
The financial aid programs are accounted for in the following
restricted current funds.
1) Financial Aid Federal
This fund will account for the following federal financial
a) Campus based programs
(1) College Work-Study
(2) Supplemental Educational
b) Entitlement Programs
(1) Pell Grants
2) Financial Aid State
This fund will account for the following state financial
a) Higher Education Award
b) Hoosier Scholarship
c) Stafford Loan
d) State Summer Work-Study Program
3) Financial Aid Other
This fund will account for any scholarship provided from
a local agency or individual.
||Auxiliary Enterprise Funds (Reference: Section K)
Auxiliary Enterprise Funds reflect financial data from activity
conducted to provide a service either directly or indirectly to
students, faculty or staff. An objective of the Auxiliary Enterprise
Fund is to be self-supporting. After an auxiliary enterprise becomes
self-supporting and excess revenue is generated, this excess can
be used (with appropriate approvals) to supplement the regional
operation of the College. Currently the Auxiliary Enterprise Fund
group maintains the following sub-groups:
- Auxiliary Enterprise Bookstore
Accounts for the bookstore operation of the College.
- Auxiliary Enterprise Parking Maintenance and Acquisition
Loan Funds account for those resources that are available for loans to students,
faculty and staff. Currently the only loan programs operated by the College
are for the benefit of the students. As an example, Ivy Tech Community College of Indiana
operates a College-wide program which has been provided by the Sears Foundation.
Several Regional institutes operate other loan programs provided from gifts
by local organizations and student governments.
There are three types of endowment funds:
1) True Endowment
2) Term Endowment
3) Quasi Endowment
True endowment funds are funds with respect to which donors have
stipulated that the principal of the gift is to remain intact
and is to be invested for the purpose of generating current and
future income for a specified purpose. Term endowment funds are
like endowment funds, except that all or part of the principal
may be utilized after a stated period of time or upon the occurrence
of a certain event.
The College operates a Quasi Endowment Fund. A Quasi Endowment
Fund represents funds established by the governing board to function
like an Endowment Fund, but which can be terminated by the board
at any time. Both income and principal are expendable.
Use of the word "Endowment" relates to disposition of
the corpus (original principal) of the fund. Income earned from
investment of the principal can be expended, and may be restricted
or unrestricted depending upon the declarations of the donor.
The Plant Fund group accounts for new construction, repair and
rehabilitation of existing facilities, retirement of indebtedness,
and the assets and liabilities of the College. The Plant Funds
are divided into the following sub-groups:
- Unexpended Plant Fund
This fund is used to account for the construction of new facilities.
- Renewals and Replacements
This fund is used to account for repair and rehabilitation
of existing facilities.
- Retirement of Indebtedness
This fund is used to record the payment of both short-term
and long-term debt obligations resulting from the financing
for the construction of facilities or the acquisitions of
- Investment In Plant
The Investment-In-Plant is a self-balancing group of accounts
and not a fund. The Investment-In-Plant group of accounts
is used to record fixed assets and long-term liabilities of
Agency Funds account for the resources held by the institution
as custodian or fiscal agent for students, faculty organization,
or governmental agencies. An Agency Fund consists of only assets
ASSETS - includes object classes of cash, receivables, and investments.
LIABILITIES - includes object classes of accounts payable.
Ivy Tech Community College of Indiana operates the following Agency Funds:
- Agency Fund Payroll
The payroll fund accounts for federal, state and county taxes,
employee payroll deductions, and College benefit contributions
not yet forwarded to the appropriate agency.
- Agency Fund Student Activity (Reference COPM 7.3-14)
This fund is to account for student activities funded from
the student activity fee and/or student government activities.
The College accounting system accepts the recording of revenue
and expenditures within these accounts. This is designed to provide
information only on additions and deductions to assets and liabilities.
Business Directors should be cognizant that the activity will
close to Fund Balance and the Fund Balance will be reclassified
to the appropriate liability account.
Interfund transfers are permanent movements of amounts between
fund groups to be used for the objectives of the fund group receiving
the transfer. There are two types of transfers:
- Mandatory Transfers
Mandatory transfers include transfers from Current Funds to
other fund groups resulting from:
- Binding legal agreements relating to the financing
of the educational plant.
