Michigan State University
Controller's Office

Administration Bldg
426 Auditorium Rd, Rm 305
East Lansing, MI 48824
517 355-5020

SECTION 5: Accounts, Account Requests, and Sub-funds

Last updated: March 2015

I. Fund Accounting

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:

  1. Permanent endowment gifts
  2. Gift income to be used by a specific department/college
  3. Gift income to be used toward the construction of a new facility
  4. Federal/State/Private grant awards for a specific initiative/research project

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.


II. Account Number Structure

  1. Fund and Sub-Fund Group Descriptions

    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 activites 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.

    1. Current Funds:
      1. General Fundunrestricted operating funds that are budgeted and allocated for the general operations of a unit/department.
      2. Designated Fundunrestricted self-supporting activities (activities generally include an instructional, research, or public service component) that furnish goods or services to the campus community and/or the general public for a fee.
      3. Auxiliary Fundunrestricted self-supporting activities (activities that generally lack an instruction, research, or public service component) that furnish goods or services to the campus community and/or the general public for a fee.
      4. Expendable Restricted Fundrestricted funding for sponsored projects/programs or current gift revenue and endowment income spending accounts restricted for a specific use.
    2. Non-current Funds:
      1. Endowment Fundunrestricted or restricted funds invested "in perpetuity" of which only a portion of the market value is distributed each year for spending (i.e. spending policy distributions).
      2. Plant Fundunrestricted or restricted funds used for purchasing, maintaining and recording of the University’s property, plant, and equipment.
      3. Student Loan Fundunrestricted or restricted funds used for the administration of student loan fund programs (For Central Use Only).
      4. Retirement & Insurance Fundunrestricted funds invested and used for various self-insured retirement and insurance programs (For Central Use Only).
      5. Agency Fund – funds on deposit at MSU and managed by University employees, but which MSU does not have any legal ownership to.

    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.

  2. Account attributes – Higher Education Function 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.

III. Fiscal Officer (FO)

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.


IV. Account Requests

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.

  1. Revolving Accounts (primarily Designated (D) and Auxiliary (X) Fund accounts)
    1. Required procedures for establishing revolving accounts are listed at: "Revolving Account Policies".
    2. When creating the account, please note that the indicated sources of income, and types of expenditures should be related.
      1. Internal Audit regularly audits accounts to determine that operations are in conformance with the information indicated on approved account request forms.
      2. Service Center Billing Rates – Revolving accounts which render services or sell goods to users on a recurring basis (including federal grants administered by CGA) must have rates approved by the Office of Financial and Cost Analysis every 2 years, at a minimum. The Service Center Billing Rate Policy details these procedures.
  2. Clearing and Deposit Accounts - These accounts may be established when deposits must be held for disbursements to others (e.g., sales tax collections to be remitted to the State of Michigan). New account requests should outline the nature of the proposed new account or amendment to existing account. Please include all required information on the Account e-doc, including a detailed description of the purpose of the account.
  3. General Fund account requests will route for approval by the Office of Planning and Budgets.
  4. Trust account requests must be arranged through the Office of Investments and Trusts, telephone 355-5018.
  5. Fellowship and Grant/Sponsored Research Accounts
    1. Refer to Section 23, concerning Fellowships; refer to Section 315, concerning Gift and Grant or Sponsored Research accounts.
    2. Any further questions concerning Fellowship accounts should be directed to the Office of Fees & Scholarships, Hannah Administration Building, 426 Auditorium Road Rm. 140; questions concerning Gift and Grant or Sponsored Research accounts should be directed to the Office of Contract and Grant Administration, Hannah Administration Building, 426 Auditorium Road Room 2.
  6. Scholarship accounts must be arranged through the Office of Financial Aid.
  7. Agency Accounts - Please contact Accounting for assistance.

V. Sub-Account Requests

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.