For the Year Ended
June 30, 1996
|The Honorable J. Fife Symington
Governor of Arizona
|The Honorable Lisa Graham Keegan
Superintendent of Public Instruction
|George H. Amos III
|John F. Munger
|Manuel T. Pacheco
Executive Vice President and
Provost of Arizona International Campus
Senior Vice President for
Academic Affairs & Provost
Vice President for Student Affairs
Senior Vice President for
|Ronald E. Smith|
|Michael A. Cusanovich|
Vice President for Research and
Table of Contents
|Introductory Letter||Statement of Current
Funds Revenues, Expenditures
and Other Changes
|Enrollment Highlights||Financial Highlights||Notes to Financial Statements|
|Current Operating Funds
|Independent Auditor's Report|
|Current Operating Funds
|Supplemental Schedule of
Bonds and Capitalized Leases
and Other Long-term Liabilities
|Market Value for Endowments|
|Current Operating Funds:
Gifts, Grants & Contracts
|Supplemental Schedule of
Federal Financial Assistance
|Balance Sheet||Notes to Schedule of
Federal Financial Assistance
|Statement of Changes
in Fund Balances
The annual financial report of The University of Arizona is published for
use by all interested persons and submitted as a public accounting of the
University's financial operations for the fiscal year ended June 30, 1996.
The financial information presented in this report is designed to enable the
reader to understand how the University managed its resources to meet the
overall mission of the institution. The financial statements and additional
related highlights provide the evidence of the institution's continued
growth and stability as we prepare to meet the challenges during the coming
year. Comments and questions relating to the information provided are always
Senior Vice President
for Business Affairs
| Ronald E. Smith |
|Academic Enrollment (Headcount)||Undergraduate||Graduate||Total Fall 1995||Total Fall 1994|
|Arts & Sciences - General||4,841||4,841||5,057|
|Business & Public Administration||4,637||475||5,112||5,088|
|Engineering & Mines||2,536||808||3,344||3,544|
|Social & Behavioral Sciences||4,412||988||5,400||5,469|
|Other Enrollment Statistics||Fiscal Year:||1995-96||1994-95||1 990-91|
|Enrollment - undergraduate (fall)||26,153||26,468||27,522|
|Enrollment - graduate (fall)||8,624||8,838||8,213|
|Tuition per full-time student:|
|Faculty and Staff|
|Admissions - Fall 1995||In-State||Out-of-State||Total||Freshmen||Transfers|
|Graduate (not including Law, Medicine, and Pharmacy)|
|State Appropriations||$ 282,488||$ 267,411||$ 243,420|
|Tuition & Fees||134,053||129,481||105,344|
|Federal Grants & Contracts||218,344||233,086||156,248|
|State and Local Grants & Contracts||12,270||12,261||5,670|
|Private Gifts, Grants & Contracts||66,742||66,425||71,052|
|Auxiliary Enterprise Operations||80,146||75,049||62,440|
|Investment Income & Net Realized Gains||15,586||15,740||15,702|
|Additions to Plant Facilities||87,630||73,507||99,169|
|Retirement of Indebtedness||12,022||10,619||6,718|
|$ 952,580||$ 910,119||$ 781,087|
|Instruction||$ 204,419||$ 197,640||$ 177,661|
|Operation & Maintenance of Plant||37,037||35,877||30,954|
|Scholarships & Fellowships||54,994||52,448||40,573|
|Auxiliary Enterprise Operations||82,173||76,035||61,366|
|Indirect Costs Recovered||41,096||40,157||33,764|
|Facility Additions & Disposals||90,620||56,161||98,131|
|$ 886,943||$ 838,029||$ 746,970|
| ||$ 65,637||$ 72,090||$ 34,117|
|Endowment (investments at market value; land at book value)||$ 92,057||$ 81,405||$ 63,666|
|June 30, 1996, with comparative totals at June 30, 1995|
|Current Operating Funds||Nonoperating Funds||Total All Funds|
|General Operating Funds||Designated Funds||Auxiliary Enterprises Funds||Restricted Funds||Total Current Operating Funds||Student Loan Funds||Endowment and Similar Funds||Agency Funds||Plant Funds||Memorandum Only|
