Table of Contents Introduction... 4 Overall Financial Practices... 4 General Accounting Procedures... 6 Cash Management Procedures...

Transcription

1 Accounting Manual

2 Table of Contents Introduction... 4 Purpose of Manual... 4 Amending of Accounting Practices and Procedures... 4 Overall Financial Practices... 4 Fund Accounting... 4 Basis of Accounting... 5 Revenue Recognition... 5 Encumbrances... 5 Federal and State Income Tax Status... 5 Use of Estimates... 5 Accounts Receivable... 6 Compensated Absences... 6 Inventories... 6 General Accounting Procedures... 6 Overall Accounting System Design... 6 Chart of Accounts... 6 General Ledger Activity... 8 Account Reconciliations... 8 General Ledger Close Out... 8 Cash Management Procedures... 8 Cash Receipts... 8 Cash Disbursements... 9 Petty Cash Funds Investment Policy Bank Accounts Maryland Local Government Investment Pool Accounts Receivable Revenue Recognition and Invoicing Billing Accounts Receivable Aging Collection on Past Due Accounts Allowance for Doubtful Accounts Deferred Revenue Hope and Lifetime Learning Tax Credits Inventories Bookstore Inventory Control and Year End Verification Inventory Control and Year End Verification at Other Locations Fixed Assets Fixed Assets Acquisitions Donated Property & Equipment Classification of Fixed Assets Depreciation Inventory of Property, Plant and Equipment Accounts Payable Primary Controls Direct Payment Voucher Payment on Purchase Orders... 19

3 Professional Development/Tuition Reimbursement Travel Expense Reimbursement Student Refund Checks Credit Cards Use of Independent Contractors Internal Revenue Service Reporting of 1099 Information Payment of Federal and State Taxes Via ACH SunGard Banner Finance Controls Application Controls System Maintenance and Documentation Controls Banner Finance Security Operating Budget Development and Controls Purpose of the Annual Budget Operating Budget Development System Budgetary Controls Over Expenditures Periodic Forecasting of Revenue and Expenditures Annual Budget Report to MHEC (CC-5) College Financial Reporting Reporting to the Board of Trustees Annual Audit Annual Financial Report to MHEC (CC-4) Integrated Postsecondary Education Data System Organizational Manager Reporting Grant Monitoring and Reporting Establishment of a Grant Defining Elements of a Grant Monitoring of Activity Reporting for Grant Managers Reporting Requirements to Funding Agencies Audit in Compliance with OMB Risk Management General Liability Contractual Liability Automobile Insurance International Travel Accident Insurance Student Professional Liability Athletic Insurance Coverage Police Professional Liability Multimedia Professional Liability... 31

4 1 Introduction This document is intended to provide an overview of the various accounting, budgeting and financial reporting processes and procedures applied and administered by the Finance Office at Harford Community College (HCC). Accounting procedures are varied and numerous, and therefore the scope of this document is not intended to cover every possible issue or situation that may arise. Should there be questions or if additional information is required about these processes and procedures, please contact the Assistant Vice President (AVP) for Finance at A detailed list of contacts in the Finance and Accounting Department can be found on the Directory page of the HCC Web site: Purpose of Manual The Accounting Manual of HCC is the official document of the College for the conduct of business and the accounting and financial administration for college activities, as well as grants awarded by the U.S. government and other funding sources The purpose of the Accounting Manual is to serve as a reference to employees and other interested parties, providing detailed information of the accounting and financial administration linked to the College. The manual references the various federal and state laws and regulations that impact the College, and assists employees in the financial administration of grants awarded by the U.S. government and other funding sources This manual constitutes all current fiscal procedures and standards that have been developed by HCC through the time of issuance, unless otherwise noted. 1.2 Amending of Accounting Practices and Procedures This manual contains the essential fiscal procedures of HCC, as determined by the Finance Office. As additional matters arise that result in significant revision of the manual, the Finance Office may issue an amendment. 2 Overall Financial Practices The significant accounting practices followed by the College are described below. 2.1 Fund Accounting In order to ensure the observance of limitations and restrictions placed on the use of the available resources, the College accounts for financial activities through the use of fund accounting. The measurement focus is the determination of financial position and changes in fund balances. The accounts of the College are organized and operate on the basis of Current Unrestricted, Current Restricted, Plant, Agency, Auxiliary, and Loan Fund groups The Current Funds group includes those economic resources which are expendable for the purpose of performing the primary mission of the College promoting lifelong learning, workforce development, and social and cultural enrichment and which are not restricted by external sources or designated by the Board of Trustees (BOT) for purposes other than operating. The term current means that the resources will be used for operating purposes Unrestricted Current Funds include all funds received for which there is no stipulation as to the purposes for which they should be expended Restricted Current Funds are those available for financing operations but which are limited (by external agencies, etc.) to specific purposes or programs. Externally imposed restrictions are to Accounting Manual Page 4 of 31

