Financial Reporting

The mission of the Financial Reporting area is to support the Vice President and Associate Vice President for Business Affairs in the preparation of the financial statements of the University.  This involves detailed review and analysis of activity within the operating ledger in order to ensure the accuracy and completeness of the information that is summarized in the financial statements.The Financial Reporting area coordinates the annual audit and annual tax return preparation. The Financial Reporting area also supports senior management in the areas of financial reporting and analysis, and provides technical accounting assistance to other areas of the University.
Department Name: Financial Services
Contacts
  • Controller, Ext. 6563
  • Assistant Controller, Ext. 6581
  • Accountants, Ext. 6351 and Ext. 6247

General Accounting Policies

EXPENSES AND REVENUE TRANSFERS AND RECHARGESPROCESS

Goal of the Transfer/Recharge Process:

It is the goal of the Controller’s Office to provide budget managers with accurate and timely information. At times, it is necessary to move previously charged expenses or revenues to other accounts as the result of an incorrect account being used in the original transaction. In addition, some departments provide services to other departments on campus, which they then recharge for. It is the responsibility of the budget manager with authority over the original budget charged, or who receives the benefit from a recharge, to request transfers/recharges to be made by the Controller’s office.

Types of Transfer/Recharges:

There are a variety of circumstances that require transfer/recharges. They may include:

  • Invoice/monthly upload charged to incorrect organization or account
  • Activity Code needs to be added to a transaction
  • A department performs services for another department

Transfer/Recharge Forms:

In order for any reclasses/recharges to be made to a budget, an Expenses and Revenue Transfers and Recharges Form must be submitted to the Controller’s office. In addition, an expense or revenue transfer must be accompanied by either a screen print or a copy of a budget report showing the original charge to a specific budget.

Required Information:

The following information is required on the Transfer/Recharge Form:

  • Name: This is the name of the person requesting the reclass/recharge.
  • Today’s Date: The date the form is being filled out.
  • Department: This is the department of the person requesting the reclass/recharge.
  • Original Transaction Date: In the case of a reclass, this would be the date the original charge was made to a budget. In the case of a recharge, this is the date the services were performed for the other department.
  • The Purpose of the reclass/recharge is used to enter the information into the Banner Finance System. This is not to exceed 34 characters (this is what is entered on the Banner system in the transaction description field, which is limited in size).
  • Include the Organization number, account number, and activity code (if applicable) for which the changes are being made.
  • Enter the title of the organization and the account description for which the changes are being made.
  • The Original Document Number would be the Banner- generated document number of the original transaction (this is only used for reclasses).
  • Enter the dollar Amount of the reclass/recharge for the given Organization/Account number.
  • Copies should be sent to any other department affected by the change. The CC field should contain the names of all parties receiving copies of reclass/recharge.
  • The following fields will be filled in by the Controller’s Office:

    Debit/Credit Indicator

    Keypunched by

    Entry date

    Internal Approval signature

    Document #

Fixed-asset Management

The purpose of this policy is to define capitalization and depreciation policies for all property, plant and equipment transactions. For financial statement and government reporting purposes, property, plant and equipment include land, land improvements, buildings and improvements, equipment, and construction in progress. Once an asset is capitalized, it is recorded at cost, and this amount will be written off periodically, or depreciated, in a systematic manner over the useful life of the asset.

Fixed-asset Capitalization and Depreciation

Capitalization

A. Requirements for Capitalization

(1) Acquisition of Equipment. To be considered for capitalization, and thus subject to depreciation, an asset must fulfill three characteristics: 1) the asset must be acquired (i.e., purchased, gift-in-kind) for use in operations, and not for investment or sale; 2) the asset (per individual unit) must have a useful life of at least three years(two years for laptops) ; and 3) the asset must have a cost value exceeding, at a minimum, $5,000.

(2) Acquisition or Construction of Buildings. These expenditures include the cost for renovations, betterments, or improvements that add to the permanent value of the asset, make the asset better than it was when purchased, or extend its life beyond the original useful life. To capitalize these costs, the improvements must fulfill at least one of the following three criteria: (1) the useful life of the asset is increased; (2) the productive capacity of the asset is improved; (3) the quality of units/services produced from the asset is enhanced. The total projectcost must also exceed $5,000.

B. Definition and Classification of Capitalized Costs

The basis for accounting for property, plant, and equipment is cost. All normal expenditures of readying an asset for its intended use are capitalized. Donated property, plant, or equipment is valued at its fair market value and is also capitalized. The capitalizable costs for each asset class are as follows:

(1) Land and Land Improvements. This category of asset classification is used for all costs connected with the acquisition or improvement of land. This includes purchase price, appraisals, professional services, and title insurance. If land is purchased as a building site, certain expenses may be added to the cost: razing and removal, land or site improvements, utilities to site, and landscaping activity associated with new construction.

