Comparing For Profit and Non for Profit Colleges Essay.
Colleges and university have slowly become one of the stepping stones into the working world today. People go to colleges for higher education with the intention of earning degrees in which they can use in their respective fields. Some example degrees that people pursue are Medical, Law, Business, Accounting, and Science Degrees. Through the years the idea of college was that it was optional and it was a door for better life and job. However in the modern times, it become a necessity.
It all started when the colleges once single- gender institutions target specific students in their respective demographics.
Today, the college market has now been divided into two major categories: Not-for-Profit Colleges and For-Profit colleges. Not-For-Profit Colleges are institutions that are interested in serving the student’s needs by providing necessary education to the student. The Not-For-Profit organization are tax exempt and have a board of trustees that makes decisions. For-Profit Colleges are run like a business in which their goal is to generate income for their owners and shareholders.
There are no board of trustees at For-Profit College and the owner and shareholders control the decision on which is best for the institution.
Although the objective for both Not-for-Profit Colleges and For-Profit College is to provide their students an education in which they can use for their future, both institution have great differences in which their organizations are run. Although the primary objective For-Profit colleges is to provide an education, they are merely a business in which their goal is to earn a profit. Like any business, the For-Profit Colleges can be setup as a sole proprietorship, partnership, or even a subsidiary of a larger company.
The For-Profit College can also be setup as a corporation that have stocks traded on the stock markets. They will try to bring earnings and a return on investment for all their shareholders and investors. They can have great flexibility because at the end of the day, the goal for the For-Profit College is to make money and only that. The instructors that are hired at For-Profit Colleges usually have a very different approach to their teaching compared to Non-For-Profit Colleges. Usually they are merely there to carry out the lesson plans in which was designed by the institution.
Majority of the lesson plan given to each student is standard which means the instructors do not have the liberty to create their own curriculum or lesson plans. This is also due to the purpose of the education given is to assist the student in getting specific jobs with specific job functions. The courses at the For-Profit college is to help the students get better jobs in the market while the courses at Not-For-Profit College intend to allow the student learn and grow within their respective fields.
Students that enter For-Profit colleges already have a plan in terms of type of jobs they would like to pursue and they enroll in the necessary courses while some students at Not-For-Profit College have no idea which career that they would like to pursue. Not-For-Profit college help you learn and gain the knowledge in the field that you’re interested in while For-Profit colleges prepare you for the specific job that you want to do. The admission process for For-Profit schools are not as selective as the one in Not-For-Profit College.
There isn’t much prior evaluation of the student since their main goal is to make a profit. They tend to be more flexible in terms of their requirements and appeal to students of all ages and races. Modern day classes can be taken online and at more convenient times such as nights and weekends to accommodate students that work full time. Online has also been the new trend because of the lower overhead costs for the For-Profit institution. For-Profit institutions tend to not have a campus like the Not-For-Profit colleges do. For-Profit colleges classes is usually at their own building or leased space.
There isn’t any services such as on-campus food or housing that is available to the students at For-Profit institutions. The college provides students with the education that they need for their desire jobs rather than a college experience that a Not-For-Profit college can provide. For Profit institutions conduct their accounting the same as any regular business would do. Their main goal is to make a profit just like all businesses would do. For-Profit institutions must comply with the Federal Accounting Standard Board. The tuitions are recorded as revenue while the expenses include leases, staff, and maintenance expenses.
For-Profit colleges budget system must include tools to forecast budgets, manage variance and generate financial reports. The budget forecast is designed to estimate revenue and expenses to its income center, administrative cost structure, and its academic schedule. The income center budget includes enrollments, revenue, and expenses by academic period. Administrative expenses include administrative costs per student and personnel pay ranges. The budget should also include financial report to show if the institution is profitable. Statements such as cash flow statements, net income, and balance sheet should all be included.
The budget must also be flexible enough in case that their projections aren’t accurate. They should be easily accessible so that managers can routinely check if their performance is above, below, or even on target. To determine if the institution is on track with its budget and strategic plans, they would measure their six categories in their budget to get a better picture of the institution’s performance. They are new students, enrollment, cost performance, revenue, net income, and cash flow. This way they would also be able to measure the efficiency of their institution also.
The goal for Not-For-Profit Colleges is to provide students with higher education and help them advance in a particular field. Not-For-Profit Colleges are traditional college such as community colleges, state universities, and liberal arts colleges. These institutions gain funding to provide their services from the government subsidy, tuition fees, and donations. All the income that are received is strictly used for institution purposes. Some examples are professors, staff, maintenance, utilities, or even computers that the school needs and student needs.
All the money is given back to the institution in some way. The professors hired at a Not-For-Profit College design their own courses and create their own course curriculum and lesson plan. They can provide the education in their courses with their own individual styles and lesson plans. The professors are under the guidance of the Board of Trustees, which is composed of different representatives that make decisions for the college. Not-For-Profit colleges are mainly to provide education for the student who are enrolled in their institution.
