FINANCIAL OVERVIEW
UNIVERSITY OF CALIFORNIA, SAN DIEGO
ANNUAL FINANCIAL REPORT 2008–09
UNIVERSITY OF CALIFORNIA, SAN DIEGO
UC San Diego’s annual operating budget is $2.6 billion.
OPERATING REVENUES BY PROVIDERS (in millions)
$ 806
Medical center
$ 584
Federal grants and contracts
$ 284
Private and local grants and contracts
$ 261
Student tuition and fees
$ 245
State educational appropriations
$ 194
Medical group
$ 127
Other $ 135
Auxiliary enterprises
TOTAL EXPENSE BY FUNCTION (in millions)
$ 693
Medical center
$ 610
Research
$ 475
Instruction
$ 190 Academic support $ 174
Depreciation
$ 122
Institutional support
$ 111
Auxiliary enterprises
$ 69
Operation and maintenance of plant
$ 62
Student services
$ 59
Student financial aid
$ 17
Public service
$
Other
2
LETTER FROM THE VICE CHANCELLOR
FOR BUSINESS AFFAIRS
In fiscal year 2008–09, UC San Diego elected not to publish its annual financial
report highlighting major events and achievements for the period. This omission
was a historical departure for the university, a cost-efficient measure, and a
reflection of the most challenging and protracted economic crisis since the Great
Depression.
The 2009–10 annual financial report will commemorate the 50th Anniversary of
UC San Diego by tracing the university’s remarkable past, its recent achievements,
and its campuswide campaign to Invent the Future. The three-year, $50 million
Invent the Future fundraising effort will generate graduate fellowships and
undergraduate scholarships to attract outstanding students to campus and
prepare the next generation of leaders.
The university’s commitment to achieving the extraordinary remains intact.
In good times and in bad, UC San Diego is a primary engine of economic
development, a powerful catalyst for the advancement of knowledge, a
critical force for improving human lives, and a vital investment in the future.
In addition to the financial overview presented here, please also reference
the 2008–09 financial statements of the UC San Diego Foundation at
http://www-er.ucsd.edu/foundationDir/FDN-ACT//pdf/June09.pdf.
Sincerely,
2
Steven W. Relyea
Vice Chancellor for Business Affairs
UC San Diego
ANNUAL FINANCIAL REPORT 2008–09
FINANCIAL OVERVIEW
Management’s Discussion and Analysis
4
The University’s Results of Operations
6
Statement of Revenues, Expenses, and Changes in Net Assets
7
Statement of Net Assets
8
Statement of Cash Flows
9
Notes to Financial Statements
10
3
UNIVERSITY OF CALIFORNIA, SAN DIEGO
FINANCIAL OVERVIEW
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S
(UNAUDITED)
The objective of Management’s Discussion and Analysis is to help readers of the University of
California, San Diego’s financial statements better understand the financial position and operating
activities for the fiscal year ended June 30, 2009, with selected comparative information for the
year ended June 30, 2008. The Financial Statements should be read in conjunction with the
Management’s Discussion and the notes to the financial statements to gain a more complete
understanding of the university’s financial information.
The audited, consolidated financial statements of the University of California are available at
ucop.edu/ucophome/busfin/reports.html.
The University’s Financial Position
The statement of net assets presents the financial position of the university at the end of each
fiscal year. At June 30, 2009 the university’s net assets were $2.0 billion, with assets of $3.7
billion and liabilities of $1.7 billion. The major components of the assets, liabilities, and net assets
as of 2009 and 2008 are as follows (in thousands).
2009 2008 CHANGE
ASSETS
Cash and equity
in treasurer’s investments $
878,737 $
911,346 $
Receivables, net 282,728 292,356 Inventories 24,098 24,101 Capital assets, net 2,440,284 2,241,920 Other assets Total assets
88,086 70,580 (32,609)
(9,628)
(3)
198,364
17,506
$
3,713,933 $
3,540,303 $
173,630
$
1,268,130 $
1,132,900 $
135,230
LIABILITIES
Debt Other liabilities Total liabilities 471,037 475,501 (4,464)
$
1,739,167 $
1,608,401 $
130,766
$
1,171,515 $
1,108,337
$
63,178
NET ASSETS
Invested in capital assets,
net of related debt Restricted Expendable 106,158 120,102 Unrestricted 697,094 703,463 4
Total net assets
$
1,974,767 $
1,931,902 $
(13,944)
(6,369)
42,865
UC San Diego’s total assets increased by $174 million to $3.7 billion in 2009, compared
to $3.5 billion in 2008, primarily due to increases in capital assets net of depreciation.