- Grant agreements with agencies of the federal government
and other governmental or private organizations to
match gifts and grants to loan and other funds. Mandatory
transfers may be required to be made from either unrestricted
or restricted current funds.
- Non-mandatory Transfers
Non-mandatory transfers include those transfers from the Current
Fund group to other fund groups made at the discretion of
the governing board, and also may include the retransfer of
resources back to Current Funds. However, unrestricted amounts
transferred from other fund groups back to the Current Fund
group are not considered revenues of Current Funds.
|II. INTERFUND BORROWING
Interfund borrowing is the movement of monies between fund groups; is temporary
in nature, and there is a definite plan for repayment within a defined period
of time. Borrowing of funds should be recorded as assets of the fund groups
making the advances, and as liabilities of the fund groups receiving the advances.
|III. FUND ADDITIONS
Fund addition and deduction transactions may be used to move dollars
between funds within a fund group. A more formal definition of
additions is funds received or made available, while deductions
represent decreases in fund balance.
Ivy Tech Community College of Indiana reports its activities on an accrual basis
of accounting. Accrual accounting represents the effects of transactions
on the assets and liabilities in the period the event occurs, not
when cash is received or paid. The accrual method is used to match
expenditures and revenues within the operating cycle of the College
(July 1 to June 30). The recording of accounts receivable and accrued
liabilities using accrual accounting enables the College to measure
its financial position at a given date.
Assets of the College represent those items that are determined
by generally accepted accounting principles to be economic resources
of the College. Assets are divided into two main categories:
- Current Assets
- Fixed Assets
|I. CURRENT ASSETS
Current assets of the College represent those items that can be
consumed or realized during the current operating cycle. The following
represents the current assets of the College:
Funds available to meet the operating expenditures of the
- Accounts Receivable
Revenue earned by the College but not yet collected. A Contra
asset account may accompany an accounts receivable. The Contra
asset account establishes an "Allowance for Uncollectible
Accounts Receivable." The establishment of this account
allows the accounts receivable to be reported on a more realistic
Current inventories represent those items that are used during
the current operating cycle to continue current operations.
Presently the only items that are inventoried are those retail
items necessary to continue the Auxiliary Enterprises of the
Investing of excess short term cash for the purpose of generating
- Prepaid Items
Expenditures for benefits not yet received.
|II. FIXED ASSETS
Fixed assets represent those items of the College that economic
resources of the College were used to acquire. Fixed assets may
be real or personal property. They can be acquired by purchase,
(includes capital leases), gift, bequest, or produced by the College.
- Real Property
Represents the purchase price and additional cost
such as legal fees, brokers' commissions, title fees,
razing, and other costs directly related to the cost
of acquiring the property. If the land is donated,
then the fair market value at the time of donation
represents its value to the College.
- Land improvements
All improvements made to land such as paving, sidewalks,
- Buildings and Improvements
Represent the cost other than land and moveable equipment
in the construction or purchasing of an existing facility.
If the building is being constructed and being financed
from a debt agreement, then the interest paid during
the construction phase is capitalized with the building
cost. If the building is donated, the same rule applies
as with land. Additional items added to the cost of
a building are:
- Repair and Rehabilitation Projects
Represents those items that increase the value,
efficiency, or usefulness of the facility
and are capitalized when the project has a
cost of at least $10,000.
- Leasehold Improvements
Represent the improvements made to leased facilities
of the College in preparing or remodeling for College
- Mobile Units and Improvements
The cost of acquiring mobile units and/or remodeling
of those units.
Includes all construction projects that are not completed
by the fiscal year end.
- Personal Property
Represents all equipment owned by the College either purchased, leased
(capital), gift, bequest, or produced by the institution. Please reference
Section N, Fixed Assests, for the capitalization
policy. Equipment is subdivided into the following areas:
- Instructional Equipment
All equipment used in the instruction of students,
ranging from classroom furniture to lab equipment.
- Office Furniture and Equipment
Furniture and equipment used in the administration
of the College (desks to calculators).
- Machinery and Vehicles
Includes non-instructional equipment and vehicles
ranging from hand tools to cars.
- Computer Equipment
Represents computer equipment such as mainframes,
terminals, mini computers and data communications
All books, tapes, periodicals costing over $10.
