Report highlights Financial statement audit: Arizona State University

              New Standards Change the
Focus of Financial Reporting
During fiscal year 2002, the University
implemented Governmental Accounting
Standards Board (GASB) Statement No.
35, Basic Financial Statements—and
Management’s Discussion and
Analysis—for Public Colleges and
Universities. This Statement establishes
new external financial reporting standards
for public colleges and universities.
The Office of the Auditor General has
worked closely with all three state
universities to assist them in
implementing these new reporting
requirements.
2002
Year Ended June 30, 2002
Arizona State
University
Subject
Arizona State University
issues financial
statements annually.
The University is
responsible for preparing
financial statements,
maintaining strong
internal controls, and
demonstrating
accountability for its use
of public monies. As the
auditors, our job is to
determine whether the
University has met its
responsibilities.)
Our Conclusion
The information in the
financial statements is
reliable. This information
is also incorporated in
the State’s
Comprehensive Annual
Financial Report.
REPORT
HIGHLIGHTS
FINANCIAL STATEMENT AUDIT
Office of the Auditor General
Assists Universities in
Implementing New Financial
Reporting Standards
At the request of the three university
comptroller’s, we attended a series of
meetings, answered specific questions,
and provided general guidance and
advice on implementing the new
reporting standards. We also reviewed
draft financial reports that the universities
prepared and provided comments
regarding the universities’
implementation of the new reporting
requirements.
GASB Statement No. 35 requires
universities to present financial
statements on a consolidated basis to
focus on the university as a whole;
previously, financial statements focused
on the accountability of individual fund
groups. The new standards require three
basic financial statements: Statement of
Net Assets, Statement of Revenues,
Expenses, and Changes in Net Assets,
and Statement of Cash Flows.
Statement of Net Assets
The Statement of Net Assets reports all
assets and liabilities using the accrual
basis of accounting, which is similar to
the accounting that most private-sector
institutions use. Net assets, the
difference between assets and
liabilities, are one way to measure the
University’s financial health. Net assets
include three major categories. The
first category—invested in capital
assets, net of related debt—shows the
University’s equity in property, plant,
and equipment. The next category is
restricted net assets. Restricted net
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assets show the amount of net resources
available for certain University
expenditures. These net assets must be
used for purposes determined by donors
and external entities that have placed
purpose restrictions on the use of those
resources. The third category is
unrestricted net assets—the net
resources available to the University to
fund general operations. The chart to the
right illustrates the components of the
University’s net assets as of June 30, 2002.
Statement of Revenues,
Expenses, and Changes in
Net Assets
The Statement of Revenues, Expenses,
and Changes in Net Assets presents the
University’s operating results, as well as
nonoperating revenues and expenses.
Resources generated from the
University’s primary activities, such as
instruction, public service, and research,
are considered operating revenues. All
other resources are considered non-operating
revenues, even though those
resources are used for operating costs.
The summary to the right provides a
break down of the University’s operating
and nonoperating revenues for the year
ended June 30, 2002.
Statement of Cash Flows
The Statement of Cash Flows provides
information about cash receipts and cash
payments during the year. This
statement helps users assess the
University’s ability to generate net cash
flows to meet its obligations as they
come due, and the need for external
financing. The summary to the right
shows the net cash flows from each of
the University’s major activities.
Net Assets
As of June 30, 2002
(In Millions)
$643
$123
$103
Invested in capital assets
Restricted
Unrestricted
Operating and Nonoperating Revenues
For the Year Ended June 30, 2002
(In Millions)
Operating Revenues
Student tuition and fees $188
Governmental grants and contracts 123
Other revenues 4
Sales and services 105
Total operating revenues $420
Nonoperating Revenues
State appropriations $320
Share of state sales tax
revenues (TRIF) 18
Gifts 79
Other nonoperating revenues 3
Total nonoperating revenues 420
Total revenues $840
Cash Flows
For the Year Ended June 30, 2002
(In Millions)
Cash Flows from
Operating activities $(302)
Noncapital financing activities 383
Capital financing activities 100
Investing activities (167)
Net increase in cash $ 14
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Privatization of Student
Housing and Campus
Energy Management
The University has entered into several
privatization arrangements with
management firms to construct on-campus
student housing and main-campus
energy management projects.
In order to finance these projects, the
University assisted the management
firms in issuing tax-exempt debt. The
debt terms state that the University is not
responsible for repayment in the event of
a default by the management firm.
Therefore, the debt associated with these
projects is not recorded in the
University’s financial statements.
At June 30, 2002, outstanding debt
totalled $32.1 million for two privatized
arrangements. The University is planning
to complete two similar financing
arrangements for $50 million in late 2002.
Completed privatized projects and those
currently under construction are as
follows:
Main Campus
• Facilities to house 330 sorority members.
• New air conditioning chillers.
• Replacement of inefficient lighting fixtures
and equipment with new, low-voltage
lighting and energy-efficient equipment.
ASU East
• Renovation and conversion of existing
base housing to student and faculty/staff
housing.
• New air conditioning chillers.
ASU West (currently under construction)
• Student housing complex.
• Community center.
• Swimming pool.
Arizona State University
REPORT
HIGHLIGHTS
FINANCIAL STATEMENT AUDIT
Year Ended June 30, 2002
A copy of the full report
can be obtained by calling
(602) 553-0333
or by visiting
our Web site at:
www.auditorgen.state.az.us
Contact person for
this report:
Doug Haywood
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