Compliance Audit Report

Document Sample
Compliance Audit Report Powered By Docstoc
					                             Compliance Audit Report

SACS Core Requirement 2.11
2.11. The institution has a sound financial base and demonstrated financial stability,
and adequate physical resources to support the mission of the institution and the
scope of its programs and services. The member institution provides the following
financial statements: (a) an institutional audit (or Standard Review Report issued in
accordance with Statements on Standards for Accounting and Review Services issues
by the AICPA for those institutions audited as part of a system wide or statewide
audit) and written institutional management letter for the most recent fiscal year
prepared by an independent certified public accountant and/or an appropriate
governmental auditing agency employing the appropriate audit (or Standard Review
Report) guide; (b) a statement of financial position of unrestricted net assets,
exclusive of plant assets and plant-related debt, which represents the change in
unrestricted net assets attributable to operations for the most recent year; and, (c)
an annual budget that is preceded by sound planning, is subject to sound fiscal
procedures, and is approved by the governing board.

Judgment of Compliance
Partial Compliance. The institution meets some, but not all, aspects of the
requirement. For those aspects meeting the requirement, the institution provides a
convincing argument in support of its determination and a list of documents
demonstrating compliance. For those aspects not meeting the requirement, the
institution provides the reason for checking partial compliance, a description of plans
to comply, and a list of documents that will be used to demonstrate compliance.

Statement of Rational For Judgment of Compliance
Texas A&M University-Kingsville defines a sound financial base, demonstrated
financial stability, and adequate physical resources as the ability to meet the mission
of the institution (Texas A&M University-Kingsville Accreditation and Mission
Statement [1]). The university’s net assets are comprised of capital assets (58.6%),
education funds (14.9%), endowment and permanent funds (7.5%) and unrestricted
funds (19%). Figure I below shows the increase (decrease) in each fund between
2003 & 2002 fiscal years.
           Figure 1: Increase (Decrease) in Net Assets 2002-2003
                                                      Increase               %
                          2003          2002          (Decrease)             Change
Capital Assets (net of    $51,890,122   $48,095,200 $3,794,922               7.89%
Debt)
Education                 13,223,032    10,053,604    3,169,428              31.53%
Non-expendable            6,569,913     4,428,540     2,141,373              48.35%
endowment &
permanent funds
Expendable endowment      82,731        84,242        (1,511)                (1.79%
& permanent funds                                                            )
Unrestricted              16,822,818    17,011,761    (188,943)              (1.11%
                                                                             )
Total Net Assets           $88,588,616       $79,673,347     $8,915,269      11.19%
As shown, with the exception of very small decreases in two areas, net asset
accounts experienced growth, leading to an overall increase in net assets of 11.19%.
An analysis of revenues & expenses reveals similar results as shown in Figure 2.
Operating, non-operating and other revenue accounts increased sufficiently to cover
the increase in operating expenses, leading to a large increase in “Change in Net
Assets” as compared to the prior year.
 Figure 2: Increase (Decrease) in Revenues, Expenses & Changes in Net
                                 Assets
                                                   Increase
                          2003          2002       (Decrease) %
                                                              Change
Operating Revenues        $47,903,713 $40,464,91   $7,438,799 18.38%
                                        4
Operating Expenses        89,643,477    84,816,979 4,826,498  5.69%
Net Non-Operating         46,095,790    43,119,602 2,976,188  6.90%
Revenues
Other Revenues, Expenses,
Gains, Losses & Transfers 4,559,245     3,769,764  789,481    20.94%
Change in Net Assets      8,915,271     3,769,764  6,377,970  251.37%


