General Accounting and Financial Audit Compliance

Scope

All Indiana University units and employees.

In the event of a conflict, this policy shall supersede all campus, school and college, program, department, center, institute, and unit policies on any core or regional campuses of Indiana University.

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Policy Statement

All University operations should be maintained and compliance reports prepared on the accrual basis of accounting at the end of the fiscal year. Revenues should be reported when earned and expenditures reported when materials or services are received or used.

It is the policy of Indiana University to follow accounting principles generally accepted in the United States, as prescribed by the Governmental Accounting Standards Board (GASB). Accordingly, the university follows all applicable GASB pronouncements using the economic resources measurement focus. Consequently, the university records actual financial transactions on the accrual basis of accounting.

As a component unit of the State, the university is included as a discrete entity in the State of Indiana’s Annual Comprehensive Financial Report. The university follows the fiscal year as established by Indiana Code 4-1-1. As mandated by IC 4-1-1 of the State of Indiana, the university operates on a fiscal year that begins on July 1 and ends on June 30. The university reports annual financial results on a consolidated basis with a comprehensive, entity-wide presentation of the university’s assets and deferred outflows, liabilities and deferred inflows, net position, revenues, expenses, changes in net position, and cash flows.  

Additionally, the university must adhere to various financial compliance and audit requirements established by state and federal agencies, as well as other external parties, including donors. These include requirements established by Federal Uniform Guidance (OMB), the Internal Revenue Service (IRS), and other state, federal, and external entities, as applicable.  

The Office of the University Controller (UCO) has established the IU Accounting Standards, which detail relevant university accounting and control procedures. These standards, while not exhaustive, are mandatory to carry out fiscal audit and compliance responsibilities.

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Reason for Policy

To comply with AICPA Audit Guidelines 2.09.

To ensure accurate, consistent compliant financial activity in accordance with GAAP, GASB, and the State of Indiana. Additionally, to ensure compliance with various audit requirements established by OMB, IRS, and other state, federal, and external entities, as applicable.  

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Procedures

Indiana University is currently recording most transactions on an accrual basis. This policy is intended to clarify which method of accounting is required by the AICPA Audit Guide. Office of the University Controller coordinates the year end journal entries, including accruals, for the University on non-auxiliary accounts.

The auxiliary document can be used to record entries that do not affect cash. This document is located in the Kuali Financial System (KFS).

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Definitions

Accrual Accounting: Is the matching of revenue and expense. The revenue/expense should be recorded in the period that the event happened. The revenue and expense that are correlated to each other should be recorded in the same period. If there is not any revenue generated by the expense then the expense should be recorded when it occurs not when the cash is paid.

Accrual Accounting:  

Accrual accounting recognizes assets, liabilities, revenues, and expenses when they are earned or incurred, regardless of when the cash is received or paid. The operating cycle of the university for financial reporting purposes is July 1 to June 30 (i.e., June 30 fiscal year-end). 

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Additional Contacts

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History

The source to this policy is:

AICPA Audit Guidelines, Generally Accepted Accounting Principles, Chief Accountant

[Month] 2025- This policy replaces and/or supersedes the following policies:  

FIN-ACC-350, Accrual Accounting 

FIN-ACC-390, Inventory 

FIN-ACC-420, Disbursement Voucher Supporting Documentation 

FIN-ACC-600, Auxiliary Financial Standards 

FIN-ACC-490, Non-Student Accounts Receivable  

FIN-ACC-500, Write-off Accounts 

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