- Construction in Progress - Movable Equipment
|| Liabilities represent obligations of the College arising from past
events and are to be satisfied by paying cash, transferring of assets,
or providing future services. A liability has technically occurred
when it can be reasonably estimated and assured of happening. Liabilities
are generally divided into two categories:
- Current Liabilities
- Long-Term Liabilities
|I. CURRENT LIABILITIES
Current Liabilities are designated obligations that are to be liquidated
during the current operating cycle and by using current assets.
The College recognizes the following current liabilities:
- Accounts Payable
Materials and supplies acquired for the delivering of services
to the students, faculty, or staff of the College.
- Salary, Wages, and Fringe Benefits
The accrual of salaries, wages and fringe benefits that have
been earned in one period and paid in the next.
- Deferred Revenue
Revenue that has been received, but is not yet earned.
- Other Liabilities
The current position of long term debt that is to be liquidated
within the current period.
|II. LONG-TERM LIABILITIES
Long-term liabilities represent those items that are planned to
be paid back over a period in excess of one year. Long-term liabilities
of the College represent the principal amounts of Bond Indentures
and Lease/Purchase agreements. (NOTE: Capital lease agreements
should also be included under Long-Term Liabilities.)
Revenue represents the increase in assets provided from the delivering
of services or other earning activities delivered by the College.
Current sources of revenue of the College are:
- Tuition and Fees
All tuition and fees assessed against students for the delivery
of instruction to them.
- Governmental Appropriations
Includes all unrestricted and restricted appropriations for
the current operation of the College.
- Governmental Grants and Contracts
Grants and contracts awarded by a governmental agency.
- Private Gifts, Grants and Contracts
Non-governmental source for the purpose of a particular instruction
or a select group of instruction.
- Interest Income
Income earned from the short-term investments of the College.
- Sales and Services
Goods and services provided to the students, faculty, or staff
through the auxiliary enterprises of the College.
- Overhead Recovery
A partial recovery of operating expenditures of the College
which is generally provided through contractual agreements
of the College.
- Other Income
All other income that can not be classified into one of the
It must be remembered that generally any revenue earned by the
College can and should be classified into one of the above categories.
|| Expenditures represent the cost of goods and services used or acquired
by the College in providing its services to the public. Current classifications
of expenditures are:
- Exempt (salaried)
Used to identify administrative salary staff.
- Non-Exempt (hourly)
Identifies all hourly personnel.
- Instructional Staff
- Staff Benefits
Identifies staff benefits provided by the College.
- Supplies and Expenses
Identifies expenditures other than those listed here.
Identifies utilities for owned or leased facilities operated
by the College.
Identifies lease payments made by the College.
Identifies travel expenses of the College.
Cost of Goods Sold
Generally used in the bookstore to identify cost of items
Identifies all capital expenditures of the College.
- Scholarships and Grants
Identifies financial aid passing through the College records.
When deciding on what major classification to use for a particular
expenditure, the following two items must be considered:
- Excessive detail object classification should be avoided since
it tends to complicate the accounting procedure and is often
of very little benefit in financial management.
- The selection of the most appropriate classification should
be based on an objective assessment of what the item is commonly
described as, not what its purpose for a particular situation
Expenditures may be defined as either a direct or indirect
cost. Direct costs are those costs that may be identified
specifically with a particular sponsored project, an instructional
activity, or any other institutional activity; or that may
be directly assigned to such activities relatively easily
with a high degree of accuracy, and without an inordinate
amount of accounting. These costs may include salaries, wages,
benefits, services, materials, and equipment. It is not the
nature of the goods or services that determine direct cost
classification; rather, it is the identification with the
sponsored work or final cost objective.
Indirect costs, in contrast with direct costs, are those that
have been incurred for purposes common to a number or all
of the specific projects, programs, or activities of an institution,
but which cannot be identified and charged directly to such
projects, programs, or activities relatively easily with a
reasonable degree of accuracy and without an inordinate amount
of accounting. Examples include such items as heating, lighting,
air conditioning, and janitorial services of buildings; and
administrative services such as accounting, purchasing, personnel,
and library services.
Without indirect cost reimbursements, sponsored programs and
auxiliary enterprise in colleges and universities would require
institutional support of indirect services, to the detriment
of other functions of the institutions.
