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Accounting Services


Accounting Overview Training

Revised April 24, 2014

Purpose

To provide University Business Managers and Financial Administrators with:

  1. A basic understanding of the authoritative bodies that set rules for Higher Education, State and Local Government accounting;
  2. A basic understanding of the University’s accounting system; and,
  3. A basic understanding of the principles used to charge costs to institutional activities.

Accounting Rule Setting Bodies for Higher Education, State and Local Governments

Governmental Accounting Standards Board (GASB)

Louisiana Office of Statewide Reporting and Accounting Policy (OSRAP)

American Institute of Certified Public Accountants (AICPA)

United States Government Accountability Office (GAO)

United States Office of Management and Budget (OMB)

National Association of College and University Business Officers (NACUBO)

LSUHSC-NO Accounting System Overview

LSUHSC uses the PeopleSoft Financials system.

PeopleSoft uses Chartfields which are data attributes that are used to classify transactions and account balances.

The primary Chartfields used by LSUHSC-NO are:

Account - a label used for recording and reporting in units of money, assets owned, liabilities owed, and transactions or other economic events that result in changes to assets and liabilities (i.e. revenues and expenses). Accounts are the building blocks of all accounting systems. LSUHSC-NO’s account structure is a follows:

Class – the class code is used to define the source of funds (i.e. State Appropriation, Federal Grants and Contracts, State Grants Contracts, etc.). Some of the more common class codes are:

PeopleSoft Class Code Screen

Class Code Screen

Program – program code is used to classify how funds are used (i.e. Instruction, Research, Public Service, etc.). Some of the more common program codes include:

PeopleSoft Program Code Screen

Program Code Screen

Project/Grant - a 10 character code used to group related revenues and expenses together such as a grant, contract or similar cost objective.

PeopleSoft Project/Grant Screen

Project/Grant Screen

LSU Account Numbers (Legacy Account Numbers

LSUHSC-NO’s previous accounting system which last processed transactions in July 2001, contained a data element named “LSU Account.” LSU Account numbers were created for reference purposes from July 2001 to June 2009. The data captured in this field is not consistent with the definition of the term “account” that is contained in Generally Accepted Accounting Principles issued by GASB or the Generally Accepted Governmental Auditing Standards issued by the GAO. Care should be taken when using this term so that there are no confusions with the generally accepted accounting definition of the term “account.” For example, we want to avoid a customer or an auditor believing that we are referring to a bank account or an expense account when we are actually referring to a project or an unrestricted budget.

Reporting Cycle and Basis of Accounting

LSUHSC-NO is required to close the last month of each fiscal year (June) using the full accrual basis of accounting. Under the full accrual basis of accounting, revenues are recognized when they are earned and expenses are recognized when they are incurred. The earnings process is generally defined by the performance of services required to earn the revenue. The incurrence of expense is generally determined when goods are received or when services are performed.

The other eleven months of the year, LSUHSC-NO is on a “record what can be recorded” methodology.

Accrual Accounting vs. Cash Basis Accounting

The General Ledger is used to record monetary transactions of the University in the form of debits and credits. These transactions can be directly entered by journal entry or they can be interfaced from systems such as the Human Resource Management System, Accounts Payable, Billing and other systems. The General Ledger is considered the official books and records of the University and it is the basis of financial statement preparation and audits of the financial statements.

The General Ledger should be used as the basis for reporting and any financial information maintained outside of the General Ledger (i.e. “Shadow Systems”) should be reconciled to the General Ledger to ensure compliance with OMB A-110.

Special Accounting Topics

Fringe Benefit Accounting

The University has elected the fringe benefit rate methodology defined in OMB Circular A-21. This methodology calls for the University to estimate fringe benefit expenses and submit a proposal to the US Department of Health and Human Services (DHHS) six months prior to the start of the fiscal year. Once this rate is approved by DHHS, it is consistently applied to grants, contracts and other institutional activities.

Grant and Contract Management and Transaction Review

The review of grants and contracts should place special emphasis on the difference between current year revenues and current year expenses. This difference may indicate unexecuted contracts, unbilled executed contracts and inappropriately charged costs. The main scope of the legislative audit is current year revenues and expenses.

Cost Accounting

OMB Circular A21 (Principles For Determining Costs Applicable To Grants, Contracts, And Other Agreements With Educational Institutions) establishes the criteria for charging costs to grants, contracts, and other institutional activities. OMB A-21 is a federal law (2 CFR 220).

OMB A-21 Key Points

OMB A-21 Section D.1 - Direct Costs

Direct costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently.

Examples of Direct Costs:

OMB A-21 Section E - F & A Costs

Facility and Administrative (F&A) Costs - “Costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project.” (OMB A-21, section E.1.)

Examples of F&A Costs:

OMB A-21 Section J - General Provisions for Selected Items of Cost

DS-2 Overview

DS-2 Section 2.1.0

Criteria for Determining How Costs are Charged to Federally Sponsored Agreements or Similar Cost Objectives

LSUHSC-NO follows the general guidelines in sections D and E of OMB Circular A-21 in determining the treatment of costs.

DS-2 Section 2.5

Method of Charging Salaries and Wages

Salaries and fringe benefits of faculty, professional staff (e.g. research associates), technicians, lab assistants, and graduate students associated with effort on research projects, instructional activities and other direct cost objectives are treated as direct costs.

Salary and Wage Cost Accumulation System

Additional Comments

General Rule of Thumb - Costs of faculty effort should be charged to where it is expended. The concept of paying an employee from a source of funds is not supported by OMB A-21 or the DS-2. “Spending down” a terminated sponsored project surplus balance by inappropriately classifying costs is a violation of the DS-2 and OMB A-21. Instead close out the terminated project in accordance with the Grant and Contract Closeout Policy.

Key Activities

Consequences of Non-Compliance

Accounting Services Website

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