FOUNDATIONS IN UNIVERSITY FINANCE
AUXILIARY ACCOUNTING
Auxiliary Accounting
Kathy Cochard
Auxiliary Accounting Manager
Participant Outcomes
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Distinguish between auxiliary activity and other fund group
activity
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Determine proper KFS document for recording sales and
services
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Understand reporting requirements for auxiliary units
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Understand basic financial statements and how they can be
used for ALL accounts
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Mission of Auxiliary Accounting
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Uphold the integrity of the general ledger by:
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ensuring compliance with authoritative accounting
standards and university policy;
•
developing, maintaining and enhancing university
financial systems and reporting tools related to
auxiliary accounting
Achieve excellence in customer service by:
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providing consulting services and training to support
effective and efficient accounting and business
operations
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What is an Auxiliary Unit?
aux·il·ia·ry
adjective
providing supplementary or additional help and support
IU Definition:
A unit that furnishes goods or services to any non-Indiana
University department and charges a fee directly related to,
although not necessarily equal to, the cost of the goods or
services.
• Includes sales to students, faculty and staff for non-IU
business, or the general public.
•
An auxiliary activity is an entity that is regularly carried on
and is managed with the intent to be self-supporting.
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What is a Service Center?
IU Definition:
A unit that furnishes goods or services to another IU department
and charges a fee directly related to, and equal to, the cost of
the goods or services.
Additional facts:
• Managed as a self-supporting activity that is to operate at
breakeven
• Commonly referred to as a recharge center
• Rates cannot exceed the rate charged to an external
customer
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Auxiliary Enterprises Fund Group
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Auxiliary and Service Center activity must be
recorded in specific accounts in the AE Fund
Group
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Auxiliary accounts begin with 60-XXX-XX
Service Center accounts begin with 66-XXX-XX
All revenue and expenses related to the activity
must be recorded in the same account
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Designated Fund Accounts
These are institutional unrestricted funds that have been designated for
a specific activity/project. Most are budgeted and have a multi-year life.
These should NOT contain auxiliary activity. Examples include:
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20 accounts: Continuing Education
21 accounts: Public Service
22 accounts: Faculty Research
23 accounts: Other (Biggest area of confusion)
24 accounts: Scholarships and Fellowships
When creating a new account, every fund group and sub-fund should
be considered before using a 23 account.
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Examples of Auxiliaries and Service
Centers
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University Information Technology Services
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IU Auditorium
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School of Medicine
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Parking Operations
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Physical Plant
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Residential Halls and Dining Services
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Some academic units – Biology Stock Room, Chemistry
Stores
•
Athletics
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What is NOT Considered Auxiliary
Activity
Revenue from the following is not considered auxiliary activity:
•
Instruction. Both credit and non-credit courses and continuing
education
•
Public Service. Activities providing non-instructional services
for the benefit of those external to the institution
•
Research Activities.
•
Student Services. Activities contributing to the student’s
emotional and physical well-being, and intellectual, cultural and
social development outside the context of formal instruction
program (ex: cultural events, intramural athletics, student
organizations)
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Which of these activities would be considered
“Auxiliary”?
Use your clicker to submit your answer:
A.
Department is hosting a one day
conference for higher education
business officers.
B.
Department is offering online
non-credit courses to the general
public.
C.
Department is receiving funds
from another university to split
the cost of a shared program.
D.
Department opens a shop that
sells books and departmental
logo items.
25%
A.
25%
25%
B.
C.
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25%
D.
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Why is this Important?
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Why is this Important?
•
Represents a significant portion of IU’s total
revenue
•
•
Federal Cost Accounting Standards
•
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Misstatements of financial information can lead to a
qualified opinion from State Board causing many
downstream effects
Must account for internal sales transactions correctly
or federal funds could be jeopardized
Additional compliance issues for sales to external
customers (i.e., UBIT, sales tax)
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Proper use of KFS Documents
Sales of a good or service:
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To another IU account: Internal Billing, Service Billing, ID Billing – use
revenue object code
To an external entity: KFS AR Invoice – use revenue object code
Reimbursement of expense or sharing of cost:
•
•
To/From another IU account: Distribution of Income/Expense (DI) – use
expense object code
From an external entity: KFS AR Invoice – use expense object code
Transfers:
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KFS Transfer of Funds (TF) used to record movement of cash (subsidies,
budget allotments, administrative charges, moving cash balance of closed
account)
Should not be used to allocate general operating expenses
ASOP 21.0 – Recording Transactions between University Accounts
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Physical Plant is providing maintenance
services to the IU Foundation. What type of
document should be used to record the
transaction?
