updated 7/9/08
Cornell University Policy Library -- Policy 3.7

ACCOUNTING SYSTEM

INTERIM POLICY

Volume 3, Financial Management 
Chapter 7, Accounting
Responsible Executive:  Vice President for Finanical Affairs and University Controller
Responsible Office: University Accounting
Issued: February 1996
Revised: May 2001
Errors or changes? Email us.

POLICY STATEMENT 

Cornell University funds may only be used for ordinary, necessary, and reasonable business-related expenses incurred in furtherance of the university's mission. Every Cornell University accounting transaction must be processed according to the structure and procedures outlined in this document.

REASON FOR POLICY 

The university receives funding from a variety of sources that carry with them fiduciary responsibilities. Inherent in these responsibilities is the requirement to operate the institution under guidance set forth by the Board of Trustees; to follow generally accepted accounting principles; and to comply with related federal, state, and local regulations. Proper stewardship of university funds is the responsibility of all university employees involved in financial transactions. This policy describes the structure of the Cornell University accounting system and provides the framework for other accounting policies.

ENTITIES AFFECTED BY THIS POLICY 

WHO SHOULD READ THIS POLICY 


RELATED DOCUMENTS 


 
University Documents Other Documents
University Policy 3.9, Capital Assets Cost Accounting Standards 501, 502, 505, 506
CPBS (Cornell Planning and Budgeting System) Manual NACUBO - College and University Business Administration, Volumes 1, 2, and 3
Endowed Equipment Inventory Control Guide NACUBO - Financial Accounting and Reporting Manual for Higher Education
Contract College Project Code Manual OMB A-21: Cost Principles for Educational Institutions
Contract College Equipment  OMB A-110: Uniform Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations
Inventory Control Guide OMB A-133: Audits of Institutions of Higher Education and Other Nonprofit Institutions
University Policy 3.1, Accepting University Gifts  
University Policy 3.2, University Travel  
University Policy 3.3, Corporate Card  
University Policy 3.5, Paying for Services (Independent Contractors/Consultants)  
University Policy 4.2, Transaction Authority  


CONTACTS 

Direct any questions about this policy to your Department Administrator or your department's administrative office. If you have questions about specific issues, call the following offices:
 
Subject Contact Telephone
Accounting Calendar Administrative Services (607) 255-6426
Accounting System Access Financial Reporting (607) 255-5920
Accounts Payable Accounts Payable (607) 255-0869
Accounts Receivable Accounts Receivable (607) 255-0852
Allocation Object Codes, Endowed Endowed Budget Office (607) 255-7970
Allocation Object Codes, Contract College Contract College Budget Office (607) 255-7970
Bank Accounts -- Existing Endowment/Banking/Gifts (607) 255-9474
Bank Accounts -- To Establish Cash Management Office (607) 254-1150
Collections Collections (607) 255-4160
CUDA Cornell Information Technologies (607) 254-2771
Divisional Accounting Unrestricted Funds (607) 255-9341
Employee Benefits Cost Analysis (607) 255-8883
Endowments Endowment/Banking/Gifts (607) 255-9664
Enterprise Accounting Unrestricted Funds (607) 255-2084
Equipment Inventory Equipment Inventory Control (607) 255-3351
Federal - Extension Federal Appropriations (607) 255-4427
Federal - Research Federal Appropriations (607) 255-2029
Financial Reports Financial Reporting (607) 255-5920
Gifts Endowment/Banking/Gifts (607) 255-0854
Indirect Cost Cost Analysis (607) 255-8883
Inventories Unrestricted Funds (607) 255-6358
Labor Distribution - Contract College Contract College Personnel Transactions (607) 255-5400
LTIP (Long Term Investment Pool) Endowment/Banking/Gifts (607) 255-9664
MasterCard, VISA, Discover, American Express: Electronic Processing Endowment/Banking/Gifts (607) 255-9474
Nonrecoverable Costs Cost Analysis (607) 255-8883
Open Commitments (only for Commitments Resulting from a Purchase Order) Purchasing Department (607) 255-3804
Payroll Payroll Department (607) 255-5194
Plant Fund Accounting Capital Assets (607) 255-9464
Policy and Procedure Clarification Office of the Vice President for Financial Affairs (607) 255-4242
Sponsored Funds Sponsored Funds Accounting (607) 255-5085
State Funds, Appropriations Contract College Budget Office (607) 255-2039
State Funds, Expenditures State Funds, Transactions (607) 255-8180
Statement Mailing Administrative Services (607) 255-6426
Taxes Tax Compliance Office (607) 255-3581
Transfers Unrestricted Funds (607) 255-2084
Unrestricted Funds Unrestricted Funds (607) 255-6358
Voucher Audit Voucher Audit (607) 255-0871
Wire Transfers Cash Management (607) 254-1150

