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Inter-Fund Transfers Within SCO Fund 0948 Legal Basis vs. GAAP

Inter-Fund Transfers Within SCO Fund 0948 Legal Basis vs. GAAP. October 24-25, 2007 Sherry Pickering and Lily Wang. Inter-Fund Activity Problem Statement - Issues with Inconsistency . Activity Recorded as: Expenditure Transfer (e.g. abatement) Transfers In/Out Revenue and Expense

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Inter-Fund Transfers Within SCO Fund 0948 Legal Basis vs. GAAP

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  1. Inter-Fund Transfers Within SCO Fund 0948 Legal Basis vs. GAAP October 24-25, 2007 Sherry Pickering and Lily Wang

  2. Inter-Fund ActivityProblem Statement - Issues with Inconsistency • Activity Recorded as: • Expenditure Transfer (e.g. abatement) • Transfers In/Out • Revenue and Expense • The same transactions were recorded in a variety of ways between • Campus to Campus, or • Within Campus Ledger

  3. Inter-Fund ActivityProblem Statement - Issues with Consistency (cont) • This is an issue because it • makes it difficult to training new staff • Increases the complexity and analysis in GAAP preparation. It can be a struggle to locate the entries that make up a set of transactions that need a GAAP reclassification

  4. EO 1000 - Sends Us Back to School • Accounting Principles will be applied to ensure a consistent approach is used to record inter-fund activity. • Variations from this policy should be examined and reevaluated to apply the appropriate treatment

  5. Back to Basics • Each Fund is a fiscal and accounting entity. • Transactions that must be recognized in more than one fund may be classified as: • Revenue or Expense if an external party was involved • Expense incurred on behalf of another • Periodic transfers made to shift resources - transfers

  6. Revenue & Expense if an external party was involved… • Activity that Provides a Service to Another Fund • EO 753/1000 Cost Recovery • Federal Administrative Allowance • In both of these cases, departments funded by the operating fund provide various administrative services to the recipient fund. Had these same services been provided to a third party, the operating fund would record a revenue and the external party would record an expense.

  7. EO 753/1000 Cost Recovery • Allowable direct costs incurred by the CSU Operating Fund are allocated and recovered. • Allowable and allocable indirect costs incurred by the CSU Operating Fund are identified in a cost recovery plan that and recovers them on a consistent methodology from “user” funds and programs. • Will be recorded in CSU Fund 485 • A unique FIRMS object code will be used to identify this revenue • A GAAP adjustment will be needed to eliminate double counting of revenues and expenses.

  8. Cost Recovery Example • Plan allocates a service providing department cost to Housing program. • Service providing department would otherwise be funded from State General Fund/Student Fees • Housing assessed 20% of cost to service providing department

  9. Expense Incurred on Behalf of Another • This occurs when there is a lack of adequate information at the time the transaction was recorded, an error or an incidental non-recurring service was performed • Pay vendor from a central fund and allocate to users. • Utility Bills • Energy Rebate – Offsets original cost • ProCard • Travel Vendors • Correction – Item was originally recorded to the wrong Fund/Dept.

  10. ProCard Example • Contract stipulates ProCard vendor will receive payment net 10. • Not feasible to route the bill for signature, coding and back-up to meet that time constraint. • Payment is made from a central account & allocated to users based on campus policy. • Original Payment • Dr. 660003 - fund 485 • Cr. 108090 - fund 485 • Reclassifying Entry • Dr. 660003 - fund 531 • Cr. 108090 - fund 531 • Dr. 108090 - fund 485 • Cr. 660003 - fund 485

  11. Non-Reciprocal Transfers • Transferring money to an ongoing program from another source • Debt Service Payments - Periodic movement of funds to DIRF • CERF Open University - Student pays CERF fee & program support funds moved to operating fund • Lottery Discretionary - Campus moves lottery funds to operating fund to purchase items to enhance a classroom experience • IRA-Athletics - Student pays IRA fee @ registration - funds moved to operating fund for intramural volleyball team organized by the athletics department

  12. Non-Reciprocal Transfers & Fund 485 (cont) • A CSU Fund gives or receives value from/to another fund without directly giving or receiving equal value in exchange • May be recorded under the following criteria: • Costs cannot be readily and separately identified for services that have been provided • To supplement an existing program already operating in CSU Fund 485

  13. CERF Open University Example • Meets the criteria to transfer into CSU fund 485 • To supplement an existing program already operating in 485

  14. Reporting Inter-Fund Activity in GAAP GASB Statement 34, paragraph 112, offers guidance on how interfund activity should be classified and reported. • Reciprocal interfund activity • Nonreciprocal interfund activity • Interfund transfers • Interfund reimbursements

  15. Reciprocal Interfund Activity • Service provided and used should be reported as revenue in the fund that provided the service and expense in the fund that used the service.

  16. Example of Reciprocal Interfund Activity • Auxiliary Enterprise is assessed a charge for services provided by the operating fund. • A GAAP adjustment is required to eliminate the double counting of revenues and expenditures.

  17. Nonreciprocal Interfund Activity • Interfund transfers - transfer of goods to another fund without expectation in return and repayment. • Interfund reimbursements - repayment from the fund responsible for the expense to the fund that initially paid for them.

  18. Example of Nonreciprocal Interfund Activity - Transfers • To supplement an existing program already operating in fund 485. • No GAAP adjustment is needed. Transfers eliminate one-another.

  19. Example of Nonreciprocal Interfund Activity - Reimbursements • ProCard vendor with a net 10 days. • Not feasible to route the bill for signature, coding and back-up to meet payment constraint. • Payment is made from a central account & allocated to users based on campus policy. • Original Payment • Dr. 660003 - fund 485 • Cr. 108090 - fund 485 • Reclassifying Entry • Dr. 660003 - fund 531 • Cr. 108090 - fund 531 • Dr. 108090 - fund 485 • Cr. 660003 - fund 485 • No GAAP adjustment is needed. Original expense is eliminated through the reimbursement.

  20. What About Reimbursed Activities (RA)? • Most activity previously recorded in RA now fall under one of the interfund activity. • Reimbursed Activities has been re-defined: • May be utilized only in CSU Operating Fund 485 and in Revolving Fund 499. • Activity charged to RA shall be billed to a single outside entity or multiple funding sources. • Must equal zero by fiscal year-end. • Expenditures will not generate CSU compensation budget increases. • Must not be used for campus regular, on-going activities.

  21. www.calstate.edu

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