GASB 103 for Community Colleges: Focus on Noncapital Subsidies and Student Aid Classification

Practical Guidance from Maher Duessel’s Community College Specialists

GASB Statement No. 103 will change how community colleges present their financial story, especially in the statement of revenues, expenses, and changes in net position. The biggest practical shift is not recognition or measurement. It is classification and presentation. For colleges that have historically shown large operating losses because appropriations, grants, and student aid were pushed below operating income, GASB 103 should produce a more understandable operating picture.

The Two Changes Community Colleges Will Notice First

First, GASB 103 creates a new non-operating category called noncapital subsidies. A subsidy exists when the college receives resources for which it does not provide goods or services to the other party, and those resources directly or indirectly keep current or future tuition, fees, or charges lower than they otherwise would be. Those amounts are shown after operating income (loss), with a new subtotal for operating income (loss) and noncapital subsidies.

Second, Pell Grants move to operating revenue. NACUBO’s (National Association of College and University Business Officers) public institution guidance notes that Pell Grants are awarded to named students and used to pay tuition and other costs, but they do not meet the subsidy test because they do not keep institutional fees lower. As a result, Pell Grants are operating revenues under GASB 103.

For community colleges, this distinction matters. Broad institutional support such as state appropriations, county appropriations, and certain foundation support for college programs will often be evaluated as noncapital subsidies if they subsidize the cost of providing education. By contrast, grants tied to eligible expenses, milestones, reimbursement terms, or required program activity are more likely to be operating revenues because they are connected to ongoing program delivery.

That means colleges should revisit the classification of student financial assistance and grant programs. Pell Grants should be operating revenue. FSEOG (Federal Supplemental Educational Opportunity Grant) and Federal Work-Study programs will typically be considered operating income as well, particularly because these programs are tied to identified students, eligible expenditures, or required program activity rather than unrestricted institutional support.

Implementation Items Community Colleges Should Update Now:

• Add a separate caption for noncapital subsidies in the statement of revenues, expenses, and changes in net position, and add the required subtotal for operating income (loss) and noncapital subsidies.
• Revise the summary of significant accounting policies so the operating revenue and nonoperating revenue discussion reflects GASB 103 definitions and no longer says appropriations and governmental and private grants are nonoperating by default.
• Update note disclosures that currently describe where appropriations and grants are recorded so they align with the new classification model.
• Add GASB 103 to adopted or newly implemented accounting pronouncements and present the adoption as a change in accounting principle under GASB 100, including related disclosure considerations.
• Re-present or re-classify prior year comparative presentation as needed so comparative statements reflect the new display model.
• Reassess student aid classifications, specifically Pell, FSEOG, and Work Study, rather than carrying forward old nonoperating classifications.
• Re-evaluate foundation grants, program support, and appropriations to determine whether they are noncapital subsidies or operating grants based on substance and restrictions.
• Update the chart of accounts and reporting mappings so noncapital subsidies can be captured separately from other nonoperating revenues and expenses.

How Maher Duessel Is Prepared To Guide You

If you currently work with Maher Duessel on your audit, you can be assured that all of your audit team members receive specialized college training on GASB updates (along with other relevant topics) throughout the year. We recently completed a specialized training in May addressing many key issues impacting community colleges including the following:

• GASB reporting requirement updates (along with FASB requirements applicable to community college foundations and private nonprofit universities)
• Agreed Upon Procedures for Pennsylvania Department of Education requirements (and the Annual Financial Report submission for Maryland community colleges)
• Key audit areas for community colleges including:
• Cash and cash equivalents
• Accounts receivable—students and grants
• Capital assets, including lease and SBITA (Subscription Based Information Technology Agreement) right-of-use assets and related obligations
• Accounts payable and accrued liabilities
• Bond debt
• Pension and OPEB (Other Post Employment Benefit) obligations and related inflows/outflows
• Defined contribution plans
• Student tuition and fees
• Government grants (federal, state, and county) and related expenditures, including Single Audit compliance considerations for federal awards
• Payroll expenses
• Occupancy expenses

The Bottom line

For community colleges, GASB 103 changes how readers will understand operations, subsidy dependence, and the role of student aid. Pell Grants moving to operating revenue and the new noncapital subsidies category should materially improve readability. The real work now is updating captions, policies, footnotes, prior-year presentation, and grant-classification logic before implementation year-end.