Compliance Certification Report
| 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 issued by the AICPA for those institutions audited as part of a systemwide 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. Audit requirements for applicant institutions may be found in the Commission policy entitled "Accreditation Procedures for Applicant Institutions". (Resources) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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[Compliance] |
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| The University of Alabama in Huntsville (UAH) is in compliance with Principle 2.11 because the institution has a sound financial base and financial stability as demonstrated by increases in net assets, upgraded bond ratings by Moody's and Standard & Poor's, stable State appropriations, steady growth in federal grants and contracts, and growth in endowment funds' market value. The University's recent financial history demonstrates financial stability, despite unfavorable market conditions and a continued decline in the percentage of funding from State appropriations in recent years. UAH is part of The University of Alabama (UA) System, which also includes the University of Alabama (UA) and the University of Alabama at Birmingham (UAB). All three campuses follow common reporting and budget guidelines established by the Board of Trustees of The UA System, and are subject to the same audit standards. The fiscal year ends on September 30. Both UA and UAH also have the same SCT Plus Financial Records System. The mission of UAH states that UAH is an autonomous campus within The University of Alabama System dedicated to excellence in teaching, research, and service. UAH dedicates a high percentage of its financial resources to support its mission in relation to other public Alabama institutions, with 72 percent of 2002-2003 expenditures dedicated to instruction, research, and public service. This is the most recent year for which comparative information is available. Details of the University's financial position over the past ten years are presented. Net assets have increased from $62.7 million in 1995 to $132.0 million in 2004, an increase of 111 percent. Both major bond rating institutions, Moody's and Standard & Poor's, upgraded the University's outlook from stable to positive in 2004 ratings. Some of the primary reasons cited for the upgrade were healthy operating margins, healthy balance sheet profile, and a solid market niche. As State appropriations have remained relatively stable in dollar value over the past five years, and have actually declined as a percentage of total revenues, other primary revenue sources have increased. Federal grants and contracts have exhibited steady growth, from $29.5 million in 1995 to $46.6 million in 2004, an increase of 57 percent. Tuition and fees have grown both in dollar value and as a percentage of the overall budget due to enrollment gains and rate increases. Contributions, endowments, and investment earnings are also up. The University's Educational and General (E&G) budget has continued to increase as a result of the fiscally responsible measures that have been taken. The University has enhanced student recruiting and retention programs, faculty recruiting, and fundraising, and therefore has produced an increase in enrollment. These increases have allowed the University to continue programs and provide new programs that have been determined necessary to provide an excellent college education to the institution's students. The University's endowment funds continue to grow in number, with an increase in total value in FY04 and FY03 after two years of market-value declines in FY02 and FY01. University endowments grew from a market value of $2.0 million in 1995 to $3.8 million in 2004, an increase of 91 percent. The UAH Foundation endowment funds grew from a market value of $8.3 million in 1995 to $18.9 million in 2004, an increase of 128 percent. In summary, UAH continually evaluates its financial operations to support its mission of dedication to excellence in teaching, research, and service. The institution has adequate physical resources to support its mission. Information related to physical resources is covered in detail in Comprehensive Standard 3.10.7. An independent auditor selected by The UA System Office for all UA System institutions audits the institution annually. PricewaterhouseCoopers (PwC) conducted the annual audits for all UA System institutions prior to FY03; Klynveld Peat Marwick Goerdeler (KPMG) LLP conducted the audits for FY03 and FY04. PwC will conduct the FY05 audit. An institutional audit report and a management letter are issued at the completion of the audit. As noted in the Independent Auditor's Report, the audit is conducted in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards. The opinion included in the most recent Independent Auditor's Report, dated November 24, 2004, is that the University's basic financial statements present fairly, in all material respects, and in conformity with generally accepted accounting principles, the financial position of the University, and the changes in its financial position and its cash flows. The University received an unqualified opinion for all audits in the accreditation period. In addition, each year the State of Alabama Department of Examiners of Public Accounts conducts an audit of the University's compliance with applicable laws and regulations of the State of Alabama. This audit report for the fiscal year ended September 30, 2004 did not have any findings. All audit reports issued by the Examiners of Public Accounts during the accreditation period indicated strong management controls, with only one finding noted; that has since been corrected. UAH, as a public institution, prepares its financial statements in accordance with accounting principles generally accepted in the US, as prescribed by the Government Accounting Standards Board (GASB). At the end of each fiscal year, the Office of the Assistant Vice President for Finance prepares, publishes, and distributes the UAH Financial Report. In the most recent report, for the fiscal year ended September 30, 2004, in the Statement of Net Assets, on page 12 under the heading "Net Assets," the University's unrestricted net assets are reported as $52,887,367 in 2004 and $45,387,450 in 2003. The change in these figures from one annual financial report to the next reveals the change in unrestricted net assets (excluding plant and plant-related debt). Financial statements for FY04, FY03, and FY02 were prepared in conformity with the GASB Statement 34/35 reporting model. Comparative information for fiscal years prior to FY02 is not available, as statements prior to this date were prepared in accordance with the previous American Institute of Certified Public Accountants (AICPA) Audit Guide reporting model. The financial results have been positive during all years of the accreditation period, and together with the financial position of the University demonstrate a sound financial base, financial stability, and adequate physical resources. Additional documentation of financial results and position over time is presented in Comprehensive Standard 3.10.1. The Board of Trustees of The UA System provides strategic direction and oversight for all system institutions, including UAH, for annual operating budgets. The Board's role in the planning and budgeting process is specified primarily in Board Rule 401 Finance Committee Operations, Board Rule 409 Legislative Appropriation Requests, and Board Rule 410 Annual Operating Budgets. The Alabama Commission on Higher Education (ACHE) also plays a key role in institutional planning. The planning process for operating budgets begins with an annual Legislative Appropriations Request. The Chancellor, in consultation with campus Presidents and The UA System Office staff, develops annual guidelines for requests for existing programs, program enhancements, and new programs. Recent requests focus on improvement of faculty and staff salaries as the top priority. Fixed cost increases and fringe benefit programs are also a high priority. Planning parameters issued annually by the Chancellor usually dedicate almost all new funds to these needs. UAH, along with the other System institutions, also requests a limited amount of funding for new initiatives or enhancements to existing programs. The requests from UA, UAB, and UAH are consolidated by the Chancellor for submission to ACHE. ACHE then submits a consolidated higher education request to the State legislature. The Board of Trustees also develops guidelines and parameters for the preparation of annual operating budgets for all three campuses. For many years, as with the Legislative Appropriations Request, Board guidelines have focused on enhancing faculty and staff salaries and providing funds for fixed cost increases and employee fringe benefit programs. Parameters, including tuition rates, are typically approved at a June Board meeting, with final approval of an operating budget at a September meeting based on the approved parameters. A committee structure is in place to approve all matters pertaining to Operating Budget preparation. The Finance Committee assumed this responsibility through the FY00 budget cycle. Beginning with the FY01 budget cycle, a Joint Finance and Academic Affairs and Planning Committee was formed to formalize the participation of academic affairs officers in the budget preparation process. This joint committee participated in budget discussions and approved budget parameters beginning with the FY01 budget cycle. The entire Board must also approve all actions related to the operating budget. The campus processes for resource allocation, including the annual operating budget preparation process, are explained in depth in the document Campus-Level Planning Processes: Campus Plan, Goals, Results, and Effectiveness. A large number of UAH officials and groups are involved in key decisions related to resource allocation, as detailed in the document. The University budget guidelines are included in Policies and Procedures for Current-Fund Budgets. |
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