CASH­ AND EQUITY IN TREASURER’S INVESTMENTS­— The
university’s cash and equity in
treasurer’s investments totaled $878.7 million at the end of 2009 and $911.3 million
at the end of 2008. The decrease in the short-term investments component is primarily
due to a late-term decrease in the California state budget support for fiscal year 2009.
ACCOUNTS RECEIVABLE, NET— Accounts
receivable in total decreased by $9.6 million to
$282.8 million in 2009 from $292.4 million in 2008. The decrease is primarily in
the Medical Centers category, where there was an eleven-day decrease in accounts
receivables due to improved collections.
ASSETS (in millions)
$4.000
$3.230
3.000
$2.287
1.000
$1.253
$1.080
2007
debt, principally recorded at the Office of the President, increased
by $112.4 million to $1.1 billion in 2009.
$1.214
2008
current
2009
noncurent
LIABILITIES (in millions)
$2.000
LONG-TERM DEBT— This
$2.500
$2.150
assets, net of accumulated depreciation, increased by
$198.4 million to $2.4 billion in 2009.
The university’s liabilities totaled $1.7 billion in 2009. This total includes the liabilities
of $1.1 billion for capital projects that provide financing for projects on more than one
campus and are accounted for centrally at the UC Office of the President.
$3.714
2.000щэ
CAPITAL ASSETS, NET­— Capital
Liabilities
$3.540
ANNUAL FINANCIAL REPORT 2008–2009
Assets
$1.739
$1.608
$1.499
1.500
1.000
$1.298
$1.164
$1.101
500
OTHER LIABILITIES— Other
liabilities decreased by $4.5 million to $471.0 million in 2009
from $475.5 million in 2008. The decrease is the result of a decrease in accounts
payable at the Medical Center of $10.5 million, coupled with a $3.4 million decrease in
the current portion of long-term debt, offset in part by an increase in deferred revenue
associated with grants and contracts from all sources of $13.2 million.
$398
$444
$441
2007
2008
2009
current
noncurent
Net Assets
Net assets represent the residual interest in the university’s assets after all liabilities
are deducted. The university’s net assets grew to $2.0 billion in 2009, compared to
$1.9 billion in 2008.
INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT— The
category grew to $1.2 billion
in 2009, compared to $1.1 billion in 2008. The increase represents the university’s
continued investment in its physical facilities, in excess of the related financing and
depreciation expense, and accounts for the majority of the university’s overall increase
in its net assets.
NET ASSETS (in millions)
$2.000
$1.732
$1.932
$1.975
$704
$697
$584
1.500
$126
1.000
$1.022
$106
$120
$ 1 . 17 2
$1.108
500
RESTRICTED EXPENDABLE— The decrease of $13.9 million in 2009 to $106.2 million
reflects a decrease of $8.5 million in capital projects, and a decrease of $5.8 million
in debt service.
UNRESTRICTED— Unrestricted net assets decreased by $6.4 million to $697.1 million in
2009. The decrease reflects UCSD’s $55.5 million allocation of the UC budget cuts
imposed by the state in May of 2009, offset in part by a $44.1 million increase in
reserves associated with the university housing department, the Medical Center and
UC San Diego Extension.
2007
unrestricted
2008
2009
restricted
invested in capital assets, net of related debt
5
UNIVERSITY OF CALIFORNIA, SAN DIEGO
T H E U N I V E R S I T Y ’ S R E S U LT S O F O P E R A T I O N S
The statement of revenues, expenses, and changes in net assets is a
presentation of the university’s operating results for the year.
Revenues
Revenues to support the university’s core activities, including those
classified as nonoperating revenues, increased in 2009 by $95.7
million to $2.6 billion. The university has diversified sources of revenue.
STUDENT TUITION AND FEES, NET— Student
tuition and fees revenue, net
of scholarship allowances, grew in 2009 by $30.5 million to $260.9
million. The increase is attributable to an increase in both enrolled
students, and fee increases for all categories of students.
GRANTS AND CONTRACTS—Revenues
from grants and contracts increased
$47.3 million in 2009 to $812.8 million continuing a trend of increasing
awards for federal, and private corporations. Local governments
showed a 10 percent decrease in fiscal year 2009.
The table that follows details Awarded Grants and Contracts for fiscal
year 2009 and 2008 (in thousands). Awarded grants and contracts
may be reflected in the current fiscal year or in future periods as work
is completed and billed.
