Overview: FUNDamentals of Funds
On this page:
- What Is a Fund?
- Why Do We Have Individual Funds?
- Identifying a Fund's Source of Money
- Defining How Money May Be Used
- Next Steps
What Is a Fund?
A fund is a separate accounting entity with its own assets, liabilities and fund balance (equity). Individual funds are used to record the financial activity, such as receipts and expenses, associated with a specific source of money.
Why Do We Have Individual Funds?
The University receives money from a variety of sources such as individual or corporate donors, government agencies, non-government sponsors and tuition. Many of these sources put restrictions on how the money can be spent. To ensure that monies are spent for their intended purpose, the University has created over 30,000 funds to record financial activity. These funds:
- Hold money received from or used for a specific activity.
- Allow us to track the source and use of money, ensuring monies are directed toward their intended purpose.
- And ultimately, enable the University to manage and report on the use of these monies, ensuring that we have fulfilled our fiduciary responsibilities and managed the resources as intended.
Identifying a Fund's Source of Money
When a fund is established, its source and use is identified in order to facilitate management and reporting of the different types of funds and restrictions. At Stanford, the words “fund” and “award” are used interchangeably when referring to specific sources of money.
Award types (or fund types) is a term used to describe the source of the monies. Each fund is tagged with an award type which is an abbreviated descriptive label. Award types are used for reporting purposes, and help to identify the different restrictions and implications for managing the funds. Some of the more common fund types and associated Award Types are described below:
- Operating Budgets – Record accounting transactions for the University's core academic programs and support services. Operating Budgets primarily receive their money from University unrestricted funds (such as tuition and interest) and from appropriate departmental designated funds and gift funds. (Award Type starts with GEN_OB.)
- Designated Funds – Unrestricted funds that the University (rather than a donor or sponsoring agency) has decided to use for a specific purpose. (Award Type starts with DES.)
- Grants and Contracts – Money received from an agency sponsoring research, instruction or other sponsored activity. Grants and Contracts are often restricted to a specific body of work. (Award Type starts with SPO.) See Policy Notes: Revenue Recognition – Sponsored Research.
- Cost Sharing – The portion of the costs of a sponsored project (i.e. Grants and Contracts) paid by the University rather than the sponsor. (Award Type is SPO_UNIVERSITY_FUNDED_AWARD.)
- Expendable Gift – A gift to the University that is immediately usable. Gifts often stipulate how the money may be spent. (Award Type starts with GIF.)
- Endowment Gift – Gifts where the donor has required the principal to be invested in perpetuity. Only income and appreciation from the endowment gift may be spent. The income and appreciation are maintained in an Endowment Income Fund, which is maintained separately from the endowment principal. (Award Type starts with END.)
- Service Centers – An organizational unit that provides a specific service, group of services or products to users principally within the University. Large Services Centers include Facilities Operations and Information Technology Services (ITS). (Award Type starts with SER.) See Policy Notes: Revenue Recognition – Auxiliaries and Service Centers.
- Auxiliary – Self contained financial entities that use their own income to support their operating expenses. Examples of large auxiliary units are Athletics, Residential Housing & Dining, and High Wire Press. (Award Type starts with AUX.) See Policy Notes: Revenue Recognition – Auxiliaries and Service Centers.
- Capital Projects – Money used to support a capital project (i.e. capital equipment or construction projects). Sources of these funds include gifts and debt. (Award Type starts with PPE.).
- Receivables – Used by University departments that administer programs such as a conference or professional journal sponsored by an organization outside of the University to account for expenses incurred on campus and the related reimbursements. (Award Type starts with REC.)
- Clearing (Expense Clearing) – Used to accumulate specific costs; these costs are then allocated monthly to specific users or beneficiaries of the expense. (Award Type starts with CLR.)
For additional fund types, see Award Types.
Defining How Money May Be Used
The award purpose describes the restriction on the use of money, or how the money may be used, and is usually determined by the source of the funds. Each fund is tagged with a three character award purpose to facilitate reporting. Common high level award purposes include:
- UNR – Unrestricted
- INR – Instruction and Research
- FAC – Faculty Related
- LIR – Library Related
- STA – Student Aid
- PPE – Property Plant and Equipment
For a complete list of award purposes and definitions, see Award Purposes.
Understanding why funds are set up in general, and the sources and restrictions on the specific funds you are responsible for is the first step to managing these funds. The following additional resources are available to help you manage your fund: