1993 Vangermeersch Manuscript Award: History of Financial Reporting Models for American Colleges and Universities: 1910 to the Present
Brown, Ken W., The Accounting Historians Journal
Abstract: This paper contrasts current and proposed higher-education financial reporting models with financial reporting models developed earlier in this century. The historical review in this paper has current value since the FASB and the GASB are considering major changes in the way that private and public colleges and universities report financial information. The results of the historical review reveal that, through the years, report modelers varied in their concern for user needs and report uniformity. Interestingly, the first higher-education reporting model developed in 1910 and the proposed model developed in 1992 by the FASB both focused on user needs while the primary objective for the reporting model currently in use and most other intervening models was only uniformity.
This paper provides a historical review of financial reporting models suggested for use by colleges and universities. Illustrations are included of the prescribed financial report forms suggested by major higher-education accounting publications published between 1910 and the present. To provide a context for he historical review, descriptions are provided of the present model published by the National Association of College and University Business Officers (NACUBO) and the future model published by the Financial Accounting Standard Board (FASB). Next, reviews are provided of the reporting models published by (1) the Carnegie Foundation in 1910, (2) the General Education Board in 1922, (3) Lloyd Morey in 1930, (4) the American Council on Education (ACE) in the periods 1930-35 and 1952-68, and (5) NACUBO in 1974. During this period, post-secondary education assumed a more important role in American society, and in higher-education financial reporting accordingly.
Although the earliest suggested uniform reports date back to the beginning of this century, the generally accepted format of college and university financial statements has changed very little from the format published by the American Council on Education nearly 60 years ago. This current reporting format (hereafter called the College Model) is unique to higher education since it differs significantly from the generally accepted formats for all other types of government and nonprofit organizations.
The currently used College Model prescribes that highly detailed fund accounting information be provided in external financial reports. This reporting approach, however, could soon be discarded by private institutions as a result of a new uniform reporting model being proposed by the Financial Accounting Standards Board (FASB) for all nonprofit organizations [FASB, 1992]. Also, the fate of the College Model for public institutions is uncertain pending the completion of a study by the Governmental Accounting Standards Board (GASB) [GASB, 1993].
During this period of significant change, it is worthwhile to reflect on the history of American higher-education financial reporting and to determine the foundation on which the current format is based. Through a better knowledge of the historical background for today's higher-education reporting techniques, one is better able to evaluate the FASB's new proposal and to envision its subsequent effect on the higher-education industry.
The paper is organized in the following manner. First, to provide a context for the historical review of suggested financial reporting formats, a description of the College Model currently in use is provided, followed by a comparison of the Nonprofit Model proposed by the FASB. Second, descriptions are provided of each higher-education reporting model suggested by major works published in this century. Last, the unique aspects of all reporting models (past, present, and future) are summarized and discussed, and the study's findings are related to today's issue of appropriate reporting detail levels.
HIGHER-EDUCATION REPORTING--PRESENT AND FUTURE
Today, American higher education is a major industry which serves over 13 million students each year. …