Transcript No Slide Title

Financial Reporting
April 18, 2007
Office of the Comptroller
Financial Reporting
 Financial statement design
 Proper object code/fund usage
 Proper substantiation of object
code balances
 Timeliness
 Analytics
 Proper use of agency funds
Office of the Comptroller
Financial Reporting
 Financial statement design
 Statement of Position – line item classification principally
based on object code
 Statement of Activities – line item classification
principally based on org/fund purpose code and then
by object code
– Nonoperating section – comprised of all endowment,
capital and student loan fund activity
– Operating section – comprised of all other funds
 Functional expenses – line item classification based
entirely on org/fund purpose code
Office of the Comptroller
Financial Reporting
 Financial
statement
design
Statement of Financial Position
University of Pennsylvania
(thousands of dollars)
June 30,
2006
Assets
Cash and cash equivalents
Accounts receivable, net of allowances
of $11,224 and $10,763
Patient receivables, net of allowances
of $110,946 and $89,808
Contributions receivable, net
Loans receivable, net of allowances
of $3,083 and $3,147
Other assets
Investments, at fair value
Plant, net of depreciation
Total assets
Liabilities
Accounts payable
Accrued expenses and other liabilities
Collateral due broker
Deferred income
Deposits, advances, and agency funds
Federal student loan advances
Accrued retirement benefits
Debt obligations
Total liabilities
$
$
$
Net assets
Unrestricted
Temporarily restricted
Permanently restricted
Total liabilities and net assets
$
862,789
June 30,
2005
$
711,422
140,326
140,653
219,113
326,663
255,885
257,776
89,455
122,718
5,699,086
2,909,176
10,369,326
196,467
138,346
4,859,151
2,760,840
9,320,540
93,179
861,678
220,203
80,266
123,099
77,737
215,303
1,374,459
3,045,924
3,612,342
1,757,485
1,953,575
7,323,402
10,369,326
$
$
$
91,943
751,728
186,087
76,210
116,979
78,328
273,309
1,358,041
2,932,625
3,086,908
1,552,907
1,748,100
6,387,915
9,320,540
Office of the Comptroller
Financial Reporting

Financial statement design
Statement of Activities
University of Pennsylvania
for the years ended June 30, 2006 and 2005
(thousands of dollars)
Temporarily
Restricted
Unrestricted
Revenue and other support:
Tuition and fees
Student aid
Commonwealth appropriations
Sponsored programs
Indirect cost recovery
Contributions
Allocation of A.I.F. returns
Other investment income
Hospitals and physician practices
Sales and services of auxiliary enterprises
Other income
Independent operations
Net assets released from restriction
Total revenue and other support
$
Expenses:
Salaries
Employee benefits
Total compensation
Current expense
Interest expense
Student aid
Independent operations
Loss on extinguishment of debt
Depreciation
Total expenses
Increase (decrease) in net assets before nonoperating
revenue, net gains, reclassifications and other
Nonoperating revenue, net gains, reclassifications and other:
Gain on investment, net
A.I.F. income
Allocation of A.I.F. returns
Other investment income
Contributions
Change in minimum pension liability
Income from discontinued operations
Transfers to Phoenixville Foundation
Net assets released from restrictions
Increase in net assets before cumulative effect of change
in accounting principle
$
61,290
90,565
5,187
(170,193)
(13,151)
$
4,432,719
696,317
(143,384)
44,022
544,164
188,443
42,150 $
54,296
47,791
2,137,164
92,335
144,830
61,057
141,995
4,051,180
207,144
4,197,595
207,144
4,197,595
1,725,080
422,303
2,147,383
1,434,904
53,880
55,675
54,784
17,982
204,632
3,969,240
235,124
81,940
418,129
86,108
(148,457)
8,659
308,791
45,953
82,842
33,482
(54,296)
2,672
32,900
(43,432)
32,455
248,275
(13,151)
145,196
37,922
(57,892)
3,538
53,010
45,953
230,655 $
47,981
(90,565)
4,047
93,863
42,278
205
1,074
161,918
(68,252)
204,578
205,475
954,307
Permanently
Restricted
2005
$
50,833
81,848
4,342
(141,995)
(4,972)
696,317
(143,384)
44,022
544,164
188,443
92,983
136,144
52,133
2,137,164
92,335
144,830
61,057
4,046,208
1,725,080
422,303
2,147,383
1,434,904
53,880
55,675
54,784
17,982
204,632
3,969,240
(4,972)
76,968
147,125 $
38,815
(81,848)
4,654
73,902
(203)
(46,794)
46,794
(18,820)
$
752,489
(153,299)
44,866
552,219
194,012
100,083
148,457
87,973
2,386,850
93,820
166,381
58,868
Temporarily
Restricted
Unrestricted
1,850,597
488,563
2,339,160
1,491,238
51,103
56,009
52,941
544,254
Net assets, beginning of year
2006
1,850,597
488,563
2,339,160
1,491,238
51,103
56,009
52,941
68,252
Cumulative effect of change in accounting principle
Increase in net assets after cumulative effect of change
in accounting principle
Net assets, end of year
752,489
(153,299)
44,866
552,219
194,012
38,793 $
57,892
82,786
2,386,850
93,820
166,381
58,868
170,193
4,445,870
Permanently
Restricted
215,357
10,394
177
826
143,019
(257)
130,679
154,159
240,361
72,474
(136,144)
8,152
249,821
(43,432)
32,455
(460)
500,195
(18,820)
525,434
204,578
205,475
935,487
215,357
130,679
154,159
500,195
3,086,908
1,552,907
1,748,100
6,387,915
2,871,551
1,422,228
1,593,941
5,887,720
1,953,575
$ 7,323,402
1,748,100
$ 6,387,915
3,612,342
$
1,757,485
$
$
3,086,908
$
1,552,907
$
Office of the Comptroller
Financial Reporting