The above trend speaks to the sound financial stability of the university. (Please
note that only two years were used for comparative purpose as the university
implemented GASB 34/35 into their financial statements. Years prior to 2002 were
prepared according to a different set of governmental accounting standards.
Including this data in the trend analysis would skew the results and yield misleading
information.) The university is prepared to present a three-year analysis for the
SACS team during the on-site visit. Further documentation that illustrates the sound
financial base and financial stability of Texas A&M University-Kingsville is contained
in the response to SACS Comprehensive Standard III.1-5. Documentation
referencing Texas A&M University-Kingsville’s adequate physical resources to
support the mission of the institution and the scope of its programs and services is
included in the response to SACS Comprehensive Standard III.6-7.
A. Institutional Audit (or Standard Review Report)
Texas A&M University-Kingsville is audited by the State of Texas, State Auditor’s
Office in a state-wide audit and in strategic audits keyed to programmatic areas.
Authorizing legislation for the State Auditor’s Office reviews are contained in the
Single Audit Act issued by the U.S. Office of Management and Budget (OMB) (U.S.
OMB Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations [2], and Texas Administrative Code, Title 19 Education, Part 1 Texas
Higher Education Coordinating Board, Chapter 13 Financial Planning [3]). Additional
audits are performed by the Texas A&M University System Internal Audit Office on
expenditures, units, or other management identified operational activities in
accordance with Texas A&M University System policies (Texas A&M University
System Policy Manual. Table of Contents: Sections 21, 27, and Texas A&M
University-Kingsville component [4]). The university is working with Internal Auditors
to commence the standard review with the completion date of the annual financial
report.
Texas A&M University-Kingsville, member institution of the Texas A&M University
System is scheduled to have a Standard Review Report performed in Fall 2004. The
A&M System auditors, in collaboration with state auditors, will visit our campus to
perform the review. Sufficient time will be allotted to complete the annual financial
report for FY 2004 prior to the commencement of the standard review. In addition,
the State Auditor’s Office will have time to prepare the management letter for the
most recent fiscal year completed (FY ends August 31, 2004). Updated financial
statements will be available to be included in review.
B. Schedule of Changes in Unrestricted Net Assets, Excluding Plant and Plant
Related-Debt
Annual financial statements (Texas A&M University System, Texas A&M University-
Kingsville Annual Financial Report For The Years Ended August 31, 2003, August 31,
2002 and August 31, 2001 [5]) are prepared in conformity with generally accepted
accounting principles as prescribed by the Governmental Accounting Standards
Board (Governmental Accounting Standards Board [6] and Governmental
Accounting Standards Board, GASB Statement 34 & 35, Basic Financial Statements
and Management Discussion and Analysis for Public Colleges and Universities [7]).
Surpluses or deficits from operations for the fiscal year are included in the
“Statement of Changes in Fund Balance” and the “Statement of Current Funds
Revenues, Expenditures and Other Changes” (Texas A&M University-Kingsville Fiscal
Year 2004 Operating Budget, Statement of Changes in Fund Balance and Texas A&M
University System [8], Texas A&M University-Kingsville Annual Financial Report For
The Years Ended August 31, 2003, August 31, 2002 and August 31, 2001 [5]) and
under the new format in the “Statement of Revenues, Expenses, and Changes in Net
Assets, and Statement of Cash Flow.” Financial statements are audited by the Texas
State Auditor’s Office and Federal Auditing agents using (U.S. OMB Circular A-133.
Audits of States, Local Governments, and Non-Profit Organizations [2]).
Effective with the 2001-2002 fiscal year, the Governmental Accounting Standards
Board (GASB) has provided a new financial statement format, as detailed in GASB
Statements 34 and 35. The new standards substantially change the financial
statement format for public universities (GASB 34 and 35 and The New Financial
Reporting Model for State Entities [9]). Effective with the year ended August 31,
2002, Texas A&M University-Kingsville prepared statements in accordance with the
new format, which reports a “Statement of Revenues, Expenses, and Changes in Net
Assets, and Statement of Cash Flow.”
               Figure 3: Two-Year Financial Statement Excerpt

                               FY03               FY02                 Change
Unrestricted Net Assets
                               16,822,818         17,011,761           (188,943)
less plant, property and
equipment                      (51,890,122)       (48,095,200)         (3,794,922)
**net of debt
                               30,313,794         32,348,987           (2,035,193)
URNA not including plant &
debt                           (4,753,510)        1,265,548            (6,019,058)


Net Tuition
                               18,118,602         16,101,701           2,016,901
Auxiliaries
                               5,971,435          6,082,543            (111,108)
Federal Fin Aid Grants
                             17,307,833   14,613,643    2,694,190
Other Income
                             6,505,843    3,667,025     2,838,818
Total Operating Revenue
                             47,903,713   40,464,912    7,438,801

Gifts
                             6,523,508    3,556,497     2,967,011
Investment Income
                             1,086,209    1,291,224     (205,015)
Gains (Losses)
                             3,275        21,611        (18,336)
Other Nonoperating Income
                             38,482,798   38,250,270    232,528
Total Nonoperating Revenue
                             46,095,790   43,119,602    2,976,188
TOTAL REVENUE
                             93,999,503   83,584,514    10,414,989

