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Final Implementation Operating Decisions Overview

Final Implementation Operating Decisions Overview October 24-25, 2007 Debbie Brothwell Summary of Topics CSU Financial Reporting Issues New CSU Accounting Structure Reclassification of activity within CSU Fund 496 Investment Earnings & Investment Accounting

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Final Implementation Operating Decisions Overview

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  1. Final ImplementationOperating DecisionsOverview October 24-25, 2007 Debbie Brothwell

  2. Summary of Topics • CSU Financial Reporting Issues • New CSU Accounting Structure • Reclassification of activity within CSU Fund 496 • Investment Earnings & Investment Accounting • Campus Revolving Fund/Pooled Investment Fund • Inter/Intra Fund Activity within State University Trust

  3. Summary of Topics (Cont.) • Business Changes Effects on both Campus and CSU Budget Process • Reclassification of Specific CSU Activity by CSU Fund • Recap

  4. CSU Financial Reporting & New Acounting Structure

  5. Where are we today? • Today, more than ever, the CSU needs to have a strong understanding of it’s financial data • Standards and definitions need to be used consistently amongst the campuses • Operating guidelines need to be principal based so that they can be sustained • Finance staff must have a strong understanding of CSU Funds • Governance • GAAP classifications • Fund Integrity

  6. CSU Financial Reporting • CSU’s official publication of financial information are the GAAP Financial Statements. • Financial information is reported by Net Asset Category. • A GAAP Net Asset Category can be comprised of several CSU Funds • Most CSU Funds are governed by legislation and are not fungible • CSU must be able to address Net Assets by CSU Fund • For fiscal year 2005-2006, the CSU reported $800M in Unrestricted Net Assets

  7. The $1.2 Billion Myth University Unrestricted $882,121 Combined with Auxiliary Unrestricted $’s the CSU reported 1.2 BILLION in unrestricted funds

  8. What is “Unrestricted”? • $400M of the $800M CSU Unrestricted Net Assets were divided amongst the following: • CSURMA Joint Powers Authority • Channel Islands Joint Powers Authority • Housing • Parking • CERF • Campus Union • SEOP & SUG • IRA • Contracts and Grants

  9. What is “Unrestricted”? • $400M of the CSU’s $800M in Unrestricted Net Assets was classified as: Miscellaneous!

  10. Meanwhile, AB 1802 Passes • Budget Trailer Bill 1802 (Chapter 79/2006)– Passed effective July 1, 2006 • Amended Ed Code 89721 – “The Chief Fiscal Officer of each campus of the CSU shall deposit and maintain in local trust accounts….. “ • (L) Moneys collected as higher education fees and income from students of any campus of the CSU and from other persons pursuant to Section 89700”Allows the CSU to deposit revenue from student fees into the State University Trust Fund

  11. Education Code 89721 enables the CSU to operate within State University Trust • Governed solely by CSU Delegation of Authority • Executive Order 1000 • The only funds that MUST continue to be on deposit in the State Treasury in an account with the State Controller are: • Proceeds from the sale of bonds • Interest and principal for SRB debt • Appropriated Capital Outlay (Budget Act) • Funds governed by enabling legislation

  12. RMP Implementation to Date • All campuses are… • fully operational within State University Trust • fully operational within the CSU Central Bank • fully invested • Next steps • Most Funds will be governed by EO 1000 • A major portion of the CSU Unrestricted Net Assets are made up of these Funds

  13. New CSU Accounting Structure • CSU Accounting Structure for CSU Funds regulated solely by EO 1000 – CSU Delegation of Fiscal Authority • ALL Fund in State Fund 0948 – State University Trust are regulated by EO 1000 OR • ONLY funds in State Fund 0948 – State University Trust are regulated by EO 1000

  14. New Accounting Structure • CSU Funds within State Fund 0948 shall be classified based on the following: • Proprietary Funds • Enterprise Funds – Defined by one or more of the following: • Activity is financed with debt that is secured by a pledge • Laws or regulations require activity’s cost recovered with fees • CSU policies, standards and definitions require fees • CSU policies, standards and definitions require separate accounting • CSU Operating Fund • Internal Service Fund

