15.4 Auxiliary Assets and Liabilities
An auxiliary enterprise, or auxiliary service, is defined as an activity that exists to provide a service directly or indirectly to students, faculty or staff, and for which a fee is charged that is related to, but not necessarily equal to, the cost of the service. Auxiliary enterprises are operated on a self-supporting basis, where the combination of fees and other revenues is sufficient to meet costs. Further, auxiliary enterprises are not subsidized by state appropriations, or other educational and general revenues, except as provided in Section 7.2.2 of the Board of Regents (BoR) Policy Manual, which states:
Exceptions to the requirement that institutions operate their auxiliary enterprises on a self-supporting basis shall be recognized as follows:
- Institutions may choose to operate some auxiliary enterprise activities on a loss basis, but must indicate in their five-year plans how the costs of such activities will be covered by revenues generated through other auxiliary operations. It shall be the Board of Regents’ determination as to whether such losses are sustainable based on the institution’s five-year plan.
- Institutions may apply general fund resources to auxiliary enterprise operations where such expenditures can be justified as supporting the primary mission of the institution. In no instance may general fund revenues be used to support athletic scholarships. The use and amount of general revenues applied to the support of auxiliary enterprise operations shall be included in the five-year plan.
All auxiliary enterprises are classified as business operations, and therefore must be under the direct management, control and supervision of the chief business officer of the institution. Additionally, all operations of auxiliary enterprises are to be budgeted in accordance with published budget instructions, and annual budgets are to be submitted to the Board of Regents in accordance with the schedules established under section 8.0, Budget Process.
For both budgeting and accounting, the following accounting codes should be utilized within auxiliary enterprises. Refer to section 2, Chart of Accounts, for additional details of these codes.
- Fund: Code 12000
- Function*: Codes 21xxx through 32xxx
- Funding Source: Codes 42100 through 43996
- Department: Develop locally – not standardized
- Account: All as needed
- Budget Period: As appropriate
- Project Indicator: Optional Use
* Note: Institutions using the GeorgiaFIRST model of the PeopleSoft Financials software must use the Program Code (Function) for all auxiliary enterprise transactions, except for the cash account.
Auxiliary enterprise activities include:
- Housing Operations: student apartments, residence halls, and faculty and staff housing.
- Food Services: cafeterias, snack bars, and some vending operations.
- Stores and Shops: bookstores, supply stores, gift shops, and uniform stores.
- Health Services: health service operations with full-time staffing.
- Transportation and Parking: all transportation and parking operations.
- Other Service Units: barbershops, golf courses, laundry services, print shops, some vending operations, and other operations that cannot be logically categorized in any other defined activity.
- Intercollegiate Athletics
Descriptions of these auxiliary enterprise activities are presented below.
15.2.1 Housing Operations
This enterprise is to reflect all housing operations for students, faculty, and staff.
- Apartments: The operation of all apartments, whether rented to married or single students, is to be reflected in this enterprise.
- Dormitories: The operation of all dormitories for students is to be reflected in this enterprise.
- Hotels: The operation of all facilities usually associated with public service programs, i.e., hotels and motels, is to be reflected in this enterprise.
Faculty and Staff Housing
- Apartments: The operation of apartments maintained exclusively for faculty and/or staff is to be reflected in this enterprise.
- Houses: The operation of houses maintained exclusively for faculty and/or staff is to be reflected in this enterprise.
15.2.2 Food Services
This enterprise is to reflect all food service operations. Marginal operations in terms of volume and type should be examined carefully in order to determine whether the enterprise should be classified as a cafeteria or snack bar.
The operation of food services that include meal preparation and significant kitchen operations should be classified as cafeterias and is to be reflected in this enterprise.
The operation of small-scale food services that sell, in the main, packaged food, i.e., drinks, potato chips, crackers, candies, ice cream, etc., should be classified as snack bars and is to be reflected in this enterprise. Some operations classified in these enterprises might even vend hot dogs, hamburgers, or food for regular meals, as opposed to snacks or refreshments.
15.2.3 Stores and Shops
This enterprise is to reflect all operations of bookstores, supply stores, gift shops, and uniform stores.
Stores selling books and supplies to students and faculty are to be reflected in this enterprise. Occasionally some vending operations of small proportions might appropriately be attached to a bookstore. The materiality of the sales proceeds should serve as the basis for judgment.
The operation of shops that vend gifts, i.e., art, glassware, jewelry, and souvenirs, is to be reflected in this enterprise. These operations are usually associated with public service areas or hospitals. Such shops may be operated as adjuncts to bookstores if deemed advisable by the administration.
Operations of stores that handle uniforms and military supply items for R.O.T.C. programs are to be reflected in this enterprise.
15.2.4 Health Services
This enterprise is to reflect the operation of health services that are large enough to require full-time staffing and are capable of caring for patients on a twenty-four hour basis. These operations would also have the services of medical doctors, either on a permanent basis or on a consulting basis.
Those health service operations that are smaller in nature, usually associated with institutions not housing students, should be included in resident instruction under the Student Services function.
15.2.5 Campus Transportation and Parking
This enterprise is to reflect the operation of campus transportation and parking systems.
This enterprise is to reflect the operation of transit systems designed to move students, faculty, and staff from peripheral parking lots to the central campus, and also to handle intra-campus traffic. When parking lots are operated in conjunction with this overall system, they are to be included in this enterprise.
