Drexel University’s financial accounting policies and procedures follow the generally accepted accounting principles of Fund Accounting as prescribed by the National Association of College and University Business Officers (NACUBO), the American Institute of Certified Public Accountants and the Financial Accounting Standards Board (FASB).
Fund Accounting is the manner of organizing and managing accounting transactions by which resources for various purposes are classified for financial accounting and reporting purposes in accordance with activities or objectives as specified by donors,with regulations, restrictions, or limitations imposed by sources outside the University, or with directions issued by the University Trustees. A fund is an accounting entity with a self-balancing set of accounts consisting of assets, liabilities, and a fund balance. Separate accounts are maintained for each fund to ensure observance of limitations and restrictions placed on the use of the resources.
All funds of the University are classified into major fund groups. The major fund groups of the University are its Current Funds, Loan Funds, Endowment and Similar Funds, Plant Funds, and Agency Funds.
The current funds include those resources of the University expended for the purpose of performing the primary and supporting missions of the University. The term "current" means that the resources will be expended in the near term and that they will be used for the operating purposes of the University. Current funds are categorized into operating and non-operating activities. The Current Funds group has three basic subgroups: unrestricted general, unrestricted designated, and restricted.
Unrestricted General – funds received by the University for which no stipulation was made by the Donor or other external agency as to the purpose for which they should be expended. There is a Single fund for the unrestricted general activity of the University with its own fund balance. Funds are provided for each individual activity through the annual budget process by the assignment of a unique individual departmental number to the single unrestricted general fund number. Since there is only one fund for the unrestricted general budget, each activity does not have an individual fund balance. At the end of the fiscal year, unexpended funds for each activity are credited to the single unrestricted general fund of the University rather than the individual activity.
Unrestricted Designated – funds received by the University and are unrestricted as defined above but have been designated by the University Trustees to be expended for a specific purpose. Each separate activity is assigned a unique individual fund number and each fund has its own fund balance. At the end of the fiscal year the balance of the fund, the ending balance, becomes the beginning balance for the new fiscal year.
Restricted – funds received by the University that are available for financial operations but which are limited by donors and other external agencies to specific purposes. Each separate activity is assigned a unique individual fund number and each fund has its own fund balance. At the end of the fiscal year the balance of the fund, the ending balance, becomes the beginning balance for the new fiscal year.
Current funds are categorized into operating and non-operating activities. Operating activities are those activities that relate to the on-going operations of the University. Non-operating activities are those that are incidental to the primary operations of the University.
Current Funds Revenue
Current funds revenues include (1) unrestricted gifts, grants, and other resources earned during the reporting period and (2) restricted resources to the extent that such funds were expended.
Tuition and Fees – This category includes all tuition and fees charged to students (net of refunds) for educational purposes.
Government Grants and Contracts – This category includes all amounts received or made available by grants, contracts, and cooperative agreements from governmental agencies for current operations.
Gifts and Private Grants and Contracts – This category includes amounts from non-governmental Organizations and individuals, including funds resulting from contracting for the furnishing of goods and services of an instructional, research, or public service nature.
Endowment Income – This category includes income earned from the principal of endowment and similar funds.
Investment Income – This category includes all of the interest and dividends earned on the University’s assets that are held in financial institutions for operating purposes.
Auxiliary Enterprises – This category includes all revenues generated through operations by those entities that exist to furnish goods or services to students, faculty, or staff, and that charges a fee.
Other Sources – This category includes all sources of current funds revenue not included in other classifications. Examples include miscellaneous rentals and sales, expired term endowments, and terminated annuity and life income agreements.
Current funds expenditures represent the costs incurred for goods and services used in the conduct of the Institution’s operations. They include the acquisition cost of capital assets, such as equipment and Library books, to the extent current funds are budgeted for and used by operating departments for such purposes.
Collegiate – This category includes expenditures for all activities that are part of the Institution’s instruction program. Expenditures for credit and noncredit courses, for academic and technical instruction, for remedial and tutorial instruction, and for regular, special and extension sessions are included. These expenses include faculty and academic departmental staff salaries and wages, associated fringe benefit costs, Deans’ office expenses, etc. Expenditures for departmental research and public service that are not separately budgeted are included in this classification.