5 be contrasted with internal designations imposed by the governing board on unrestricted funds. Internal designations do not create restricted funds, inasmuch as the removal of the designation remains at the discretion of the BOT Property, plant and equipment are recorded in the Plant Funds at cost. In the case of gifts, they are recorded at fair value on the date of donation. In accordance with generally accepted accounting principles for governmental entities, Governmental Accounting Standards Board Statement, specifically No. 35, depreciation on property, plant and equipment is recorded. For additional information, see section 7 on Property, Plant and Equipment. Amounts received from the County for property, plant and equipment are recorded as appropriations in the Plant Funds The Agency Funds account for the resources held by the organization as custodian or fiscal agent for other individuals or organizations, such as student activities, student athletics, etc The Auxiliary Funds account for activities that have been specifically designated as auxiliary enterprises. An auxiliary enterprise is an entity that exists primarily to furnish services to students, faculty, and staff The Loan Funds account for resources available for loans to students and for the loans made to students. 2.2 Basis of Accounting The financial statements of the College are prepared on the accrual basis of accounting in accordance with Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management Discussion Analysis for State and Local Governments, and Governmental Accounting Standards Board Statement No. 35, Basic Financial Statements and Managers Discussion Analysis for Public Colleges and Universities. 2.3 Revenue Recognition Tuition and fees are recognized in the academic period that they are earned. Amounts received for future semesters are deferred until earned in the related academic period. Credit related tuition received for the summer semester prior to June 30 is recognized equally over the two fiscal periods, as half of the semester relates to the current fiscal year, and half of the semester occurs during the next fiscal year. 2.4 Encumbrances Non-salary related encumbrances at year-end are represented by executed purchase orders. The balances correspond to the estimated amount of expenses on contracts in process. 2.5 Federal and State Income Tax Status The College is exempt from Federal and State income taxes, as it is essentially a political subdivision of the State. 2.6 Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the component unit financial statements and the reported amounts of revenue and expenditures during the reporting period. Actual results could differ from those estimates. Accounting Manual Page 5 of 31

6 2.7 Accounts Receivable Revenue is recognized on an accrual basis with the establishment of corresponding accounts receivable. The accounts receivable are recorded using the allowance method to measure bad debts. The allowance for doubtful accounts is determined based upon analysis and management s estimation of collectability of such accounts (See Accounts Receivable (section 5) for more information). 2.8 Compensated Absences Employees may bank unused annual vacation leave up to a maximum of 10 days. Employees are allowed four months subsequent to fiscal year end to utilize any vacation leave which exceeds this bank amount. Sick leave days carry over is not subject to limitation. Sick leave days are not paid out at termination except in the case of retirement and 10 years of serviceable employment where a maximum of 360 days can be paid out at a per diem rate of $ Inventories Inventories are stated at the lower of cost or market and consist primarily of items held for sale in the bookstore and consumable supplies. The cost of these items is recorded as an expense at the time they are sold to a customer or requested for use by an employee. Inventories are determined by actual count and priced on the first-in, first-out (FIFO) basis (see section 6). 3 General Accounting Procedures 3.1 Overall Accounting System Design A complete and comprehensive set of accounts is maintained using the SunGard Banner Finance System. The account numbers are designed to provide some identification regarding program, fund, etc. The fund numbers are sorted in the system by fund type, which is not included in the visible coding structure of the chart of accounts. These fund types segregate unrestricted, restricted, agency, and other funds from each other. The account numbers are sorted in the system by account type, which is also not included in the visible coding structure of the chart of accounts. (For example, Revenue is account code 51; Labor is code 60; Salaries and Wages, code 61, etc.) College organization numbers are sorted by a four digit Predecessor Organization, which is also not visible in the coding structure of the chart. 3.2 Chart of Accounts The chart of accounts is the identification system for the five sections of the College accounting system, which are: assets, liabilities, fund balances, revenues, and expenditures. The coding structure for the Banner general ledger (basically, balance sheet accounts such as assets, liabilities, and fund balances) is: XXXX Fund XXXX Balance sheet account The coding structure for the Banner operating ledger (revenue, expenditure, or encumbrance) is: XXXX XXXX XXXX XX Fund Organization Account Program Fund - The fund is the initial four digits of the account number. This designation of fund is used to capture the aggregate of related financial information for legal or other reporting purposes. The assignment of an entity with a fund number will result in the full set of financial statements (balance sheet as well as operating results) being made available for the respective reporting requirements. Accounting Manual Page 6 of 31

7 3.2.2 Balance Sheet Account Balance sheet accounts resemble a typical standard structure of assets, liabilities and fund balance accounts designed to accommodate the appropriate account controls and reporting. The major accounts are assigned as listed below: 1XXX 2XXX 3XXX Assets 10XX Cash 1090 Interfunds 11XX Investments 12XX Receivables and Reserves 13XX Prepaid Charges, Misc. 15XX Inventories 17XX Capital Assets (Land, Buildings, Equipment, etc.) Liabilities 20XX Accrued Vacation Payables 21XX Payables 25XX Deferred Income Fund Balances 30XX Fund Balance 35XX Fund Balance Invested in Capital Assets 80XX Control Accounts Organization The organization (or department) is assigned to develop, monitor, and track budgetary, revenue, and expense transaction information Account Number The various four digit account numbers are used to signify the various revenue and expense categories. 40XX 42XX 44XX 46XX 50XX 51XX 53XX 54XX 56XX 57XX 59XX 60XX 61XX 62XX 63XX 64XX 65XX 66XX 7XXX Tuition and Fees Revenue Revenue from Governmental Sources Misc. Revenue Sources Sales and Related Auxiliary Revenue Administrative Salaries & Benefits Faculty Salaries & Benefits Classified Salaries & Benefits Professional Salaries & Benefits Overtime Part-time Salaries & Benefits Federal Workstudy Salary and FICA Contracted Services Supplies and Materials Communications Conferences and Meetings Grants and Mandatory Transfers Utilities Fixed Charges Furniture and Equipment and Library Books Program program or function expenditures are categorized as follows, in compliance with NACUBO guidelines. 10 Instruction 30 Public Service 40 Academic Support 50 Student Services 60 Institutional Support 70 Plant Operations Accounting Manual Page 7 of 31

