Fund Accounting

Fund accounting is the accounting method used to segregate the organization's money by its sources in order to ensure it is properly spent and accounted for. Funds must not be intermingled. This means that one fund cannot be substituted for another, and money can be moved from one fund group to another only under limited circumstances.
Fund accounting is common to all universities and colleges. The university's Board of Trustees delegates stewardship of the organization's funds to the various colleges and equivalent areas. In turn, day-to-day stewardship responsibility is often delegated to individual departments with many individual employees acting as stewards of the university funds.
Fund accounting allows employees to be good stewards of university assets by segregating funds according to their intended purposes. Some of the funds are intended for specific purposes, while others are for more general use. Some funds can be spent in the short term while others are longer term.
Answering the following questions will identify the fund type:
  • What are the sources and uses of the funds?
  • Where did the money come from, and what is it to be used for?
  • Are the funds unrestricted or restricted?
  • Who decides how it is to be used?
  • Are the funds current or non-current?
  • Can we use it now, or are we holding it in some way?

Defintions of "Fund"

Be aware that the word "fund" is used in several different ways:
  • It can mean simply "money" as in "we don't have enough funds for this project."
  • It can mean the Fund Group, as in "the university's Current Unrestricted fund is about $3 billion each year."
  • It can mean subsets of a Fund Group, as in "we have about 4,000 endowment funds in the Endowment Fund Group."
  • Finally, it can mean the "fund number," one of the ChartField accounting codes used in the Financials system.

The Seven Fund Groups

The university has seven Fund Groups as shown in the chart below. The first digit of each fund identifies the Fund Group to which it belongs. The Fund Groups can be organized into Current Funds, Non-Current Funds and Agency Funds.

Current Funds
Current Unrestricted Current Unrestricted Funds can be spent in the current operating cycle. No outside person or agency has specified how the funds are to be spent.

(Funds 0xxxxx and 1xxxxx; Hospitals use Hxxxxx)

Examples of funding sources:
  • Student fees
  • State support for instruction and departmental research
  • Facilities and Administrative Cost recoveries (indirect cost recoveries)
  • Interest on cash investments
  • Sales of goods and services
Current Restricted Current Restricted Funds can also be spent in the current operating cycle. An outside person or agency has specified how the funds are to be spent.

(Funds 2xxxxx, 3xxxxx and 5xxxxx; OSP uses 590000)

Examples of funding sources:
  • Gifts for current or continuing use
  • Distributions from the Endowment
  • State appropriations for specific purposes
  • Grants and contracts for research
  • Other grants and contracts
Non-Current Funds
Endowment Endowment Funds may not be spent and are invested "in perpetuity." A portion of the market value of the Endowment is distributed each year, usually to Current Restricted Funds (Funds 2xxxxx), for spending.

(Funds 6xxxxx)

Example of funding source:
  • Endowment principal
Annuity and Life Income Annuity and Life Income Funds are invested by the university to provide the donor with an annuity until a specified date. At the end of the time period, the money reverts to the university.

(Funds 70xxxx-74xxxx)

Example of funding source:
  • Deferred gifts
Loan Loan Funds are monies lent to students, collected from the students and lent out again.

(Funds 75xxxx-79xxxx)

Example of funding source:
  • Gifts and Federal Funds to provide loans to students
Plant Plant Funds are funds associated with purchasing, maintaining and recording the university's property, plant and equipment.

(Funds 8xxxxx)

Examples of funding sources:
  • Allocations from the state for buildings and equipment
  • Money borrowed for construction (bond issues)
Agency Funds
Agency Agency Funds do not belong to the university, but are managed by a university employee. Money coming into Agency Funds is generally payment from external entities.

(Funds 9xxxxx)

A typical example is an academic journal of which the editor is a faculty member. Payment is accepted for subscriptions and printing, distribution and other expenditures are recorded, but the funds ultimately belong to the organization that publishes the journal.

Current Restricted Funds

Current Restricted Funds must be spent only for the purpose intended by the outside entity that established the restriction. Because the university has a legal stewardship obligation to abide by fund restrictions, it is important to be aware of the restrictions and monitor the funds for appropriate use.

  • Endowment Fund restrictions can be found on the web site of the Office of Financial Services, or in the Development Fund Warehouse, an inquiry system made available by the Office of University Development.
  • Restrictions for Current Use Gifts are established when the gift fund is established. The department maintains these funds and monitors for appropriate use according to the restrictions. The Office of University Development's business office maintains copies of the documents which can be accessed online using the Development Fund Warehouse.
  • Restrictions on grants and contracts can be found in the relevant grant agreement or contract.

The original paperwork used to establish a fund in the General Ledger is also a useful source of information on fund restrictions.

USES OF CURRENT RESTRICTED FUNDS
Type of Use Fund Number
Endowment Income & Expense Distribution of income from the Endowment principal that can be spent in accordance with fund restrictions.

2xxxxx
Current Use Gifts (also called Development Fund Gifts) Gifts that can be spent currently in accordance with fund restrictions.