|Cash and investments (See VI)||$14,424||$47,681||$21,167||$13,837||$97,109||$1,443||$68,657||$10,375||$32,413||$209,997||$217,991|
|Notes, accounts receivable and unbilled charges, less allowance: 1996--$1,880; 1995--$2,252||242||6,910||4,583||25,560||37,295||14,168||986||454||8,374||61,277||57,957|
|Inventories and supplies||39||267||7,490||7,796||155||7,951||8,468|
|Due from other funds||58||58||64||122||721|
|Liabilities and Fund Balances|
|Deferred revenue and deposits||2,866||2,444||4,637||18||9,965||4||88,670||98,639||104,312|
|Funds held for others||10,844||10,844||13,596|
|Due to other funds||122||122||122||721|
| Capitalized lease obligations and other long-term liabilities|
| Bonds payable|
|Total Liabilities and Fund Balances||$14,705||$54,916||$33,240||$39,606||$142,467||$15,611||$71,942||$10,984||$1,289,544||$1,530,548||$1,484,398|
|Fund Balances consist of:|
|Amount obligated for outstanding purchase orders||$14,871||$14,871||$12||$14,883||$18,173|
|U.S. Government grants refundable||12,205||12,205||11,907|
|Amount obligated for outstanding purchase orders||$2,949||$3,036||5,985||11,405||17,390||14,161|
|Net Investment in Plant||851,221||851,221||804,190|
|Total Fund Balances||$2,022||$48,608||$24,217||$30,075||$104,922||$15,595||$71,942||$876,682||$1,069,141||$1,003,504|
See notes (I-XI) to Financial Statements
|Current Operating Funds||Nonoperating Funds||Total All Funds|
|Revenues and Other Additions|
|Unrestricted current revenues||$363,001||$106,073||$94,549||$563,623||$ 563,623||$ 537,891|
|Tuition and fees||$79||79||$ 490||569||574|
|Federal grants and contracts||181,232||181,232||$ 236||$ 788||182,256||197,886|
|State grants and contracts||9,703||9,703||9,703||9,870|
|Local grants and contracts||1,774||1,774||1,774||1,593|
|Private gifts, grants and contracts||46,923||46,923||38||1,055||6,020||$2,024||56,060||54,603|
|Investment income including net realized gains||2,828||2,828||78||896||37||$1,841||5,680||7,072|
|Interest on loans receivable||331||331||342|
|Additions to plant facilities including amounts expended|
|from current funds: 1996 - $38,433; 1995 - $34,576||87,630||87,630||73,507|
|Retirement of indebtedness||12,022||12,022||10,619|
|Total revenues and other additions||363,001||106,073||94,549||245,092||808,715||733||2,521||32,188||1,846||106,577||952,580||910,119|
|Expenditures and Other Deductions|
|Educational and general expenditures||363,464||67,807||208,577||639,848||639,848||634,057|
|Auxiliary enterprises expenditures||82,173||82,173||82,173||76,035|
|Indirect costs recovered||41,096||41,096||41,096||40,157|
|Cancellation of loans and provision for bad debt||28||28||341|
|Administrative and collection costs||186||186||220|
|Expended for plant facilities (including noncapitalized|
|expenditures of $3,663 in 1996 and $3,712 in 1995)||51,921||51,921||41,422|
|Interest on indebtedness including $939 capitalized as|
|construction in progress in 1996 and $1,221 in 1995||19,712||19,712||19,886|
|Disposal of plant facilities||38,699||38,699||14,739|
|Refunded to grantors or donors||1,144||1,144||4||1,148||449|
|Retirement of indebtedness||12,022||12,022||10,619|
|Total expenditures and other deductions||363,464||67,807||82,173||250,817||764,261||214||4||51,921||31,844||38,699||886,943||838,029|
|Transfers Among Funds|
|Mandatory loan fund matching grants||(12)||(26)||(38)||38|
|Mandatory principal and interest||(375)||(25,667)||(7,482)||(33,524)||45||33,479|
|Net increases (decreases) for the year||(333)||10,366||871||(1,956)||8,948||487||3,459||1,779||3,933||47,031||65,637||72,090|
|Fund balances, beginning of year||2,355||38,242||23,346||32,031||95,974||15,108||68,483||10,343||9,406||804,190||1,003,504||931,414|
|Fund balances, end of year||$2,022||$48,608||$24,217||$30,075||$104,922||$15,595||$71,942||$12,122||$ 13,339||$851,221||$1,069,141||$1,003,504|
See Notes (I-XI) to Financial Statements.