The fund balance of a particular fund represents the past accumulation
of revenue minus expenditures plus any additional adjustments.
A fund balance can either be unallocated or allocated. An unallocated
fund balance represents those resources that are available without
a future restriction as to their use. While in turn, an allocated
fund balance is either restricted to a particular use by an external
entity or designated as to a particular use by the governing board.
Ivy Tech Community College of Indiana classifies its lease agreements in accordance
with generally accepted accounting principles:
- Capital Leases
- Operating Leases
|I. CAPITAL LEASES
A capital lease is recorded as an asset and as an obligation at
an amount equal to the present value of the property being leased.
Capital leases are determined by any one of the following criteria:
- The lease transfers ownership of the property to the lessee
by the end of the lease term.
- The lease contains a bargain purchase option.
- The terms of agreement are equal to 75% or more of the estimated
useful life. (NOTE: If the lease falls within the remaining
25% of useful life, the above criteria is no longer valid.)
- "The present value at the beginning of the lease term
of the minimum lease payments, excluding that portion of the
payments representing executory cost such as insurance, maintenance,
and taxes to be paid by the Lessor, including any profit thereon,
equals or exceeds 90% of the excess of the fair value of the
leased property to the lessor at the inception of the Lease."
(AICPA Professional Standards Volume 3, Section 4053.007)
When applying the above criteria to land and buildings the following
should be applied:
- If the lease falls under items A or B, the land and buildings
should be capitalized separately.
- If the lease falls under C or D and the fair value of the
land is less than 25% of the total, then the land and building
is considered as a single unit. If the value of the land is
25% or more, then the land and buildings are considered separately.
|II. OPERATING LEASES
An operating lease is any lease that does not fall into any of
the four criteria under capital leases. It is a lease agreement
that the College has no intention of acquiring title to. The lease
is not capitalized, but is treated as a recurring expenditure
over the term of the lease.
The Library cost center has been identified as the area in which
to record all expenses for the operation of and services provided
by the Library.
The following definitions are provided to properly classify, record,
and report library expenses:
Activities that support the collection, cataloging, storage,
and distribution of published materials; activities that directly
support the operations of a catalogued collection or otherwise
classified collection. This includes activities providing
audio visual services and other services that aid in the transmission
of information in support of the College's instruction and
public service programs.
The activities include the following:
- Acquire materials
- Determine acquisition policy.
- Screen and evaluate available materials.
- Obtain materials for the libraries.
- Prepare materials
- Prepare and maintain materials for general
use and distribution.
- Provide service to identify and access materials.
- Provide services and aids to identify and
locate documents or materials
visual aids (posters, signs)
- Distribute materials
- The control and distribution of library materials
loan and rental services
- Participate in inter-institutional exchange and
- The borrowing or lending materials to other
inter-library loan office
- Disseminate information/promote Library
- Provide general information about the library
and its activities to promote library use.
advertisements and exhibits
The purchase of books by a department from its funds would
not be classified in this category, even though a departmental
"library" is produced. The appropriate program
categories may be used in classifying activities when
the library serves a single, specific, academic program
- Branch Library
Auxiliary unit of a central library unit, which is administered
from a central unit, and which has all of the following:
- separate quarters
- a permanent basic collection of books
- a permanent staff
- a regular schedule for opening to the public
References: Higher Education Finance Manual (HEFM)
Program Classification Structure (PCS)
IPEDS Libraries Survey
|AUTO REPAIR PROGRAMS
Automotive repair, as referred to in this section includes auto
mechanics and body shop. This section is provided due to tax related
and classification and reporting issues.
Automotive programs frequently involve hands-on instruction in
mechanics and body shop. Students may elect to use their personal
vehicles; however, the instruction may involve the use of vehicles
owned by individuals other than Ivy Tech students. In all cases,
the preferred practice for acquiring parts and supplies is for
the vehicle owner to provide the required items. This is generally
accomplished based upon estimates of parts and supply needs.
The practice of the vehicle owner providing parts and supplies
is preferred to minimize problems with Indiana Gross Income Tax
and Indiana Sales Tax. In addition, this practice provides for
a uniform method of dealing with the acquisition of automotive
program parts and supplies and does not require the Region to
maintain an inventory of parts.
