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Compliance Certification Report
Core Requirement 2.11


Last Updated August 24, 2004
(static edition)


Core Requirement 2.11:

The institution has a sound financial base, 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 system-wide 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 Statewide Review Report) guide;

(b) a statement of financial position of unrestricted net assets, exclusive of plant assets and plant-related debt, which represents the changing 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.”

The Institution Certifies Compliance: Yes

Compliance report completed by: Audit Team 8

Statement of Rationale for Judgment of Compliance:

The University of Memphis defines having a sound financial base, demonstrated financial stability, and adequate physical resources as the ability to offer quality higher educational and cultural experiences with appropriate grounds, space, and environmentally safe and appropriate facilities. Documentation that the university has a sound financial base and demonstrated financial stability is contained in response to comprehensive standard 3.10.1. [1] Documentation that the university has adequate physical resources to support its mission and the scope of its programs and services is contained in responses to comprehensive standards 3.10.6 and 3.10.7. [1]

(a) The University of Memphis is audited annually by the Division of State Audit.  Tennessee state law authorizes the Comptroller of the Treasury, Division of State Audit [2] to post-audit all accounts and financial records of state government agencies in accordance with generally accepted auditing standards and in accordance with such procedures as may be established by the comptroller.  Additionally, Tennessee Code Annotated Section 8-4-109 authorizes the Comptroller of the Treasury to audit any books and records of any governmental entity that handles public funds when the comptroller considers an audit to be necessary or appropriate. [3]

An institutional audit report and management letter, if necessary, is issued upon completion of each annual audit. [4] The audit report for the year ended June 30, 2003, is the most recently published audit report. The audit report contained no findings and the financial statement opinion was unqualified.  No separate management letter was issued.

(b) Each year the Accounting Office prepares and publishes the University of Memphis annual financial report, which is audited by the State Division of Audit.  Annual financials are prepared in conformity with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB). The financial presentation provides a comprehensive, entity-wide perspective of the university’s assets, liabilities, net assets, revenues, expenses, changes in net assets, and cash flows. Also included is management’s discussion and analysis of financial performance during the period of audit.

For the most recent fiscal year, ending June 30, 2003, the University of Memphis audited financial report includes the Statement of Net Assets, which details the components of unrestricted net assets at June 30, 2003, and June 30, 2002. [5] Total unrestricted net assets were $47,139,821 at June 30, 2003, and $47,837,120 at June 30, 2002.

Unrestricted net assets comprise various subcategories of designated and committed funds. A significant proportion of these funds is designated for contractually committed goods and services not received as of the report date, capital projects in various stages of planning and completion, and for normal working capital balances maintained for departmental and auxiliary enterprise activities.  

Details of unrestricted net assets for each of the past two years are included in the Notes. [6] Graphical representation of the changes between years are illustrated and discussed in the management discussion and analysis. [7]

(c) The university's annual operating budget is shaped by levels of state appropriations, changes in tuition and fees, enrollment planning, fiscal planning, and shifts in activities and other operations. Decisions made are influenced by state law and focus on institutional needs based on the university mission and strategic priorities. Financial decisions are impacted by students, faculty, staff, administrators, the president, and the Tennessee Board of Regents (TBR).  

In response to a legislative request to determine how higher education in Tennessee could operate more efficiently in an era of reduced financial resources from the state, the TBR adopted a document entitled “Defining our Future” in December 2001. [8] This document provides several current and future institutional policy directives intended to produce cost savings for reallocation to priority areas that serve students with a higher degree of excellence. This document complements the university's use of a budget process that continuously reevaluates resources as each year's budget is developed.

At the UofM, the President’s Council holds meetings throughout the year to discuss funding issues, review existing financial performance, and align budget priorities.  This council includes the president, provost, vice president for business and finance, vice president for student affairs, vice president for information technology, vice president for advancement, the athletic director, and the executive assistant to the president.  This council works closely with the budget director and assistant vice president for finance to design the fiscal parameters for unit planning in conjunction with state law, TBR guidelines, and university policies and procedures. [9]

During late winter each year, budget hearings provide campus units an opportunity to present their budget requests and plans in an open forum. [10] At the hearings, deans, faculty senate representatives, student government representatives, staff senate representatives, and other constituencies interact with the President’s Council and other senior officials to discuss how unit budget requests will further university strategic priorities. Following the budget hearings, budget requests are discussed and prioritized by the President’s Council before consideration by the president.

Budget allocation decisions are forwarded to UofM's Office of Financial Planning, where they are reviewed to ensure compliance with TBR financial guidelines. These guidelines are also used to prepare the university annual operating budget [11] which is submitted to TBR for approval. [12] (The FY2005 budget was approved at the June 2004 TBR meeting; minutes from that meeting will be approved and published in September 2004. The final report of the Committee of Finance and Business Operations, presented to TBR in June, is presented here as documentation.)


Relevant Organizational Unit(s):

Vice President for Business and Finance; Assistant Vice President for Finance


Supporting Documentation and Evidence:

[1] UofM Response to Comprehensive Standards

3.10.1

3.10.6

3.10.7

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[2] Tennessee Code Annotated: Section 4-3-304 – Audit Authorization
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[3] Tennessee Code Annotated: Section 8-4-109 – Audit Requirements
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[4] UofM audit reports for fiscal years ending

June 30, 2003

June 30, 2002

June 30, 2001

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[5] Statement of Net Assets, fiscal year ending June 30, 2003
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[6] Unrestricted Net Assets, fiscal year ending June 30, 2003
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[7] Unrestricted Net Assets, fiscal years ending June 30, 2003 vs. June 30, 2002
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[8] TBR 'Defining our Future' Policy Directive
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[9] Budget policies and procedures

TBR Policy 4:01:00:00 Budget Control

UofM Budget Procedures

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[10] 2005 Budget Process

2005 Budget Guidelines and Instructions

2005 Budget Unit Hearing Format

Major Budget Units

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[11] UofM annual operating budgets

FY2005

FY2004

FY2003

FY2002

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[12] Budget Approval - TBR Minutes

FY 2005 - June 10, 2004 Committee on Finance and Business Operations

FY 2004 – June 27, 2003

FY 2003 – July 15, 2002

FY 2002  – July 17, 2001

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