(2) Buildings and Building Improvements. This category of asset classification is used for all costs related to the acquisition, or construction of a building if over $5,000, including the purchase price, professional services, appraisals, test borings, site preparation, materials, labor, and overhead as a direct result of the project during construction. Also included are all costs associated with projects involving significant alterations, renovations, or structural changes (i.e., gutting a building and completely rebuilding the interior) that exceed $5,000, and that increase or amend the usefulness of the asset, enhance its efficiency, or prolong its useful life by at least three years. Building improvements may include interior or exterior construction of a building or building systems, such as electrical or plumbing.

(3) Equipment. This category of asset classification is used for all costs associated with the purchase of tangible property that has a useful life of more than three years and cost in excess of $5,000 in total. All bulk purchases of tangible property are included in this category. Charges may also include the cost of installation, transportation, taxes, duty, or in-transit insurance. Tangible property includes furniture, fixtures, computer equipment, software, and vehicles. In addition to the net invoice price of an asset, all costs associated with modifications, attachments, accessories, or auxiliary apparatus necessary to make the property usable for its intended purpose may also be capitalized, only if incurred at the time of initial equipment purchase. All subsequent costs of this nature, to maintain the equipment, will be expensed.

This category also includes all costs per unit related to the external purchase of software applications and the associated implementation costs (including initial licensing fees) that have a useful life of three years. (Fees paid for the renewal of software licensing and maintenance will not be capitalized and will be expensed.)

(4) Construction in Progress. This category of asset classification is used for those costs incurred in connection with the construction of a building prior to the building being put into use.

(5) Feasability Studies. Costs incurred in connection with preliminary planning and testing of site adequacy or the preparation of site modeling.

C. Non-capitalizable Expenses

Costs that are below the $5,000 threshold for capitalization that neither significantly add to the permanent value of a property nor prolong its intended useful life are expensed. The following types of plant costs should be expensed:

(1) Maintenance. The recurring work required to preserve or immediately restore a facility to such condition that it can be effectively used for its designed purpose. It includes work done to prevent damage to a facility. Examples: Custodial services; repainting a room; recarpeting; fixing a leaky faucet.

(2) Preservation/Restoration Costs. Expenditures associated with maintaining special assets in, or returning them to, a level of quality as close to the original as possible. Example: Returning a stained glass window to its former level of beauty or acting to prevent any further deterioration.

(3) Interest Costs During Construction. The cost of interest related to the acquisition or construction of an asset will be expensed during the period of time that is required to complete and prepare the asset for its intended use.

D . Equipment Leases . Please notify Financial Services regarding all equipment leasing to determine proper accounting treatment.

Depreciation

A. Purpose

A provision for depreciation is recorded to attribute the cost of the asset over a useful life.

B. Depreciation Method

With the exception of land, artwork, and books, all capitalized assets will be depreciated using straight-line method over the useful life of the asset class. An asset’s useful life is the period of time over which services are expected to be rendered by the asset. The calculation of depreciation will be based on historical cost. The University implemented the Banner Fixed Asset module July 2011. It was determined new acquisitions of fixed assets would be placed into newly created categories that more accurately reflect the nature of the assets that are purchased and placed in service. In addition to the new categories, the University also reevaluated the useful life of all assets placed in service as of July 2011. The following table summarizes useful life by category of assets placed in service prior to July 2011 :

 

Asset Category Rate Life Yearly
Land N/A N/A
Land Improvement
– General Land Improvement 5 Yrs 20.0%
– Construction of Quadrangle 33 Yrs 3.33%
– New Parking Lot Construction 15 Yrs 6.66%
Building 40 Yrs 2.5%
Building Improvements 15 Yrs 6.66 %
Furniture & Equipment
– Plant F&E 5 Yrs 20.0%
– Computer Equipment & Software 4 Yrs 25.0%
– Books N/A N/A
– Admin Enterprise Sys 5 Yrs 20.0%
– Artwork N/A N/A
– Student Laptop Computers 2 Yrs 50%

The following table summarizes the useful life by category of assets placed in service after July 2011:

Asset Category Rate

Life

Yearly

Land

N/A

N/A

Land Improvement    
– Campus & Infrastructure Improvements 15 Yrs 6.67%
Buildings
– New Buildings 40 Yrs 2.50%
– Roofs & Mechanical Equipment 20 Yrs 5.00%
– Building Modernization 20 Yrs 5.00%
– Building Renovations 10 Yrs 10.00%
Furniture & Equipment
– Furniture & Equipment 7 Yrs 14.29%
– Athletic/fitness Equipment 5 Yrs 20.00%
– Automobiles 3 Yrs 33.33%
– AV Equipment 4 Yrs 25.0%
– Admin Enterprise System 5 Yrs 20.00%
– Computer Equipment 4 Yrs 25.0%
– Student Laptops 2 Yrs 50.00%
– Artwork

N/A

N/A

– Books

N/A

N/A

C. Salvage Value

Salvage value will generally not be utilized in calculating depreciation, unless the salvage value is specifically known.