8 80 Scholarship 81 Transfers 90 Auxiliary Enterprises 3.3 General Ledger Activity All entries should be made soon after the underlying accounting event to ensure that the financial records are accurate and reporting is current All journal vouchers should be approved in writing by the Vice President for Finance, Operations, and Government Relations (FOGR), AVP for Finance, or the Accounting Coordinators prior to entry into the General Ledger. All entries must be supported by adequate documentation that clearly shows the justification and authorization for the transaction. 3.4 Account Reconciliations Each balance sheet account should be reconciled monthly to ensure that postings are correct and adjustments have been properly processed. All differences and balances should be investigated on a timely basis Each account is placed on a master checklist with assignments made as to who will be performing the reconciliation and who will be reviewing each reconciliation at the end of the year. As the reconciliations are completed, the person performing the reconciliation will mark off the corresponding account on this master checklist Each account (or group of accounts) reconciliation will be performed in a manner to generate a reconciliation file (or summary reconciliation file) that will be stored electronically within the secure Finance folder on the network. 3.5 General Ledger Close Out At the end of the fiscal year, all items of income and expense are closed through an automated systems process so that they will not carry over to the next fiscal year. General Ledger balances are rolled with the end of year processes in SunGard Banner; remaining encumbrance balances are rolled as a commitment in the new fiscal year; remaining budget balances are not rolled to the new fiscal year. 4 Cash Management Procedures Funds collected and disbursed by Harford Community College follow established procedures for recording and accountability. Those procedures for cash receipts, cash disbursements, petty cash funds, investments, bank accounts, and the Maryland Local Government Investment Pool are described below. 4.1 Cash Receipts Funds are received from various sources including federal, state, and local governments, organizations (gifts), miscellaneous income (i.e. facility rentals, proctor testing, softball/baseball league fees, etc.), and student tuition and fees. HCC s procedure for cash receipts minimizes recording errors and provides for accurate and timely recording and accountability of such funds. For cash receipts, the following internal accounting controls are followed: a) Opening of mail is performed by two employees in the Finance Department. The Administrative Specialist in that area has the responsibility to safeguard these receipts. b) All checks are endorsed with HCC s deposit stamp. c) All checks that come through the mail are recorded daily on the Daily Mail Log form. d) Cash, check, credit card payments, and deposits brought to the Cashiers Office by customers are recorded immediately in the Banner system. Accounting Manual Page 8 of 31

9 e) If a scholarship check is received through the mail, the Administrative Specialist will make a copy of the check to send to the Financial Aid Specialist. f) The Daily Mail Log is given to the Accounts Receivable Specialist for verification of third party account numbers. g) Once the Accounts Receivable Specialist has verified third party account numbers, he/she will submit the Daily Mail Log along with the corresponding checks to the supervisor of the Cashiers Office. h) The Cashiers Office will record the received checks within the appropriate account in Banner. At the end of the day, the cashiers balance their respective receipts including cash, check, and credit card charges with the totals recorded in the Banner system and a deposit slip is completed. Each cashier will close their own session in Banner before they leave for the day and complete a closing sheet to document the contents of their physical drawer compared to their Banner session. Each cashiers batch paperwork is reviewed and compiled into the cashiers monthly excel spreadsheet which highlights any discrepancies and is used by the Staff Accountant in the bank reconciliation process. i) All cash and checks received are locked in the safe overnight and picked up the next day by an armored car service. j) Banner control accounts are reconciled with the Banner Accounts Receivable Subsidiary Ledger on a daily basis. k) Periodic billing statements are sent to customers and customer-noted differences are assessed. l) The cash account is reconciled to the bank statements by the Staff Accountant who is independent of handling cash receipts. m) The Staff Accountant reconciles online tuition payments from the End of Day Reconciliation Report provided by NelNet to the Banner Online Cashier WWWCCPMT automated report on a daily basis. A log is kept in the P:\Finance\Bannerlog directory. n) The Staff Accountant notes the cash amount in Bank 1001 from TGRFEED per the daily automated Banner reports and inputs it into an excel spreadsheet located in the P:\Finance\Bannerlog directory. This file assists in the monthly reconciliation of the bank accounts. o) The Staff Accountant enters the feed numbers from the Banner FURFEED report that automatically runs each night into an excel spreadsheet located in the P:\Finance\Bannerlog directory. This provides an audit trail indicating all Finance feeds made in Banner. 4.2 Cash Disbursements - Checks are prepared on a timely basis upon receipt of properly authorized disbursement requests that contain appropriate documentation and approvals (refer to Section 8 - Accounts Payable). The following internal accounting controls are followed: a) Security featured blank check stock is used. b) Check numbers are sequentially assigned in the payroll and accounts payable process in Banner. c) The President s signature along with other vital check information is micro encoded on each check as it is printed. The signature is secured and activated by an authorized employee in the Computer Technology Services (CTS) department who also prints the checks in a secured area in CTS. d) Checks greater than or equal to $10,000 are initialed by the AVP for Finance prior to disbursement. Accounting Manual Page 9 of 31

