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Business and Policy Areas
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Advisory Report 1999-6

July 8, 1999

Accounting and Reporting Safety and Security Expenses by Higher Education

POSITION PAPER PREPARED BY THE NACUBO ACCOUNTING PRINCIPLES COUNCIL

The position paper that follows was approved in April 1999 by the NACUBO Accounting Principles Council. The paper represents preferred industry practice, and in the absence of any guidance from the Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), or the American Institute of Certified Public Accountants (AICPA), this document should be followed by all higher education institutions.

Purpose: This document addresses the proper safety and security expense classification. The current literature, the Financial Accounting and Reporting Manual for Higher Education (FARM), is being revised as pertains to revenues and expenses. Previous editions required expenditures for Safety and Security to be classified as institutional support. While it is recognized that Safety and Security are institutional in nature, a better classification, in keeping with other regulatory pronouncements, is under Operations and Maintenance of Plant. It is NACUBO’s intent to revise the FARM to reflect the elimination of Safety and Security from Institutional Support and add them to Operations and Maintenance of Plant.

Applicability: This position paper applies to all independent and public higher education institutions.

Scope: The FARM will be modified to eliminate Safety and Security from Institutional Support and include them in Operations and Maintenance of Plant.

Significance: The net result of the reclassification will be consistency in reporting between the FARM and federal regulatory requirements.

Effective Date: The requirements of this document are effective for all higher education institutions for fiscal years beginning after June 15, 1999, with earlier application recommended.

Summary

The following paragraphs will be included in a future revision of the FARM and may be used in the interim for accounting and reporting purposes:

Institutional Support

The institutional support category includes expenditures for central, executive-level activities concerned with management and long-range planning for the entire institution, such as the governing board, planning and programming operations, and legal services; fiscal operations, including the investment office; administrative data processing; space management; employee personnel and records; logistical activities that provide procurement, storerooms, printing; transportation services to the institution; support services to faculty and staff that are not operated as auxiliary enterprises; and activities concerned with community and alumni relations, including development and fund raising.

Appropriate allocations of institutional support should be made to auxiliary enterprises, hospitals, and any other activities not reported under the Educational and General heading of expenditures.

This category includes the following subcategories:

Executive Management. This subcategory includes expenditures for all central, executive-level activities concerned with management and long-range planning for the entire institution (as distinct from planning and management for any one program within the institution). All officers with institutionwide responsibilities are included, such as the president, chief academic officer, chief business officer, chief student affairs officer, and chief development officer. This subcategory includes such operations as executive direction (for example, governing board), planning and programming operations, and legal operations.

Fiscal Operations. This subcategory includes expenditures for operations related to fiscal control and investments. It includes the accounting office, bursar’s office, and external audits, and also includes such "financial" expenses as allowances for bad debts and short-term interest expenses.

General Administration. This subcategory includes expenditures for activities related to general administrative operations and services (with the exception of fiscal operations and administrative data processing). Included in this subcategory are personnel administration, space management, purchasing and maintenance of supplies and materials, campuswide communications and transportation services, general stores, and printing shops.

Administrative Information Technology. This subcategory includes expenditures for computer services that provide support for institutionwide administrative functions unless separately budgeted and expended elsewhere. When information technology is allocated to multiple expense categories, the allocation method and results should be displayed in the notes to the financial statement. If an institution does not separately budget and expense information technology resources, the costs associated with the three primary programs will be applied to academic support and the remainder to institutional support.

Public Relations/Development. This subcategory includes expenditures for activities to maintain relations with the community, alumni, or other constituents and to conduct activities related to institutionwide development and fund raising.

Operation and Maintenance of Plant

The operation and maintenance of plant category includes all expenditures of current operating funds for the administration, supervision, operation, maintenance, preservation, and protection of the institution's physical plant. They include expenses normally incurred for such items as janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture, and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; safety; hazardous waste disposal; property, liability and all other insurance relating to property; space and capital leasing; facility planning and management; and, central receiving. It does not include expenditures made from the institutional plant fund accounts.

This category includes the following subcategories:

Physical Plant Administration. This subcategory includes expenditures for administrative activities that directly support physical plant operations. Activities related to the development of plans for plant expansion or modification, as well as plans for new construction, should be included in this subcategory. Also included are property, liability, and all other insurance relating to property.

Building Maintenance. This subcategory includes expenditures for activities related to routine repair and maintenance of buildings and other structures, including normally recurring repairs and preventive maintenance.

Custodial Services. This subcategory includes expenditures related to custodial services in buildings.

Utilities. This subcategory includes expenditures related to heating, cooling, light and power, gas, water, and any other utilities necessary for operation of the physical plant.

Landscape and Grounds Maintenance. This subcategory includes expenditures related to the operation and maintenance of landscape and grounds.

Major Repairs and Renovations. This subcategory includes expenditures related to major repairs, maintenance, and renovations. Minor repairs should be classified as building maintenance. The distinction between major repairs and minor repairs should be defined by the institution.

Security and Safety. This subcategory includes expenditures related to security; earthquake and disaster preparedness; safety, including environmental safety; and hazardous waste disposal.

Logistical Services. This subcategory includes expenditures related to logistical services such as central receiving as well as space and capital leasing.

Operation and Maintenance Information Technology. This subcategory includes expenditures for formally budgeted and/or separately budgeted operation and maintenance information technology. When information technology is allocated to multiple expense categories, the allocation method and results should be displayed in the notes to the financial statement. If an institution does not separately budget and expense information technology resources, the costs associated with the three primary programs will be applied to academic support and the remainder to institutional support.