- Properly report the financial position of the College and to ensure the integrity and relevance of the College's accounting books and records via the use of General Accepting Accounting Principles (GAAP) in the United States of America and the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide For-Not-Profit Organizations;
- Maintain adequate levels of operating cash to fund daily expenditures and to invest all excess operating cash in income bearing instruments within the investment guidelines set by the College;
- Ensure and maintain proper controls over College resources thereby safeguarding the assets of the College;
- Provide superior service to College faculty and staff as it pertains to accounting, cash and investment services by developing and maintaining financial and administrative best practices.
College Financial Overview
College operations are organized into operational units that execute strategic and operational plans in support of the college’s mission, vision and objectives. Operational units collect and utilize financial resources which are recorded as transactions in the college’s financial accounting system. The financial records are essential for providing necessary information to various stakeholders such as auditors, banks, taxing authorities, lenders and internal management.
Administrative Software System Overview
The college uses Ellucian’s Banner software as its main administrative software system. Banner includes a suite of administrative modules for student, financial aid, finance, HR, and advancement functions.
Although modules are integrated, a great deal of cooperation and collaboration between operational units is necessary to support efficient flows of data.
The college’s fiscal year runs from July 1 through June 30. This 12 month period is used for budgeting, accounting and financial statement purposes. All financial transactions in the automated financial systems of the college have a designated transaction date which determines the fiscal year in which they will be included. The fiscal year is divided into 12 monthly periods or fiscal months. In the case of a Ju1y 1st through June 30th fiscal year, the fiscal months are numbered as follows:
July: 1, August: 2, September: 3, October: 4, November: 5, December: 6, January: 7, February: 8, March: 9, April: 10, May: 11, June: 12
Accrual Basis of Accounting
The college uses the accrual basis of accounting rather than the cash basis. Under the accrual method of accounting revenues are recorded when earned, and expenses are recorded when incurred which is different than cash basis accounting where revenues and expenses are recorded when cash is received or disbursed. Although accrual and deferral entries could be computed monthly, the college generally only applies adjusting accrual and deferral entries as part of the year end closing process.
In practical terms, for year-end expenses, the timing of the delivery of goods or services generally determines the fiscal year in which they will be recognized regardless of the actual cash disbursement date. For example, if goods were ordered 2 weeks before the end of a fiscal year but were delivered 2 weeks after the end of the fiscal year, the associated expenses would be charged to the fiscal year in which the goods were delivered regardless of when the actual cash disbursement was made.
Similarly, revenue is recognized when earned not necessarily when the actual receipt of funds occurs. For example, if a student were to prepay tuition a year in advance, the college would not recognize the revenue until the fiscal year in which the educational services would be provided (earned). Until then, the funds would be recorded as a liability.
The college prepares financial statements on a monthly basis for assessing its financial status and results of operations. Three main statements are produced as described below:
Statement of Financial Position (a.k.a. Balance Sheet):The primary purpose of the Statement of Financial Position is to provide relevant information about the college’s assets, liabilities and net assets and their relationships to each other at a moment in time. The information contained in the Statement of Financial Position provides help in assessing the following:
The college’s ability to provide services.
The college’s liquidity, financial flexibility, ability to meet obligations and needs for external financing.
Statement of Activities (a.k.a. Income Statement): The primary purpose of the Statement of Activities report is to provide relevant information about revenues and expenses during a specific period of time. The information contained in the Statement of Activities provides help in assessing the following:
The college’s performance during the period.
The college’s service effort and ability to continue providing the service.
How the college’s management has discharged its stewardship responsibilities and other aspects of performance.
Statement of Cash Flows
The primary purpose of the Statement of Cash Flows is to provide relevant information about the cash receipts and cash payments of the College during the period. The information contained in the Statement of Cash Flows provides help in assessing the following:
The college’s ability to generate positive future net cash flows.
The college’s ability to meet obligations and its needs for external financing.
The College’s differences between net income and associated cash receipts and payments.
The effects of the college’s financial position of cash and noncash investing and financing transactions during the period.
Banner Chart of Accounts System - FOAPAL
The chart of accounts is a coding system for recording, tracking, classifying and reporting financial (budget and actual) transactions. It provides the structure for collecting, storing and retrieving financial data. The Banner chart of accounts system is known by the acronym FOAPAL which stands for Fund, Organization, Account, Program, Activity and Location.
A self- balancing set of accounts. Used to identify financial transactions related to a specific activity or objective. For example, individual endowments or grants may have their own fund codes. Fund codes are also used to segregate certain types of data (like personnel data) so that individual access rights can be restricted. For financial statement purposes funds may be grouped into broad categories like Unrestricted, Temporarily Restricted and Permanently Restricted.
Represents a department or unit of budgetary responsibility within the institution. A single department (organization) could have many funds associated with it. For example, the Chemistry org code could have grant, payroll and student wage funds associated with it.
Identifies the specific type of transaction within the accounting categories of Asset, Liability, Equity, Revenue and Expense. Expense codes represent items like supplies, travel, equipment . . .etc. Commonly Used Account Numbers
Program codes are used to group financial data into categories for financial statement presentation. Categories include Instruction, Academic Support, Student Services, Public Service, Institutional Support, Auxiliary Enterprises
An optional code used to further identify activities or transactions.