  15. New Accounting Structure (Cont) • Fiduciary Fund • Investment Funds • Private-Purpose Trust Funds • Agency Funds • PeopleSoft Fund Attributes will be updated to include the CSU Fund Types for each CSU Fund within 0948 – State University Trust Fund • CSU Fund Classifications based on New Accounting Structure

  16. Basic Principles • Fund Integrity at the CSU Fund Level • Guided by GASB and GAAP • Consider effect on CSU Budget Process and state reporting • Consider effect on CSU Budget Allocations • Easy identification of legal basis activity that may require a GAAP adjustment • Consistency across the CSU • Standard Definitions • Restrictions on the use of funding source

  17. Reclassification Miscellaneous Trust

  18. New CSU Funds • Need to better define activity currently classified as Miscellaneous Trust 496 • Need to use appropriate existing CSU Funds whenever applicable

  19. Reclassification of CSU Fund 496 Activity • Activity currently defined as Miscellaneous will be transferred from CSU Fund 496 to : • New CSU Fund 541 – Pooled Investment Fund • CSU Fund 464 – International Programs • All activity related to student study abroad • CSU Fund 485 - CSU Operating Fund • All student fee activity • Cost recovery income based on annual Campus Cost Allocation Plan • All activity related to student health services, including Basic and Augmented Health Services

  20. Reclassification of CSU Fund 496 Activity • New CSU Fund 543 – Internal Campus Services • All activity related to campus service providers • New CSU Fund 544- Enterprise Campus Services • CSU defined enterprise activity (TBD) • New CSU Fund 542 – Capital Project Mgmt • Activity related to Capital Project Management may be recorded in the CSU Fund

  21. Investment Earnings and Accounting Procedures

  22. Change in Plans • 2006-2007 Investment Earnings Accounting • Campuses were directed to record all investment earnings related to CSU Operating Fund in CSU Fund 499 (Internal Service Fund) • Campuses were directed to use new FIRMS Object codes to record any transfer out of investment earnings to CSU Operating Fund • The only fund that would have actual investment earnings was CSU Fund 499

  23. Change of Plans • Accounting for investment activity in 2007-2008 and in subsequent years will be different than the procedures campuses were given for 2006-2007 • Why? • Emphasis on Fund Integrity • CSU Management wants investment activity recorded consistently in all fund by all campuses

  24. Change of Plans • Along with changes in accounting for investment earnings • In order to record all investment earnings consistently across all campuses and in a timely manner for legal basis close, the CSU will allocate investment earnings on a quarterly basis. • The quarters will be defined as follows for all campuses;

  25. Investment Earnings (Cont) • The quarters will be defined as follows: • First Quarter • June, July, August • Second Quarter • September, October, November • Third Quarter • December, January, February • Fourth Quarter • March, April, May

  26. More Details to Come • More detailed information will be outlines in a session later today

  27. New Internal Service Funds

  28. New CSU Funds Classified as Internal Service Funds • Campus Revolving Fund • Re-name CSU Fund 499 – Campus Revolving Fund • Classified as an Internal Service Fund CSU Fund Type • Attributes will reflect the classification • Balances remaining in this fund at year end must be reclassified as Due To/From the appropriate CSU Fund • Fund balance must be zero at year end

  29. New CSU Funds Classified as Internal Service Funds • Pooled Investment Fund • New CSU Fund 541 • Investment earnings shall be recorded in the Pooled Investment Fund and then allocated out to other CSU Funds according a campus allocation policy. • Campus allocation will be recorded in the FIRMS Object Code for investment earnings in both the Pooled Investment Fund and the receiving fund • The fund balance for the Pooled Investment Fund will be zero at fiscal year end • CSU will allocate investment earnings on a quarterly basis

  30. Inter-fund & Intra -fund Transfers

  31. Inter- & Intra Fund Transfers • CSU will be consistent in its recording of inter-fund activity • The nature of the transaction should determine the accounting • Consistent definitions need to be developed to guide the appropriate accounting treatment • Expense/Revenue • Expense/Reduction to Expense • Transfer out/In

  32. Inter- & Intra- Fund Transfers • Considerations for determining the appropriate treatment if Inter/Intra Fund activity: • CSU Operating Fund • Reporting prior year activity to the state • Budget allocation of new year resources • GAAP elimination requirements • GASB Fund accounting • All Other Funds • GASB Fund accounting