|Year Ended June 30, 1996, with comparative totals for 1995|
|Unrestricted Funds||Total Current Operating Funds|
|General Operating Funds||Designated Funds||Auxiliary Enterprises Funds||Total Unrestricted Funds||Restricted Funds||1996||1995|
|State appropriations||$ 271,590||$ 271,590||$ 730||$ 272,320||$ 261,051|
|Tuition and fees||86,444||$ 36,411||$ 10,629||133,484||368||133,852||129,197|
|Federal grants and contracts||36,070||18||36,088||145,567||181,655||197,582|
|State grants and contracts||608||1||609||8,012||8,621||8,399|
|Local grants and contracts||80||104||184||1,728||1,912||1,546|
|Private gifts, grants and contracts||7,786||2,896||10,682||43,308||53,990||52,438|
|Investment and endowment income||1,593||7,942||40||9,575||2,737||12,312||11,481|
|Sales and services of educational departments||1||14,177||14,178||14,178||11,970|
|Sales and services of auxiliary enterprises||80,146||80,146||80,146||75,049|
|Total current revenues||363,001||106,073||94,549||563,623||208,603||772,226||761,057|
|Expenditures and Mandatory Transfers|
|Educational and general:|
| ||34,843||2,194||37,037||37,0 37||35,877|
|Educational and general expenditures||363,464||67,807||431,271||208,577||639,848||634,057|
|Total educational and general||363,839||93,486||457,325||208,603||665,928||652,324|
|Total auxiliary enterprises||89,655||89,655||89,655||83,248|
|Total expenditures and mandatory transfers||363,839||93,486||89,655||546,980||208,603||755,583||735,572|
|Other transfers and additions (deductions):|
|Net increases (decreases) in fund balances||$ (333)||$ 10,366||$ 871||$ 10,904||$ (1,956)||$ 8,948||$ 13,936|
See notes (I-XI) to Financial Statements
For each fund group, fund balances restricted by outside sources are identified and separated from fund balances allocated to specific purposes by action of the Arizona Board of Regents or the Administration. Externally restricted funds may be used only for the purposes established by the source of such funds. In contrast, designated funds are controlled by the Administration of the University in achieving its institutional purposes.
Changes in the use of resources require an accounting transfer of the resources to the fund with the activity or objective to be accomplished. Mandatory transfers are those required to meet legally binding agreements such as bond indentures. Other transfers result from decisions by the Arizona Board of Regents or the Administration as to permitted use of funds.
The Designated Funds account for the recovery of indirect costs from sponsored research and academic year tuition and fees retained by the University. Summer session and extension teaching programs, unrestricted gifts and income from short-term and long-term investments are also included in these funds. The purposes of these funds are determined by the Arizona Board of Regents and University Administration.
The Auxiliary Enterprises Funds account for the revenues and expenditures of revenue-producing, substantially self-supporting activities that perform a service to the student body, faculty and public but are not themselves educational activities. Auxiliary enterprises activities include student housing, bookstores, student unions, stores, intercollegiate athletics and others.
The Restricted Funds account for governmental and private gifts, grants and contracts. The purposes are restricted by the donor or supporting agency. Funds not used for the restricted purpose may revert to the sponsor or donor. Revenues of the Restricted Funds are reported only to the extent of expenditures and mandatory transfers in the Statement of Current Operating Funds Revenues, Expenditures and Other Changes.
The Endowment and Similar Funds account for private gifts and other funds that require the principal be permanently invested and only the income be utilized for general or specific requirements. Quasi-endowment funds have been established by the Arizona Board of Regents or the Administration for the same purpose as endowment funds, except that principal and income may be expended for general or specific requirements.
The Agency Funds account for deposits held in custody for others. These include funds held for the University Physicians, Inc., Arizona State University and Northern Arizona University student financial aid trust funds, Boyce Thompson Arboretum and others.
The financial statements are prepared on the accrual basis of accounting. The Statement of Current Operating Funds Revenues, Expenditures and Other Changes is a statement of financial activities for current operating funds during the current reporting period. It is not intended to present the results of operations or the net income or loss for the period as would a statement of income.
The accounting policies followed by the University conform to generally accepted accounting principles as applied to governmental colleges and universities in the AICPA College Guide Model as defined in Governmental Accounting Standards Board Statement No. 15. The methods of applying those policies which materially affect the determination of financial position, current operating funds revenues, expenditures and other changes and the current changes in fund balances are summarized below:
Investments and donated land are stated at cost or fair market value at the date of acquisition, as appropriate.
Inventories and supplies are stated at the lower of cost (determined by the first-in, first-out method) or market.
Physical properties are stated at cost or fair market value at date of acquisition, as appropriate. Special collections are carried at a nominal value of $1 per collection. Capital expenditures reported as current operating expenditures also appear as additions to the Plant Funds. As permitted by generally accepted accounting principles, the University does not provide for depreciation of physical properties.
Tuition and fees revenue (net of refunds) includes $22,203,000 of waivers charged to Scholarships and Fellowships and $2,939,000 of waivers for faculty and staff benefits charged to the appropriate expenditure programs to which the applicable personnel relate.
Summer session revenue and expenditures are reported within the fiscal year in which the summer session's program is predominantly conducted.
Revenue and accounts receivable include amounts received and expended by the University under Federal and State funded research, student aid and other programs. Both the direct and indirect costs of these programs are subject to audit by cognizant governmental agencies or their appointees. The University expects that adjustments or repayments, if any, resulting from such audits would not have a significant effect on the financial statements.
Transfer of construction debt from Unexpended Plant Funds to Investment In Plant is accomplished as the construction proceeds are expended. The Statement of Changes in Fund Balances includes $20,847,000 of voluntary transfers all of which are associated with construction and debt. There is no net effect to the Plant Fund group as a whole.