10 e) Checks are either mailed directly to or held for the payee based on directions on the Direct Payment Voucher or the Receiving Report. f) Bank statements are reconciled to cash accounts and any outstanding checks are evaluated by the Staff Accountant whose responsibilities are independent of accounts payable and cash disbursement. g) The Staff Accountant reconciles and may propose adjustments that are reviewed and approved by the AVP for Finance. h) Requests for replacement checks will be researched to verify that the recipient is still entitled to the check and that the check is still outstanding. Verification is accomplished through both the bank statement and through M&T Bank s online banking system. i) Stop payments will be issued for any checks still valid and outstanding. The reissued check will be logged into both the Banner computer system and into M&T Bank s online banking system. j) The Maryland Unclaimed Property Report is filed each year by October 31 with the Comptroller of Maryland. This report lists checks that have been outstanding for three years. Final letters attempting to contact the payee must be sent by HCC no more than 120 days or less than 30 days prior to filing the Unclaimed Property Report on October 31. k) Federal financial aid refund checks that become stale are handled according to the Federal guidelines which require that unclaimed Title IV funds be returned to the Federal Government. These stale checks are not turned over to the State as unclaimed property (as described in paragraph i) above). The Federal guidelines state that these Title IV refund checks should be returned to the Federal Government within 240 days (8 months) of issue date. Thus, these stale checks must be identified and handled more expediently than other stale checks. 4.3 Petty Cash Funds The two primary petty cash funds utilized at HCC are the General Petty Cash and the Theatre Box Petty Cash, which are both secured within the Cashiers Office The General Petty Cash is used for routine reimbursements to employees for business expenses up to $25 per day. The following internal accounting controls are followed: a) The employee must complete a Petty Cash Reimbursement Voucher with the appropriate account number. b) The Petty Cash Reimbursement Voucher must be approved with a signature of the responsible supervisor. c) Supporting receipts or other documentation must be submitted along with the Petty Cash Reimbursement Voucher. d) The Cashiers maintain a Petty Cash Log which is utilized to record every transaction (even providing change to an employee or student) to enable the reconciliation of petty cash on hand at any given time. e) When the General Petty Cash needs to be replenished, the vouchers are batched by the responsible cashier, and a Direct Payment Voucher is submitted to the Accounts Payable Department. f) The Accounts Payable Specialist posts the transactions in Banner, which records the expenses in the appropriate accounts in the general ledger and generates a check to replenish the General Petty Cash. g) Periodically the General Petty Cash should be audited by an employee with responsibilities independent of cash receipts, disbursements, or fund custody. Accounting Manual Page 10 of 31

11 4.3.2 The Theatre Box-Petty Cash is provided to the Box Office Cashiers to sell tickets for performances and events on campus. These bags are prepared and secured in the Cashiers Office. They are disbursed to the appropriate location of the show, and are returned with this seed money along with the corresponding ticket sale deposit for the Cashiers Office to initiate There are also minimal balances of petty cash on hand at various other locations of the College, such as the Library, Test Center, Food Services, and the Bookstore. This petty cash is audited at least once per year by the Cashiers Office to verify the cash balance and investigate and record any changes. 4.4 Investment Policy: It is the policy of the BOT of Harford Community College to invest public funds in a manner which will conform to all State of Maryland and County statutes governing the investment of public funds while meeting its daily cash flow demands and providing a return at least equal to the three-month Treasury bill yield. The following sections clarify the procedures and guidelines associated with this policy: Scope: The investment policy applies to all financial assets of the College. These funds are accounted for in the College s annual report and include: a) current funds b) agency funds c) plant funds d) auxiliary enterprise funds Prudence: Investments shall be made with judgment and care speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The BOT will not borrow funds for the express purpose of investing those funds. The standard of prudence to be used by the investment officials shall be the prudent person standard and shall be applied in the context of managing an overall portfolio. Investment officers, acting in accordance with written procedures and the investment policy, and exercising due diligence, shall be relieved of personal responsibility for an individual security s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments Objectives: The primary objectives, in priority order, of the BOT s investment activities shall be: a) Safety: Safety of principal is the foremost objective of the investment program. Investment of the BOT shall be undertaken in a manner that seeks to ensure preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. b) Liquidity: The BOT s investment portfolio will remain sufficiently liquid to enable the BOT to meet all operating requirements which might be reasonably anticipated. c) Return on Investment: The BOT s investment portfolio shall be designed with the objective of attaining a market rate of return throughout the budget and economic cycles, taking into account the BOT s investment risk constraints and the cash flow characteristics of the portfolio Delegation of Authority: Authority to manage Harford Community College s investment program is derived from applicable laws, codes, regulations and policies of the BOT. Management responsibility for the investment program has been delegated to the Vice President for FOGR or designees responsible for adherence to these practices and procedures. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures. The Vice President for FOGR or designee shall be responsible for all transactions. Accounting Manual Page 11 of 31

12 4.4.5 Ethics and Conflicts of Interest: Officers and employees of the College shall comply with all applicable laws, codes, regulations and policies of the BOT governing ethics issues relative to public employees Authorized Financial Dealers and Institutions: The College will deal only with financial institutions that qualify under Securities and Exchange Commission rule 15c3-1 (net capital rule) Authorized and Suitable Investments: The College s investments will conform without exception to Article 95, Section 22 and Section of the state Finance and Procurement Article of the Annotated Code of Maryland Collateralization: When the College enters into a trade requiring collateral, the initial margin will not be less than 102% of the principal amount of the trade. This margin must be maintained for the full term of the trade. Collateral must be posted with either a third party custodian with whom the College has a custodial agreement or with the Federal Reserve Bank in a segregated account. The collateral is restricted by type in accordance with Section of the state Finance and Procurement Article of the Annotated Code of Maryland Safekeeping and Custody: All security transactions, including collateral for repurchase agreements entered into by Harford Community College shall be conducted on deliver versus payment basis. Securities will be held by a third party custodian designated by the Vice President for FOGR and evidenced by safekeeping receipts or with the Federal Reserve Bank in a segregated account Diversification: The College will diversify its investments by security type and institution. With the exception of U.S. Treasury securities, authorized pools, repurchase agreements and money market funds, no more than 50 percent of the BOT s total investment portfolio will be invested in a single security type Maximum Maturities: To the extent possible, the BOT will attempt to match investments with anticipated cash flow requirements. Unless matched to specific cash flow, the BOT will not directly invest in securities maturing more than one year from the date of purchase. However, the BOT may collateralize its repurchase agreements using longer investments not to exceed 30 years to maturity. Reserve funds may be invested in securities exceeding one year if the maturity of such investments are made to coincide as nearly as practicable with the expected use of the funds Internal Control: A system of adequate internal controls will be maintained to assure compliance with the investment program policy and procedures Performance Standards: The investment portfolio will be designed to obtain a market average rate of return during budgetary and economic cycles, taking into account the BOT s investment risk constraints and cash flow needs. The basis used by the Vice President for FOGR to determine whether market yields are being achieved shall be the three-month Treasury bill rate. The Vice President for FOGR will also consider the average Federal Funds rate or other recognized indices and approve Report: The Vice President for FOGR is charged with the responsibility of providing a market report on investment activity and returns at appropriate intervals on a routine basis to the President Investment Policy Review: The BOT s investment policy shall be reviewed on a periodic basis. 4.5 Bank Accounts Operating Account This account functions as the main disbursement account for the College and also receives a daily transfer of charges and credits that are made to each of the following separate accounts listed below Accounts Payable/Disbursement Account This zero balance account is for accounts payable to vendors or students. Accounting Manual Page 12 of 31