Research – This category includes all expenditures for activities specifically organized to produce research outcomes, whether commissioned by an agency external to the Institution or separately budgeted by an organizational unit within the Institution.
Public Service – This category includes funds expended for activities that are established primarily to provide non-instructional services beneficial to individuals and groups external to the Institution. Included in this category are community service programs, conferences, institutes, general advisory services, reference bureaus, consulting, and similarly non-instructional services to particular sectors of the external community.
Academic Support – This category includes funds expended primarily to provide support services for the Institution’s primary missions – instruction, research, and public service. It includes libraries, museums, galleries, and media (such as audiovisual services.)
Student Services – This category includes funds expended for offices of admissions and registrar and those activities whose primary purpose is to contribute to the student’s emotional and physical well-being and to his or her intellectual, cultural and social development outside the context of the formal instruction program.
Institutional Support – This category includes expenditures for: central executive-level activities concerned with management and long-range planning of the entire Institution, such as the governing board; fiscal operations, including the investment office; information systems; communication services; employee personnel, and activities concerned with community and alumni relations, development and fund-raising.
Operation and Maintenance of Plant – This category includes all expenditures of current operating funds for the operation and maintenance of physical plant. Included in this category are expenses for routine maintenance of University facilities, utilities, housekeeping, etc.
Mandatory Transfers – This category includes transfers from the Current Funds group to other fund groups arising out of (1) binding legal agreements related to the financing of educational plant, such as amounts for debt retirement, interest, and required provisions for renewal and replacements of plant, not financed from other sources, and (2) grant agreements with agencies of the federal government, donors, and other organizations to match gifts and grants to loan and other funds.
Non-mandatory Transfers – This category includes those transfers from the Current Funds group to other fund groups made at the discretion of the University Trustees to serve a variety of objectives, such as additions to loan funds, additions to quasi-endowment funds, specific plant additions, voluntary renewals and replacements of plant, and prepayments of debt principal.
These activities include any gain or loss on University’s investments, the operating profit or loss of any University subsidiary and any accounting changes required to conform to revised accounting principles and endowment and other gifts.
These funds account for assets, which can be loaned to students. The loan funds are usually meant to be financed by the repayment of loan principal and payment of interest. The original financing of the funds comes from various sources: gifts, grants, endowment fund income, transfer from other funds, and internal and external borrowing.
ENDOWMENT AND SIMILAR FUNDS:
True endowment funds are those for which donors or other external agencies have stipulated under the terms of the gift instrument creating the fund that the principal of the fund is not expendable-that is, it is to remain inviolate in perpetuity and is to be invested for the purpose of producing present and future income, which may be expended or added to principal.
Term endowment funds are like endowment funds, except that all or part of the principal may be used after a stated period of time or on the occurrence of a certain event.
Quasi-endowment funds (funds functioning as endowment) are funds that the Trustees, rather than a donor or other external agency, have determined are to be retained and invested. Since these funds are not required by the donor to be retained and invested, the principal as well as the income may be totally utilized at the discretion of the Trustees, subject to any donor-imposed restrictions on use. This fund group also includes annuity and life income funds. These are funds received by an institution from a donor under an agreement whereby the donor or the designated beneficiaries will receive contracted payments from the Institution during their lives, generally paid out of the income generated from investing the assets or, if necessary, from the principal. Upon the death of the donor and/or other beneficiaries, the fund balances are available to be utilized for the benefit of the Institution in accordance with the donor’s stated restrictions.
The Plant Funds group is used to account for: (1) unexpended funds to be used for the acquisition of long-lived assets for institutional purposes, (2) funds set aside for the renewal and replacement of institutional properties, (3) funds set aside for debt service charges and retirement of indebtedness on institutional plant, and (4) the cost (or fair value at the time of donation) of long-lived assets (other than those of endowment and similar funds) and the sources from which the cost is funded, including associated liabilities.
Accordingly, four self-balancing subgroups are provided for in the Plant Funds group: Unexpended Plant Funds, Funds for Renewals and Replacements, Funds for Retirement of Indebtedness, and Investment in Plant.
Agency Funds consist of funds held by an Institution as custodian or Fund Agent for others such as student organizations, individual students, or Faculty members.