Classification Differences Between the Operating Statement and Cash Flow Statement

Some agencies may include investment earnings in the operating section of the operating statement.

However, on the cash flows statement, investment earnings, unless they are from program loans, are classified in the Investing Activities section per GASB Statement 9. Program loans are considered governmental social programs and are reported as operating activities instead of investing activities. Therefore, the interest on program loans would also be shown as operating activities.

Regardless of what an agency or university includes in operating income on the Operating Statement, if the cash flows fit the criteria of one of the three other categories (Noncapital Activities, Capital Activities, or Investing Activities), they can not be included in the operating activities category. Therefore, if investment earnings are included in operating income on the operating statement, the related cash flows should be presented as a deduction from operating income in the reconciliation section of the statement of cash flows.

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