13 4.5.3 Payroll Account All payroll activity is cleared through this zero balance account. This includes the payment of the payroll checks as well as the settlement of the direct deposit payments to employees. 4.6 Maryland Local Government Investment Pool (MLGIP) The College participates in the MLGIP. This investment facility operates in a manner similar to a money market account. This fund may invest in any instrument in which the state Treasurer may invest. The permissible instruments for investments are established by Section of the state Finance and Procurement Article of the Annotated Code of Maryland. 5 Accounts Receivable Accounts receivable entries occur as the result of student registration and general services offered by the College (i.e., facility rental, retiree benefits, etc.). Entries are relieved by the posting of receipts of cash, financial aid, approved exemptions or waivers, approved withdrawal or dropped classes, and the write-off of uncollectible accounts. Maintenance of the Accounts Receivable sub-ledger is the responsibility of the Finance Office. 5.1 Revenue Recognition and Invoicing Student accounts receivable and corresponding revenue entries are recognized on an accrual basis. Revenue resulting from student registration is recognized daily. Registration transactions create a debit to the student s accounts receivable account and a credit to the appropriate tuition accounts (i.e., resident, nonresident, continuing education, etc.) and applicable fee accounts (i.e., course fee, late fee, etc.). Consolidated fee revenue is split between the general fund, student athletic funds, student activity funds, and the parking reserve. Revenue entries occur real-time in the student module of the Student Information System (SIS), but are fed once a day to the general ledger in the finance module of the SIS Student accounts receivable entries occur when a student registers or adds classes to his/her schedule. At that time, an entry is made to the student s account balance in the subsidiary accounts receivable ledger. A due date is established for each semester that is approximately 3-4 weeks prior to the start of the term. After the student registers and before the due date, one or more schedule bills are mailed to the student by the Finance Office. If payment has not been received or other arrangements made with the Finance Office (i.e., a later payment date, third party payment, financial aid, payment plan, etc.,) by the due date, the student s registration is canceled. In this case all accounting entries are reversed (revenue is debited and accounts receivable is credited). If a student officially drops his/her classes before the refund date, accounting entries are reversed. Any credit balance resulting from a withdrawal, overpayment, or funds received from a third party, scholarship or grant, is refunded to the student in the form of a check. If the original student payment was made via credit card, at the request of the student, their credit card may be credited through the Cashiers Office. Refunds for current semesters are reviewed and approved weekly by the Finance Office and submitted electronically to Accounts Payable for disbursement (See Student Refund Checks procedure in Section 8.6) Upon receipt of an invoice, a student may pay his/her account in full or establish a partial payment plan through Nelnet Business Systems, a third party agency Revenue from other sources (i.e., facility rental, Box Office sales, student activities, etc.) are recorded in one of two ways. If the funds are collected by a department and deposited directly at the Cashier s Office, then cash is debited and the appropriate revenue account is credited at the time the deposit is made. If the funds are received as a result of a billing, then revenue was recognized at the point the debtor s account was charged and the payment is debited to cash and credited to the appropriate accounts receivable account Campus Food Services, Vending, and the College Bookstore each have an accounts receivable subledger account which is charged using detail codes which credit the various revenue accounts based upon the type of sale. Cash receipts are deposited at the Cashier s Office and cash is debited and the accounts receivable account credited. Accounting Manual Page 13 of 31