The financial information shown for fiscal year 1994-1995 in the accompanying financial statements is included as a basis for comparison with fiscal year 1995-1996 and represents summarized totals only. Certain prior year items in the accompanying financial statements have been reclassified, without effect on total fund balances, revenues or expenditures, to conform with the current year's classifications.
The University Foundation, Inc. is a nonprofit corporation controlled by a separate Board of Directors. The principal goals of the Foundation are to support The University of Arizona through various fund-raising activities, and to contribute funds to the University for support of various programs. According to the audited financial statements of the Foundation for the year ended June 30, 1995, assets, liabilities, revenues and expenditures totaled $122 million, $76 million, $25 million, and $24 million, respectively.
The University Physicians, Inc. (UPI) is a nonprofit corporation established to provide medical services and to support The University of Arizona in its teaching and research missions. UPI is controlled by a Board of Directors, comprised of the Dean, all clinical department heads, twelve other faculty physicians, and four community members. The primary purpose of UPI is to assist the University's College of Medicine in achieving the fulfillment of its teaching and research. According to the audited financial statements of UPI for the year ended June 30, 1995, assets, liabilities, revenues and expenditures totaled $74 million, $25 million, $97 million, and $85 million, respectively.
The Arizona Research Park Authority (ARPA) is a nonprofit corporation created with the permission of the Arizona Board of Regents (ABOR) and designated by Arizona law as a political subdivision of the State, governed by a separate board of directors which by law may not include officers or employees of ABOR. ARPA was established under the State's industrial development authority statute to assist in the acquisition, improvement, and operation of university research parks and related properties. In August 1994, ARPA, with the approval of ABOR, sold $98 million nontransferable special revenue bonds to International Business Machines Corporation (IBM) to enable the University to acquire from IBM a 345-acre developed industrial site (the "Research Park") near Tucson, Arizona, together with 1,000 acres of adjacent unimproved land (collectively, the University of Arizona Science and Technology Park or the "Park"). The transaction was accomplished through the following steps: (1) the University agreed to pay $98 million to IBM for title to the entire Park; (2) ARPA and Campus Research Corporation jointly agreed to lease the developed portion of the Park from the University for a period of 30 years with a prepaid rental of $98 million; (3) ARPA subleased 79% of the building space in the developed portion of the Park to IBM for periods of up to 30 years for a rental sufficient to pay debt service on ARPA's bonds; and (4) ARPA used the $98 million received from its bond sale to make the rental prepayment to the University which, in turn, applied the money to purchase the entire Park from IBM. The bonds are payable solely from lease rentals paid by IBM. If IBM defaults or cancels its lease, the bonds must be surrendered and discharged. Title to the entire Park resides in the University and neither the Park nor any payments by the University secures ARPA's bonds. Audited financial statements for the year ended June 30, 1995, reflecting assets, liabilities, revenues and expenditures are not available.
The Campus Research Corporation (CRC) is a nonprofit corporation governed by a separate Board of Directors and was established to assist the University in the acquisition, improvement and operation of the Research Park and related properties. CRC leases from the University the remaining 21% of the building space of the Research Park that is not leased to ARPA (see preceding paragraph). CRC is responsible for developing presently undeveloped portions of the research park and for subleasing to the University or to third parties existing unoccupied space, newly developed space, and space now occupied by IBM or its subtenants once the current subleases expire. The University is responsible only for payment of its proportional share of operation expenses. All income received by CRC from its activities, after payment of expenses and financial reserves, will be turned over to the University. Audited financial statements for the year ended June 30, 1995, reflecting assets, liabilities, revenues and expenditures are not available.
Gifts and grants received as endowments or for restricted purposes are invested according to conditions stipulated by the donor or grantor; however, if no conditions are imposed, such funds are usually invested in one of two Consolidated Endowment Pools. The Consolidated Endowment Pools function as highly-diversified investment funds under the control of the University Investment Committee whose responsibility is to define, develop, and implement investment objectives, policies and restrictions relating to the Endowment funds held by the University. The primary investment objective of one pool is maximum long-term total return from income and capital appreciation under a policy of maximum investment productivity at an acceptable level of risk and volatility. The primary investment objective of the other pool is to maximize the current income earned. The Separately Held Endowment funds are separately invested according to the terms of the donor's gift or the administrator.
Cash and securities on deposit with trustees are held in trust for the University by various commercial banks. Trust funds are invested by the trustee in accordance with the Board's authorizing resolutions.
