University System of New Hampshire
Financial and Administrative Procedures

REVENUE ACCOUNTING
Procedure 10-001
Issued By: Controller
Issued Date: 03/01/92

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, 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:



1. 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 A*** through Z*** (Fund Group R), that proper Banner Revenue Source Codes be used, and that all Banner EXPB lines (expense budgets) be coded with the appropriate Revenue Source Reference (coded by the Controller's Office).

   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.

2. 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.

3. Other revenues (non-operating) and fund additions. Resources which are restricted by outside persons or agencies to 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 his gift is to be used for the purchase of library books. The gift would be recorded as a current restricted gift. 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 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 debits to tuition revenue since these are viewed as corrections of amounts previously recorded as revenue.
2. Recurring interdepartmental sales. Self-supporting departments established primarily to provide goods or services to other USNH departments are generally set up as revolving funds (Banner funds beginning with "3"). Examples include Mail Service, Central Stores and Central Copying. Interdepartmental sales of revolving funds are recorded as revenues for operational management purposes, even though they don't result in an increase to overall net assets of USNH. However, for financial reporting purposes, all revenue and expense activity in 3*** funds are eliminated from the USNH financial statements so that the overall USNH expenditures will not be double-counted (once in the 3*** fund and again in the department buying the goods or services).

Auxiliary enterprise funds are 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 or other USNH departments. All sales by auxiliary enterprises (with the exception of accounts such as Telecommunications which have special interdepartmental cost allocation Banner Orgs) are recorded as revenues, even though some of their sales are interdepartmental. The primary source of funding is the key factor. For example, departments may purchase goods from Dining Services but, because the majority of their revenue is from outside sources (students), all sales are recorded as revenue.

3. Recording receipts as credits to expense object codes. Revenue should never be recorded in an expense object code, except in the following instances:
1. De minimis employee reimbursements of infrequent, emergency, personal, employee phone, mail or copier usage are properly recorded as credits to the appropriate object code classification within the department which ultimately will pay the bill. Personal usage of USNH services and facilities by employees is generally not allowed, but in certain circumstances, and with the approval of the supervisor, it is understood that emergencies will necessitate employee usage and reimbursement. The key criteria to be used to determine whether it should be recorded as operating revenue or credit to expense are: Is this transaction part of the normal operating activity of USNH? Are there specific legal or regulatory reasons for recording it as revenue vs expense? Are the amounts significant?
2. Interdepartmental sales by an operating account or department with a Banner Fund number beginning with "1" should be recorded as a credit to an expense object code. This is because an interdepartmental sale does not add a new dollar to USNH's net assets; it merely increases the net assets of one USNH unit/account and decreases the net assets of another USNH unit account. Such interdepartmental sales should be infrequent and not part of the normal operations of the department. If interdepartmental sales are part of normal operations, the account should usually be established in Banner with a fund beginning with a "2" or "3" (see B.2. above).
3. 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 object code originally charged when the goods or services were bought.
4. Vendor payment discounts received from the timely payment of vendor invoices are properly credited to the expense object 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 and then contact Property Control after the sale to request that the item be removed from the USNH equipment inventory. If the sale is made to another USNH department, the transaction should be recorded on a Banner IV (intra-institutional voucher) document and reported to Property Control via the Equipment Transfer Form. The department buying the equipment should debit an equipment object code (26**) and the selling department should credit an equipment object code (26**). If the sale is made to an outside party, the transaction will involve the receipt of cash and be recorded via a Department Deposit Report and 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 object code thereby utilizing the funds generated from the sale of surplus equipment in the current year budget.