LINK Program Self-Supporting Funds University Accounting & Financial Reporting OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Presenter Roger Fredenhagen, CPA Self-Supporting and Financial Analysis Coordinator Phone: 217-333-7156 Email: frednhgn@uillinois.edu OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Fund Accounting – Definition An accounting system used by non-profit & governmental organizations which emphasizes accountability (not profitability) to ensure proper stewardship and expenditure of financial resources received in compliance with applicable regulations, guidelines and restrictions associated with the funds received Financial resources received are recorded in a collection of different fund types, with each fund type having a different purpose depending on the source of revenue OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Fund Accounting – Definition (cont.) Segregating these financial resources into separate fund types helps properly classify and monitor resources appropriated, awarded, contributed, and entrusted to the University Properly classifying and monitoring these financial resources into separate fund types enables compilation of accurate financial statements which help illustrate how the University meets its mission of teaching, research, public service, and economic development OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

C-FOAPAL Overview C-FOAPAL Chart: At which University (location) is the operation located? Fund: Where is the money from? Organization: Which department does the funding belong to? Account: What is the natural classification of the transaction? In other words, what type of expense was purchased or what type of revenue was earned? Program: What is the functional classification of the transaction? In other words, how will the activity be presented on our financial statements and how does it coincide with the University’s mission? Activity: Optional code used for tracking short-term projects. Location: Optional code used to identify physical location of assets. C-FOAPAL OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

What are Self-Supporting Funds? Self-supporting funds are used for recording revenue and expenses generated from the sale of products or services to University departments, students/faculty/staff, or the general public. Managed as business-like operations which relate to or enhance the University mission and which have the objective of generating sufficient revenue from sales to finance the costs required to generate the revenue. Per LAC Guidelines & State Finance Act, these types of funds are to operate at an approximately break-even basis and should not be used for discretionary purposes OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

How are SSFs Identified in Banner? Self-Supporting fund codes range from 300000 – 399999 Fund Types: 3E: Sales to other University units 3J: Sales to students/faculty/staff 3M: Sales to students/faculty/staff when bond financing is involved in the activities (e.g., bookstores, housing operations, student unions) 3Q: Sales to customers who are external to the University, such as sales to the general public, sales to other institutions/companies, etc. Self-supporting funds use unique program codes (as opposed to generic program codes such as 19nnnn that are used on gift funds) Example: 1-301201-220010-220023 OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

What Types of Transactions are Allowed on Self-Supporting Funds? Revenue from sales to customers Make sure sales are recorded to an applicable revenue account code Expenditures directly related to the revenue generation For example, payroll of the employees who provided the services or the purchase of goods which were being sold Transfers to a plant fund for equipment reserves, etc. For example, reserves to replace equipment which is used in a self-supporting operation OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Tips for Properly Managing Self-Supporting Funds Make sure your SSF operations approximately break- even over time to ensure compliance w/ LAC Guidelines Review rates charged to customers at least once every 2 years Record sales to applicable revenue account code, not as a credit to expense OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Tips for Properly Managing Self-Supporting Funds When selling to external customers on credit, use Banner Accounts Receivable module (or obtain an approved exemption if necessary) Use expense account code 187100, “Purchase of Goods for Resale” Use FGITBSR in Banner to find current cash, liability, and fund balance OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Tips for Properly Managing Self-Supporting Funds Collect and remit sales tax when selling tangible property Review policy for reporting for Unrelated Business Income (UBI) tax Perform a physical count on 6/30 of every year of any inventory for resale on hand OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Tips for Properly Managing Self-Supporting Funds Record any accrual, deferral, and/or inventory adjustments as they occur using the Fact Sheet tool Assign proper entity codes to any equipment used in SSF activities Ensure that any revenue-generating activities operating through a SSF is a legitimate University activity. See Account for Financial Activity of Revenue-Generating Events for more details. OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Establishing & Terminating SSFs Requesting New SSFs Terminating SSFs Units should email uas@uillinois.edu asking for termination if: Original purpose of fund has changed No revenues/expenses in recent years Activity has ended Old funds cannot be used for new activities! Complete Fund, Program, Index Request form Rate calculation Multi-year budget Surplus/Deficit Plan Any revenue-generating agreements, contracts, or other documentation Attestation statement OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Excess Funds Overview Required Calculation per Legislative Audit Commission Guidelines Calculation analyzes by entity, not individual fund Top funds are assessed excess funds & excess balance lapses to Income Fund Work with Budget Office to receive re-allocation of funds as State budget Rule of thumb: two months of operating expenses OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

More SSF Tips… Match revenues and expenses Include any related salaries and wages Review rates Report payables and deferred income on year-end Fact Sheets Plan prior to year end! OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Sales Tax Overview Taxability of Purchases Taxability of Sales Exempt from sales & use taxes in Illinois Not exempt from Hotel Operators’ Occupation Tax Taxability of Sales Sales of tangible property are subject to sales tax Textbooks, t-shirts, food, fundraisers Students, employees, alumni, other individuals Submit Sales Tax Reporting Form OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Unrelated Business Income Tax (UBIT) Overview Exempt from income taxes on normal, related university activity UBIT Examples Advertising income (including advertisements provided in conjunction with sponsorships) Real property rental income with services provided Personal property rental income (such as tower rentals to cell phone providers) Sales of campus recreation services to alumni OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Resources 22 Self-Supporting/Revenue Generating Activities Fund Type FAQs UAFR Reference Materials Banner Account Codes Accounting & Financial Reporting Forms Sales Tax Procedure Sales Tax Policy OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Self-Supporting Funds Roger Fredenhagen frednhgn@uillinois.edu 217-333-7156 John Laroe jmlaroe@uillinois.edu 217-333-9133 OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Sales Tax Contacts Roger Fredenhagen Benjamin Liles Terry Thompson frednhgn@uillinois.edu 217-333-7156 Benjamin Liles liles@uillinois.edu 217-300-7407 Terry Thompson terryt@uillinois.edu 217-333-9062 Brenda Sutherland brsuther@uillinois.edu 217-333-5428 OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING

Questions? OFFICE OF BUSINESS AND FINANCIAL SERVICES – UNIVERSITY ACCOUNTING AND FINANCIAL REPORTING