DEFINITIONS 


These definitions apply to these terms as they are used in this policy:
 
Academic Support The utilization of funds for support services for the institution's primary mission of instruction, research, and public service. Support services include but are not limited to libraries, museums, audiovisual services, Endowed Division academic deans, academic service centers, and separately budgeted course and curriculum development. (FNC 45X, 451 nonrecoverable)
Account A place to record financial activity in the general ledger. An account is identified by its unique seven-digits, composed of a three-digit department number and a four-digit subledger number. Each account has specific characteristics (attributes) that govern its use and presentation in financial reports.
Account Attributes Identifiers assigned by the staff of the accounting office at the time an account is established. These codes are assigned to follow fund accounting guidelines and various reporting requirements. Information is aggregated in the university accounting system according to these attributes and can be sorted by any combination of them.
Accounting System The principles and procedures under which Cornell University transacts, compiles, and records its financial activity while satisfying various government, agency, and university reporting requirements.
Account Number The first seven-digits of the transaction character coding. It consists of the three-digit department code and four-digit subledger code.
Administrative Systems Mainframe on-line computer systems at the university for budgeting (CPBS), accounting (FISC), human resources (CHRISP), purchasing (APPS), and materials management (IMMS).
Agency Funds Funds held by the university acting in a custodial capacity. There is no institutional equity in these funds. Examples are funds held on behalf of university classes and national professional organizations. (FNC 197)
AICPA American Institute of Certified Public Accountants.
Analysis Option An alphabetical account attribute used for financial analysis and control. It specifies the handling of an account's activity at the end of the fiscal year: June 30.
Appropriation Funds provided by the State of New York the federal government or from the university's general purpose budget. Each source of funds carries its own set of limitations of use.
APPS Automated Procurement and Payment System.
Asset A tangible or intangible item that has a positive value to the university. Some examples are: cash, government receivable, a stock held for investment, a building, or a piece of equipment. An asset account normally should have a debit balance.
Balance Sheet A report of financial status at a specific time showing assets, liabilities, and fund balances of an entity. The reporting entity may be the entire university or any separate division. The audited balance sheet is published annually and reflects financial status as of June 30. The format is prescribed by the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA).
Bequest A gift given to the university at the time of a person's death as set forth in the individual's last will and testament.
Budget A financial plan serving as an estimate of and a management tool for future operations.
Budget Journal A form used to establish a budget in an account or to adjust the budget in an account.
Bundy Aid New York formula-driven financial assistance to the state's private colleges. This appropriation is calculated using the number and type of degrees conferred by the institution during the previous academic year. It is based on the availability of funds as determined by the state legislature.
Business Expense Charges for goods or services that foster or support the ongoing mission of the university.
Capital Acquisition Items of a permanent nature that have a value of $500 or more (except catalogued library books), a life of at least two years, are specifically identifiable, and are held for purposes other than investment or resale.
Capital Construction Expenditures for the construction of a new building, renovation of an existing building, or landscaping.
Cash Currency, coin, checks and credit card payments accepted for goods, services, or as gifts.
Casual A type of appointment of fewer than twenty hours per week with no end date.
CHRISP Cornell Human Resources Information System/Payroll.
College Funds In the Contract College Division, a term used to describe the unrestricted funds that are a combination of Deans' Funds and department (Designated) Funds.
Commitment Also known as an encumbrance. Anticipated expenditure recorded on the books in the form of salaries, purchase or work orders, travel notices, contracts, or similar items that will become payable upon delivery of goods, or performance of service. The commitment for salaries is determined by calculating each committed employee's salary through the end of the fiscal year, the termination of the account, or until the end of an appointment. (It is calculated by multiplying the annual salary times the bi-weekly payroll factor by the number of payroll periods.) One time payments and payments for temporary employment are not committed.
Compensation All amounts paid currently or accrued by the institution for services of employees rendered during the period of performance.
Contract A legal relationship establishing the rights and duties of the contracting parties and constituting an agreement that gives each party legal duties to the other and the right to seek a remedy for a breach of those duties.