14 5.2 Billing Third party billing (credit and non-credit) occurs when a student presents a contract from a third party agency in payment of any portion of his/her tuition account. At the point the contract is entered onto the student s account, an entry is made to credit the student s accounts receivable account and debit an agency s accounts receivable account in the general ledger. Agencies may be billed for tuition, fees, books and supplies, depending upon the content of the contract. Third party agencies are billed on the 1 st and 15 th of each month. If HCC is advised by a third party agency that they do not intend to honor their payment commitment, the contractor s account is credited and the student s account is debited. The accounts receivable balance reverts to being the responsibility of the student The Business and Training Office within the Continuing Education Division contracts with certain employers directly for instructional services. The classes are setup in a way so that a registration record is maintained for each student but no individual account receivable is established. Instead, the Business and Training Office sends notification to the Finance Office to charge the employer a lump sum amount. Invoices are mailed on these accounts on the 1st and 15th of each month Miscellaneous billing occurs when any department of the College requests billing of an outside source (e.g., agency, lessee) for services rendered by HCC. Examples of miscellaneous billing include facility rental, health benefits for retirees, etc. Upon receipt of a request from another department, the Finance Office creates an entry debiting the miscellaneous accounts receivable account of the business, agency, or individual and crediting the appropriate revenue account. Retiree and Cobra insurance beneficiaries, pre-school accounts, and lessee accounts are billed the first of each month. Other miscellaneous receivables accounts are billed on the 1st and 15th of each month. 5.3 Accounts Receivable Aging All accounts receivable balances (i.e. credit student, non-credit student, credit third party agency, non-credit third party agency, contract, and miscellaneous) are maintained in a manner to indicate the length of time the debt has been outstanding. Payments in full, partial payments, credits, exemptions, waivers, and other authorized adjustments to accounts receivable are posted against the corresponding invoices in order to maintain the accurate aging of the accounts receivable subsidiary ledger Aging reports are produced daily via an automated job run overnight. Two reports are produced, one of credit balances and one of debit balances. They are organized in a sequence of: 0-60, , , 366+days past due. These aging reports are reconciled on a regular basis to balances within the general ledger. Differences are investigated and resolved. 5.4 Collection on Past Due Accounts Student Billing A financial hold is placed on past due student accounts prohibiting the student from future registration, receiving grades, or receiving transcripts. A sweep bill is run at regular intervals throughout the year which displays a message of increasing severity depending upon the aging of the debt. Each spring, the Finance Office Collection Specialist selects the most delinquent accounts and sends a series of two final demand letters thirty days apart. If the account remains unpaid, it is placed with Access Receivables, a collection agency. At that point a collections hold code is put on the account and HCC ceases billing and collection efforts. If the account remains unpaid after approximately one year with the collection agency, it is closed and placed with the Central Collections Unit of the State of Maryland (CCU). CCU will attempt collection by regular methods. They also will attach state income tax refunds, garnish wages if the debtor is a state employee, and list the debt with credit bureaus. HCC writes off accounts when they are placed with CCU and places a write-off hold on the students account. Accounting Manual Page 14 of 31

15 5.4.2 Third Party Billing Third Party accounts are regularly sent balance forward bills and worked on a case by case basis by the Finance Office Accounting Specialist. These may be placed for collections or written off if we are unable to collect Miscellaneous Receivables Billing For these accounts (i.e. insurance benefits, food services, business and training, etc.) a monthly aging report of delinquent balances is sent to the appropriate department administrator. They are often personally acquainted with these debtors and will intervene to affect collections. 5.5 Allowance for Doubtful Accounts The College maintains a reserve for accounts which may not ultimately be collected. The balance maintained is based upon historical collection experience, current aging of amounts due, and specific evaluations of the collectability of individual balances. Individual accounts are written off against the reserve when they are placed with CCU or otherwise deemed to be uncollectible. An entry is booked to the general ledger to debit the allowance for doubtful accounts and to credit the student s accounts receivable balance. The hold placed on the student s account remains after the balance is written off so that the student is prevented from registering, receiving grades or transcripts An entry is booked to the general ledger at year end to account for the allowance for doubtful accounts. The entry is a debit to the bad debt expense account and a credit to the allowance for doubtful accounts. The amount of the allowance entry is determined by the aging of accounts receivable as follows: Accounts 366+ days past due reserved at 75% Accounts days past due reserved at 50% Accounts days past due reserved at 25% 5.6 Deferred Revenue Fall, winter and spring tuition and fee credit revenue is recognized in the current fiscal year. For the credit summer term, revenue recognition is governed by when the student registers for the course. If the student registers for a summer course prior to July 1, 50% of the revenue is recognized in the current fiscal year and 50% is deferred into the next fiscal year. Revenue for summer registrations recorded after July 1 is fully recognized in the succeeding fiscal year. If a student registers for the upcoming fall term prior to July 1, all of the tuition and fee revenue is deferred and recognized in the next fiscal year. For non-credit courses, fall and spring tuition and fee revenue is recognized in the current fiscal year. Summer tuition and fee revenue is all recognized in the succeeding fiscal year. 5.7 Hope and Lifetime Learning Tax Credits The Internal Revenue Service has enacted the Taxpayer Relief Act of 1977 (TRA97). This regulation is designed to provide tax credits to taxpayers that meet the IRS criteria and eligibility for this credit. Harford Community College is required to file a 1098-T for all credit students by January 31. Our institution reports tuition and fees to students based on the amounts billed method. Harford Community College contracts with a reputable third party vendor to process and mail out the 1098-T forms to our students. 6 Inventories As stated in section 2, inventories of books and supplies at the Bookstore and other campus locations are stated at cost. Cost is determined by the first-in/first-out (FIFO) method. 6.1 Bookstore Inventory Control and Year End Verification - At the end of the fiscal year, June 30, the bookstore operations will close to conduct a physical inventory. The inventory records and adjustments are subject to review by the Finance Office, who observe and test a sample of the year-end inventory count. Any adjustments are made by Finance and recorded in the General Ledger at year end. Accounting Manual Page 15 of 31