SALARIES AND BENEFITS— Over
60 percent of the university’s expenses are
related to salaries and benefits. During 2009, salaries and benefits
grew by $95.7 million to $1.6 billion or 6.4 percent.
UTILITIES— During 2009, utility expenses were $48.0 million. Fiscal year
2008 expenses were restated downward by $26.0 million to $43.7
million due to mis-coding related to recharges. The offset is reflected
in other expenses.
SCHOLARSHIPS AND FELLOWSHIPS— Scholarships
and fellowships (gross)
increased in 2009 by $6.3 million to $58.0 million or 12.3 percent.
OTHER EXPENSES— Expenses in this category were $325.7 million in
2009. Fiscal year 2008 was restated upward by $26.0 million to
$324.1 million due to a mis-coding of recharge expenses related to
utilities expenses.
Other Changes in Net Assets
A significant decrease occurred in the state capital appropriations,
which decreased by $27.9 million, or 57 percent to $20.8 million in
2009, due to the worsening of the state of California’s budget situation.
The decrease represents San Diego campus’ share in the UC budget
cuts distributed in December 2008 and May 2009.
New Awards Received (in thousands)
Campus Area
General Campus
2009
$
Health Sciences
260,915 2008
$
246,831
494,279 456,191
Scripps Institution of Oceanography
126,430 125,760
$
881,624 828,782
Total
$
MEDICAL CENTER— Revenues
of $805.5 million in 2009 reflect an
increase of $73.0 million from 2008. The Medical Center’s operating
revenues reflect growth in inpatient volumes at both hospital sites
and additional Medi-Cal funds made available under the American
Recovery and Reinvestment Act. Increased utilization of outpatient
services in key ancillary areas including surgery, radiation oncology,
imaging, and infusion were major operating contributors.
SALES AND SERVICES, EDUCATIONAL ACTIVITIES— Revenues
from educational
activities grew to $227.4 million in 2009 from $223.8 million in 2008.
The increase is primarily due to increased medical group’s patient
services activities.
STATE EDUCATIONAL APPROPRIATIONS— Educational
appropriations from the
state of California decreased by $56.7 million to $244.6 million in
2009, as a result of the state of California budget situation.
Expenses
Expenses associated with the university’s core activities, including
those classified as nonoperating expenses, increased by $108.3
million, from $2.5 billion to $2.6 billion in 2009.
6
In accordance with the Governmental Accounting Standards Board’s
(GASB) reporting standards, operating losses were $285.9 million
in 2009 and $336.0 million in 2008. These operating losses were
more than offset by net revenues and expenses that are required by
GASB to be classified as nonoperating, but which remain available to
support operating activities of the university, $332.9 million in 2009
and $395.5 million in 2008. This income is restricted by either legal or
fiduciary obligations, allocated for academic and research initiatives or
programs, necessary for debt service, or required for capital purposes.
The University’s Cash Flows
In 2009, the net cash outflow from operating activities was $99.7
million, offset by $290.1 million of cash provided by noncapital
financing activities. Similarly, in 2008, the net cash outflow from
operating activities was $148.9 million, offset by $358.2 million of
cash provided by noncapital financing activities.
The net cash outflow from capital and related financing activities was
$324.1 million in 2009 and $232.0 million in 2008. The primary uses
of cash were payments to employees, suppliers, utilities and capital
asset purchases. Cash sources include grants and contract, and
receipts from the medical centers.
(UNAUDITED)
C A M P U S F O U N D ATI O N
20092008 1 20092008
OPERATING REVENUES
Student tuition and fees, net
$
260,915
$
230,451
$
—
Grants and contracts
Federal
584,294
564,095
—
State
42,115
35,812
—
Private
175,215
153,152
—
Local
11,201
12,453
—
Sales and services
Medical Center
805,547
732,500
—
Educational activities
227,425
223,764
—
Auxiliary enterprises, net
134,575
130,696
—
Contributions revenue
—
—
32,409
Other operating revenues, net
56,752
54,936
—
Total operating revenues 2,298,039
2,137,859
32,409
$
—
—
—
—
—
—
—
—
40,007
—
40,007
ANNUAL FINANCIAL REPORT 2008–2009
STATE M E NT O F R E V E N U E S, E XP E N S E S, AN D C HAN G E S I N N ET ASS ETS
АFO R TH E F I S CAL YEAR S E N D E D J U N E 3 0, 200 9 AN D J U N E 3 0, 200 8 (in thousands)
OPERATING EXPENSES
Salaries and wages
1,319,900
1,249,558
—
—
Benefits
278,283
252,920
—
—
Scholarships and fellowships
57,962
51,626
—
—
1
Utilities 47,997
43,675
—
—
Supplies and materials
379,893
383,559
—
—
Depreciation and amortization
174,200
168,423
—
—
Grants to campus
—
—
47,107
61,356
Other operating expenses
Building maintenance
108,280
106,944
—
—
Travel
33,963
32,171
—
—
Telecommunications
30,098
27,642
—
—
Other
153,398
157,341
29
123
Total operating expenses 2,583,974
2,473,859
47,136
61,479
Operating income (loss) (285,935)(336,000) (14,727) (21,472)
NONOPERATING REVENUES (EXPENSES)
State educational appropriations
244,612
301,300
—
—
State financing appropriations
13,030
17,602
—
—
Private gifts
55,791
59,136
—
—
Investment income
24,613
24,505
7,702
10,433
Realized gain on sale of investments
—
—
1,620
9,203
Unrealized appreciation/depreciation on investments
—
—
(84,377)
(25,405)
Interest expense
(336)
(4,743)——
Change in value of annuity and life income liabilities
—
—
(2,613)
2,690
Loss on disposal of capital assets, net
(3,626)
(1,614)
—
—
Other nonoperating revenues (expenses)
(1,215)
(641)
126
(1,932)
Total net nonoperating revenues (expenses)
332,869395,545 (77,542) (5,011)
Income before other changes in net assets
46,934 59,545 (92,269)(26,483)
OTHER CHANGES IN NET ASSETS
State capital appropriations
20,797
48,672
—
—
Capital gifts and grants
10,894
22,982
—
—
Permanent endowments
—
—
12,616
14,654
Transfers
(34,998)69,139
—
—
Total other changes in net assets (3,307)140,793 12,616 14,654
Increase in net assets 43,627
200,338
(79,653)
(11,829)
NET ASSETS
Net assets, beginning of year
1,931,902
1,731,564
496,788
508,617
Cummulative effect of a change in accounting principle
(762)
—
—
—
Net assets, end of year
$
1,974,767$
1,931,902$
417,135$
496,788
Financial statements for the University of California, San Diego are unaudited. Financial statements for the UC San Diego Foundation are audited. See accompanying Notes to the Financial Statements.
(1) Restated 2008 Utilities expenses (decreased by $26.000 million) and Other expenses (increased $26.000 million).
2 00 9 R EVE N U E S S U PPO RTI N G C O R E ACTIVITI E S
2 00 9 EXPE N S E S ASS O C IATE D WITH C O R E ACTIVITI E S
31% Grants and Contracts
51% Salaries and Wages
30% Medical Center
15% Supplies and Materials
10% Student Tuition and Fees
12% Other Expensese
10% State Educational Appropriations
11% Benefits
9% Educational Activities
7%
5% Auxiliary Enterprises
2%
Utilities
2% Other Revenues
2%
Scholarships and Fellowships
Depreciation and Amortization
2% Private Gifts
1% Investment Income
7
UNIVERSITY OF CALIFORNIA, SAN DIEGO
STATE M E NT O F N ET ASS ETS
(UNAUDITED)
FO R TH E F I S CAL YEAR S E N D E D J U N E 3 0, 200 9 AN D J U N E 3 0, 200 8 (in thousands)
C A M P U S F O U N D ATI O N
2009 2008 20092008
ASSETS
Current Assets
Cash and equity in treasurer’s investments
$
878,737
$
911,346
$
3,024
$
2,492
Investments held by trustees
676
1,443
72,437
72,814
Accounts receivable, net
State and federal government
57,307
56,302
—
—
Medical Center
149,857
158,819
—
—
Other
75,563
77,235
65
96
Pledges receivable, net
4,629
4,163
7,028
6,951
Notes receivable, net
2,476
2,280
—
—
Inventories
24,09824,101
—
—
Other current assets
20,623
17,321
380
198
Total current assets
1,213,9661,253,010 82,934 82,551
Noncurrent Assets
Investments held by trustees
18,164
5,981
313,738
397,686
Pledges receivable
4,373
3,284
37,935
38,846
Notes and mortgages
28,169
26,993
—
—
Land, buildings, equipment, libraries, and special collections