Contribution See Gift.
Corporate Card A Diner's Club card or an American Express card provided free of charge through the university's Corporate Card program.
Cost The amount of money asked or paid for a good or service.
Cost Recovery Reimbursement by sponsors or donors of costs incurred by the university to complete an activity.
Cost Sharing A situation in which a portion of total project costs related to a sponsored project is provided by an entity other than the sponsor. Other terms used to describe cost sharing include matching, third party, and in-kind contributions.
CPBS Cornell Planning and Budgeting System.
Credit An accounting entry that is either: an addition to a liability account a revenue in a fund balance account a deduction from an asset account or a reduction of expense in a fund balance account.
Current Funds The fund group that includes all of those resources used, or available for use in carrying out operations directly related to the institution's primary and supporting mission. It also includes those moneys associated with the operation of the institution's enterprise and service operations. This fund group is shown in the university's financial reports as two distinct subgroups: unrestricted and restricted. Unrestricted is further subdivided into: Undesignated, Designated and Enterprise and Service Operations. (FND 4XX)
Deans' Funds In the Contract College Division, unrestricted funds generated for current use. These funds are primarily derived from tuition income, indirect cost recoveries, and earnings on investments.
Debit An accounting entry that is either: an addition to an asset account; an expense in a fund balance account; a deduction from a liability account; or a reduction of revenue in a fund balance account.
Debt An obligation of the university for money borrowed from a lender with a promise to repay later. Debt can be collateralized (secured with the promise of an asset in the event of non-payment) or un-collateralized. Debt can also be tax exempt (interest payments to bondholders that are exempt from income tax) or non-exempt (interest payments to bondholders that are subject to income tax).
Debt Service All payments in connection with borrowed funds (e.g., principal payments, interest charges, payments to ensure future principal and interest payment, trustees' service charges, legal expenses, etc.). Some bond agreements to which the university is a party also require an annual payment into a "building and equipment reserve" as means of assuring adequate future maintenance of pledged facilities.
Deficit Also known as overdraft. An account balance less than $0.00. The amount by which an account's expenses and transfers out exceed revenues and transfers in.
Department (DEPT) The first three digits of the transaction character coding, that identifies a university department.
Department Funds See Designated Funds.
Department Use Only (DUO) The last three digits of the transactional character coding. It is available for use by departments if they desire to identify transactions in the account in more than one category.
Depreciation The means by which the cost of a capital asset is matched against the revenue generated by the asset. The cost of the asset is amortized over its useful life to determine the amount of the annual depreciation expense.
Designated Funds Current funds unrestricted as to use, either by the donor or because of the nature of the way the funds were generated, e.g., an exchange transaction. Designated funds have been specified to be used in a specific college or department or generated by activity of a specific enterprise or service.
Direct Cost A cost that can be specifically identified with Instruction, Research and Public Service. It can also be one that can be easily and accurately divided between two or more of the primary functions.
Donor An individual or entity that makes a contribution.
Effort Distribution See Labor Distribution.
Employee An individual paid through the university payroll system to provide a service.
Employee Benefits Also known as fringe or staff benefits. The cost to the university of the various benefits provided to employees, including: pension costs, social security, worker's compensation, disability payments, medical insurance, group life insurance, faculty and staff children's tuition, etc. The total costs to the university of employee benefits are pooled and distributed to various accounts of the university as a percentage of salaries. Employee benefits are assessed at different rates depending on a number of factors. The object code of the salary and wage expense drives the employee benefit rate assessed. Contract College salaries and wages paid on unrestricted accounts are not assessed a benefit rate. New York State funds these benefits directly.
Endowment Funds that are invested or available for investment to produce revenue for current use. The income may or may not be restricted in purpose. This fund group consists of the four categories, which follow.
Endowment, Funds Functioning as Also known as quasi-endowment funds. Funds that the Board of Trustees (rather than a donor or outside agency) determine to be retained and invested as endowment funds. At any time, the board may reverse the decision and declare the funds spendable. In the case of gifts, the university has the legal responsibility to use the funds as specified by the donor.