Financial statement design
Statement of Activities
University of Pennsylvania
for the years ended June 30, 2006 and 2005
(thousands of dollars)
Temporarily
Restricted
Unrestricted
Revenue and other support:
Tuition and fees, net
Commonwealth appropriations
Sponsored programs
Contributions
Investment income
Hospitals and physician practices
Sales and services of auxiliary enterprises
Other income
Independent operations
Net assets released from restrictions
$
Expenses:
Program:
Instruction
Research
Hospitals and physician practices
Auxiliary enterprises
Other educational activities
Student services
Support:
Academic support
Management and general
Independent operations
Increase (decrease) in net assets before nonoperating
revenue, net gains, reclassifications and other
Nonoperating revenue, net gains, reclassifications
and other:
Gain on investment, net
Investment income, net of amounts classified
as operating revenue
Contributions
Change in minimum pension liability
Income from discontinued operations
Transfers to Phoenixville Foundation
Net assets released from restrictions
Increase in net assets before cumulative effect of change
in accounting principle
$
61,290
95,752
(170,193)
(13,151)
$
599,190
44,866
746,231
100,083
236,430
2,386,850
93,820
166,381
58,868
2005
$
552,933
44,022
732,607
92,983
188,277
2,137,164
92,335
144,830
61,057
4,432,719
4,046,208
800,863
592,791
2,225,647
109,820
134,388
41,753
800,863
592,791
2,225,647
109,820
134,388
41,753
753,303
579,417
2,092,749
106,719
118,006
37,853
57,613
177,544
57,176
4,197,595
57,613
177,544
57,176
4,197,595
55,629
165,961
59,603
3,969,240
235,124
76,968
248,275
(13,151)
145,196
230,655
(16,432)
53,010
45,953
(38,537)
93,863
68,252
(68,252)
$
204,578
42,278
418,129
240,361
1,279
161,918
(53,690)
308,791
45,953
(55,518)
249,821
(43,432)
32,455
(460)
205,475
954,307
500,195
(18,820)
Net assets, beginning of year
2006
$
544,254
Cumulative effect of change in accounting principle
Increase in net assets after cumulative effect of change
in accounting principle
Net assets, end of year
599,190
44,866
746,231
38,793
140,678
2,386,850
93,820
166,381
58,868
170,193
4,445,870
Permanently
Restricted
(18,820)
525,434
204,578
205,475
935,487
500,195
3,086,908
1,552,907
1,748,100
6,387,915
5,887,720
1,953,575
$ 7,323,402
$ 6,387,915
3,612,342
$
1,757,485
$
Office of the Comptroller
Financial Reporting
 Proper object code/fund usage
 Income classification - Gifts are non-reciprocal transactions that should
only be recorded via the gift system. Revenues received for goods or
services provided that may be designated for quasi-endowments
cannot be deposited directly to the endowment. Must be deposited
properly and then resource transferred to the endowment fund.
 Receivables/accrued expenses - Receivables object codes (12xx
range) are to be used only for receivables due from parties external to
the University. Internal funding/allocation/transfer cannot be accrued.
Likewise for all balance sheet object codes.
 Resource transfers – must use 4820 and 4825 together. Cannot be
used with agency funds or the interfund.
 Cost sharing – must use 4822 on both sides of journal entry. Cannot be
used with agency funds or the interfund.
 Interfund transactions – a 15xx object code should be used, with the
other side being either an external expense, external revenue or interentity transfer (4824).
Office of the Comptroller
Financial Reporting
 Proper substantiation of object code balances
 Reconciliation of all asset and liability object code balances to
subsidiary records – i.e. billing systems, amortization schedules, etc.
 Inventory needs to be adjusted to correctly reflect your individual
physical counts.
 Equipment in process should be current and any completed items
properly categorized in Plant.
 Risk areas include Accounts receivable, Prepaid assets, Accrued
expenses, etc.
 Receipt accrual - PO's should only be receipted for goods or services
received. Expenses will be recorded for all amounts on PO's receipted
in the current period. If the benefits of the goods or services will be
received in future periods, the PO should not be receipted, and the
expenses would be charged to those periods.
 Contingent liabilities - Review of any known conditions that may
warrant recording of contingent liabilities. A contingent loss exists at
the time the event is probable and can be reasonably estimable, not
when cash is paid.
Office of the Comptroller
Financial Reporting