The classes are usually on a campus in which the student spends a majority of their time at. The board of Trustees focuses on improving their campus for the student. The Board of Trustees is constantly making decisions from an academic, campus, and efficiency perspective in order to provide the best possible service for their students. Not-For-Profit Colleges select their students through a vigorous and selective process. Students usually express interest in attending the college and then the college decides if the student would be a good fit for the college.
After being accepted, the student would be able to earn a scholarship to help with the room and board that the college charges. Not-For-Profit Colleges are selective of the students since they strive to serve students who would fit the reputation of the institution. This selective process allow college to focus on the needs of the students that are a good match for the college. From an accounting perspective Not-For-Profit colleges follow the rules of Governmental Accounting Standards Board who is responsible for Generally Accepted Accounting Principles used by the United States.
The Governmental Accounting Standards Board issues statements that deal with the accounting principles and financial reporting rules of government and other Not-For-Profit organizations. Like all Not-For-Profit organization, these college contribute without expecting commensurate returns. Their main purpose is to provide education to the students that enroll in their school. Most of their income for these colleges come from the tuitions and fees they receive from their student. Other income comes from donation and government subsidies.
When a Not-For-Profit College receives tuition payments and fees in full from students the college is supposed to record it at a gross amount, as any revenue would be recorded. If a student meets certain criterion that allows them to attend a publicly funded not-for-profit institution, tuition may be waived in the form of a tuition waiver. Tuition Waivers are reported as a contra-revenue account reducing the revenue account. If the college has any debts, they are recorded just as businesses record them as the debts are recorded with institutional support expenses.
Students may pay for college with scholarships which are essentially amounts contributed for the education of a selected individual. Scholarships are given for a range of reasons including high academic standing, membership in certain societies, or awards. However there are two main sources of scholarships which are an outside donor or the scholarship is awarded by the college itself. If the scholarship is from an outside donor the not-for-profit college simply collects the amount receivable from the donor.
If the scholarship is awarded by the college itself the accountant reduces the college’s accounts receivable. This reduction in the accounts receivable is recorded as an expense to education and general student aid. Certain expenses of a not-for-profit college are unrestricted net assets classified as instruction expense, research expense, public service expense, academic support, student services, institutional support, operation and maintenance of plant and student aid. Not-For-Profit Colleges cannot operate on tuition fees alone as all the money is immediately put into the school.
Fortunately as a Not-For-Profit organization these colleges may receive governmental subsidies as support revenue. There are two types of government subsidies classified as unrestricted and restricted. Unrestricted subsidies are intended for the college to use in general operations. The Board of Trustees also has the power to decide whether a subsidy is unrestricted. Restricted subsidies can be split into either temporarily or permanently. These subsidies often are given for a certain purpose such as an expansion or special project.
The restrictions on these subsidies refer to the amount that can be spent and when it can be spent. Sometimes the government may also provide students with grants, which are similar to scholarships in the sense that they are provided to help students reach their financial needs for school. Government grants can both be state or federal and come from government programs such as Pell or the Federal Supplemental Education Opportunity Grant. Similar to scholarships the college may either distribute the cash to the proper students or receive the amount that is to be distributed.
If the college decides to receive the grant then it is recorded as a liability in the “Grant Funds Held for Students” account. Not-For-Profit colleges usually also have an endowment fund which is used to help finance the operating expenses of the organization. Aside from the general endowment the institution may also have restricted endowments intended for specific purposes such as professorships, scholarships or fellowships. For cash received from permanent endowments it is recorded as a contribution and the income is restricted to student aid.
Any income received due to an endowment is temporarily restricted and the cash is meant to be spent on student aid. The other services that a Not-For-Profit College provides are the Auxiliary Services. The Auxiliary Services are the services and amenities of the campus. Examples of such services are residence halls, food services and the college athletic teams. These services are classified under unrestricted revenues and expenses. The total of the accounts from the auxiliary services are reported on the Statement of Activities for the College and subsidiary records are also kept.
The Statement of Activities for the Not-For-Profit College will usually list the Revenues combined with Total Net Assets Released from Restrictions for Operations to get the Total Revenues and Reclassifications. The next section is usually the Expenses section followed by any Net Change in Unrestricted Assets, Temporarily Restricted Assets and finally Permanently Restricted Net Assets. The Statement of Activities is then followed by a summary on the Change in Assets for the past year. Even though the main purpose of both For-Profit and Not-For-Profit is the same, the way that they function aren’t necessary the same.
The accounting standards and rules that they follow both are very different. Also the rules that both colleges follow are extremely different. Both colleges have their strength and weaknesses in their way that they serve their students. The student should chose the type of college they want depending on what their needs are. If the student is looking to advance their education they should be looking for a traditional Not-For-Profit College. If they are trying to land a job that has technical skills which are required, then the For-Profit College is a better option.