4,551,051
4,215,855
—
—
Less: Accumulated depreciation
(2,110,767)
( 1,973,935)
—
Other noncurrent assets
8,977
9,115
1,507
1,673
Total noncurrent assets
2,499,9672,287,293 353,180 438,205
Total assets
$
3,713,933$
3,540,303$
436,114$
520,756
LIABILITIES
Current Liabilities
Accounts payable
$
139,797$
154,386$
758$
1,325
Accrued salaries and benefits
64,790
64,623
—
—
Deferred revenue
110,262
105,236
—
—
Current portion of long-term debt 46,556
46,367
—
—
Funds held for others
1,780
1,485
150
136
Annuities payable
—
—
1,200
1,288
Liabilities to life beneficiaries
—
—
1,059
1,501
Other current liabilities
77,991
72,054
—
—
Total current liabilities
441,176444,151 3,167 4,250
Noncurrent Liabilities
Federal refundable loans
23,177
22,936
—
—
Annuities payable
—
—
7,729
8,181
Liabilities to life beneficiaries
—
—
8,084
11,088
Long-term debt
Revenue bonds
953,116
722,627
—
—
Certificates of participation
—
1,794
—
—
Mortgages and other borrowings
39,638
156,903
—
—
Capital lease obligations
228,820
205,209
—
—
Other noncurrent liabilities
53,240
54,781
—
449
Total noncurrent liabilities
1,297,9911,164,250 15,813 19,718
Total liabilities
$
1,739,167$
1,608,401$
18,980$
23,968
NET ASSETS
Invested in capital assets, net of related debt $ 1,171,515
$ 1,108,337
$
— $
—
Restricted
Nonexpendable
Endowments
—
—
230,999
243,260
Annuity and life income funds
—
—
3,167
4,686
Expendable
Endowments
—
—
58,360
115,596
Endowment income
10,636
10,830
—
—
Annuity and life income funds
—
—
4,989
6,091
Funds functioning as endowments
—
—
10,497
14,000
Loans
3,540
1,367
—
—
Gifts
80,343
81,940
105,879
110,492
Capital projects
6,703
15,250
—
—
Debt service
4,843
10,661
—
—
Other
93
54
—
—
Unrestricted
697,094703,463 3,243 2,663
Total net assets
$
1,974,767$
1,931,902$
417,134$
496,788
Financial statements for the University of California, San Diego are unaudited. Financial statements for the UC San Diego Foundation are audited. See accompanying Notes to the Financial Statements.
8FC8
(UNAUDITED)
FO R TH E F I S CAL YEAR S E N D E D J U N E 3 0, 200 9 AN D J U N E 3 0, 200 8 (in thousands)
2009
C A M P U S
2008
2009
CASH FLOWS FROM OPERATING ACTIVITIES
Student tuition and fees
$
265,523
$
229,391
$
—
Grants and contracts
826,008
767,099
—
Receipts from sales and services of
Medical Center
815,155
700,359
—
Educational activities
223,545
219,145
—
Auxiliary enterprises
132,428
133,559
—
Receipts from contributions
—
—
32,343
Collections of loans to students and employees
3,008
2,960
—
Payments to employees
(1,316,526)
(1,229,537)
—
Payments to suppliers and utilities
(746,149)
(718,398)
—
Payments for benefits
(275,456)
(250,294)
—
Payments for scholarships and fellowships
(57,962)
(51,626)
—
Payments to campuses
—
—
(44,356)
Payments to beneficiaries
—
—
(2,536)
Loans issued to students and employees
(3,805)
(2,405)
—
Other receipts (payments)
34,489
50,880
(5,028)
Net cash provided (used) by operating activities
(99,742)
(148,867)
(19,577)
F O U N D ATI O N
$
2008
—
—
—
—
—
34,584
—
—
—
—
—
(57,252)
(2,707)
—
(4,108)
(29,483)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State educational appropriations
244,612
301,300
—
Private gifts for endowment purposes
—
—
11,802
Private gifts received for other than capital purposes
55,175
58,626
—
Other receipts (payments)
(9,668)
(1,738)
318
Net cash flows from noncapital financing activities 290,119
358,188
12,120
—
13,492
—
798
14,291
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
State capital appropriations
19,007
40,142
—
State financing appropriations
17,301
17,558
—
Capital gifts and grants
6,874
20,828
—
Proceeds from debt issuance
48,899
34,343
—
Proceeds from the sale of capital assets
204
124
—
Proceeds from insurance recoveries
—
—
—
Purchases of capital assets
(395,216)
(326,953)
—
Refinancing/prepayment outstanding debt
—
—
—
Principal paid on debt and capital leases
(18,563)
(14,459)
—
Interest paid on debt and capital leases
(2,609)
(3,571)
—
Net cash provided (used) by capital and related activities
(324,103)
(231,988)
—
—
—
—
—
—
—
—
—
—
—
—
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale and maturities of investments
(31)
(627)
51,944
Purchase of investments
—
—
(53,917)
Other receipts 4,492
—
9,962
Net cash provided (used) by investing activities
4,461
(627)
7,989
156,375
(148,407)
8,894
16,862