D. Depreciation Timing

Depreciation of capitalized assets will commence in the year the item is placed into service or using the half-year convention. The half-year convention records a half-year of depreciation expense the first and last year of the asset’s useful life. Construction in Progress will not bedepreciated until the subsequent full year after the project’s completion.

Disposal of Assets

Prior to July 2011 t he University did not have a mechanism for tracking each individual asset capitalized in a project and its eventual disposal. The University only track ed the total amounts capitalized annually to each fixed asset account on the balance sheet on a cumulative spreadsheet, which was updated monthly. In order to compute the disposal of certain classes of fixed assets acquired prior to July 2011 , the University bases its calculation of disposal of these historical fixed assets on a conservative assumption that all fixed assets would be disposed off after 1-3 times the depreciable life of the asset (depending on the type of asset). The University normally does not sell its used assets (except for laptops and automobiles – see accompanying explanations for such sales). Fixed assets put into service as of July 2011 are identifiable by project and the University is able to dispose of these assets when they are replaced. The following descriptions provide further detail for each asset category of historical assets and how they are disposed .

Buildings

Buildings are estimated to have a useful life of 40 years. Replacement of building systems and renovations to structure are undertaken through the building improvement accounts once a structure is erected.

Building disposals are to be undertaken only when the structure of the building is razed to the ground.

Building Improvements

Denote replacement of building systems and renovations to structure which are undertaken to elongate/enhance the life or usefulness of a structure. Useful life of building improvements is estimated to be 10 years. Building improvements will be written off from the general ledger after 3 times the useful life of the asset , i.e., 30 years. No calculation has been made to date.

Land Improvements Account Range (16611-16614):

The University has multiple rates of depreciation for land improvement as identified below.

Acct # Asset Type

Depreciable Life

Disposal Multiple

Disposal After:

16611

General Land Improvements – Trees, Shrubs, Walkways, Parking Lot Improvements 5 Years

3

15 Years

16613

Construction of Quadrangle, Land Clearance and Earth Fill 33 Years Blended Rate

1

33 Years

16614

New Parking Lot Construction 15 Years Blended Rate

1

15 Years

Calculation of Disposal

The University has estimated the disposal of general land improvements to be written off after 3 times the useful life of the asset. These assets are considered to require replacement and renovation on a continual basis and, therefore are considered to have a shorter useful life.

Furniture and Equipment ( Account Range 164xx-165xx)

Calculation of Disposal

Average life of different categories of Furniture and Equipment and their disposal period is as follows:

Acct # Asset Type

Depreciable Life

Disposal Multiple

Disposal After:

16651

Historical F&E 5 Years

3

15 Years

16673

Historical Computer Equipment 4 Years

3

12 Years

16694

Books 0 Years

0

0 Years

16693

Artwork 0 Years

0

0 Years

Student Laptops are handled differently because they are on the books for two years, laptops in the possession of seniors will be gifted to them when they graduate and the laptops in the possession of sophomores will be sold at a market/reduced rate. Therefore, student laptops will not be written off. Any gain or loss on sale of laptops will be recorded in the non-operating section of the statement of activities.

Artwork is not considered depreciable and is only written off only when sold or discarded.

Automobiles

The University estimates useful life of its automobiles to be three years.

Calculation of Disposal

The University maintains a list of vehicles for insurance valuations, added to this list were any vehicles used on campus as service vehicles. This composite list is summed up and any variation from it is removed from the vehicle assets through the contra account. Older automobiles are normally traded in for newer autos. The trade-in value of such autos are netted against the purchase price of a brand new auto. The new auto is depreciated at the net purchase price.

Capitalization of Asset remediation obligation

Financial Interpretation Number (FIN) 47 which was adopted by the University, effective July 1, 2005, requires the University to record a liability on the future value of all facilities which are legally required to be remediated when being renovated or replaced. The Present Value cost of the future liability must be capitalized and depreciated from construction date through estimated settlement date of remediation. Any changes in such estimates which were originally developed in Fiscal 2006, must be updated periodically. Once such assets are remediated, the capitalized present value originally booked/subsequently updated must be taken off from gross asset and accumulated depreciation totals.

