This information provides guidance on how to properly classify and record university operating revenue. Operating revenue is defined as that which is received from the university’s normal, mission-related operations. Revenues that are considered non-operating are not addressed in this document.
Revenue is the income a company receives as a result of its business activities, typically through the sale of goods or services, rents, and other sources. In the case of universities, the most common forms of revenue is from tuition, contributions, contracts and grants, government appropriations, and auxiliary operations.
Generally accepted accounting principles dictate that the university must use accrual-basis accounting. This accounting method requires that revenue must be recognized in the period in which it is earned, not necessarily when the cash is received. Revenue is considered earned when the university has substantially met its obligation to be entitled to the benefits represented by the revenue.
See the Accounting for Revenue section below for additional information related to proper accounting practices.
The university has nine principal operating revenue streams, which generally adhere to the recognition principles articulated above, but may also have additional and/or unique requirements for how the funds are accounted for and administered.
Although not true revenues, sections are also included for the following:
Generally accepted accounting principles dictate that the university must use accrual basis accounting. This accounting method requires that revenue must be recognized in the period in which it is earned, not necessarily when the cash is received. Revenue is considered earned when the university has substantially met its obligation to be entitled to the benefits represented by the revenue. Contractual adjustments or sales discounts should be recorded as a reduction of revenue, not an expense.
If subsidiary systems (e.g., point-of-sale systems, specialized industry-specific software applications, etc.) are used to process revenue transactions, revenue must be recorded in and reconciled to the university’s accounting system in a timely manner, as determined by the unit, though generally no less frequently than monthly.
Understanding that it may be impractical to comply with every accounting principal related to revenue, it becomes the responsibility of each operating unit of the university, under the general guidance of the university controller, to determine and document adequate business processes and internal controls to adhere to these principles in all material ways.
Materiality is the accounting concept that permits the noncompliance of another accounting guideline if the amount is insignificant. Operating units should evaluate the dollar threshold at which the reliability, relevance and completeness of financial information would be compromised. Decision makers should keep in mind that materiality is cumulative – an omission of $100 may be immaterial, but a hundred instances of a $100 omission would not be. An operating unit’s materiality threshold, along with the methodology for its determination, should be documented and included in the unit’s SOX questionnaire (Ithaca only).