Lease Org Hierarchy
The University must adopt a new accounting standard (Accounting Standards Codification 842 – Lease Accounting) for leases in FY20. The new lease accounting standard requires all operating leases (building and equipment) to be recorded as a right of use asset and right of use liability. The need for developing a consistent method of accounting for building and equipment leases will allow the University to successfully implement the new accounting standard, implement a lease accounting software, and consistently allocate charges to the areas consuming the space.
For FY20, a new accounting methodology will be adopted that charges all rent expenses, centrally, to the unrestricted fund (110001) using separate and distinct org assigned to each unique building lease. These expenses will then be charged out, based on the FY19 FM Systems space survey data, to the schools and colleges occupying the space as a service department charge using account 4300 – Building Rent Allocation. A&S units will have their rental allocations booked centrally using a control fund. The result will be that the lease orgs will net to zero, and the real expense will be charged to the occupants of the space.
The central organization of our leases combined with the chargeback method will allow us to track all our building leases in the Banner ERP and reconcile them to our new lease accounting software. Further, this methodology will allow us to properly functionalize our expenses as required by Accounting Standards Codification 958-Not-for-Profit Entities, which is required to be adopted for FY19. However, this method highlights the importance of completing space surveys in FM since this system will drive the allocation.
Finally, a new series of orgs are being introduced for Drexel’s lease activity, and they will be housed under the 76 series in our organizational hierarchy. The full hierarchy of the lease orgs can be found below. The new hierarchy follows the same model as we have been implementing for funds and account codes where there is visual ability to identify roll-ups versus data-enterable orgs. The data enterable org will remain 4 digits.