This enterprise is also to reflect those operations that provide transportation to students for educational and recreational purposes. Transporting students on field trips, to debating tournaments, and for other educational functions are appropriate uses of vehicles included in this enterprise. Transportation of athletic teams to and from intercollegiate athletic events would also be an appropriate use.
In accordance with Section 188.8.131.52 of the BoR Policy Manual, users of institution-operated buses are to pay adequate rates per mile for such use in order to provide all maintenance, operating, and replacement costs for these buses.
This enterprise is to reflect operations that provide parking for students, faculty, and staff on a rental basis. All appropriate costs to operate lots or facilities, such as security, maintenance, etc., would be included. However, lots or buildings operated as parts of campus transit systems would not be included in this enterprise, but would be included as part of Campus Transportation, as noted above.
This enterprise is not to include auto registrations that are primarily for vehicle identification. Revenue generated from vehicle registrations is to be included in resident instruction, as will expenses connected with this procedure.
15.2.6 Other Service Units
This enterprise is to include those operations that meet the definitions of auxiliary enterprises, but cannot be logically categorized in any other defined enterprise. These operations may include the enterprises listed below.
The operation of barbershops is to be reflected in this enterprise.
This enterprise is to reflect the operation of golf courses that basically serve the institution community for recreational purposes. To whatever extent this facility is used for educational purposes, the cost should be appropriately reflected in resident instruction expenditures.
This enterprise is to reflect operations that provide students with laundry services.
Print shops and duplicating operations that serve a larger market are to be reflected in this enterprise. Print shops and duplicating operations that serve a local campus are classified as administrative services and should be included in resident instruction.
This enterprise is to reflect the operation of all systems that issue merchandise to the students, faculty, and staff.
If certain vending machines (isolated and few in number) are considered as part of Food Service or Stores and Shops, as described in sections 15.2.2 or 15.2.3, they may be excluded from this enterprise.
15.2.7 Intercollegiate Athletics
This enterprise is to reflect the operations of an intercollegiate athletic program.
The revenues for auxiliary enterprise operations consist of sales, rents, fees, and commissions. Any other revenues incidental to the operation of an auxiliary enterprise also should be included.
The expenditures for auxiliary enterprise operations consist of cost of goods sold, direct operating costs, and indirect operating costs.
Cost of Goods Sold
The cost of goods sold should be developed in the accounting records for all auxiliary enterprise activities engaged in selling merchandise or food. Implicit in this determination is the use of appropriate purchase accounts, inventories and inventory adjustments at the close of each accounting period. The percentage of the cost of goods sold may be significant in evaluating management effectiveness.
The cost of goods sold must be booked monthly by enterprise prior to providing data to the data warehouse. The amount of the entry may be calculated using actual or perpetual inventories, or may be calculated using a historic percentage of sales method during months when an actual inventory is not available
Direct Operating Costs
Direct operating costs include:
- Salaries and wages of all employees in the various auxiliary enterprise operations
- Staff benefits for all employees
- Travel, operating supplies, and expenses
- Charges for any share of debt service and/or lease rentals that are borne by the particular auxiliary enterprise operation
Equipment purchases shall be budgeted and recorded in the Auxiliary Enterprise fund group. Depreciation expenses for equipment will also be recorded in this fund group
Indirect Operating Costs
Indirect operating costs are defined as costs incurred by the institution that are allocated to auxiliary enterprises on an equitable basis. An example would include costs relating to the operation and maintenance of physical plant. Each USG institution is required to allocate a portion of its cost of operating and maintaining the physical plant to auxiliary enterprises unless it is directly charging these costs to auxiliary enterprises.
Costs to be allocated to auxiliary enterprises should be accumulated within resident instruction in separate cost centers so that the total allocated amount from each area can be readily determined. Major account code identity must be maintained. The amounts in these cost centers relating to auxiliary enterprises are then transferred to each operating unit within auxiliary enterprises on an allocated basis.
Note: This would not apply to any direct charges associated with physical plant or other administrative activities.
The percentage being allocated to auxiliary enterprises must be included with the budget request, and must be approved by Fiscal Affairs. This percentage must be used for the entire fiscal year, unless permission to change is granted by Fiscal Affairs.
Assets of auxiliary enterprises may include, but are not limited to:
- Cash on hand
- Petty cash
- Demand deposits
- Accounts receivable
- Prepaid items
- Merchandise inventory
- Investments, buildings
- Any amounts due from other funds
Liabilities of auxiliary enterprises may include, but are not limited to:
- Accounts payable
- Accrued expenses
- Sales taxes payable
- Deferred revenues
- Any amounts due to other funds
The reserves of auxiliary enterprises may include reserves for renewals and replacements, reserves for subsequent years’ expenditures and reserves for investment (improvements) in plant.
Note: For Fiscal Years 2009 through 2012 only, the Board of Regents Reduction Plan allows institutions to use reserves of auxiliary enterprises for general operating purposes.
Institutions are required to fund current year depreciation as an addition to the renewal and replacement reserve. The renewal and replacement reserve can be used for renewal and replacement of capitalizable assets only. Items that do not meet the capitalizable threshold should be funded from the reserve for subsequent years’ expenditures (funds generated from operating profits). The renewal and replacement reserve can be used for capitalizable expenditures that extend the useful life or improve the performance of an asset.↑ Top