3.10.1     Financial Stability

The institution's recent financial history demonstrates financial stability.

Responsible Unit: Division of Business and Finance

Compliance Judgment

Compliance

Narrative

The recent financial history of North Carolina Agricultural and Technical State University (A&T) demonstrates the university's financial stability.  Revenues have remained strong, investment in facilities is ongoing, and new gifts are growing the university's endowments. [1] [2][3][4][5][6]

Revenues: Total operating revenues increased from 2004 through 2007, a result of increased enrollment levels in 2004 and 2005; increases in charges for tuition, fees, and services; and increases in sponsored program receipts.  Fiscal year 2008 saw a 1.2 % decline in total operating revenue resulting from a decrease in enrollment while the university maintained student charges for tuition, fees, and services at the 2007 level.  University officials anticipate that enrollment will rebound by 2010.  Income received from federal, state, local, and private contracts, grants, as well as federal appropriations, increased by 15 % from 2004 to 2008, a result of the growth in the university's sponsored programs.

Operating revenues were supplemented by non-operating income from state appropriations, noncapital grants, and investment income.  State appropriations, based on enrollment levels as well as program expansion, covered from 38% to 43 percent% of total operating costs.

Unrestricted revenues, included in the table of total revenues above, are composed of state appropriations; student tuition, fees, and services; recovered overhead costs associated with sponsored programs; and other unrestricted receipts.  Unrestricted revenues remain more than sufficient to cover the university's associated unrestricted expenses as illustrated in the table below.

Sponsored Programs, Contracts and Grants: A&T has ranked third in sponsored research funding in the UNC System for the last five years behind UNC-Chapel Hill and North Carolina State University.  Major projects include $12.2 million from the Department of Commerce for the National Oceanic Atmospheric Administration Interdisciplinary Scientific Environmental Technology laboratory cooperative and several multi-year million dollar awards from the National Science Foundation (NSF) and from the Office of Naval Research.  A&T also has over $1 million a year in funding from private companies.  In September 2008, A&T announced that the NSF has awarded the university an Engineering Research Center (ERC).  The ERC is considered the "crown jewel" among NSF awards.  In the past twenty-five years, only about thirty ERCs have been funded by the NSF.

Revenues for contracts, grants, and gifts from all sources have increased during the five-year period from 2004 through 2008 as illustrated below:

The university also received the following federal grants for the development of research and classroom facilities:

Endowments and Gifts: All gifts and endowments received by the university are processed through the office of the vice chancellor for development.  That office is responsible for determining the nature of the gift and whether the gift is designated for the university or the foundation.

Endowment gifts are managed by the office of the vice chancellor for business & finance under the direction of the Endowment Board Committee, through the university's Board of Trustees.  The committee consists of up to seven members with the chairman of the Board of Trustees also serving as the chairman of the Endowment Board Committee.   The Endowment Board Committee sets investment and spending policies and also approves investment managers for the endowment portfolio.

The spending policy [7] adopted by the Endowment Board Committee was designed to provide a relatively even flow of resources for scholarships and endowed professorships from year to year.  The budget is based on no more than 5% of the three-year average of the portfolio value at December 31.  The university has capped the spending rate at 4.5% over the past several years.  Permanent files are maintained on all endowments in the comptroller's office and are reviewed annually for spending eligibility.

The university's endowment fund has experienced steady growth from 2004 through 2008, including a positive total return through 2007.  Gifts received in 2009 totaled $3.5 million through January, exceeding the 2008 level of gifts by over $1 million.  The market downturn in 2008 resulted in a total net loss on the portfolio of $371,642 by June 30^t and that loss increased to $2,569,459 by December 31.  The change is primarily due to the unrealized loss on the endowment investments as a result of the volatile and unstable world-wide financial market.  It is expected that this downward trend will continue into the foreseeable future.  The university's management, along with investment management advisors, plans to continue monitoring the investment portfolio to minimize any significant losses.

Expendable Restricted Net Assets and Endowment Net Assets: Expendable restricted net assets consist of contracts and grants, the expendable portion of endowment funds, and funds held for capital improvements.   The cost of construction projects has exerted significant influence on the university's financial statements for the past five years and will continue to do so through 2009.  Since the passage in November 2000 of a $2.5 billion bond package for the improvement and expansion of facilities on the seventeen campuses of the University of North Carolina System, the university has received over $143,822,092.98 in state construction grants financed by the bond proceeds.  All twenty-two of the university's bond-funded projects were under design, in the construction phase or completed at June 30, 2008.  The construction phase of the bond-funded projects has resulted in large variations of the net assets held for capital improvements over the past five years.  The final bond-financed project is expected to be completed by June 30, 2009.

Long -Term and Short-Term Debt: The Board of Trustees is responsible for approving the issuance of new debt for the university.  At June 30, 2008, the university had outstanding revenue bonds on its stadium, dining, student union, and parking facilities.  Over the five-year period from 2004 through 2008, the university issued bonds to build a 500-car parking deck and to refund dining system and student union revenue bonds.  Short-term financing of $6,168,000, secured in 2006 to begin construction on the parking deck, was retired when long-term bonds were issued in 2007.  The university's debt balance of $18,420,000 is very low compared to total net capital assets of $283,998,651.  The debt service balances and bond coverage ratios are presented below:

Enrollment: A&T experienced steady total enrollment growth from 2000 through 2005.  Although total enrollment dropped in 2006, 2007, and 2008, the university projects that the enrollment decline will level out in 2009 and return to a trend of growth by 2010.

Enrollment decline was experienced in undergraduate students, but as illustrated in the chart below, graduate student numbers actually increased over the same period.  The number of advanced degrees offered by the university has grown over the years to include doctorates in six disciplines, as well as master's degrees in forty-eight disciplines. [8]

Depreciation: Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally ten to fifty years for general infrastructure, ten to fifty years for buildings, and five to fifteen years for equipment.  The university's art collections are capitalized at cost or fair value at the date of acquisition or donation.  These collections are considered inexhaustible and are therefore not depreciated.

The depreciation method and useful lives of assets developed by the university are consistent with the guidelines established by the North Carolina Office of the State Controller at the following link: [9]

Supporting Documents

[1]      Business & Finance, Audited Financial Statements, FY 2008

[2]      Business Finance, AFS, Fiscal Year 2008, Institutional Audit Management Letter

[3]      Business Finance, AFS, Fiscal Year, 2007

[4]      Business Finance, AFS, Fiscal Year, 2006

[5]      Business Finance, AFS, Fiscal Year, 2005

[6]      Business Finance, AFS, Fiscal Year, 2004

[7]      Business Finance, Spending Policy and Guidelines for Investment of the Endowment Portfolio

[8]      Fact Book, Enrollment Data 2001-2008

[9]      NC Office of the State Controller, Depreciation Policy

go to top

Last Updated ( Monday, 12 October 2009 16:15 )