Instructional
                             31,169,684   30,037,845    1,131,839
Academic Support
                             3,012,856    2,887,862     124,994
Student Services
                             4,929,723    4,518,524     411,199
Institutional Support
                             10,313,913   10,058,860    255,053
Scholarships
                             12,321,995   10,991,276    1,330,719
Auxiliary
                             8,894,937    7,932,395     962,542
Research
                             8,670,747    7,849,348     821,399
Public Service
                             201,355      99,241        102,114
Major Repairs &
Maintenance of Plant         75,189       721,429       (646,240)
Operation & Maintenance of
Plant                        7,717,118    7,296,105     421,013
Less Depreciation
                             2,335,961    2,424,095     (88,134)
TOTAL EXPENSES
                             89,643,478   84,816,980    4,826,498


Change
                             4,356,025    (1,232,466)   5,588,491

** Debt Payment
Reimbursed by State          31,107,100   29,369,774    1,131,839
C. Annual Budget
Texas A&M University-Kingsville has an effective planning system, which is overseen
by the Texas A&M University-Kingsville Council for Assessment and Planning (CAP)
(Texas A&M University-Kingsville, Council for Assessment and Planning [10]).
This committee, with input from the President and the Provost, communicates the
start of an annual budgeting and planning cycle to the university community. Budget
needs and plans are built from a bottom-up process that begins in the individual
academic departments or administrative units, and is then aggregated into college
and division budget plans. The CAP committee is charged with developing the final
institutional strategic plan (University Strategic Plan FY 99 Update, Report date
December 07, 1999 [11]) based on university goals and objectives, which they
identify. The CAP committee is further charged with the evaluation of institutional
effectiveness (Institutional Effectiveness Report 2004 [12]).
   Figure 4: Three-Year Financial Statement Excerpt - Operating Budget

Revenues              FY 2004             FY 2003              FY 2002

 State
Appropriations        40,358,048          40,118,365           39,596,444
 Higher Education
Fund                  3,555,651           3,555,651            3,555,651
 Tuition and Fees
                      23,945,200          19,719,700           17,182,360
 Remissions and
Exemptions            1,749,250           1,570,650            1,579,390
 Tuition Discounts
                      (3,150,000)
 Contracts, Grants
and Gifts             21,079,110          21,251,548           18,300,657
 Sales and
Services              5,673,800           5,534,300            5,147,300
 Investment and
Interest              743,463             1,389,687            1,568,570
Total Revenue
                      93,954,522          93,139,901           86,930,372

Expenses
 Salaries - Non-
Faculty               19,623,731          18,344,597           17,858,421
 Salaries - Faculty
                      18,999,328          18,582,911           19,093,886
 Wages
                      2,448,150           2,365,796            2,104,089
 Benefits
                      9,801,809           10,429,940           9,744,567
 Utilities
                      3,121,500           2,771,000            2,771,000
 Scholarships and
Grants               16,561,197           15,945,091           14,349,685
 Scholarship
Discounts            (3,150,000)
 Operations and
Maintenance          18,152,725           19,823,455           17,926,959
Total Expenses
(Less Service        85,558,440           88,262,790           83,848,607
Dpts)

Net Service
Departments          (35,000)             (35,000)             (45,000)

Total Expense
                     85,523,440           88,227,790           83,803,607

Transfers
 Retirement of
Indebtedness         (3,968,631)          (4,506,801)          (3,050,233)
 Other Transfers
                     (120,000)            (106,000)            (96,200)
Total Transfers
                     (4,088,631)          (4,612,801)          (3,146,433)

Net Change in
Fund Balance         4,342,451            299,310              (19,668)



Revenue projections are completed as early as possible to provide the President with
data needed to make sound fiscal decisions. Revenue estimates provide an upper
bound within which expenditures are developed to remain in budget. The President,
after consulting with the Vice Presidents and reviewing the Legislative Appropriation
Request, makes final decisions relating to budget allocations. The allocations are
reviewed by the university comptroller to ensure compliance with Texas A&M
University System guidelines (Texas A&M University System, Office of Budgets and
Accounting, FY 2004 Budget Information [13]) and Board of Regents financial
guidelines (Texas A&M University System, Bylaws of the Board of Regents of The
Texas A&M University System [14]). The Texas State Legislative Budget Board (LBB,
Agency Instructions, Legislative Appropriations Requests: Institutions and Agencies
of Higher Education [15]) and the Texas State Comptroller (Texas State Comptroller
Reporting Requirements and Technical Guidance for Annual Financial Reports of
State Agencies & State Colleges and Universities [16]) issue advisements and policy
guidelines on budget preparation and review requirements. The annual operating
budget (Texas A&M University-Kingsville, Operating Budget for the Fiscal Year Ending
August 31, 2004 [8]) is submitted to the Texas A&M University System Board of
Regents for final approval (Texas A&M University System, Minutes of the Board of
Regents, July 2002 Minutes [17]).