3xxxxx
Private Grants and Contracts Grants and contracts with non-governmental organizations and foundations.

50xxxx
State Appropriations:
(e.g., OARDC Support, College of Dentistry Support)
Funding from the State of Ohio for specific purposes.

53xxxx
Federal Appropriations Funding from the Federal Government for purposes specified in Federal grants.

56xxxx
Office of Sponsored Programs (OSP) All sponsored projects monitored by OSP are managed in this fund. A ChartField project value is required when using this fund number.

590000

Current Unrestricted Funds

The General Fund provides the money that sustains the university's core instruction, departmental research, instructional support, related general administrative costs and facilities expenditures. Funds may be used for any legal and reasonable purpose in carrying out the mission of the institution: Instruction, Research, and Public Service.

How do we use our Current Unrestricted Funds?

Type of Use Fund Number
Departmental Budgets Allocation of funding from the university.

011000, 011200, and others
Grad Fee Authorizations Tuition waivers for graduate associates on appointment.

014000
Federal Work Study Program (FWSP) Matching 75% paid by the Federal Government, 25% paid by university financial aid money.

014002
Release Time Reimbursement of faculty salary from research grants.

017000
Departmental Research Internally funded research with funds distributed by the departmental administration.

04xxxx
Designated Funds A fund that has a use specified by the Board of Trustees. Since Designated Funds are not considered legal commitments, the university can reverse or unwind these funds without legal ramifications. For example, many of the unrestricted gifts received by the university are designated by the Board of Trustees to be used for student scholarships.

06xxxx
Departmental Earnings, Earning Operations Each fund is set up as a business with revenues and expenses.

110000 - 115999
Conferences Department run academic conference with revenue and expenses.

116000 -119999
University Services Earnings Operations that primarily provide services to the other university departments.

140000 - 149999
Auxiliaries (Athletics, dormitories, etc.) Earnings Operations with sales of products primarily to students, patients, employees, and general public. Examples of revenue are from dorms, parking and athletic tickets.

16xxxx, Hxxxxx

Discretionary Funds

Discretionary Funds are given to the university for use at the discretion of a Dean, Chair or other University official. They are generally used to support special departmental needs, as the Administrator determines appropriate, within the limits of reasonableness, legality and university policy. These are not personal funds, so when the Administrator vacates the position, the Fund falls under the stewardship of the succeeding Administrator. Most are restricted current use gifts (range 3xxxxx), but some come from unrestricted gifts that have been internally designated (range 06xxxx) as discretionary by the Board of Trustees.
Important! Discretionary Funds are the only funds that can be used to purchase alcohol. Please see the University Expenditures Policy for additional information.


Non-Current Funds

Non-Current Funds are monies that have a longer timeframe than Current Funds. Typically, they are not spent in the current operating cycle, but may be held for many years.

Endowment Funds

The Endowment Fund group includes the principal of all of the individual Endowment funds and any undistributed income. In most cases the donor restricts the Endowment fund to specific uses, such as professorships or scholarships. However, some Endowment funds are given without any specifications. Most of these are used to provide scholarships for students.

Distinction between Endowment Principal and Endowment Income & Expense

Endowment Funds are unique in that each endowment gift has two fund numbers of which the last five digits are identical. Money is not spent directly out of the Endowment Fund principal (6XXXXX Funds). Instead, every year a distribution is made to each department using the Endowment Income and Expense Fund (a Current Restricted Fund in the 2XXXXX range of Funds). Expenditures are charged against this fund. The distribution is calculated by the Office of Financial Services using a percentage of the average market value of the Endowment over a seven-year period. By using an average market value, taken over a period of time, the university is able to compensate for fluctuations in investment returns.
FUND TYPE FUND # THE FUND . . .
Endowment Principal 6xxxxx is held in perpetuity and invested
Endowment Income & Expense 2xxxxx receives an annual distribution of investment income from the endowment principal that may be spent

Annuity and Life Income Funds

These funds are invested by the university and provide the donor with an annuity (fixed amount of money distributed annually to the donor) until a specified date. At the end of the time period, the money reverts to the university, usually as an Endowment.

Loan Funds

Loan Funds represent monies that are lent to students, collected from the students and lent out again. The money is a mixture of gifts and federal money that is managed by the Office of Financial Aid.

Plant Funds

Plant Funds are used to account for the university's capitalized assets. The funds are generally managed centrally.

There are four subsets of Plant Funds:

  1. Capital Additions

    Used to accumulate costs of capitalized assets such as new buildings or equipment during the timeframe that they are being constructed or acquired. When complete, the total cost is transferred to the Investment in Plant Fund Group.
  2. Renewals and Replacements

    Used to account for remodeling, renovation or replacement of fixed assets. These are the funds usually used for departmental equipment reserves.
  3. Debt Service

    For the monies used to pay back debt that the university has acquired in the form of bond issues.
  4. Investment in Plant

    Used to record the value of our capitalized assets such as land, buildings and equipment.