CHAPTER 3 MAINTENANCE OF ACCOUNTS
CHAPTER 3 MAINTENANCE OF ACCOUNTS
Monies paid to an institution in the form of loan and scholarship awards and/or other income to the funds must be deposited and maintained in separate and distinct accounts, apart from other accounts of the institution and apart from each other. The school should maintain a ledger system of accounts which contain at least a journal of original entry, a set of control accounts, and a subsidiary account which contains a record on each and every borrower and/or scholarship recipient. All transactions should be recorded promptly and subsidiary accounts reconciled to the control accounts on a regular basis.
The following is a basic Chart of Accounts that satisfies the record keeping requirements for the Department of Health and Human Services' loan programs and facilitates the preparation of the Annual Operating Report. Although any uniform numbering system is acceptable, the one used here identifies the part of the financial statements on which the accounts are located. For example,
1 - Assets Accounts
2 - Asset Reduction Accounts
3 - Liability Accounts - None
4 - Fund Accounts
5 - Fund Reduction Accounts
6 - Revenue Accounts
7 - Expense Accounts
The following is intended to be used as a guide for the entries that would be made to each of the accounts listed in the Chart of Accounts in Section 1 above.
1-1 CASH: This is an asset account which shows the total cash available.
Debit this account for:
Credit this account for:
1-2 FUNDS RECEIVABLE, FEDERAL AWARDS: This is an asset account which shows the total of the funds due from the Federal Government for the Federal Capital Contribution.
Debit this account for:
Credit this account for:
1-3 FUNDS RECEIVABLE, INSTITUTIONAL CONTRIBUTION: This is an asset account which shows the total of the funds due from the institution for the Federal Capital Contribution. It should be noted that loans cannot be made to students from the Federal Capital Contribution fund without the institutional one-ninth share being deposited first.
Debit this account for:
Credit this account for:
1-4 LOANS TO STUDENTS, IN SCHOOL: This asset account is a control account for loans to borrowers during their enrollment in school. The total of the amounts shown as advances to each in-school student (subsidiary account) should be reconciled to the balance in this account at the end of each month.
Debit this account for:
Credit this account for:
1-5 LOANS TO STUDENTS, NO LONGER ENROLLED: This asset account is a control account for the total amount loaned to borrowers who are no longer enrolled at the institution. The total of the amounts shown as advances to borrowers who are no longer enrolled (subsidiary account) should be reconciled to the balance in this account at the end of each month.
Debit this account for:
Credit this account for:
2-1 LOAN PRINCIPAL COLLECTED: This asset reduction account is maintained to show the total amount of loan principal collected since the beginning of the program.
Debit this account for:
Credit this account for:
Note: Credit entries of cash collections entered in #1-4 and #1-5 would not be entered in this account.
2-2 LOAN PRINCIPAL CANCELLED: This asset reduction account is maintained to show the cumulative amount of loan principal cancelled under the provisions of the law, including employment, death, and disability.
Debit this account for:
Credit this account for:
2-3 LOAN PRINCIPAL ADJUSTMENTS, BANKRUPTCY: This asset reduction account is maintained to show the cumulative total amount of loan principal uncollectible because of bankruptcy.
Debit this account for:
Credit this account for:
2-4 LOAN PRINCIPAL ADJUSTMENTS, WRITE-OFF: This asset reduction account is maintained to show the cumulative total amount of loan principal uncollectible because of other reasons (write-offs) as specified by the Division of Student Assistance, including write-offs under Public Law 100-607. Each entry to this account should be adequately labeled to identify the reason for the adjustment.
Debit this account for:
Credit this account for:
2-5 INSTITUTIONAL REPAYMENTS OF BAD DEBTS, PRINCIPAL: This asset reduction account is maintained to show the total amount of loan principal repaid by the institution for bad debts.
Debit this account for:
Credit this account for:
4-1 FEDERAL CAPITAL CONTRIBUTIONS AUTHORIZED: This is a fund account maintained to show the net Federal Capital Contributions since the beginning of the program.
Debit this account for:
Credit this account for:
4-2 INSTITUTIONAL CAPITAL CONTRIBUTIONS: This is a fund account maintained to show the net institutional capital contributed since the beginning of the program.
Debit this account for:
Credit this account for:
4-3 TRANSFERRED FROM SCHOLARSHIP FUND: This is a fund account maintained to show the total amount transferred from the scholarship account since the beginning of the program.
Debit this account for:
Credit this account for:
5-1 REPAYMENTS TO THE FEDERAL GOVERNMENT, PRINCIPAL: This is a fund reduction account maintained to show the total principal repayments to the Public Health Service, Health Resources and Services Administration (PHS,HRSA), as distribution of Fund capital.
Debit this account for:
Credit this account for:
5-2 REPAYMENTS TO THE FEDERAL GOVERNMENT, INTEREST: This is a fund reduction account maintained to show the total interest repayments to the Public Health Service, Health Resources and Services Administration (PHS,HRSA), as distribution of Fund capital.
Debit this account for:
Credit this account for:
5-3 REPAYMENTS TO THE FEDERAL GOVERNMENT, OTHER INCOME: This is a fund reduction account maintained to show the total other income (penalty charges and investment income) repayments to the Public Health Service, Health Resources and Services Administration (PHS,HRSA), as distribution of Fund capital.
Debit this account for:
Credit this account for:
5-4 REPAYMENTS TO THE INSTITUTION, PRINCIPAL: This is a fund reduction account maintained to show the total principal repayments to the institution as distribution of Fund capital.