At year-end, the University's bank balance is $2,194,000. Of this balance, $153,000 is covered by federal depository insurance. The remaining balance is collateralized by U.S. Government obligations held by the bank's trust department in the University's name. Securities are collateralized as follows:
b. $34,644,000 are held by major financial institutions in the name of the University. The financial institutions act as both custodial and purchasing agent for these investment transactions.
c. $5,746,000 are held by trustees. Bond funds held by trustees include money market funds invested in U.S. Government obligations, U.S. Government obligations, and obligations of agencies sponsored by the Federal Government held in the trustee's Federal Reserve Bank account. These securities are recorded in the University's name in the records of the trustee. The trustee acts as both custodial and purchasing agent for these investment transactions.
b.The Bank Investment Contract (BIC) is also uncollateralized. The bank is rated Aaa/AAA and there is a provision in the contract whereby if the bank's rating falls below Aa but is at least A by Moody's and below AA but is at least A by Standard & Poors, then the bank must collateralize the investment with U.S. Government obligations. If the rating falls below A/A, then the University has the option to terminate the contract.
Deposits and Investments, at June 30, 1996, consist of the following:
|Deposits:||Total Cost||Total Market|
|Cash on Deposit with State Treasurer||$ 3,058,000||$ 3,058,000|
|Certificates of deposit||160,000||160,000|
|U.S. Treasury and Agency Govt. obligations||103,913,000||103,563,000|
|Endowments held by trustees||8,588,000||13,035,000|
|Investment contracts (GIC & BIC)||2,690,000||2,690,000|
|Totals||$ 209,997,000||$ 230,677,000|
The cash overdraft results from an aggressive short-term investment policy in which the University invests its funds until outstanding check are cashed.
Deposits and Investments, at June 30, 1996, by management areas are as follows:
|Total Cost||Total Market|
|Current Operating Funds:|
|$ 3,058,000||$ 3,058,000|
|Other Nonoperating Funds:|
|$ 209,997,000||$ 230,677,000|
|Buildings and Improvements||$ 683,535,000|
|Construction in Progress||55,525,000|
|Total Physical Properties||$ 1,248,451,000|
In addition to expenditures through June 30, 1996 it is estimated that $57,008,000 will be required to complete projects under or planned for construction. Of this amount $21,943,000 is contractually encumbered. On April 1, 1996, the University changed its equipment capitalization criteria from $500 or more in valuation and two years or more life expectancy to $1,000 and one year, resulting in a one-time write off of $23,927,000 in assets.
|Interest||Year of Maturity||Original Issue||Currently Outstanding|
|Student Housing Revenue Bonds||3.0-3.75%||2002-2008||$ 8,500,000||$ 2,935,000|
|1988 - System Revenue Bonds||6.3-7.0%||1999||31,950,000||2,390,000|
|1990A - System Revenue Bonds||6.5-9.0%||2003||46,300,000||9,580,000|
|1990B - System Revenue Bonds||6.9-9.4%||2003||39,630,000||7,485,000|
|1991 - System Revenue Bonds||6.0-8.5%||2010||9,665,000||4,575,000|
|1992 - System Revenue Bonds||3.1-6.625%||2011||113,150,000||110,835,000|
|1992A - System Revenue Bonds||2.9-6.2%||2016||55,490,000||53,185,000|
|1993 - System Revenue Bonds||2.7-5.0%||2017||42,085,000||31,310,000|
|1994 - System Revenue Bonds||4.8-6.35%||2014||28,500,000||27,615,000|
|$ 375,270,000||$ 249,910,000|
Principal and interest on bonds outstanding at June 30, 1996, are collateralized by registration fees, tuition, rentals and other charges and such obligations are generally callable by the University. The principal amounts due over the next five years are as follows:
Cash and securities on deposit with trustees, restricted for retirement of bonded indebtedness and renewals and replacements, are $507,000 and $645,000 respectively, at June 30, 1996, as required by the bond indentures. In addition, $10,645,000 was held by trustees for payment of future construction costs.
In fiscal years 1977, 1990, 1992 and 1993 the University refunded in advance of maturity certain outstanding revenue bonds. At June 30, 1996, the outstanding principal balance of the refunded bonds is $112,185,000 which will be paid by investments held in trust with a carrying value of $84,944,000. These amounts are not included in the accompanying financial statements.
The University also acquired a building, certain computer, telecom-munications and farm equipment, and agricultural land under various capital leases and certificates of participation (COPs). At June 30, 1996, the balance sheet includes $39,979,000 representing the cost of assets included in land, buildings, and equipment.
Cash and securities on deposit with the trustee, restricted for retirement of certificates of participation, are $8,016,000 at June 30, 1996. In addition, $1,067,000 is held by trustee for payment of future construction costs.
In 1991 the University refunded in advance of maturity certain outstanding certificates of participation. At June 30, 1996, the outstanding principal balance of the refunded certificates was $16,355,000 which will be paid by investments held in trust with a carrying value of $17,237,000. These amounts are not included in the accompanying financial statements.
|Capitalized||Operating Leases & COPs Leases|
|1997||$ 7,376,000 $||656,000|
|Total minimum lease payments||110,278,000||$ 1,899,000|
|Less: Amount representing interest||( 43,723,000)|
|Present value of net minimum lease payments$||66,555,000|
Eligible Faculty, Academic Professionals and Administrators at the University may select from the following retirement plans: Arizona State Retirement System, TIAA/CREF Retirement Plan, VALIC Retirement Plan, Fidelity Investments Retirement Plan and Aetna Variable Annuity Retirement Plan. The former is a defined benefit plan and the latter four are defined contribution plans. Eligible classified staff belong to the Arizona State Retirement System.
