The Core Business Activities of Higher Education

Although higher education is a complex industry, its financial statements are dominated by transactions in a few core business activities. For financial statements to be fairly presented, core business transactions must be processed consistently, timely, and accurately by colleges and universities. The Management Discussion & Analysis section of the financial report is designed to highlight the core business activities of the organization. The auditor has limited responsibility for this section of the financial report, though, and is required to communicate their level of responsibility for other information contained in the audited financial statements.

For the financial statements, though, the external auditor must communicate significant accounting policies to the Audit Committee. In addition, Audit Committee members may wish to inquire specifically about the accounting and auditing procedures related to the following core business activities:

  • Tuition and Fees,
  • State Operating and Capital Appropriations
  • Employee Compensation
  • Federal and State Financial Aid Programs
  • Capital Asset Construction and Maintenance
  • Auxiliary Operations, such as bookstores, residence halls, and food services
  • Budget Reserves compared to Unrestricted Net Asset Balances