Endowment, Living Trust Funds Also known as life income funds and annuity funds. Donated funds, the income of which is payable to one or more beneficiaries during their lifetimes. On the termination of life interests, the principal becomes available for university purposes that may or may not have been restricted by the donor.
Endowment, Term Funds received from a donor with the restriction that the principal may be expended after a stated period of time or upon the occurrence of a certain event.
Endowment, True Those funds for which donors or other outside agencies have stipulated, as a condition of the gift, that the principal must never be spent. Only the income generated from the investment of these funds may be used as directed by the terms of the gift.
Enterprise Operation Also known as auxiliary enterprise. A unit that exists to furnish goods or services to students, faculty, or staff, and that charges a fee directly related to, although not necessarily equal to, the cost of the goods or services. The distinguishing characteristic of enterprise operations is that they are managed as self-supporting activities. Examples of enterprise operations are: residence halls, dining services, and The Cornell Store. An enterprise operation should not be confused with a service facility or a specialized service center. The difference is the customer. Enterprise operations have students, faculty and staff as primary customers while the primary customers of a service facility or a specialized service center are other university departments. Examples of a service facility are machine shops and large volume copy operations. The three specialized service centers at the university are Utilities, Cornell Information Technologies, and Networks and Telecommunications Services.
Exchange Activity Also known as Exchange Transaction. A situation where a resource is provided to the university that requires specific actions, services, or deliverables by the university. Exchange activity includes: fees for services, tuition payments (in exchange for education), and research grant funding (in exchange for the project results).
Exchange Transaction See Exchange Activity.
Expenditure The cost of goods delivered or services rendered, whether paid or accrued, including expenses, debt service, and capital outlays.
Expense Charges incurred, whether paid or accrued, for operation, maintenance, interest, and other charges that are presumed to benefit the current fiscal period.
FASB Financial Accounting Standards Board. A private, independent board that issues standards for preparing audited financial statements.
Financial Statements A set of reports consisting of a statement of financial position (balance sheet), a statement of financial activity, a cash flow statement, and explanatory notes. The statement may report on the entire university or on one division. The university issues an annual audited financial statement for the period ending June 30. The format for the statements is prescribed in part by FASB and the AICPA.
FISC Financial Information System at Cornell.
Fiscal Year Twelve consecutive months used as an accounting period/cycle. The university fiscal year is July 1 through June 30, as is the fiscal year for regular state appropriations. For specific funding source fiscal years, see the "Other Fiscal Year Periods" segment of the "Reporting" Section of this document.
Function Code (FNC) A three-digit numeric account attribute that indicates the specific purpose of the funds contained in an account.
Fund Balance The difference between assets and liabilities in a fund group.
Fund Group Code (FND) A three-digit numeric account attribute that indicates the classification of an account according to fund accounting guidelines. Accounts are classified by the constraints and limitations placed on the resources that fund accounts.
Funding Agency An entity that provides support (e.g., money, equipment) for a project.
Funds Functioning as Endowment (FFE) See Endowment, Funds Functioning as.
GASB The Government Accounting Standards Board. A private, independent board that issues standards that governmental entities are required to follow when publishing its audited financial statements.
General Purpose Funds (GP) Resources provided from the central university budget, composed of various types of revenue, which are pooled and then allocated to individual organizations. These funds are recorded in fund group 431 accounts on a 33XX object code.
Gift A resource provided by a donor who enters into the transaction voluntarily and receives nothing other than a "token" of appreciation in exchange for the resource he/she is providing. Contributions can have a variety of forms including, but not limited to: cash, marketable securities, tangible fixed assets, and consumable commodities. Gifts are classified according to the absence or presence of donor stipulations as either unrestricted, temporarily restricted, or permanently restricted. See Unrestricted Funds, Temporarily Restricted Funds, and Permanently Restricted Funds.
GP General Purpose funds.
Grant The agreement used whenever 1) the principal purpose of the relationship is the transfer of money, property, services, or anything of value to the recipient to accomplish a public purpose of support and stimulation, and 2) there is no substantial programmatic involvement between the sponsoring agency and the recipient during the performance of the contemplated activity.
IMMS Integrated Materials Management System.
Income The excess of revenues earned over the expenses incurred to carry out operations.