The Arizona State Retirement System is a cost-sharing multiple-employer defined benefit pension plan. The payroll for employees covered by the System for the year ended June 30, 1995 was approximately $4,228,265,000. The University's total payroll for the year ended June 30, 1996 was $416,554,000; the base salary amount for those employees who participate in the Arizona State Retirement System was $189,838,000.
Employees who retire at or after age 65 with any number of years of credited service, at or after age 62 with 10 or more years of credited service, or at or after any combination of years of service and age that totals 80, are entitled to a monthly benefit of 2 percent of their average monthly earnings, as defined in the plan, for each year of credited service. Employees who are age 50 or older with at least five years of credited service may retire early and receive reduced retirement benefits. The plan also provides death benefits and limited retiree health benefits. Benefits are established by state statute.
The Legislature established a new long-term disability program and removed the long-term disability benefit from the plan. Effective October 1, 1995, that liability for current beneficiaries was transferred to the new program.
The actuarially determined contribution rate for both employees and employers for fiscal year 1995-96 was 3.95 percent of compensation ($7,499,000 each). This contribution rate would have covered the actuarially determined current service costs plus amortization of the unfunded past service liability over a rolling 30-year period, which is being phased in. The current amortization period is 11 years. However, during the year ended June 30, 1996, state statutes required that both employees and the University contribute an amount equal to only 3.36 percent of the employee's base salary. Both the University and the covered employees made the required 3.36 percent contribution, amounting to $6,379,000 from each source, totaling $12,758,000.
The actuarial computation of the contribution rate is made two years in advance based on June 30 information and, therefore, the rate for fiscal year 1995-96 was based on June 30, 1994 information.
The amount reported below as "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is intended to help users assess the plan's funding status on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among government pension plans and employers. The System does not make separate measurements of assets and the pension benefit obligation for individual employers.
The pension benefit obligation at June 30, 1995, (the date of the last actuarial valuation) for the System as a whole, determined through an actuarial valuation performed as of that date, was $10,289,740,000. The System's net assets available for benefits on that date were $10,752,930,000 (market value $12,464,462,000), resulting in net assets in excess of the pension benefit obligation of $463,190,000. The University's contribution represented approximately 4.02 percent of total contributions required of all participating employers.
Historical trend information for all years available presenting the System's progress in accumulating sufficient assets to pay benefits when due is presented in the Arizona State Retirement System 41st Component Unit Financial Report for the Year Ended June 30, 1995.
B. Defined Contribution Plans
The University offers pension benefits for its eligible Faculty, Academic Professionals and Administrators through its defined contribution plans - TIAA/CREF, VALIC, Fidelity Investments and Aetna Variable Annuity. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. State statute requires that both the employee and the University contribute an amount equal to 7 percent of the employee's base salary.
The University's total payroll in fiscal year 1995-96 was $416,554,000. The University's contributions were calculated using the base salary amount of $148,531,000 for those employees who selected a defined contribution plan. Both the University and the covered employees made the required 7 percent contribution. For the defined contribution plans each source contributed $10,397,000 for a total of $20,794,000.
State of Arizona
Office of the
Independent Auditors' Report
The Arizona Board of Regents
We have audited the accompanying balance sheet of The University of Arizona as of June 30, 1996, and the related statements of changes in fund balances and current operating funds revenues, expenditures and other changes for the year then ended. These financial statements are the responsibility of the University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The University of Arizona as of June 30, 1996, and the changes in its fund balances and its current operating funds revenues, expenditures and other changes for the year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the financial statements of The University of Arizona taken as a whole. The accompanying supplemental schedule of bonds and capitalized leases and other long-term liabilities as of June 30, 1996, and the supplemental schedule of federal financial assistance for the year then ended are presented for purposes of additional analysis and are not a required part of the financial statements. The information in the schedules has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we will also issue reports on our consideration of the University's internal control structure and on its compliance with laws and regulations at a future date.