  33. Inter- & Intra- Fund Transfers • Basic fund accounting defines the appropriate transaction • Reciprocal transactions • exchange of goods or services • Generally should be reported as revenues and expenses • Non-reciprocal transaction • Non-exchange • Inter-fund transfers • Eliminated • Inter-fund reimbursements • Not eliminated as they are between expense accounts

  34. Campus Cost Allocation Plan - Indirect • Indirect Cost recovery income is recorded in CSU Fund 485 • Needs to be eliminated in prior year expenditure reporting to the state • Needs to be eliminated from expenditures for Budget allocations of new resources • Year end process needs to be efficient and timely • All campuses must record in a consistent manner • Shall be recorded in CSU Fund 485 as Non-Operating Revenue (Reimbursement) • Easily identified by all parties

  35. BUDGET

  36. Business Changes Effect on Budgets • The major change to the campus budget process is related to the inter- and intra-fund transfers • Previously when operating within the General Fund these transfers were: • Processed within Reimbursed Activity • Could result in a reduction to expense within the General Fund • No budget entry required • Processed as an expenditure transfer between funds (regardless of the nature of the transaction) • No budget entry required • Processed as Revenue (in Fund 498) • Budget required to authorize expenditures

  37. Business Changes Effect on Budgets • New Business Process – Current year operations • For transactions meeting the definitions identified by the CSU as Revenue and/or Transfer in to the CSU Operating Fund • Budget entry required to authorize expenditures • For transactions meeting the definitions identified by the CSU as Reimbursements and/or Expenditure Corrections • No Budget entry required

  38. Business Changes Effect on Budgets • Use of prior year expenditure data for CSU Budget allocations • Prior year data will now include additional expenditures resulting from the new revenue and transfers activity • CSU budget allocation for Student Fee Revenue and State Support will not use the increased expenditure amounts • CO Budget Office will prorate expenditures DOWN – eliminating any additional expenses relating from income and/or transfers in not authorized as part of the Final Budget

  39. Business Changes Effect on Budgets • Annual Budget Submission will include only those revenue types included in the CSU Final Budget allocation received from CO Budget Development • Identified in the annual budget submission instruction memo as category 1 (Attachment 2)

  40. Budget Submission Instructions

  41. FIRMS Budget Submission • The Annual FIRMS Budget Submission will include only the following CSU Funds (unless otherwise stipulated) • CSU Operating Fund/General Fund & Student Fees • Housing Revenue Fund • Parking Revenue Fund • Continuing Education Revenue Fund • Lottery • Auxiliary Orgs

  42. Reservation/Designations • Campuses will communicate the components of the Fund Balance within the CSU Operating Fund thru the use of three unique FIRMS Object Codes: • Reserve for Encumbrance: 304018 • GASB Definition of encumbrances • Should = total of FIRMS Record Types 15+16 • Designated: 304016 • Designated by Management • Represents amounts being held centrally • Or designated for a specific purpose • Or designated for re-allocation (rolled forward) to campus areas • Undesignated: 304015 • Represents amounts for which the university has no specific plans

  43. Major Policy Changes • Transaction activity shall be recorded based on GASB unless otherwise indicated • GAAP activity shall be maintained at the CSU Fund Level • Investment earnings to CSU Fund 485 – CSU Operating Fund may be transferred out to CSU Fund 491 – Special Projects for the purpose of funding capital programs.

  44. Summary of Agenda • Investment Earnings & Accounting Procedures • Lorlie Leetham • Campus Revolving Fund/Pooled Investment Activity • Lisa Chavez • Inter- and Intra-fund activity – Legal and GAAP • Sherry Pickering and Lily Wang • Business Change Effect on CSU Budget Process • Rodney Rideau and Debbie Brothwell • Reclassification of specific CSU Activity by CSU Fund • Sherry Pickering and Becka Paulsen • New CSU Funds, FIRMS Object Codes and Definitions • Letitia Coate and Carol Terry • Review Sessions

  45. Final Thoughts We're almost done...

  46. www.calstate.edu

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