Income and Allocation Accounts Accounts used to record revenue at some specified aggregate level (e.g., by organization, by source of funds, etc.). The total revenue is then disbursed from these accounts in the form of an allocation to fund balance accounts of lower level units.
Indirect Costs Also known as overhead. Costs that cannot be easily identified with the primary functions of instruction, research, and public service, but are expended to meet the requirements of those functions. They include such items as utilities and other plant costs; departmental, college, and institutional administration; library operation; depreciation of equipment and facilities; and certain general expenses that are to some degree attributable to sponsored programs.
Indirect Cost Recovery The charge to a grant or contract to reimburse the university for a share of indirect cost.
Internal Control A process effected by the Board of Trustees, management, and other personnel designed to provide reasonable assurance regarding the achievement of objectives in the following categories: -effectiveness and efficiency of operations; -reliability of financial reporting; -compliance with laws and regulations.
Investment An exchange of cash for a less liquid asset that is expected to increase in value beyond the initial purchase price. Investment vehicles include corporate stocks and bonds, government bonds, real estate, and interests in limited partnerships.
Investment Pools See Long Term Investment Pool (LTIP)
IRIS Inquiry and Reporting Information System. An ad hoc mainframe reporting system that allows records to be selected and sorted based on various attributes of the data.
Labor Distribution Also known as effort distribution. The allocation of an employee's salary and wages to appropriate university accounts to reflect the effort of that employee.
Lapse The return of unspent funds to the source of the funding. Generally used in relation to university, state, or federal appropriations.
Liability Obligations of the university to transfer assets or provide services to other parties in the future as a result of past transactions or events. Some examples are: unpaid balances to vendors for items that have been received; tuition and fees collected from students before the academic year has started; and money set aside to fulfill promises to pay pension and health benefits to current employees after they retire. A liability account normally should have a credit balance.
Long Term Investment Pool (LTIP) One of the university's investment vehicles that includes true endowment funds and such funds functioning as endowments and other expendable funds that are not expected to be spent for at least three years. The objective of the pool is to produce a reasonable current return coupled with capital appreciation.
Main Account The primary account for a sponsored project (or other type of project). Subaccounts, which are established to separate particular aspects of the project and its related financial activity, are linked to the main account. Reporting to the funding agency is done in aggregate.
Modified Total Direct Cost (MTDC) The total direct costs minus specific cost categories called modifiers. These are the qualifying costs used in the indirect cost calculation (including salaries and wages, employee benefits, materials and supplies, services, travel, and the first $25,000 of subcontracts). For most grants and contracts, MTDC is also the basis on which the indirect cost rate is applied.
Modifier Used in connection with Indirect Cost; categories of expense (specifically identified by object code) subtracted from total direct costs to arrive at qualifying direct costs. The total qualifying direct costs is multiplied by the indirect cost rate to arrive at the indirect cost. Total qualifying direct costs are referred to as modified total direct costs (MTDC).
Month-end Monthly process to close the general ledger. Involves all transactions that occurred during that month, including internal direct billings.
NACUBO The National Association of College and University Business Officers, a trade group for administrative officers of educational institutions.
Net Asset Excess of assets over liabilities; includes all statement of activity accounts.
New York State Clearing Account (formerly known as the unrealized account) An account used to record the New York State (NYS) appropriation receivable. Funds awarded through the NYS certification process are recorded in this account, offset to Income and Allocation accounts. Vouchers submitted to NYS for reimbursement provide the offset to this account, hence clearing the account balance to zero by year-end.
Nonrecoverable Cost A cost that is specifically identified in Section J, OMB Circular A-21 as unreimbursable by the federal government, unless specifically allowed by terms and conditions of the sponsored project. Nonrecoverable expenses may not be paid from state or federal funds, but may be paid from other fund sources.
Object Code The four-digit code used in each transaction to classify and describe the financial activity - allocation, expense, transfer or revenue.
Off-campus Activity/Expense An activity/expense performed/incurred in a location without the use or aid of university operated facilities, whether owned or leased (i.e., a facility in which the university is responsible for all costs of maintenance, custodial service and utilities).
OMB The Office of Management and Budget, a division of the executive branch of the federal government.