Use your clicker to submit your answer:
A.
Internal Billing
B.
KFS AR Invoice – expense
object code used
C.
Distribution of Income/Expense
D.
KFS AR Invoice – revenue
object code used
E.
None of the above
20%
A.
20%
20%
B.
C.
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20%
20%
D.
E.
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Role of Auxiliary Accounting
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Compliance Services
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Consulting Service
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Accounting principles, university policy, external regulations
Financial statement review and assist with university
financial statements
“Accounting help desk”
Act as liaison between auxiliary units and other UA areas
(Tax, Cost, Budget, etc)
Special projects
Systems Support & Training Services
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Develop and maintain auxiliary reporting tools
Provide regular training related to auxiliary accounting
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“Reporting” Auxiliary and Service Units
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Organizations with more than $750,000 in sustainable
revenue in a given year
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Report to Auxiliary Accounting on a quarterly basis
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Must record transactions on an accrual basis at least
quarterly
•
Currently 71 Reporting Organizations (over 300
auxiliary units in total)
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Important Policies Related to Auxiliary
Accounting
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Accrual Accounting | FIN-ACC-I-350:
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Auxiliary Financial Standards | FIN-ACC-600:
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Matching of revenue and expenses
KFS Auxiliary Voucher used to move revenue or
expenses to proper period. Does NOT move cash. See
ASOP 3.0: Accruing and Adjusting Entries
Provides a more accurate picture of the organization’s
financial situation
Accounting and financial reporting oversight of auxiliary
units
Role of Fiscal Officer, Acct Manager and Acct
Supervisor | FIN-ACC-I-1
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Important Auxiliary Standard Operating
Procedures (ASOPs)
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ASOP 1.0 | Definition of Auxiliary & Service Center
Accounts
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ASOP 2.0 | Definition of Reporting and Auxiliary Service
Centers
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ASOP 7.0 | Annual Reporting Requirement for Nonreporting units
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ASOP 17.0 | Quarterly Variance Analysis
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ASOP 44.0 | Balance Sheet Backup for Year-End
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Basic Financial Statements
Balance Sheet
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Assets: what we own at a given date in time
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Cash, Accounts Receivable, Capital Assets
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Liabilities: what we owe at a given date in time
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Accounts Payable, Accrued Payroll, Bonds Payable
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Fund Balance = Assets – Liabilities
Income Statement
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Revenues: what we earn during a given period of time
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Sales and Services, Gifts, Contract & Grant income
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Expenses: costs we incur during a given period of time
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Salary & Wages, Utilities, Contractual Services, Depreciation
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Net Income (Loss) = Revenues - Expenses
IUIE – PDQ Generator
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IUIE Report Example – Balance Sheet
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Quarterly Variance Analysis
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Used to explain significant variances in the
financial statements by organization (not account)
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Current quarter amounts are compared to the
prior year and to current budget
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IUIE report identifies the significant variances and
the organization is required to explain the
identified variance (10% materiality threshold)
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Explanations need to explain WHY the variance
occurred
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Quarterly Variance Analysis - Examples
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Auxiliary Unit X has a sales increase of
$100,000 (20%) over prior year sales. Which
of these would be the most appropriate
explanation for this:
Use your clicker to submit your answer:
A.
The cost to make our product
increased by 20%.
B.
Revenue increased significantly
over the prior year.
C.
Two new customers were acquired
last year bringing in an additional
$100,000 in prior year sales.
D.
We added three new product lines
this year which resulted in a
significant increase in revenue.
25%
A.
25%
25%
B.
C.
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25%
D.
