Consolidation, Object Levels and Object Codes
Prior to reading the standard on Chart of Accounts – Consolidation, Object Level and Object Codes, it is beneficial to review the below sections to gain foundational information:
This standard discusses attributes of the chart of accounts including consolidation codes, object levels, and object codes, and how they impact accounting and financial reporting at Indiana University. The information presented below will walk through a general understanding of the consolidation hierarchy, the appropriate usage of object codes, and the available clearing object codes within IU.
Introduction – What are Consolidation, Object Levels and Object Code Attributes
An object code classifies a financial transaction as an income, expense, asset, liability, or fund balance. At Indiana University these attribute classes function similarly to accounts in most other organizations and become the basis for internal and external reporting. When submitting an object code document, users must specify the following required details:
|Fiscal Period||An institution's defined yearly period used for the purposes of financial reporting. A requirement for submission of object code; it defines the active fiscal years to which general ledger entries can be posted.|
|Chart Code||Each campus has a unique chart. In addition, there are subsidiary charts on the Bloomington and Indianapolis charts to separate the activity of some auxiliary units. University Administration, which includes organizations that serve all IU campuses, also has a unique chart. A requirement for submission of object code.|
|Object Code||All object codes belong to an object level. This is the summary code for a given range of detailed object code classifications and identifies the level to which the object code belongs. A requirement for submission of object code.|
|Object Sub-Type Code||This is the designation assigned to similar groups of object codes e.g. AR – Accounts Receivable, CA – Cash, DR – Depreciation etc. A requirement for submission of object code; most often used to help with internal reporting.|
Indiana University’s object code attributes were created to facilitate internal and external financial reporting and analysis. These attributes provide departments/units with the proper classification for accurate recording of financial activities. As noted in the above consolidation pyramid, users can determine what level of reporting is needed, ranging from consolidation (high level overview) to sub-object code (highest level of detail). If a user wants to be granular and look at what a department spent on academic assistants, they can run a report using the single object code (2350) for academic assistant salaries. If the user wanted a broader look at spending on all student academic appointees in general, a report by the student academic appointees (SAAP) level code would be more appropriate. If the user wanted to zoom out even farther and look at expenses related to compensation as a whole, a report by the CMPN consolidation level would be ideal. The level of detail required is based on the user’s needs.
Importance and Impact of Object Codes
IU is a large and evolving organization with many accounting complexities, which is why the chart of accounts is critical to accurate and transparent reporting. These attributes ensure proper use of funds, compliance with applicable reporting standards, adherence to allocated budgets, and stewardship of IU resources. Categorizing financial data also allows users to understand the nature of the activity at a glance.
Object code attributes within the chart of accounts are associated with external compliance and certain IU policies related to grant & contract revenue, capital assets, travel, and sales tax, for example, ensuring a strong reporting hierarchy and correct routing and approval of transactions. Failure to use these attributes in the appropriate manner within the chart of accounts can cause confusion during the review and approval process and lead to errors in accounting and financial presentation. This in turn could jeopardize future funding sources such as state appropriations, gifts, or contracts & grants that rely on accurate financial statements.
Lastly, these attributes are key in external financial and tax reporting. Improperly categorizing IU’s financial transactions impacts what is reported on tax forms submitted to local, state, and federal organizations which can result in fines, negative IRS findings, and additional audit implications. Not submitting or incorrectly representing the financial data for the university can have major impacts on funding.
Indiana University’s Object Code Consolidation Hierarchy
All object levels report to a higher object consolidation code and are grouped with similar object levels for reporting presentation purposes. There are less than 30 object consolidation codes within IU’s Chart of Accounts. Examples of object consolidation codes include liabilities (LIAB), indirect cost recovery income (IDIN) and financial aid (SCHL). A full list of object consolidation codes is available here.
All object codes report to a higher object level code and are grouped with similar object codes for reporting presentation purposes. In other words, level codes are made up of a combination of related object codes. There are less than 100 object levels within IU’s Chart of Accounts. Examples of object levels include academic salaries (ACSA), taxes (TAX) and repairs and maintenance (R&M). A full list of object levels is available here.