OMB Circular A-21 "Cost Principles for Educational Institutions" revised July 1993. A21 provides federal principles for determining costs applicable to grants, contracts, and other agreements. These principles govern cost determination, and are designed to ensure that the federal government bears its share of total cost.
OMB Circular A-110 "Uniform Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations" A110 promulgates standards for obtaining consistency and uniformity among federal agencies in the administration of grants and other agreements.
OMB Circular A-133 "Audits of Institutions of Higher Education and Other Nonprofit Institutions" A133 establishes audit requirements and defines federal responsibilities for implementing and monitoring such requirements for institutions of higher education and other nonprofit institutions receiving federal awards.
On-campus Activity/Expense An activity/expense performed/incurred in a location with the use or aid of university operated facilities, whether owned or leased (i.e., a facility in which the university is responsible for all costs of maintenance, custodial service and utilities).
Organization Code A two-digit attribute code used to group departments for reporting and other administrative purposes.
OTPS Other than personal services. A term used by the Contract College Division to categorize expenditures for New York State reporting purposes OTPS refers to all expense other than salaries and wages.
Overdraft See Deficit.
Permanently Restricted Funds Funds provided by a contribution with donor imposed stipulations to maintain the contribution permanently. The use of the investment income derived from the contribution may or may not be stipulated by the donor and can be either temporarily restricted or unrestricted. In cases where the donor has stipulated that investment income be returned to principal, the investment income is permanently restricted.
Pledge In accordance with FAS 116/117, a pledge is an intent to give (not legally enforceable) or a promise to give (legally enforceable). Only pledges considered unconditional promises to give are reported as assets on the university's financial statements.
Principal Investigator The individual identified in a sponsored agreement as the person who will lead the project's activity. At the university, the Office of Research and Advanced Studies is responsible to determine eligibility criteria for principal investigators.
Project Code The three-digit transaction characters that are used in Contract College accounts for operation and maintenance of plant identification, cost sharing, and federal reporting purposes.
Promise to Give A legally enforceable pledge. Pledges are considered legally enforceable if 1) they are used to solicit other contributions (e.g., challenge pledges); 2) they are relied upon (e.g., a building was built); or 3) there is verifiable documentation showing legal enforceability. In accordance with FAS 116/117 the only pledges reported as assets in the university's financial statements are unconditional promises to give.
PSR Personal Services Regular. A term used by the Contract College Division to categorize expenditures for New York State reporting purposes referring to salary expenses.
PST Personal Services Temporary. A term used by the Contract College Division to categorize expenditures for New York State reporting purposes, referring to temporary wage expenses.
Real Property A university holding of land or buildings.
Recharge Operation A service offered, for a fee, as a convenience to the employees and students of a department rather than to the entire university community. Annual revenue generated from fees must be less than $50,000. Examples of recharge operations are: departmental charges for use of the FAX, and copy machines.
Recoverable Cost A cost that is specifically identified in Section J, OMB Circular A-21 as reimbursable by the federal government.
Regular A type of appointment of twenty or more hours per week for a period of greater than six months with no defined end date.
Resource Funds available including carry forward balances, income, transfers in, etc.
Revenue Additions to assets that do none of the following: increase any liability; represent the recovery of an expenditure; or represent a transfer of reserves between two accounts. Some examples are: tuition and fee revenue, sales of enterprise departments, and earnings on investments.
Salary Recovery That portion of a faculty member's or senior extension associate's salary that is budgeted on a Cornell Appropriations Account (FND 43X) or a State Appropriations Account (FND 44X), but charged to a sponsored account. Normally the percentage of effort (and corresponding amount of salary) is included in the proposal budget and requires approval by the sponsoring agency. The Endowed Division also defines the portion of endowed machine shop salaries charged to sponsored projects for work performed in the various endowed machine shops that are financed by general purpose funds as salary recovery.
Service Facility An operating unit established for the primary purpose of providing goods and services to the university community for a fee. Annual revenue generated from user fees must equal or exceed $50,000*. User fees are normally calculated to cover the operating costs of the service facility. Examples of service facilities are: machine shops, analytical services, instrument and computer facilities, and large volume copy operations. *If revenues are less than $50,000 annually the unit is termed a recharge operation. Typically the service provided by a recharge operation is offered as a convenience to the employees and students of a department rather then the entire university community. Examples of recharge operations are departmental charges for use of the FAX and copy machines.