Debit this account for:
Credit this account for:
5-5 REPAYMENTS TO THE INSTITUTION, INTEREST: This a fund reduction account maintained to show the total interest repayments to the institution as distribution of Fund capital.
Debit this account for:
Credit this account for:
5-6 REPAYMENTS TO THE INSTITUTION, OTHER INCOME: This is a fund reduction account maintained to show the total other income (penalty charges and investment income) repayments to the institution as distribution of Fund capital.
Debit this account for:
Credit this account for:
5-7 TRANSFERRED TO SCHOLARSHIP: This is a fund reduction account maintained to show the total amount transferred from the scholarship account since the beginning of the program.
Debit this account for:
Credit this account for:
6-1 INTEREST INCOME COLLECTED ON LOANS: This is a revenue account maintained to show the total interest which has been collected on loans to borrowers.
Debit this account for:
Credit this account for:
6-2 INTEREST INCOME CANCELLED ON LOANS: This is an account maintained to show the total interest which has been cancelled on loans to borrowers, including employment, death, disability, and bankruptcy.
Debit this account for:
Credit this account for:
6-3 INSTITUTIONAL REPAYMENT OF BAD DEBTS, INTEREST: This is a revenue account maintained to show the total amount of loan interest repaid by the institution for bad debts.
Debit this account for:
Credit this account for:
6-4 PENALTY CHARGES COLLECTED ON LOANS: This is a revenue account maintained to show the total penalty charges which have been collected on loans to borrowers.
Debit this account for:
Credit this account for:
6-5 PENALTY CHARGES CANCELLED ON LOANS: This is an account maintained to show the total penalty charges which have been cancelled on loans to borrowers, including employment, death, disability, and bankruptcy.
Debit this account for:
Credit this account for:
6-6 INSTITUTIONAL REPAYMENT OF BAD DEBTS, PENALTY CHARGES: This is a revenue account maintained to show the total amount of loan penalty charges repaid by the institution for bad debts.
Debit this account for:
Credit this account for:
6-7 INVESTMENT INCOME: This is a revenue account maintained to show the net amount of investment income earned on Fund monies.
Debit this account for:
Credit this account for:
7-1 COLLECTION AGENT COSTS, PRINCIPAL: This is an expense account maintained to show the net allowable amount (internal and external) charged to the Fund for the principal portion of collection costs incurred in the collection of loans.
Debit this account for:
Credit this account for:
7-2 COLLECTION AGENT COSTS, INTEREST: This is an expense account maintained to show the net allowable amount (internal and external) charged to the Fund for the interest portion of collection costs incurred in the collection of loans.
Debit this account for:
Credit this account for:
7-3 LITIGATION COSTS, PRINCIPAL: This is an expense account maintained to show the net amount charged to the Fund for the principal portion of litigation costs incurred in the collection of loans.
Debit this account for:
Credit this account for:
7-4 LITIGATION COSTS, INTEREST: This is an expense account maintained to show the net amount charged to the Fund for the interest portion of litigation costs incurred in the collection of loans.
Debit this account for:
Credit this account for:
7-5 CREDIT BUREAU FEES: This is an expense account maintained to show the net amount charged to the Fund for credit bureau costs.
Debit this account for:
Credit this account for:
7-6 OTHER COSTS: This is an expense account maintained to show the net amount charged to the Fund for other allowable costs.
Debit this account for:
Credit this account for:
7-7 LOAN PRINCIPAL, INTEREST AND PENALTY CHARGES CANCELLED - EMPLOYMENT: This is an expense account maintained to show the cumulative total cost of cancellations for employment.
Debit this account for:
Credit this account for:
7-8 LOAN PRINCIPAL, INTEREST AND PENALTY CHARGES CANCELLED - DEATH: This is an expense account maintained to show the cumulative total cost of cancellations for death.
Debit this account for:
Credit this account for:
7-9 LOAN PRINCIPAL, INTEREST AND PENALTY CHARGES CANCELLED - DISABILITY: This is an expense account maintained to show the cumulative total cost of cancellations for disability.
Debit this account for:
Credit this account for:
7-10 LOAN PRINCIPAL, INTEREST AND PENALTY CHARGES CANCELLED - BANKRUPTCY: This is an expense account maintained to show the cumulative total cost of cancellations for bankruptcy.
Debit this account for:
Credit this account for:
7-11 OTHER EXPENSES OR LOSSES: This is an expense account maintained to show other net allowable expenses or losses (write-offs) incurred in the collection of loans.
Debit this account for:
Credit this account for:
The following is a basic Chart of Accounts that satisfies the record keeping requirements for the scholarship programs and facilitates the preparation of the Financial Status Reports.
1 - Asset Accounts
1-1 Cash
1-2 Federal Funds Receivable
2 - Asset Reduction Account
2-1 Scholarships to Students
4 - Fund Account
4-1 Scholarship Funds Authorized
The following is intended to be used as a guide for the entries that would be made to each of the accounts listed in the Chart of Accounts in Section 2 above.
1-1 CASH: This is an asset account which shows the total cash available.
Debit this account for:
Credit this account for:
1-2 FEDERAL FUNDS RECEIVABLE: This is an asset accounts which shows the total of the funds due from the Federal Government for the Scholarship Fund.
Debit this account for:
Credit this account for:
Scholarship monies drawn down and deposited into Scholarship account (contra account #1-1)
2-1 SCHOLARSHIPS TO STUDENTS: This is an asset reduction account which shows the aggregate of Scholarships awarded to students within the project period.
Debit this account for:
Credit this account for:
4-1 SCHOLARSHIP FUNDS AUTHORIZED: This is a fund account maintained to show the net Scholarship authorization for each project period.
Debit this account for:
Credit this account for:
