Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Organization of AFRs for University Systems, Component Universities & Independent Universities
Tuition and Scholarship Allowances
To provide consistent reporting of tuition and fee revenue, as well as related exemptions and waivers, the following is required for financial reporting purposes:
- Tuition and fee exemptions, as defined by the Texas Higher Education Coordinating Board (THECB), are reported as part of the gross tuition and fee revenues for each university. Since there is no cash collection from these exemptions, the revenue is to be offset by discounts and allowances.
- Tuition waivers, as defined by the THECB, are excluded from gross tuition and fee revenues of each university and require no offset.
This methodology was adopted by the TASSCUBO Accounting Principles Committee and is still in effect. See the Types of Financial Aid – Exemptions and Types of Financial Aid – Waivers on the THECB website for more information.
The following provides background information and the methodology used to calculate allowances and discounts.
NACUBO issued Advisory Report 97-1, Accounting and Reporting Scholarship Allowances to Tuition and Other Fee Revenues by Higher Education, to reduce the “grossing up” of tuition revenues and scholarship expenses. Scholarship allowances are reported with the implementation of GASB 34 and GASB 35. GASB informed the Accounting Principles Council of NACUBO that the guidance provided by NACUBO in this advisory report is appropriate for public universities.
NACUBO provides guidance for two methods for the application of financial aid and institutional resources to student accounts receivable. The first is a case-by-case method and the second is a rational allocation method. Because a case-by-case method is not feasible for most universities, the rational allocation or “alternate method” is the preferred method of determining tuition and scholarship allowances.
In September 2000, NACUBO issued Advisory Report 2000-05 detailing the “alternate method.” Excerpts from that report are provided below.
Universities may use a rational, documented allocation methodology to determine the portion of applicable financial aid support to be applied as scholarship allowances and student aid expenses. Universities must calculate the following categories and their amounts:
- Financial aid not recognized as revenue of the university. Activity in this category represents transactions of the statement of net position and not transactions of the statement of revenues, expenses and changes in net position. These are resources held for others (such as direct loans [subsidized and unsubsidized]).
- Financial aid applied from resources already recognized as revenue by the university. Activity in this category represents statement of revenues, expenses and changes in net position transactions (such as Pell , Supplemental Educational Opportunity Grant (SEOG) and state grant funds).
- Third party payments. Payments by third parties are statement of net position transactions. Payments by third parties could create an overpayment of the students’ accounts and would generate a refund.
- Total payments by students. It is assumed that students pay only the amount owed, less any financial aid. Student payments do not create any overpayments and do not generate a refund. Any timing issues are immaterial for the purpose of this calculation.
- Total refunds made to students from all sources of funding. A portion of this amount is charged to student aid expense on the statement of revenues, expenses and changes in net position. This does not include emergency loans for the university.
- Total non-monetary exemptions (discount) applied to students’ accounts.
- Total charges applied to students’ accounts during the year. If any of the charges are for prior years and are material, the prior year charges must be eliminated before the computations are made.
- Total postings to student accounts receivable that could potentially generate a refund.
- Proportion of institutional resources that represent scholarship allowances and student aid expenses to student accounts receivable that could generate a refund.
- The amount of refunds to be applied as a student aid expense.
- The amount of scholarship allowances.
The computational steps are as follows:
|Step 1||Compute the total postings to student accounts receivable that could potentially generate a refund, (H).
(A) + (B) + (C) + (F) = (H)
|Step 2||Compute the proportion of institutional resources that represent scholarship allowances and student aid expenses to student accounts receivable that could generate a refund, (I).
((B) + (F)) / (H) = (I)
|Step 3||Compute the amount of refunds to be applied as a student aid expense, (J).
(E) * (I) = (J)
|Step 4||Compute the amount of scholarship allowances, (K).
(B) + (F) – (J) = (K)
|Step 5||Allocate scholarship allowances to the general university funds and the auxiliaries. An algorithm could be used to compute the proportional amount for each category of aid if the information is not available from the administrative system.|
NACUBO provides guidance for institutions of higher education regarding Coronavirus Aid, Relief, and Economic Security (CARES) Act funding for fiscal 2020:
- Recording CARES Act Student Aid Expenses — Report the portion of the CARES Act funding for direct emergency aid to students as student aid expense (a natural expense). Since the payments do not reduce the price the student pays for his/her academic program or residential services, the amounts are not shown as a discount to revenue, nor are the payments included in the macro-level formula used by GASB institutions to calculate the discount.
- Functional Classification — For all universities, emergency student aid payments (under the CARES Act) result in an increase of student aid expense (a natural expense) over the prior fiscal year. Whether public or independent, all universities must categorize the student aid expense under the functional “Scholarship and Fellowships” category.