A. SUMMARY OF ADMINISTRATIVE PROCEDURE
This statement defines operating and non-operating revenues. It addresses commonly asked questions on interdepartmental sales, recording receipts as credits to expense, and sales of departmental equipment.
1. Definition of current operating revenue. Within USNH current funds, revenue is defined as any transaction which results in an increase in the current financial resources (i.e., net assets) of USNH as a whole. Operating revenue results from the sale of USNH's primary products and services to a non-USNH entity or from carrying out other activities that support USNH's missions of instruction, research and public service. Examples of operating revenue include all tuition and fees assessed against students, state of New Hampshire general appropriations, gifts, grants, contracts, investment and endowment income, departmental sales and services to external entities, miscellaneous college receipts, and auxiliary enterprise sales. Sources of USNH operating revenues include students, governments, donors, and other public customers. Within auxiliary enterprise funds, sources of revenue are primarily students, faculty and staff; however, incidental sales to the general public and other USNH departments may be included.
2. Designations of revenue:
a. Restricted current fund revenues. These are resources which are available for current operating purposes but whose expenditure is limited by an external source (e.g., donors, government, grantor, etc.) to specific purposes, programs, schools, departments, etc. Restricted revenues, although recorded when earned in accordance with Procedure 10-002, Billing for Goods Sold or Services Rendered are recognized as revenue in the USNH financial statements only to the extent that such funds are expended, as required by generally accepted accounting principles (GAAP). To accomplish GAAP recognition, USNH requires that all restricted current funds be recorded in Banner funds whose second character is numeric (See Procedure 02-023: USNH Grant Fund Coding Conventions), that proper Banner account codes be used (see Procedure 02-039: Account Coding Conventions).
Funds with internal restrictions are not classified as restricted current funds because a restriction imposed by the governing board or administration can be removed at their discretion. These funds are properly classified as internally designated funds, a subdivision of unrestricted current funds.
b. Unrestricted current fund revenues. These are resources which are not restricted by external sources and which are expendable for operating purposes. Included are undesignated educational and general, auxiliary enterprise, and internally designated resources. The absence of an external restriction implies that the resource is available for current operations and, therefore, must be recorded in current unrestricted revenues.
c. Other revenues (non-operating) and fund additions. Resources which are restricted by outside persons, agencies (such as on loan funds), endowment and similar funds, or plant funds are accounted for as restricted revenues in the appropriate fund group to which the restriction applies. For example, a donor might state that their gift is to be used for the purchase of library books. The gift would be recorded as a current restricted gift in a restricted gift fund. If, however, the donor stated the gift was to be used for construction of a library, it would be recorded as a restricted gift in plant funds. To take it a step further, a gift received whereby only the income earned on the gift could be spent for purchase of library books would be recorded in endowment and similar funds; the income earned on the gift which is available to spend would be recorded in current restricted funds.
In accordance with GAAP, all gains and losses arising from the sale, collection, or other disposition of investments and other noncash assets are accounted for in the fund which owned such assets. Ordinary income derived from investments, receivables, and the like is accounted for in the fund owning such assets, except for income derived from investments in endowment and similar funds. Income derived from endowment and similar funds is accounted for in the fund to which it is restricted or, if unrestricted, as revenue in unrestricted current funds.
B. DETAILED OPERATING PROCEDURES
1. Offsetting revenue and expenses. Revenue is always recorded at the gross amount, not net of any discounts, etc. For example, tuition, fees and room and board charges are recorded at the gross amount according to Trustee approved rate schedules even though there is no intention of collection directly from the student. Institutional scholarships, staff tuition waivers, etc., are then recorded as expenditures. However, refunds to students as a result of courses dropped during the refund period are recorded as reductions to tuition revenue since these are viewed as corrections of amounts previously recorded as revenue that will not be earned.
2. Recurring interdepartmental sales. Self-supporting departments established primarily to provide goods or services to other USNH departments are generally set up as internally designated or auxiliary funds (Banner funds whose second character is "A" or "D"). Examples include Mail Service, Central Stores and Central Copying. Interdepartmental sales for these operations don't result in an increase to overall net assets of USNH. Accordingly the sales are recorded as reductions of expenses. In this way, all revenue and expense activity in these funds are eliminated from the USNH financial statements and overall USNH expenditures will not be double-counted.
Auxiliary enterprise funds are also used to account for revenues of operations established primarily to furnish goods or services to students, faculty or staff. Often, auxiliaries incidentally service the general public. These sales by auxiliary enterprises are recorded as revenues. The primary source of funding is the key factor. For example, departments may purchase goods from Dining Services, but those sales would be recorded as a reduction of expenses rather than revenue.
3. Recording receipts as credits to expense account codes. Revenue should never be recorded in an expense account code, except in the following instances:
a. Interdepartmental sales by an operating account or department with a Banner Fund in the unrestricted range (second character is "U", "D" or "A") should be recorded as a credit to an expense account code. This is because an interdepartmental sale does not add new dollars to USNH's net assets; it merely increases the net assets of one USNH unit and decreases the net assets of another. When interdepartmental sales are part of the normal operations of the department, the account should usually be established as described in Section B.2. above.
b. Vendor credits and other corrections of expenditure transactions resulting from the overpayment of an employee or a vendor invoice, return of goods, etc., should be recorded as a credit to the expense account code originally charged when the goods or services were bought.
c. Vendor payment discounts received from the timely payment of vendor invoices are properly credited to the expense account code originally used for the purchase.
4. Sales of departmental equipment. Occasionally, departments must sell surplus unused or obsolete equipment originally purchased with departmental funds. Departments should contact Purchasing first to determine the proper property disposition procedure (see Procedure 11-030: Disposal of Surplus Property) and then contact the appropriate campus Property Control contact to adjust the inventory as instructed in the disposal procedure noted above. If the sale is made to another USNH department, the transaction should be recorded on a Banner JV document using PB* and IV* rule codes as needed and reported to the applicable campus Property Control contact via the USNH 11-010F: Equipment Location Form. The department buying the equipment should debit an equipment account code (74*) and the selling department should credit an equipment account code (74*). If the sale is made to an outside party, the transaction will involve the receipt of cash and be recorded via a Banner JV document using a proper CR* rule code. The sale proceeds should normally be credited to the campus' miscellaneous college receipts account. If approved by the campus Chief Financial Officer (CFO), the sale proceeds may be credited directly to an equipment account code thereby utilizing the funds generated from the sale of surplus equipment in the current year budget.