16 6.2 Inventory Control and Year End Verification at Other Locations - The physical inventory for Central Stores, the Print Shop, Food Services, and Vending is performed at year end by the respective supervisor or manager and is audited by the Staff Accountant in the Finance Office. Any adjustments are made by Finance and recorded in the General Ledger at year end. 7 Fixed Assets Fixed assets are accounted for in the Fixed Asset module of the SunGard Banner system. The Fixed Asset module is integrated with Banner Finance; thus the posting of asset additions, modifications, dispositions and depreciation are processed through the Fixed Asset module which generates the entries to the general ledger in Banner Finance. Fixed assets are generally property, plant and equipment that have a material value and are expected to provide future economic benefits (useful life of more than 1 year). 7.1 Fixed Assets Acquisitions Purchase requisition approval This process sets the framework for identifying items that the College is purchasing that qualify as fixed assets. Items with a cost of at least a $1,000 will be given an asset tag # and recorded in the fixed asset system for tracking purposes. Items with a cost of greater than $2,500 are tagged with an asset # and will be capitalized and depreciated over the useful life of the asset Amount to be Capitalized - The basis for determining the total cost of an item includes the acquisition cost and all related expenditures to prepare the asset for use. This would include the component costs that make up the total item, installation costs, architect/engineer fees, along with shipping and handling costs Investment in Plant - Capitalization of plant assets is recorded in fund Receiving Department - Under the purchasing guidelines for the College, deliveries are made to the Harford Community College Receiving Department. It is the Receiving function to verify packing slips against purchase orders and document the receipt of an item. The Receiving Department identifies those items costing $1,000 or greater and affixes an asset tag to the item. These items are recorded on a monthly Summary of Fixed Asset Acquisitions report. This report records relevant information to include purchase order #, item description, date received, asset tag #, and the department receiving the item Finance Department Once received by Finance, the items listed on the monthly Summary of Fixed Asset Acquisitions report are reviewed, verified against the vendor invoice and recorded in the Banner Fixed Asset system. 7.2 Donated Property & Equipment Fixed assets may be acquired through donations or contributions by private parties. These assets that are deemed to be valued at a $1,000 or greater should be tagged with an asset tag # (by the Receiving Department). The asset should be valued at the estimated fair market value at the time of the donation. The item would be recorded in the appropriate asset account and account 3504 (Fund Balance Plant Contributions) would be credited with the value of the contribution. Accounting Manual Page 16 of 31

17 7.3 Classification of Fixed Assets Fixed assets are recorded in the following categories: Land - The capitalized value of real estate includes the purchase price of the property, plus associated costs such as broker and legal fees. Land is not depreciated Land Improvements - Land Improvements include such items as parking lot paths/sidewalks, fencing, athletic fields, outdoor lighting, and sewer systems. Such items are capitalized and depreciated Buildings - Buildings should be valued at the purchase price or construction cost. Each component of the building should be capitalized (i.e. architectural fees, plumbing, electrical systems, etc). Additions and those improvements that extend the life of the building should be captured as a component of the building and separately depreciated. Maintenance expenditures are necessary to keep a facility in working condition and are expensed Furniture and Equipment - Furniture and Equipment consists of movable tangible personal property with a useful life of greater than one year. Subcategories of equipment include computer, audio visual, fitness, and lab equipment. Furniture and equipment that meets the $2,500 threshold will be capitalized and depreciated. Included in the value of the asset are purchase price, plus any installation, shipping and handling Vehicles - Vehicles are motorized devices that are capable of carrying passengers, goods and equipment. Vehicles should be valued at cost; maintenance costs are those expenditures necessary to keep the vehicle in operating condition, and are expensed as incurred Library Books - The cost of library books in total is reported as a capital asset on the financial statements. This figure represents books only; it does not include the cost of electronic journals & services, periodicals or non print materials (DVDs, etc). The College library has its own inventory system called Horizon which tracks in detail the library collection, and includes data such as original cost, replacement value and physical location of the materials. At the end of each fiscal year, an annual report from the Horizon system will be used by the Finance department to adjust the value of the library books based on the year s acquisitions and dispositions. This asset is reported on the financial statements as a group as opposed to other items which are recorded in the fixed asset system on an item by item basis Construction in Progress - Capital Projects are assigned a distinctive Fund/Org/Account Code and all expenditures incurred during construction projects are accumulated within this account. Projects that are in progress will be reported as Construction in Progress for financial reporting. When the asset is placed into service, the project will be recorded in the Fixed Asset system which will generate the appropriate entries to record the item as a fixed asset, and begin calculating depreciation accordingly. 7.4 Depreciation Fixed assets are depreciated over their estimated useful lives, with the exception of land All items that are depreciated follow the straight-line method of depreciation. HCC follows the halfyear depreciation convention, which means that in the year of acquisition one-half year of depreciation is recognized for the respective item The basis of depreciation is the cost of the respective asset plus the amount expended to bring such asset into service. Salvage value will not be factored into the equation as assets tend to be utilized by the College beyond the defined useful life, to the point that there is minimal, if any, salvage value. Accounting Manual Page 17 of 31

18 7.4.3 Useful lives are programmed into Banner as follows: Computer Equipment Audio Visual/Business Machines Athletic Equipment Library Books Outdoor/Ground Equipment, Tools Furniture & Fixtures Land Improvements (Roadways) Parking Lots & Sidewalks Buildings Storm Drains & Water Lines 5 years 7 years 10 years 10 years 15 years 20 years 20 years 30 years 45 years 50 years 7.5 Inventory of Property, Plant and Equipment To maintain the currency and accuracy of the property, plant and equipment accounts, a complete inventory should be performed at least every 24 months. The results of the inventory will be reconciled to the books of record and appropriate adjusting entries will be recorded. 8 Accounts Payable 8.1 Primary Controls Accounts Payable has a responsibility to make timely and accurate payments to vendors and reimbursements to employees. These payments can be requested through the submission of the following documents: a) Direct Payment Voucher b) Invoice associated with a Purchase Order c) Professional Development Expense Reimbursement Form d) Tuition Reimbursement Form e) Travel Expense Reimbursement Form Accounts Payable checks are normally processed on Thursday morning each week. Requests for payment must be received in the Accounts Payable by Wednesday at 9:00 a.m. Emergency manual check requests may be issued in extreme circumstances. These checks must be properly authorized and approved by either the AVP for Finance or the Vice President for FOGR. The Accounts Payable Manager reviews all direct payment vouchers before processing to ensure proper coding, signature of approval, and appropriateness of the respective expenditure. The Banner Finance System is coded to reject documents not having sufficient funds budgeted in the accounts. The system will validate that the required appropriated budgets are in place within the funds prior to releasing the payment in the system. An error message will be displayed if there are insufficient budgeted funds. In such cases, the Accounts Payable Manager must intervene to evaluate the situation, request a transfer of funds from the appropriate budget manager, or in rare cases may override the system restriction. 8.2 Direct Payment Voucher A Direct Payment Voucher is an Accounts Payable form used by the College to initiate payment to a vendor or employee by check. The Direct Payment Voucher is available on the Owlnet - Worklife tab. Accounting Manual Page 18 of 31