An object code classifies a financial transaction as an income, expense, asset, liability, or fund balance. Object codes store information about financial transactions and categorize activity based on the nature of the transactions. There are over 3,000 unique object codes within IU’s Chart of Accounts. In the Kuali Financial System (KFS), object codes are unique to a fiscal year and chart code. Object codes are automatically generated for the subsequent year prior to budget construction.
Object codes consist of a four digit code and can remain the same over multiple fiscal periods within the same chart code. While every effort is made to keep object codes consistent across charts, there is some variability. For example, in the BA chart, object code 1470 may be used for Parking Garage - Poplars while the same 1470 object code is used for Other Gifts within the IU chart and for Jumpstart & Unlock Fees in the SE chart. Ensure when recording financial transactions that both the correct chart code and object code are used. The Office of the University Controller is responsible for the creation and maintenance of a full object code dictionary; it is currently available here. Periodically check this dictionary for additional entries or changes.
Sub-object codes are tools that allow departments to further divide the activity of an object code as they choose. The main purpose of a sub-object code is for budgetary and expense tracking along with internal reporting purposes. Sub-object codes are unique to both an account and an object code and will assume all attributes of the associate object code. For example, a department might create sub-object codes within the office supplies object code to track purchases at a more granular level.
Appropriate Usage of Object Codes
IU's budget and reporting structures are built on object codes. Specific object codes may have certain implications:
- Reportable object codes trigger tax reporting, such as miscellaneous income on Tax Form 1099-MISC.
- Some object codes are associated with external compliance and certain IU policies related to grant & contract revenue, capital assets, travel, sales tax, etc.
- Some object codes drive document routing configurations.
Object codes, like account numbers, have some logic built into the code. The first digit of the object code allows users to easily identify the accounting classification (i.e., income, expense, asset, liability). These object code prefixes (first digit) allow IU employees to easily identify and communicate about financial activity. KFS, however, does not rely on the object code prefix logic. The below table identifies the associated financial statement line item by the prefix of an object code.
|0 or 1||Income|
|2 or 3||Salaries and Wages|
|4 or 5||General Expense|
|56 or 57||Benefits|
|6||Employee Travel (non-employee travel: 4088 and 4089)|
|9||Liabilities / Transfer Codes/Fund Balance|
Project codes are specialty codes which are used to track how much is spent on a particular project, especially when the project is supported by many accounts. Project codes are optional and are used in conjunction with object codes, levels and consolidation. Because project codes are not specific to an account, they can be used to track project activity that is shared across multiple accounts within an organization or even across multiple organizations.
An example of a project code might be to track activity related to a major campaign, such as the IU Bicentennial. The use of this code allows individuals to run specific reports to get a listing of all revenues and expenditures that have been assigned to the project. In order to submit a project code document, users must specify the following required attributes:
|Chart Code||Each campus has a unique chart. In addition, there are subsidiary charts on the Bloomington and Indianapolis charts to separate the activity of some auxiliary units. University Administration, which includes organizations that serve all IU campuses, also has a unique chart. A requirement for submission of project code.|
|Organization Code||The organization code is unique within the chart to which it belongs and identifies the organization the report is being run for along with identifying the level to which the project code belongs. A requirement for submission of project code.|
Requirements and Best Practices
This section outlines requirements related to the Chart of Accounts – Consolidation, Object Level and Object Codes, as well as best practices. While not required, the best practices outlined below allow users to gain a better picture of the entity’s financial health and help identify potential issues on a more frequent basis. This allows organizations to identify errors, mistakes and pitfalls which can be remedied quickly and prevent larger issues in the future.
- Fiscal officers should be knowledgeable of all the Chart of Account- Consolidation, Object Level and Object Codes standard listed within the document. In addition, fiscal officers should review the accounting Glossary to gain pertinent knowledge of accounting at IU.
- It is the responsibility of the fiscal officers to ensure the proper usage of individual object codes during the object code selection process. Refer to the object code dictionary to identify object codes with additional external reporting requirements. Contact your RC fiscal officer or campus business office for internal reporting requirements related to proper object code usage.
- If users have questions regarding the chart structure or attributes, contact the University Accounting and Reporting Services team at the firstname.lastname@example.org.
- For additional information on the structure of the chart of accounts, attend the KFS Training Series held by the Financial Training & Communications team. Register by visiting the training website.