CHANGE IN ACCOUNTING PRINCIPALS
Cumulative effect of change in accounting principals
(762)
—
—
Net change due to GASB Prouncements (762)
—
—
—
—
CASH FLOWS FROM TRANSFERS
Current
Intercampus
280,929
280,465
—
Interfund
(93,212)
(82,380)
—
Net revenue of bonds and other indebtedness programs
973
55,296
—
Unexpended plant
144,723
81,566
—
Retirement of indebtedness
(71,031)
(36,601)
—
Investment in plant
2
(445)
—
Loan
71
86
—
Indirect cost recovery
(165,680)
(154,195)
—
Net cash flows from transfers
96,775
143,792
—
Total net increase in cash (33,252)
120,498
532
—
—
—
—
—
—
—
—
—
1,670
Cash beginning of year
Cash end of year
$
911,040
877,788
$
790,542
911,040
$
2,492
3,024
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES
Operating income (loss)
$
(285,935)
$
(336,001)
$
(14,727)
Depreciation and amortization expense
174,200
168,423
—
Noncash gifts
—
—
(1,313)
Allowance for doubtful accounts
7,707
2,078
—
Loss on impairment of capital assets
—
—
—
Change in assets and liabilities
Receivables, net
2,262
(41,999)
835
Inventories
2
(1,203)
—
Deferred charges
(3,302)
(4,953)
—
Other assets
126
(357)
413
Accounts payable
(6,161)
27,970
(1,930)
Accrued salaries and benefits
169
11,711
—
Deferred revenue
5,956
12,823
—
Annuities payable
—
—
(2,854)
Other liabilities
5,234
12,641
—
Net cash used by operating activities
$
(99,742)
$
(148,867)
$
(19,576)
ANNUAL FINANCIAL REPORT 2008–2009
STATE M E NT O F CAS H FLO WS
$
$
$
822
2,492
(21,471)
—
(2,855)
46
—
(2,830)
—
—
259
873
—
—
(3,505)
—
(29,483)
Financial statements for the University of California, San Diego are unaudited. Financial statements for the UC San Diego Foundation are audited. See accompanying Notes to the Financial Statements.
FC99
UNIVERSITY OF CALIFORNIA, SAN DIEGO
N OTE S TO TH E FI NAN C IAL STATE M E NTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(UNAUDITED)
SHORT-TERM INVESTMENTS— UCSD participates in a temporary investment pool
that is administered by the Office of the President. This pool invests primarily in
The accompanying financial statements of the University of California, San Diego
U.S. Treasury securities, commercial paper, and short-term corporate notes with
campus, including the UCSD Medical Center, have been prepared in accordance
cost approximating market value. These temporary investments are considered cash
with generally accepted accounting principles, including all applicable effective
equivalents for the purposes of the statement of cash flows.
statements of the Financial Accounting Standards board through November 30,
1989 and generally adhering to the statements of the Governmental Accounting
INVESTMENTS— The Regents, as the governing board, is responsible for the
Standards Board (GASB), using the accrual basis of accounting. The accounts of
management of the university’s investments, and establishes policy, which is carried
the San Diego campus are subject to limited-scope procedures as a part of the
out by the treasurer. Investments are primarily recorded at fair market value.
annual audit of the financial statements of the entire University of California. The
financial statements of the San Diego campus have not been individually audited.
ENDOWMENTS— The campus endowment funds are invested and administered by
The significant accounting policies of the university, not including the UC San Diego
the Endowment and Investment Accounting unit of the Office of the President, and
Foundation, are summarized below.
are not included in these financial statements. Income from campus endowment
funds is recorded at UCOP and transferred to the campus annually. The university’s
The UC San Diego Foundation is a nonprofit, public-benefit corporation organized
endowment income distribution policies are designed to preserve the value of the
for the purpose of accepting and administering the full range of private contributions
endowment and to generate a predictable stream of spendable income.
for the campus. It is qualified as a tax-exempt organization under the provision of
Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and
INVESTMENTS HELD BY TRUSTEES— All investments held by trustees are insured,
state income taxes on related income.
registered, or held by the university’s trustee or custodial bank, as fiduciary for the
bondholder or as agent for the university.
