Public University System it Has a Total

Public University System

It has a total of 234 thousand students on 10 different campuses. They were first organized 144 years ago and have been concentrating on delivering ground breaking educational services to stakeholders. ("Annual Financial Report," 2011) To determine if the university is fiscally sound requires carefully examining their financial statement and audit reports. This will be accomplished by studying the employee pension plan, analyzing how economic conditions will impact future growth, reviewing the treatment of federal grants and comparing how endowments are calculated. Together, these different elements will highlight the financial strength of the university and the way this is impacting the quality of services that are provided.

Identify and analyze the employee pension plan disclosures in the financial statements. Evaluate the impact of the GAASB proposed changes to the pension liabilities on the financial statements of the institution.

In the case of the employee pension plan, these expenses have been dramatically rising over the last several years. Evidence of this can be seen in the below table which is highlighting the scope of these increases.

University of California Pension Obligations from 2008 to 2011

Year

Amount

2008

$1.11 million

2009

$2.44 million

2010

$5.38 million

2011

$6.98 million

("Annual Financial Report," 2011)

This is illustrating how the university is dealing with rising pension costs.

Two proposed changes that will have an impact on the school include:

Assets will be valued at market prices rather than estimated for increased accuracy.

Liabilities can be written off at a slower rate if they meet one of two conditions to include:

The return for liabilities is backed by project assets.

Using the funds acquired from a higher grade municipal bond rate for specific activities. (Munnell, 2012)

These areas will have an effect on how the University of California is accounting for liabilities and the way they will be treated in the future.

Identify and analyze the economic conditions that will affect the future growth and success of the institution.

The biggest factors that will have an impact on future growth include: changes in public financing, increasing expenses and having to create alternative forms of funding. The combination elements will determine how quickly the system grows and the quality of education that is provided. This will decide the direction and future trends of the university. ("Annual Financial Report," 2011)

Changes in public funding are becoming a major challenge for the University of California. This is because there is decreasing support from state programs. Between 2007 and 2011, this meant that funding decreased from $3.42 million to $3.04 million annually. ("Annual Financial Report," 2011)

Increasing expenses is when the university is facing higher costs from the maintenance and operations of various facilities. This is one of the primary factors which have been resulting in an increase in fees. During this last four years, this has boosted the total debt obligations from $9.36 million in 2007 to $13.44 million in 2011. ("Annual Financial Report," 2011)

Creating alternative forms of funding is when the school must find new avenues for financing different activities and projects. This means that they will have to rely more on private donors. At the same time, they must create alternative streams of income that can address any shortfalls. ("Annual Financial Report," 2011)

As a result, these economic factors will determine how much liquidity is available to University of California system. This will influence the kinds of activities that are supported, the quality of education that is provided and what type of research is conducted. In the future, this will determine if the school is able to remain competitive on the world stage. ("Annual Financial Report," 2011)

Review and evaluate the treatment of federal grants such as Pell grants, supplemental grants, and work study on the revenue reported for the institution.

In 2011, the University of California received a total of $5.79 million in federal / supplemental grants and work study. This is higher than 2007, when these amounts were coming in at $4.60 million. These funds are helping to protect the school against sudden shocks from rising costs. As a result, this has reduced the decline that the University is facing from falling asset values with these figures going from $22.4 million (in 2007) to $19.7 million in 2011. The treatment of the funding from these different sources is transparent and open. This helps stakeholders to objectively evaluate the financial strength of the institution and the activities they are involved in. ("Annual Financial Report," 2011)

Compare the treatment of endowments, earnings on endowments, and restricted funds with GAASB requirements.

Under GAASB guidelines all institutions have to be careful in the way they are utilizing any gifts or funds received. This is because there have been situations where endowment funds and other assets were promised. However, politics and changes in policies often resulted in shifting priorities. To prevent this from harming the bottom line results all schools are required to use the money over a period of several years. This is improves transparency and it allows stakeholders to see what projects the university is working on. ("Post Secondary Education," 2010) ("Annual Financial Report," 2011)