1. McGraw-Hill/Irwin©2007, The McGraw-Hill Companies, All Rights Reserved Essentials of Accounting for Governmental and Not-for-Profit Organizations Chapter 9: Accounting for Special Purpose Entities, Including Public Colleges and Universities

2. 9-2 Special Purpose Entities General Purpose Governments include: States, counties, cities, towns, and villages. Special Purpose Entities include: Fire protection districts, park districts, and public authorities. A SPE may be a component unit of a General Purpose government.

3. 9-3 Special Purpose Entity Reporting If engaged in governmental and business type activities –Use general GASB 34 reporting model and report both fund basis and government-wide financial statements If engaged in multiple governmental activities –Use general GASB 34 model, just omit enterprise funds statements which are not applicable

4. 9-4 Special Purpose Entity Reporting If engaged in single governmental activity –Can prepare governmental fund, government-wide statements, and reconciliation effects all on one statement If engaged only in business-type activities –Can prepare enterprise fund financial statements (no need for government-wide) If engaged only in fiduciary type activities –Can prepare fiduciary fund financial statements

5. 9-5 PUBLIC Colleges and Universities Public College financial reporting is covered by GASB. Private Colleges come under FASB guidance -- covered in chapter 11. Although there are more private than public colleges, roughly 3/4 of the students attend public institutions.

6. 9-6 Public College Financial Reports Public Colleges may have governmental type activities, business type activities, or both. Most public colleges, with the exception of some community colleges that have power to levy property taxes, will report as governmental units with “business activities only”. –Therefore they will prepare enterprise fund statements

7. 9-7 Public Colleges and Universities – GASB 35 –GASB 35 requires statements similar to those of special purpose governments under GASB 34. –The effect is to require colleges to use the accrual basis and record long-term assets, including infrastructure, along with depreciation.

8. 9-8 Public College Statement of Net Assets Assets and Liabilities –Classified as current and noncurrent. Net Assets Classified as 1) Invested in capital assets, net of debt, 2) Restricted -- Nonexpendable and Expendable 3) Unrestricted Note: Deficits in unrestricted assets may be common because –Colleges are not accustomed to setting aside funds for depreciation. –States seldom fund compensated absences in advance.

9. 9-9 Public College Statement of Revenues, Expenses and Changes in Net Assets Operating Revenues: –Student Tuition net of scholarship allowances –Federal and State Grants –Auxiliary - Operating Expenses including depreciation + or - Nonoperating Revenues and Expenses –Includes state appropriations, gifts, investment income, interest on capital debt + or - Capital appropriations, gift, endowment additions = Increase in net assets + Beginning net assets = Ending net assets

10. 9-10 Public College Statement of Cash Flows Must be on direct format Operating: Excludes interest and dividend revenues and expenses Noncapital Financing: Includes state appropriations and gifts including endowments Capital Financing: Purchase of long-term assets and related gifts, appropriations and debt repayment including interest Investing: Includes interest revenues, endowment and other investments kept separate Reconciliation of Operating income to cash flows from operations Could also have noncash financing and investing section