|Douglas R. Norton
|June 30, 1996||Bonds Payable and Leases||Debt Service Commitments by Fiscal Year|
|Issue||Interest Rates||Year of Maturity||Original Issue||Currently|
June 30, 1996
|1962 - Sonora||3.375%||2002||$ 1,500||$ 366||$ 72||$ 70||$ 68||$ 66||$ 69||$ 63|
|1963 - Arizona||3.0 - 3.5%||2003||1,500||368||68||71||69||67||70||70|
|1965 - Coronado||3.0%||2005||3,000||1,016||134||131||132||134||136||486|
|1967 - Married Student Housing||3.75%||2008||2,500||1,185||123||125||122||123||125||852|
|System Revenue Bonds:|
|1988 - System Revenue Bonds||6.3 - 7.0%||1999||31,950||2,390||1,199||1,199||268|
|1990A - System Revenue Bonds||6.5 - 9.0%||2003||46,300||9,580||1,805||1,780||1,758||1,761||1,766||3,541|
|1990B - System Revenue Bonds||6.9 - 9.4%||2003||39,630||7,485||1,431||1,410||1,382||1,384||1,381||2,767|
|1991 - System Revenue Bonds||6.0 - 8.5%||2010||9,665||4,575||504||502||504||504||508||4,580|
|1992 - System Revenue Bonds||3.1 - 6.625%||2011||113,150||110,835||7,561||7,559||8,495||13,124||13,121||131,220|
|1992A - System Revenue Bonds||2.9 - 6.2%||2016||55,490||53,185||3,406||3,408||3,409||3,409||3,408||86,266|
|1993 - System Revenue Bonds||2.7 - 5.0%||2017||42,085||31,310||5,474||5,479||5,473||1,111||1,111||23,740|
|1994 - System Revenue Bonds||4.8 - 6.35%||2014||28,500||27,615||2,562||2,562||2,564||2,561||2,565||33,317|
|Total bonds payable||$ 375,270||$ 249,910||$ 24,339||$ 24,296||$ 24,244||$ 24,244||$ 24,260||$ 286,902|
|Capitalized Leases and Other Long-term Liabilities:|
|Telecommunication Certificates||4.6 - 6.5%||2012||25,995||21,200||2,649||2,646||2,645||1,847||1,848||21,966|
|Educational Certificates||3.2 - 6.4%||2007||4,670||4,020||477||475||472||472||472||3,274|
|Residence Life Certificates||4.1 - 5.8%||2014||16,725||16,725||1,468||1,468||1,470||1,469||1,471||19,090|
|Maingate Admin Certificates||4.25 - 6.0%||2024||16,170||16,170||1,177||1,175||1,178||1,180||1,180||27,156|
|Agriculture Demonstration Farm||9.0%||2003||2,282||1,258||250||250||250||250||250||500|
|University Foundation Building||4.75 - 7.75%||2007||4,950||3,780||484||485||484||482||483||3,330|
|Other Capitalized Leases||4.6 - 9.22%||Various||4,107||3,402||871||641||1,112||245||198||988|
|Total capitalized leases and other long-term liabilities||$ 74,899||$ 66,555||$ 7,376||$ 7,140||$ 7,611||$ 5,945||$ 5,902||$ 76,304|
|1968 - Student Union||5.25 - 5.5%||1998||3,000||350|
|1977 - Revenue Refunding||6.0%||2002||22,315||22,315|
|1988 - System Revenue Bonds||7.0 - 7.625%||2011||24,135||24,135|
|1990A - System Revenue Bonds||6.5 - 9.0%||2015||33,210||32,435|
|1990B - System Revenue Bonds||6.9 - 9.4%||2016||29,205||28,525|
|1991 - System Revenue Bonds||6.5 - 8.5%||2017||4,425||4,425|
|Total refunded bonds||$ 116,290||$ 112,185|
|Certificates of Participation:|
|1988 Telecommunications Certificates||6.1 - 7.6%||2003||27,595||16,355|
|Total refunded issues||$ 143,885||$ 128,540|
|Year Ended June 30, 1996|
|Federal Grantor/Pass-Through Grantor|
|Federal Student Financial Aid Programs:|
|Department of Health & Human Services|
|Other Financial Aid Programs||$ 106|
|Subtotal Department of Health & Human Services||106|
|Department of Education|
|Federal Pell Grant Program||10,372|
|Federal Work Study Program||839|
|Federal Perkins Loan Program||231|
|Federal SEOG Program||1,096|
|Other Financial Aid Programs||40|
|Subtotal Department of Education||12,578|
|Miscellaneous Federal Agencies|
|Other Financial Aid Programs||759|
|Total Federal Student Financial Aid Programs||$ 13,443|
|Federal Research & Training Programs:|
|Agency for International Development||$ 655|
|Department of Energy||3,889|
|Department of the Interior||8,580|
|Department of Agriculture|
|Agriculture Extension Service||3,672|
|Agriculture Experiment Station||1,954|
|U.S. Department of Agriculture||4,027|
|U.S. Forestry Service||674|
|Subtotal Department of Agriculture||10,327|
|Department of Defense|
|Subtotal Department of Defense||14,300|
|Department of Commerce||1,215|
|Department of Health & Human Services|
|Agency for Health Care Policy and Research||1,248|
|Division of Medicine||397|
|U.S. Dept. of Health & Human Services||8,625|
|Health Resources and Services Administration||1,472|
|National Cancer Institute||12,279|
|National Center for Nursing Research||236|
|National Heart, Lung & Blood Institute||5,835|
|National Institute on Aging||1,030|
|National Institute of Allergy & Infectious Diseases||1,421|
|National Institute of Child Health/Human Development||1,018|
|National Institute on Drug Abuse||3,681|
|National Institute of Diabetes, Digestive & Kidney Diseases||1,462|
|National Institute of Environmental Health Sciences||4,968|
|National Institute of General Medical Sciences||3,008|
|National Institutes of Health||8,098|
|National Institutes of Mental Health||1,426|
|National Institute of Neurological Disorders||1,860|
|Subtotal Dept. of Health & Human Services||62,109|
|Department of Justice||242|
|Department of Transportation||165|
|National Aeronautics & Space Administration|