SMA Security Maintenance and Administration system. SMA is the security system that enables the owners of administrative systems to control access and alteration of data contained in these systems.
Source Code A four-digit numeric account attribute assigned to an account to identify the origin of its funding.
Specialized Service Center A unit that renders services primarily to other university departments, and operates on a fee for service basis. The fees charged approximate the cost of the service. There are only two specialized service centers at the university: Utilities, and Networks and Telecommunications Services. Specialized service centers should not be confused with enterprise operations. The difference is the customer. The primary customers of service operations are other university departments while Enterprise operations have students, faculty and staff as primary customers. Examples of enterprise operations are residence halls, dining services and Cornell Store.
Sponsor An entity that funds a project.
Sponsored Project An arrangement, represented by a signed grant, contract, or cooperative agreement, in which the university agrees to perform a certain scope of work, according to specified terms and conditions, for a specific budgeted financial compensation.
Student An individual officially registered for classes at the university.
Subaccount An account that contains a segment of the financial activity of another account, referred to as the main account. It is sometimes necessary to record the financial activity of a sponsored project (or other type of project) as several isolated components. Subaccounts are established to separate particular aspects of a project and its related financial activity. In the case of sponsored projects, the separation is sometimes necessary because different individuals (sometimes in different departments) are responsible for various components of the projects. Each subaccount is given its share of the budget of the main account. All subaccounts are linked to the main account and the reporting to the funding agency is done in aggregate.
Subcontract A written agreement between Cornell University and a third party, often issued under a sponsored project, to procure substantive programmatic effort. A subcontract generally involves services over a period of one or more years.
Subledger The four digits assigned sequentially that follow the three-digit department number. Together these seven digits comprise the account number. Historically, the subledger code allowed visual identification of the type of account. There is no subledger assignment convention. Accounts are not classified by subledger. The only accurate method to classify an account in the university accounting system is by FUND GROUP and FUNCTION.
Temporarily Restricted Funds Contributions where the donor has imposed stipulations as to how the funds must be spent however, if the only donor stipulation is that it be spent by a specific college or an official department (as designated by the Trustees or President) the funds are considered unrestricted.
Temporary A type of appointment of twenty hours or more per week for a period of up to six months with a defined end date.
Termination Date There are three specific contexts in which termination date is used. 1. The end date of an employee's appointment. 2. The expiration date of an account. 3. The end of an award period on grant and contract accounts.
To Pay Number The pay period number associated with the fiscal year commitment of a salary line. For most lines, the To-Pay number corresponds to the ending date of the fiscal year, the employee's termination date, or the termination date of the account.
Transaction Any event that involves an exchange of funds between two parties. Examples are: paying a bill to a vendor, paying an employee, collecting a fee from a student, and an interdepartmental charge.
Transaction Characters The seventeen numeric and alphabetical digits assigned to financial activity when an input document is completed. Also referred to as account coding. The seventeen characters are divided into five groups, each with a distinct purpose (Department, Subledger, Object, Project, and DUO).
Transfer Financial activity among accounts or within an account among object codes. Transfers either increase or decrease resources in an account.
Unrestricted Funds Funds that are not the result of a contribution (e.g., exchange activity) or that are contributions for the discretionary use of the university, college, or official department (as designated by the Trustees or President). Investment income from contributions is also considered unrestricted, unless documentation from the donor specifically states otherwise.
Year-end (University Fiscal) The term used to describe both the time of closing and the process of closing the university's operating cycle. The university's fiscal year-end is June 30. The year-end process involves closing and reporting on the financial results of the past year. The process takes approximately three months, from closing the records and reporting to departments (mid-July), to providing information to the independent auditors (during the month of August), to preparing the annual report (early September), and then preparing the supplemental reports.