19 The completed form must include the following information: The vendor s federal identification number (if applicable) Vendor ID Vendor name, address, phone, and fax numbers Budget account number(s) Payment amount to each respective account number Name of the organization Requestor s name Appropriate approval signatures based on budget level of authority Invoice number (if applicable) corresponding to the attached original invoice and/or receipt HCC employees should make every effort to purchase goods and supplies through the College s Purchasing Department. Materials and supplies that are reported on a Direct Payment Voucher form for employee reimbursement should not include sales tax. Employees should contact the Purchasing Office regarding a sales tax-exempt certificate to provide to the supplier. All original receipts, indicating the method of payment and items purchased, are required for reimbursement. The Direct Payment Voucher must contain the approval signature of the: The employee being reimbursed Employee s supervisor Cost Center Administrator of the account number being charged based on level of authority, if differs from the employee s supervisor If the required information is not provided, the form will be returned to the department for completion. The completed check request should be sent to Accounts Payable for processing. If applicable, it must include an invoice to support the disbursement that is being processed for payment. All check requests that are forwarded to Accounts Payable are date stamped and provided to the Accounts Payable Specialists. The Accounts Payable Specialists monitor the check request for completion, accuracy of the budget account number, proper approval signatures, and appropriateness of the expense. The request is then forwarded to the Accounts Payable Manager who approves the request and returns it to the Accounts Payable Specialists for processing. 8.3 Payment on Purchase Orders Invoices that relate to a purchase order (established through the completion/approval of a purchase requisition) should be mailed directly to Accounts Payable by the vendor. Training guides and documentation related to processing online purchase requisitions and approvals, and the functionality of Banner Self Service are located on the G: network drive under G:\Finance\Training Guides. Shipments are initially received in Distribution Services, and a Receiving Report is prepared. Certain items, such as computer equipment, will not be opened by Distribution Services, and will instead be sent to the ordering department for their inspection. In these instances, the ordering department will prepare the Receiving Report. Receiving Reports can be prepared directly through Banner or submitted via a written hard copy. The Accounts Payable Specialists match the invoice with the receiving document and prepare the invoice for payment. If there is any discrepancy with the invoice such as the price of materials shipped or any other conflicting issue, it should be resolved with the vendor and Purchasing ASAP so that timely and accurate payments can be made. Purchasing procedures are located on the Purchasing website: Professional Development/Tuition Reimbursement Professional Development funds are available to all full-time employees. The funds are utilized to obtain knowledge through seminars and classes which will enable the employee to improve their daily job function. Accounting Manual Page 19 of 31

20 8.4.2 The Professional Development funds available for each employee in a given year are approved by the BOT All professional development and tuition expenditures must be approved prior to registration. Employees must complete and submit a Development Approval form to their immediate supervisor. The Development Approval form must be approved by the immediate supervisor, the next level supervisor, and the appropriate Vice President or the President. Once the appropriate signatures are obtained, the form is submitted to the Finance department where it is assigned an identifying number. The form is filed in the Finance Office, and will be utilized to match to the employee s future request for reimbursement Accounts Payable is responsible for administering a spreadsheet that tracks all professional development spending by employee. This control has been created to ensure that employees do not exceed their professional development allocation for the year Professional development and tuition payments are submitted to accounts payable utilizing various forms depending upon the type of expense and whether the employee incurs the expense or requests to have the vendor paid directly: Direct Payment Voucher made payable to the vendor offering the requested services that correspond to the professional development approval Professional Development Expense Reimbursement made payable to the employee for funds expended by the employee attending the professional development opportunity (registration fees, transportation, lodging, meals, etc) Tuition Reimbursement made payable to the employee upon successful completion of the class for funds expended for tuition, fees, and textbooks. Reimbursement must be submitted within 60 days of the completion of the course. Payment/reimbursement guidelines must be properly adhered to by employees in order to avoid any issues with processing. Forms will be returned to the employee if there are errors and omissions, such as missing backup or supervisory approvals. 8.5 Travel Expense Reimbursement A Travel Expense Reimbursement form should be utilized by HCC employees to request reimbursement for appropriate business travel expenses (mileage, tolls, parking, meals, hotel, etc). The Travel Expense Reimbursement form can also be found on the Owlnet - Worklife tab. An original receipt must substantiate all expenses incurred and reported on the expense form. This original receipt must be submitted, or the expense will not be reimbursed. When requesting reimbursement for mileage, it is permissible to round up the calculation. Meal receipts may include gratuity and tax paid as defined in the College Travel Reimbursement Procedure. Materials or supplies that are purchased and reported on a Travel Expense Reimbursement form should not include sales tax. When purchasing materials or supplies for the College, a tax-exempt certificate must be presented to the cashier at the time of purchase. The form must have an account number assigned, along with the following approvals: The employee being reimbursed Employee s supervisor Cost center administrator of the account number being charged based on level of authority, if differs from the employee s supervisor Accounting Manual Page 20 of 31