|NASA AMES Research Center||313|
|Goddard Space Flight Center||19,880|
|National Science Foundation||19,186|
|Department of Education|
|Subtotal Department of Education||4,922|
|Environmental Protection Agency||1,024|
|Nuclear Regulatory Commission||817|
|National Endowment for the Humanities||255|
|National Endowment for the Arts||97|
|Miscellaneous Federal Agencies|
|Defense Advanced Research Projects Agency||290|
|Defense Logistics Agency||17|
|Subtotal Miscellaneous Federal Agencies||6,024|
|Through State Government||2,249|
|Through Local Government||445|
|Jet Propulsion Laboratory||8,063|
|Subtotal Through Non-profits||15,826|
|Through Miscellaneous Private||122|
|Total Federal Research & Training Programs||$ 181,639|
|Total Federal Financial Assistance||$ 195,082|
|See Notes to Schedule of Federal Financial Assistance|
The purpose of the Schedule of Federal Financial Assistance is to summarize those expenditures of The University of Arizona for the year ended June 30, 1996, that have been financed by the U.S. government (federal awards). This schedule includes expenditures financed by all federal assistance and procurement relationships entered into directly between The University of Arizona and the federal government, and expenditures of subawards from nonfederal organizations made under federally sponsored agreements. For reporting purposes, federal awards have been classified into two types:
The accounting principles followed by The University of Arizona in each of these areas and used in preparing the accompanying schedule are as follows:
Federal Student Financial Aid Programs - Expenditures are recognized on the accrual basis for awards made to students and allowable administrative expenses incurred in connection with the student loan programs. The student financial aid programs are funded by the federal government under various programs. For loan programs only the federal portion of administrative costs are included in the Schedule. Other disbursements are discussed in Notes C and D.
Federal Research & Training Programs - Expenditures for direct costs are recognized as incurred using the accrual method of accounting and the cost principles set forth in OMB Circular A-21, Cost Principles for Educational Institutions. Under those cost principles and requirements of the individual grant agreements, certain types of expenditures are not allowable or are limited as to reimbursement. Moreover, expenditures include a portion of costs associated with general university activities (indirect costs) that are allocated to federal awards under negotiated formulas commonly referred to as indirect cost rates. Indirect costs and related revenues applicable to these cost recoveries are classified as unrestricted expenditures and revenues on the financial statements.
B. The University did not identify Catalog of Federal Domestic Assistance Numbers due to the large number of individual assistance programs. In addition, many of the assistance programs do not have Catalog of Federal Domestic Assistance Numbers as they are specific to the University.
C. The University administers the following Department of Education loan program:
For Department of Education program the following information is provided:
|Loans outstanding at 6/30/96||$11,964,000|
|New loans to students FY 95/96||1,834,000|
|Loans cancelled FY 95/96||74,000|
The University administers the following Department of Health and Human Services (HHS) loan programs:
|Nursing (NSL 2 Programs)||93.364|
|Health Profession (HPSL 4 Programs)||93.342|
For Health and Human Services loan programs the following information is provided:
|Loans outstanding at 6/30/96||$2,484,000|
|New loans to students FY 95/96||324,000|
|Loans cancelled (recovered) FY 95/96||(4,000)|
D. Federal Family Education Loans are not considered grants to the University since the University is responsible only for determining student eligibility and distributing the loans directly to students. Consequently, such loans distributed by the University during the year ended June 30, 1996, are not included in the Schedule of Federal Financial Assistance. However, because the Federal Family Education Loans Program is a Title IV, Higher Education Act student financial assistance program (CFDA number 84.032) sponsored by the U.S. Department of Education, it is considered a federal financial assistance program for single audit purposes. During fiscal year 1995/96 the University distributed approximately $79 million of Federal Family Education Loans to students.
E. Revenues equal to the expenditures reported on the Schedule of Federal Financial Assistance are included in the accompanying basic financial statements as follows (in thousands of dollars):
|Statement of Current Operating Funds Revenues, Expenditures and Other Changes:|
|Statement of Changes in Fund Balances - Items not recognized as revenue:|
|Federal portion of student loan funds:|
|Federal portion of plant funds:|
|Total Federal Financial Assistance||$195,082|