POLICY OVERVIEW


The Accounting System Policy contains detailed information about the university accounting system structure, detailed in the following Sections of this document:
 
  - "Accounting System Structure"

ACCOUNTING SYSTEM STRUCTURE 

General Comments

This Section of the policy is a user's guide to the accounting system of Cornell University, which adheres to the principles set forth by the National Association of College and University Business Officers (NACUBO) in the publication College and University Business Administration and conforms to principles of fund accounting, and those established by the American Institute of Certified Public Accountants (AICPA).

Every employee who initiates, processes, reviews or records transactions has the responsibility to comply with this policy and all other university policies and procedures.

Bylaws of the university and various federal and state regulations require preparation of annual financial statements of the university's fiscal year activity. Every accounting transaction at the university is an individual component of these statements and their supporting schedules. Processing and coding transactions correctly are key to the integrity of the accounting system and the financial statements. Each accounting transaction is identified by a number of codes and characters. There are two types of characters:  

Caution: The presence of certain New York State requirements and restrictions necessitates some differences between contract college and endowed accounting structure and procedures. Where necessary, divisional differences have been noted and explained.

 Although this policy is not a technical reference for fund accounting, some fundamentals are presented. The Accounting: System Policy is intended for use by staff of Endowed-Ithaca and Contract College Divisions.

 Financial reporting is done using combinations of account attributes and transaction characters (see the "Reporting" Section of this document).

What is an Account?

An account is a place to record financial activity in the general ledger. An account is identified by its unique seven digits: a three-digit department number and a four-digit subledger number. The subledger is assigned sequentially at the time the account is established. Each account has specific characters (attributes) that govern its use and presentation in financial reports.

 Caution: An account is set up and attributes are assigned based on a request containing specific information including source of funds and purpose of account. If the purpose of the account changes, contact the appropriate department in the Office of the Vice President for Financial Affairs.

 Note: Refer to the "Transaction Characters" and "Account Attributes" Sections of this document for more details. 

How to Set Up an Account

Accounts are established in any of several different ways depending on the type of account. Following is a brief summary of the types of accounts:

ACCOUNT ATTRIBUTES 

What are Account Attributes?

Account attributes are identifiers, in the form of numeric and alphabetical codes, assigned by the staff of the accounting office at the time an account is established. These codes are assigned to follow fund accounting guidelines and various reporting requirements. Information is compiled in the university accounting system according to these attribute codes and can be sorted by any combination of them (see the "Electronic Inquiry and Reporting" segment of this document).

 The unit requesting a new account must consider the meanings and uses of these attributes when completing the New Account Request Form. The account description, use, and source of funds should provide clear and concise information. It is from this information that the staff of the university accounting office determines and assigns attribute codes to the new account. The initial assignment of correct codes is essential to ensure accuracy in using the funds and reporting.

 The attributes of an account include the following codes:  

* These attributes of an account are shown on the Schedule of Departmental Balances. 

Fund Group Code (FND), General

This is the three-digit code that indicates the classification of the account according to fund accounting guidelines. Accounts are classified by the constraints and limitations placed on the resources that fund the accounts. There are four major fund groups: Current Funds, Endowment and Similar Funds, Plant Funds, and Loan Funds. These fund groups are explained in the following segments of this policy.

Function Code (FNC)

This is the three-digit attribute code that indicates the specific purpose of the funds contained in the account. Listed below are an array of the most widely used function codes.

 ASSET FUNCTIONS (An asset account should have a debit balance)

LIABILITY FUNCTIONS (A liability account should have a credit balance)   REVENUE AND EXPENSE FUNCTIONS - (Current Funds)   Most accounts in the general ledger have revenue and expense function codes (40X - 6XX). However, some departments have a limited need for accounts with either an asset or liability function code. Described below are those functions that are most widely used.