A second acceptable practice, which may be used if the preferred
practice described above is programmatically impractical, permits
College funds to be used to acquire necessary parts. The total
expense including sales tax should be accounted for in a program
specific accounts receivable account in the operations fund. Vehicle
owners are required to pay amounts due as a condition of the return
of their vehicle. If balances are in the Accounts Receivable account
at fiscal year end, a schedule must be forwarded to the Assistant
Assistant Treasurer listing (a) Vehicle Owner, (b) Date of Purchase
of Parts, and (c) Total Amount Due. The total of this schedule
must agree with the balance in the accounts receivable account.
Regions who want to use alternative methods to the two practices
detailed above for acquiring and costing vehicle parts and supplies,
must file a request annually with the College Vice President for
Finance/Treasurer. The request will be reviewed to determine the
appropriateness of the alternative method. The request will be
filed for each fiscal year and, if approved, will be retained
by the Executive Director of Finance for review by internal and
|| The Ivy Tech Community College of Indiana prepares and distributes an annual financial
report. The report is prepared to meet internal needs, as well as
to provide data for oversight bodies and for public distribution.
The annual financial report includes three basic statements: (1)
Balance Sheet, (2) Statement of Changes in Fund Balance, and (3)
Statement of Current Fund Revenues, Expenditures, and Other Changes.
The Notes to Financial Statements are considered to be an integral
part of the Statements. Additional schedules, statements, etc.
are included in the report as supplemental information to assist
the reader/user of the report. The College has elected to use
the columnar report format for the basic statements.
For financial reporting puRposes, funds with similar characteristics
are combined into fund groups. The College has summarized funds
for reporting purposes as:
- OpeRations Fund
- Auxiliary Enterprise Bookstore
- Auxiliary Enterprise Parking Acquisition/Maintenance
- Sponsored Programs Federal
- Sponsored Programs State
- Sponsored Programs Local
- Sponsored Programs Apprentice
- Private Grants & Contracts
- Student Aid Federal
- Student Aid State
- Student Aid Other
- Student Loan Fund
- Endowment and Similar Funds
- Plant Funds
- Plant Fund Unexpended
- Plant Fund Renewal and Replacement
- Plant Fund Retirement of Indebtedness
- Plant Fund Investment-In-Plant
- Agency Funds
- Agency Fund Payroll
- Agency Fund Student Activity
The Balance Sheet is a statement of financial position at the end
of the College fiscal year-June 30. Account balances for Assets,
Liabilities, and Fund Balance are combined for each fund group
as needed for fair presentation. Comparative data is presented
for Prior Year.
The Statement of Changes in Fund Balance reports the change in
the financial position for the reporting period for each fund
group. All fund groups containing a fund balance are reported.
The Statement of Current Fund Revenues, Expenditures and Other
Changes reports revenue detail by source, and expenditure detail
by function for each fund group. Total Revenue and Total Expenditure
data should concur with data reported in Statement of Changes
in Fund Balance.
The Notes to Financial Statements should be considered to be an
integral part of the financial statements. A disclosure summary
of significant accounting policies is contained. The summary briefly
describes the fund groups, together with a short narrative concerning
activity within each fund group. Additional notes are contained
as required for fair presentation. This may include, but is not
limited to, investment valuation, valuation of Investment-in-Plant,
basis of accrual accounting, significant change in accounting
procedure(s), significant changes in fixed assets and/or long-term
liabilities, as well as other material financial consideration.
Correction of an error and/or adjustment of a material amount
in previously issued financial statements may be disclosed in
the financial statements or in the notes to the statements.
Supplemental schedules may include Statement of Allocated Fund
Balance. The Statement provides detail of allocated fund balance(s)
by fund group. The allocated totals by fund group should concur
with reported allocated funds on the Balance Sheet.
Supplemental schedules on Auxiliary Enterprise Fund Bookstore are
currently included. The purpose is to provide greater detail on
an area of concern to management. Greater detail on one fund in
a fund group may be included to provide additional focus on an
activity currently receiving additional management analysis. In
addition, graphs and/or charts may be included to provide alternative
presentation of financial data.
Supporting schedules are included on debt service and lease purchase.
The schedules may be detailed by project/location and summarized
to report College commitment.
end of Section A