Documentation
 Source or Document              Web Address or Document             Date Website
        Name                            Location                       Accessed
[1] Texas A&M                http://www.tamuk.edu/administration
University-Kingsville        /accred_mission.shtml                      July 2004
Accreditation and Mission
Statement
[2] U.S. OMB Circular A-     http://www.whitehouse.gov/omb/circu        July 2004
133: Audits of States,       lars/a133/a133.html
Local Governments, and
Non-Profit Organizations
[3] Texas Administrative     http://info.sos.state.tx.us/pub/plsql/re
Code, Title 19:              adtac$ext.ViewTAC?tac_view=4&ti=19         July 2004
Education, Part 1: Texas     &pt=1&ch=13
Higher Education
Coordinating Board,
Chapter 13: Financial
Planning
[4] Texas A&M University     http://sago.tamu.edu/policy/tocmain.
System Policy Manual.        htm                                        July 2004
Specifically Sections 21,
27, and Texas A&M
University-Kingsville
component section
[5] Texas A&M University     http://sago.tamu.edu/soba/afr/afr.ht
System, Texas A&M            m                                          July 2004
University-Kingsville
Annual Financial Report
For The Years Ended
August 31, 2003, August
31, 2002 and August 31,
2001
[6] Governmental             http://www.gasb.org/
Accounting Standards                                                    July 2004
Board
[7] Governmental             Office of Assistant Vice President,
Accounting Standards         Finance and Administration, College        July 2004
Board, GASB Statement        Hall, Room 122
34 & 35, Basic Financial
Statements and               (Document is too large to scan.
Management Discussion        Details actual accounting standards)
and Analysis for Public
Colleges and Universities.
[8] Texas A&M                http://sago.tamu.edu/soba/budget/FY
University-Kingsville        _2004/TAMUK_670_04.pdf                     July 2004
Fiscal Year 2004
Operating Budget,
Statement of Changes in
Fund Balance
[9] GASB 34 and 35 and       http://www.window.state.tx.us/compt
The New Financial            rol/san/gasb/gasb34_intro.html             July 2004
Reporting Model for State
Entities.                    (Provides overviews of statements to
                             be applied. Complete standards are
                             referenced above.)
[10] Texas A&M              http://cap.tamuk.edu/
University-Kingsville,                                             July 2004
Council for Assessment
and Planning (CAP)
[11] University Strategic
Plan FY 99 Update           http://cap.tamuk.edu/UnivStratPlan/U   July 2004
(Report date December       SP99.pdf
07, 1999)

[12] Institutional
Effectiveness Report        http://cap.tamuk.edu/PowerPoint/IEP/   July 2004
2004                        IEP_PPT.htm
[13] Texas A&M              http://sago.tamu.edu/soba/budget/bu
University System, Office   dget.html                              July 2004
of Budgets and
Accounting, FY 2004
Budget Information
[14]]Texas A&M              http://tamusbor.tamu.edu/bylaws.htm
University System,                                                 July 2004
Bylaws of the Board of
Regents of The Texas
A&M University System
[15] LBB, Agency            http://www.lbb.state.tx.us/LAR/Highe
Instructions, Legislative   rEd_Documents.htm                      July 2004
Appropriations Requests:
Institutions and Agencies
of Higher Education
[16] Texas State
Comptroller. (Updated       http://www.window.state.tx.us/fm/pu    July 2004
June 2004) Reporting        bs/afrrptreq/
Requirements and
Technical Guidance for
Annual Financial
Reports of State
Agencies & State
Colleges and Universities
[8] Texas A&M               http://sago.tamu.edu/soba/budget/FY
University-Kingsville,      _2004/TAMUK_670_04.pdf                 July 2004
Operating Budget for the
Fiscal Year Ending
August 31, 2004
[17] Texas A&M              http://tamusbor.tamu.edu
University System,                                                 July 2004
Minutes of the Board of
Regents, August 2003
Minutes, p. 4

				
DOCUMENT INFO