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Quarterly Variance Analysis
Group Activity
Quarterly Variance Analysis
Group Activity – Questionable Items
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Negative revenue – missed entry or other error?
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Large increase in sales needs explained
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Discounts should be negative
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With sales increase, Cost of Goods Sold should also increase in most cases
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What happened to the salaries?
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Large increase in computing services needs explained - Service contract?
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Decrease in Contractual Services needs explained
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Increase in depreciation should correlate to increase in capital assets on the balance
sheet
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What happened to rent expense?
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Why is there negative Telephone & Postage expense?
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Large increase in Valuations & Adjustments needs explained
Balance Sheet Backup for Year End
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Balance Sheet amounts represent assets and
liabilities of the unit
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Sufficient supporting documentation must be
provided for all non-system-generated balance
sheet amounts at fiscal year end
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Required for all auxiliary and service units earning
more than $750,000 (reporting units)
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Balance Sheet Backup - Examples
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Inventory – detailed listing of all items in inventory as of
6/30/XX which includes:
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Description of items
Quantity
Cost
Accounts Receivable – detailed listing of all items
comprising AR balance as of 6/30/XX which includes:
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Customer name
Invoice number & date
Amount due
Prefer amounts to be in “aging buckets”
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Balance Sheet Backup – Inventory
Listing
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Accounts06/30/20XX
Receivable – detailed listing of all items
8300 Balance
as of June 30th
comprising
AR balance$ 3,264.21
as of 6/30/XX which includes:
Valuation Date:
Part Number
D0172630
D0101000
D0110000
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Customer
name On Hand
Part Description
Avg. Cost
Item 1 number & date
32.97
$10.00
Invoice
Item 2
1.00
10.39
Amount
due
Item 3 amounts to be
0.00in “aging buckets”
115.00
Prefer
Value
$329.70
10.39
0.00
D0110003
Item 4
7.00
6.38
44.66
D0110004
Item 5
143.00
7.60
1,086.80
D0113200
Item 6
37.00
2.23
82.51
D0115000
Item 7
255.00
1.95
497.25
D0115001
Item 8
3.00
1.95
5.85
D0115002
Item 9
332.00
1.95
647.40
D0115003
Item 10
287.00
1.95
559.65
Inventory value per physical count 6/30/XX
$3,264.21
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Balance Sheet Backup – Accounts
Receivable
Customer
Name
Amount
Invoice #
Current
1-30 days
31-60 days
61-90 days
Over 91
days
Total
Jones
$15,000
AB123
$1,000
$2,000
$4,000
$1,000
$7,000
$15,000
Smith
$2,000
CC899
$500
Brown
$13,000
FB778
$10,000
Williams
$5,000
OU156
$250
$4,750
Green
$15,000
SC462
$5,000
$3,000
$1,000
$16,750
$9,750
$6,100
$50,000
$1,100
$1,500
$2,000
$1,900
$13,000
$5,000
$4,400
$6,000
$15,000
$13,000
$50,000
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Revenue Producing Activity (RPA)
Process
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Policy VI-121 requires that all activity-generating revenue be
approved by the Revenue Producing Activity Committee (RPAC)
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Online RPA questionnaire needs to be completed and routed to the
RPAC. Detailed instructions and link to site found here:
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https://www.sharepoint.iu.edu/sites/revenue/SitePages/RPAProcess.aspx
RPAC includes members from:
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Treasury
FMS – Tax, Auxiliary, Cost
Purchasing
UITS
Research Administration
IU Foundation
Risk Management
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Auxiliary Accounting Consulting
Services
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Aid Auxiliary units in developing proper accounting
procedures
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Provide training to Auxiliary units related to accounting
standards, university policies and procedures,
university systems, and reporting tools
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Guide service (recharge) centers through the rate
setting process
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Assist with special projects and business endeavors
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Visit the Auxiliary Website for More
Information
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https://fms.iu.edu/auxiliary-accounting/
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Auxiliary Contacts and “Who is my Consultant”
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Complete list of Auxiliary Standard Operating Procedures
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Frequently Asked Questions
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Links to commonly used Auxiliary IUIE reports
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Questions?
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