Michigan State University
Controller's Office
The University is required to follow Governmental Accounting Standards and maintain its accounts in accordance with fund accounting. Fund accounting is the standard accounting method used by colleges and universities to appropriately segregate funds by its sources in order to ensure they are used for their intended purposes. Fund accounting aids employees in being good stewards of University assets in accordance with all rules and regulations that may apply. Some funds are intended for specific purposes while others are for general use.
One important factor to consider when choosing the fund group to account for monies received by the University is whether the money is restricted. Fund restrictions may be classified differently for internal and external reporting purposes. For example, discretionary gift income given to a specific department is considered restricted for external reporting; however, at the department level is not considered restricted and can be used at the department’s discretion. For purposes of choosing a fund group to deposit monies to and for annual reporting, funds are considered restricted if the payee of the money in any way dictates how the funds should be spent or who can spend the money. Funds can be permanently restricted (nonexpendable) as in the case of an endowment where the principal must remain intact, or temporarily restricted (expendable) such as donor gifts whose restrictions may expire with the passage of time or by fulfilling certain criteria. Common examples of restricted funds are:
Revenue earned through fee-for-service activities is not considered restricted. These are monies earned by a specific department activity for goods/services provided and are likely reinvested in the fee-for-service activity. The payee/customer has not restricted the use of the payment; it is merely an exchange for goods or services provided.
To comply with fund accounting standards, MSU currently uses nine fund groups. Each of the fund groups has been broken down into multiple sub-funds to group similar activities together.
The following is a brief description of each fund group. Please select the fund group name to view a detail listing of available sub-funds and their descriptions for each fund group.
MSU’s financial system uses an alphanumeric code for its chart of accounts structure. The first character outlines the fund group the account resides in, while the first two characters together provide the account’s sub-fund group.
Account Type Codes are a required account attribute in the finance system that allows for grouping similar types of accounts into 12 standard categories, or “types”, for reporting and analysis purposes. The 12 types were identified based on feedback from campus fiscal officers and are based on the operational characteristics of the account. Please select the following link to view a summary description of each account type and the corresponding finance system accounts. Account Type Codes
As a requirement under Governmental Accounting Standards, the University must report expenses based on the purpose, or function, for which the expense is incurred to support (i.e. instruction, research, etc.) rather than based on the natural classification of the expenses (i.e. payroll expense, office supplies, etc.). Each account within the finance system is assigned a Higher Education Function Code. This code/account attribute indicates the functional classification to which the expenses incurred on that account will be classified for financial reporting purposes. Since only one code can be assigned per account, the predominant functional classification of that account should be used in selecting the appropriate Higher Education Function Code. If a predominant function cannot be identified, the activity within the account should be split into separate accounts to more accurately report functional expenses.
The University reports expenses based on nine basic functional categories. Additional detail coding is available for General Fund and Auxiliary Fund accounts to facilitate reporting requirements; however, for the financial statements all expenses roll-up to these basic nine categories. Please select the following link to view a summary description of each basic category: Higher Education Function Code.
For each account, fiscal officers must indicate whether the account can accept payroll charges (salaries + fringe benefits) or if these charges should be redirected to another account. In most cases, salaries and fringe benefits are allowed on Current Funds; however, for certain General Fund accounts, fringe benefit costs are funded centrally and should be redirected to certain central accounts. For more information about redirected payroll expenses, please visit the Controller’s Office website.
Every account is assigned one (1) Fiscal Officer by the unit requesting the account. If approved by the Controller’s Office, the FO is the “signature authority” over an account’s financial system transaction and maintenance documents. The Fiscal Officer (FO) ensures that accounting and other information is accurate and complete. FO’s may delegate approval authority to another financial system user (“Account Delegate”). It’s the FO’s responsibility to ensure funds are accounted for in accordance with the accounting framework outlined above.
Accounts are created and edited in an e-docs in the financial system. At the Main Menu, click “Account” under “Lookup and Maintenance/Chart of Accounts”. From here, you may look up an account to edit, or you may click “create new” in the upper right corner to create a new account. All account e-docs route to the Fiscal Officer and to the Controller’s Office for approval. Upon Controller’s Office review, other routing/approvals may be required based on the type of account being processed.
Sub-accounts are edited and created via e-docs in the financial system. At the Main Menu, click “Sub-Account” under “Lookup and Maintenance/Chart of Accounts”. From here, you may look up a sub-account to edit, or you may click “create new” in the upper right corner to create a new sub-account.
Sub-accounts are tied to individual accounts and are governed at the Fiscal Officer level. The account Fiscal Officer is the only approval necessary on sub-account e-docs. Central Accounting is not on the route for these e-docs.