Journal Entry to remove/dispose asset

New contra accounts within a range of the actual asset account have been set up so the University can maintain a clean history on our Banner system of gross capital expenditures. The journal entry will be to credit these new contra accounts and debit accumulated depreciation.


Software and Computer Systems Capitalization Policy

Capitalization, Depreciation, and Disposal of Software and Computer Systems.

1. Policy Overview

The purpose of this policy is to communicate consistent guidance in this specialized area of accounting; promote University compliance with specific guidelines issued by the Financial Accounting Standards Board (FASB); and promote proper accounting for University assets and expenses in conformity with generally accepted accounting principles (GAAP).

2. Capitalization

a. Non-capitalizable Expenses

Costs incurred during the preliminary project stage must be expensed as incurred. Preliminary project stage includes the following activities: Conceptual formulation of alternatives, evaluation of alternatives, determination of existence of needed technology, and final selection of alternatives.

b. Definition of Capitalized Costs

Costs that have an estimable future benefit that are included on the Statement of Financial Position as assets, and amortized or depreciated over their estimated useful lives.

c. Classification of Capital Costs

Software Development: Costs incurred for the development or acquisition of software for the University computer systems (such as procurement, payroll, student services, general ledger, and others), including software upgrades and new releases, may be capitalized if they:

  • Are an integral part of the system, or
  • Identifiably enhance the functionally of the system because of their direct relationship to it.

A major computer system becomes an asset of the University upon capitalization and will be recorded in the same manner as other assets and amortized over its estimated useful life. In addition, the total costs of a computer system must be reasonable and should accurately reflect the value of the system.

Computing Infrastructure Applications and Systems: May support multiple computer modules and integrated systems. These applications may be characterized as separate systems and therefore subject to the capitalization principles set forth in Software Development.

Implementation Stage: Costs incurred to implement the chosen technological solution, including planning, may be capitalizable if they relate to a system that fulfills the criteria for capitalization in accordance with this policy. This stage generally encompasses the following activities:

  • Design of chosen path, including software configuration and software interface;
  • Technical software coding
  • Installation of hardware
  • Testing
  • Data conversion (programs and tools only);
  • Other related costs; and
  • Equipment

Specific types of costs generally incurred during the implementation stage are:

  • Purchased Software: The cost to purchase software.
  • Personnel Costs: Large-scale computer projects may entail the use of both employees and external consultants to design and implement the system. (The costs of both directly allocable internal employees and external consultants who are directly dedicated to the development and implementation of the computer project may be capitalized.)
  • Travel, Lodging, and Other Similar Expenses: To qualify for capitalization, travel, lodging and similar expenditures will be directly allocable to a specific system or application that meets the University’s criteria for capitalization.
  • Interest expense: Interest expense will be capitalized on software development projects consistent with the University’s policy for interest capitalization on long-term projects.
  • Training: Training costs incurred to develop or implement internal-use computer software/applications during the application development stage can be capitalized. Training in post-implementation/operation stages should not be capitalized, since such training programs should be conducted on a continuous basis, and the related costs should be recognized as an integral component of the University’s operating budget.
  • General and Administrative Expense: General and administrative expenses are not to be allocated and capitalized as part of the cost of a software development project.
  • Maintenance and Warranty Contract Costs: These are not considered as capitalized costs. Extended maintenance and warranty contracts entered into at time of purchase must be treated as prepaid assets and expensed over the time period for which the benefits of such maintenance and warranty contracts extend.
  • Software License Agreements: These are not capitalized unless ownership is indicated within the license agreement. Software license agreements not indicating ownership should be expensed. If the software license allows use of the software for a period exceeding 12 months (normally the estimated useful life of the asset), then such a license can be capitalized.
  • Equipment: Equipment should be purchased, managed and capitalized in accordance with the University equipment policy. A major computer system implementation may have many smaller pieces of equipment that individually may not be capitalized but as a group form an integral part of a system implementation and can be capitalized as part of that system.

Useful Life of Software

In determining the estimated useful life over which the costs incurred for internal-use computer software will be amortized, departments should consider the effects of obsolescence, technology, competition, and other economic factors on useful life. Departments should consider if rapid changes are occurring in the development of software products, software operating systems, or computer hardware, and whether the University intends to replace any technologically obsolete software or hardware.

Amortization of Software

Amortization of the computer software should start once the software is put into live mode or active status. The software should be amortized based on the estimated useful life on a straight-line basis.

Impairment

Impairment in the value of the cost basis of internal use computer software can occur when:

1) Internal-use computer software is not expected to provide substantive service potential;

2) A significant change occurs in the extent or manner in which the software is used or is expected to be used;

3) A significant change is made to the software program;

4) Costs of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify the software.