USE OF ESTIMATES— The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
ACCOUNTS RECEIVABLE— Accounts receivable include reimbursements due from
and assumptions that affect the reported amounts of assets and liabilities at the date
state and federal sponsors of externally funded research, patient billings, and other
of the financial statements and the reported amounts of revenues and expenditures
receivables.
during the reporting period. Actual amounts could differ from those estimates.
PLEDGES RECEIVABLE— Unconditional pledges of private gifts to the university to
GASB Statement No. 49, Accounting and Financial Reporting for Pollution
be paid in the future are recorded as pledges receivable and revenue in the year
Remediation Obligations, was adopted by the University during the year ended
promised at the present value of expected cash flows.
June 30, 2009. Statement No. 49 establishes criteria to ascertain whether certain
events result in a requirement for the university to estimate the components of any
NOTES AND MORTGAGES RECEIVABLE— Loans to students are provided from
expected pollution remediation costs and determine whether these costs should
federal student loan programs and from university sources. Home mortgage loans,
be accrued as a liability. The costs were estimated using the expected cash flow
primarily for faculty, are provided by the Short-Term Investment Pool and from other
technique, which measures the liability as the sum of probability-weighted amounts
university sources.
in a range of possible estimated amounts. Previously, pollution remediation costs
were accrued only if they were both probable of occurring and could be reasonably
INVENTORIES— Inventories, consisting primarily of supplies and merchandise for
estimated. In accordance with Statement No. 49 retrospective application is required.
resale, are valued at cost, typically determined using the weighted average method,
The cumulative effect of the accounting change described above to establish the
which is not in excess of net realizable value.
initial $0.3 million liability was recorded as an adjustment to the July 1, 2007 net
assets.
CAPITAL ASSETS— Land, infrastructure, buildings and improvements, equipment,
The university also restated the 2008 financial statements for purposes of
value at the date of donation in the case of gifts. Capital leases are recorded at the
presenting comparative information for the year ended June 30, 2009. The effect
present value of future minimal lease payments. Significant additions, replacements,
libraries, and special collections are recorded at cost at the date of acquisition or fair
of the changes from the adoption of Statement No. 49 on the university’s financial
major repairs and renovations are generally capitalized if the cost exceeds $35,000
statements for the year ended June 30, 2008 was to increase the liability from $0.3
and if they have a useful life of more than one year. Minor renovations are charged
million at June 30, 2007 to $1.0 million at June 30, 2008.
to operations. Equipment with a cost greater than $4,999 and a useful life of more
than one year is capitalized.
The adoption of Statement No. 49 did not result in any adjustments to the financial
statements of the UC San Diego Foundation.
Interest on borrowings to finance facilities is capitalized during construction, net of
any investment income earned during the temporary investment of project related
CASH AND CASH EQUIVALENTS— The Office of the President (UCOP) Treasurer’s
borrowings.
Office maintains centralized management for substantially all of the university’s
10
cash. Cash in demand deposit accounts is minimized by sweeping available cash
Depreciation is calculated using the straight-line method over the estimated
balances into investment accounts on a daily basis.
economic life of the asset.
NET ASSETS — Net assets are required to be classified for accounting and reporting
government retains a reversionary interest are capitalized and depreciated.
purposes into the following categories:
Inexhaustible capital assets such as land or special collections that are protected,
preserved, and held for public exhibition, education, or research, including art,
INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT— This category includes
museum, scientific, and rare book collections, are not depreciated.
all of the university’s capital assets, net of accumulated depreciation, reduced by
outstanding debt attributable to the acquisition, construction or improvement of
DEFERRED REVENUE— Deferred revenue primarily includes amounts received
those assets.
from grant and contract sponsors that have not been earned under the terms of
the agreement and other revenue billed in advance of the event, such as student
RESTRICTED— The university and campus foundations classify net assets resulting
tuition and fees, and fees for housing and dining services.
from transactions with purpose restrictions as restricted net assets until the
ANNUAL FINANCIAL REPORT 2008–09
Capital assets acquired through federal grants and contracts where the federal
specific resources are used for the required purpose, or for as long as the provider
FUNDS HELD FOR OTHERS— Funds held for others result from the university or
requires the resources to remain intact.
the campus foundations acting as an agent, or fiduciary, on behalf of organizations
that are not significant or financially accountable to the university or campus
foundations.
