The Function Segment: Understanding the “Why” Behind University Spending

In previous articles in our Chart of Accounts (COA) series, we explored how key segments, including Entity, Source, Organization, and Activity, help organize the university's financial information.

Together, these segments help answer important questions about each transaction, including:

• Who is responsible for managing it?
• What funding source is being used?
• What is the purpose of the expense?

In this edition, we focus on the Function segment, which answers that final question. 

What Is the Function Segment?

The Function segment classifies expenses based on their purpose within the university’s mission and operations. While other COA segments identify where a transaction occurs, who manages it, and how it is funded, Function identifies the purpose of the expense.

This is a required segment for expense transactions, ensuring that financial activity is consistently categorized across all departments.

Why It Matters

The Function segment provides context by showing the purpose behind each expense. It ensures that spending is not only recorded accurately but also categorized according to the activity it supports.

By grouping expenses according to their purpose, Function helps translate financial activity into meaningful insight about how resources are used across teaching, research, service, as well as operations.

Common Function Categories

The university's Function categories follow standards established by the National Association of College and University Business Officers (NACUBO). Using these common classifications supports consistent financial reporting, enables meaningful comparisons with peer institutions, and aligns the university with widely accepted higher education practices.

• Instruction: Expenses related to teaching and academic program delivery.
• Research: Expenses supporting separately budgeted research activities.
• Public Service: Activities that serve external communities and partners.
• Academic Support: Libraries, academic administration, and other instructional support services.
• Student Services: Programs that support student engagement, development, and success outside the classroom.
• Institutional Support: Central administrative and operational functions that support the university as a whole.
• Auxiliary Operations: Self-supporting services such as housing, dining, and parking.

How Function Is Used

The Function segment plays an important role in financial reporting and analysis by:

• Enabling consistent classification of expenses across the university 
• Supporting meaningful financial reporting and benchmarking 
• Helping leadership understand how university resources are allocated across major functions and priorities 
• Improving transparency in how institutional funds are used

Because Function is applied consistently, it also allows for meaningful comparisons across departments and with peer institutions.

Questions Function Helps Answer

Because every expense is assigned a Function, the university can answer questions such as:

• How are university resources supporting instruction and research in a college or department?
• What portion of spending supports students directly?
• How are administrative and operational costs distributed?
• Are resources aligned with institutional priorities?

Key Takeaway

Whether reviewing departmental spending or preparing institutional reports, the Function segment provides the context needed to understand the purpose behind university spending and ensures expenses are classified consistently across the institution.

What Comes Next

In the next article in our Chart of Accounts series, we will explore Object Code and how it categorizes the type of expense, further completing the picture of how financial activity is recorded and understood.

For additional information on Function, please see the Quick Reference Guide (QRG).