Understanding and Managing Agency Funds
Agency funds are held in a custodial capacity by the college for faculty, staff, student organizations or others closely aligned with the college’s mission. Agency funds are held in trust for others so do not involve measurement of college revenues and expenses. Accordingly, financial activity, both inflows and outflows, is usually recorded in a single assigned liability account. A running balance similar to a checking account is maintained. The standard Banner financial reports available to budget managers apply to income statement accounts (revenue and expense) only so cannot be used to view Agency Fund activity.
The close of each fiscal year involves preparation of financial statements in accordance with generally accepted accounting principles. Year-end financial statements are audited by independent external auditors who issue an opinion as to their fairness and conformity with accounting principles. The desired result of an audit is an unqualified audit opinion. Anything else could adversely affect the college’s accreditation, credit rating, recruiting and reputation.
The audit includes an examination of evidence supporting amounts and disclosures in the financial statements as well as assessing accounting principles used. Auditors conduct the bulk of their work on site during several weeks following the June 30 end of each fiscal year. In order to close the year and prepare financial statements in a timely manner, budget managers must expedite any paperwork involving receipts and disbursements relating to the year being closed. Delays can extend the audit timeline resulting in extra staff work and likely add to audit costs.
Journal entries are used to transfer or adjust charges and credits posted from one FOAPAL to another. Journal entries must be submitted or approved by an authorized individual of the FOAPAL to be charged. You must complete the Transfer Request Form and submit it to the Business Office. The Business Office will consider a form submitted from an authorized signer’s email account as “signed.” If you are debiting another department and crediting your own, you are required to copy an authorized signer in that department when you send in the email attachment to verify authorization of the department receiving the charge. Transfer Request Form
Generally, properly filled out and submitted journal entries will be posted within 5 business days of
An endowment is a financial arrangement that can be used to provide long-term or even permanent funding to the college. Endowments are a critical component of the college’s fund raising efforts and significantly contribute to ongoing college financial resources. Typically endowments are targeted for particular organizational needs such as student scholarships, endowed faculty chairs or supporting academic programs. The terms “scholarship endowment” and “program endowment” are used to distinguish an endowment’s purpose as relating to either student scholarships or support of other college purposes.
There are three primary categories of endowments: true endowments, term endowments and quasi- endowments.
- True endowments are funds where the principle or corpus is held in perpetuity and invested. Only the return on investment may be used as a funding source.
- Term endowments are similar to true endowments except that all or part of the principle may be used after a stated period of time or upon the occurrence of a certain event.
- Quasi-endowments are funds from which either the investment return or some portion of the principal may be used as needed.
When donors agree to fund an endowment they enter into a legal agreement that spells out any special conditions or donor stipulations. Although uniformity in donor agreements is simpler for the administration of funds, many varieties of agreements are in effect to accommodate specific donor stipulations and to broaden the pool of potential donors.
Endowment Spending Policy
When a donor makes a gift to establish an endowment, two funds are created; a restricted fund representing the fund’s principle (gifts and reinvested income) and a spendable fund which records budgeted distributions and actual expenditures in accordance with the endowment agreement. The budgeted distribution or amount available to spend is based on the college’s endowment spending policy.
Each year, the board of trustees, exercising their fiduciary responsibilities, establishes the spending rate for the next fiscal year. The spending rate determines each fiscal year’s allocation of spendable funds. Spending rates are typically determined from a formula based on historical market values which reduces volatility in payout rates.
Financial Responsibilities of a Budget Manager
A budget manager, as defined by Centenary College of Louisiana, is the individual responsible for a department, program, or organization’s operational funds. The following sections outline some of the responsibilities and financial duties of a budget manager named on a department, agency, grant or any other units that has a budget.
Budget Process & Oversight
A budget manager is accountable for the financial integrity of his or her academic department or administrative office. Financial integrity is maintained by careful attention and adherence to the department’s budgets within the college’s financial reporting system (Banner). Budget managers are responsible for ensuring that the expenses of the department do not exceed the allocated budget.
Budget managers are responsible for requesting budget changes, submitting transfers, approving transactions and requesting payments. All transactions must be processed in compliance with the college’s policies and procedures. Budget managers should review their budgets on a regular basis to ensure proper recording of expenses.
A budget manager may not approve his own or her own transactions. These expenditures include, but are not limited to, college’s credit card payments, if the card is in the budget manager’s name, approval must also comply with the College’s administration policy
- Review and Approve Original Charges: All invoices and requests for payment, including any related backup documentation, should be reviewed by the appropriate authority and signed as approved.
- Review Posting of Charges: A review of all charges and deposits to accounts under your purview should be made regularly and at least monthly.
- Reporting and Resolution of Issues: Any issues found during your review should be immediately brought to the attention of the Business Manager. The Business Manager shall assist the Budget Manager in researching and resolving issues. However, the Budget Manager is ultimately responsible for final follow up and resolution.
- Delegated Responsibilities: It is the Budget Manager’s responsibility to ensure that any delegated authorities or duties are properly documented, approved and maintain appropriate internal controls. Any questions can be directed to the Controller.
- Suggest spending improvements that increase profits and forecast future budget needs