Timeliness of data

Notification to Senior Business Officers and Office of the Comptroller personnel of
any significant transactions, changes in business practices – i.e. timing of billings,
disposals or relocation of equipment, etc.
–
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University stands to benefits a great deal by move to room to room depreciation, which
cannot be done with timely and accurate records
Recording of incentive bonus accruals.
Recording of revenue and non-PO related expenses that should be included in
the current reporting period.
Clearing of SUSP org balances and balances in suspense object codes as they
may misstate the financial results of the University.
Reclassification of grant overdrafts to operating funds.
Allocations/transfers between schools and centers – cannot complete school
closing process if journals continue to be recorded after deadline.
Correction of wayward transactions – incorrect org/fund combinations.
Closing of inactive funds.
Review of feeder transactions to ensure proper recording.
Office of the Comptroller
Financial Reporting
 Analytics
 Analytical reviews of your areas should be consistently done,
preferably on a monthly basis for the following reasons:
– Timely detection and correction of errors
– Explanation of business reasons for significant fluctuations
 Fluctuation analysis is a powerful tool that can be employed as your
review tool.
 Preventative controls, such as signing-off on review of reconciliations,
process documentation, etc., should be installed into your operations
to ensure that transactions are recorded correctly the first time.
Office of the Comptroller
Financial Reporting
 Proper use of agency funds
 An agency relationship exists only if the University has an agency
agreement with an external 3rd party whereby the University is acting
as an agent to provide services for the 3rd party that it may not be
able to do itself or the University can perform better.
 Revenues and expenses captured in agency funds are not classified as
revenues and expenses of the University, as these activities are merely
being managed by the University on behalf of an external 3rd party.
This activity is netted and recorded as a liability on the financials of the
University, as any unspent funds are due back to the external 3rd party
if not used.
 Example: Running or managing an event alone may not merit
classification as an agency relationship. May simply be a proper use of
University resources and be recorded as expense and revenue to the
University.
Office of the Comptroller