NONEXPENDABLE— Net assets subject to externally-imposed restrictions, which
must be retained in perpetuity by the university or the campus foundations, are
classified as nonexpendable net assets. Such assets include the university and
FEDERAL REFUNDABLE LOANS— Certain loans to students are administered by
campus foundation permanent endowment funds.
the university with funding primarily supported by the federal government. The
university’s statement of net assets includes both the notes receivable and the
EXPENDABLE— Net assets whose use by the university or the campus foundations
related federal refundable loan liability, representing federal capital contributions
is subject to externally imposed restrictions that can be fulfilled by actions of the
owed upon termination of the program.
university or campus foundations, pursuant to those restrictions, or that expire by
the passage of time, are classified as expendable net assets.
DEBT— Long-term financing includes bonds, certificates of participation, loans and
other borrowings, and capital lease obligations. Some loans, bonds, and certificates
UNRESTRICTED— Net assets that are neither restricted nor invested in capital
of participation provide financing for projects on more than one campus and are
assets, net of related debt, are classified as unrestricted net assets. The university’s
accounted for centrally at UCOP. For financial statement presentation, selected
unrestricted net assets may be designated for specific purposes by management
statements have been adjusted to include long-term debt recorded at UCOP. In the
or The Regents. The campus foundations’ unrestricted net assets may be
statement of net assets, the totals for long-term debt, including the current portion
designated for specific purposes by their Boards of Trustees. Substantially all of
of long-term debt, have been adjusted to reflect the UCOP-held debt. Likewise the
the university’s unrestricted net assets are allocated for academic and research
invested in capital assets, net of related debt total, has been adjusted. Similarly, the
initiatives or programs, for capital programs or for other purposes. Expenses are
transfers total in the statement of revenues, expenses, and changes in net assets
charged to either restricted or unrestricted net assets based upon a variety of
for 2009 has been adjusted by $112.4 million, the change in UCOP-held debt
factors, including consideration of prior and future revenue sources, the type
from $975.9 million in 2008 to $1.1 billion in 2009. The statement of cash flows
of expense incurred, the university’s budgetary policies surrounding the various
has not been adjusted.
revenue sources, or whether the expense is a recurring cost.
Following is the combined UCSD debt for the years ending June 30, 2009 and
REVENUES AND EXPENSES— Operating revenues of the university include receipts
2008 (in thousands).
from student tuition and fees, grants and contracts for specific operating activities,
and sales and services from medical centers, educational activities and auxiliary
Maturity
Years Outstanding Outstanding
2009 2008
605,263
budgeted for fundamental operational support of the core instructional mission of
67,393 70,658
the university are mandated by the GASB to be recorded as nonoperating revenues,
2009-2041
58,157
64,082
including state educational appropriations, private gifts and investment income,
2009-2032
0
6,625
since the GASB does not consider them to be related to the principal operating
981,216
746,657
General
2009-2040
Hospital
2009-2047
Multiple purpose project
Research facility
$
sub-total revenue bond
Mortgages and other borrowings
2009-2010
Capital lease obligations
2009-2030
Certificates of participation
2009-2010 40,293 Less current portion of long-term debt
Total long-term debt
855,666 245,692 Total outstanding debt
of the university are presented in the statement of revenues, expenses and changes
in net assets as operating activities. Certain significant revenues relied upon and
REVENUE BONDS
enterprises. Operating expenses incurred in conducting the programs and services
$
$
166,941
215,789
659
3,513
1,268,130
1,132,900
46,556
46,367
1,221,547
$ 1,086,533
activities of the university. Campus foundations are established to financially
support the university. Private gifts to campus foundations are recognized as
operating revenues, since, in contrast to the university, such contributions are
fundamental to the core mission of the campus foundations. Foundation grants
to the university are recognized as operating expenses. Private gift or capital
gift revenues associated with campus foundation grants to the university are
recorded by the university as the gifts are made. Nonoperating revenues and
expenses include state educational appropriations, state financing appropriations,
private gifts for other than capital purposes, investment income, net unrealized
appreciation or depreciation in the fair value of investments, interest expense, and
gain or loss on the disposal of capital assets. State capital appropriations, capital
gifts and grants, and gifts for endowment purposes are classified as other changes
in net assets.
№№11
UNIVERSITY OF CALIFORNIA, SAN DIEGO
COMMITMENTS AND CONTINGENCIES— Substantial amounts are received and
NEW ACCOUNTING PRONOUNCEMENTS— In June 2007, the GASB issued Statement
expended by the university, including its medical center, under federal and state
No. 51, Accounting and Financial Reporting for Intangible Assets, effective for the
programs, and are subject to audit by cognizant governmental agencies. This funding
university’s fiscal year beginning July 1, 2009. This statement requires capitalization
relates to research, student aid, medical center operations, and other programs.
of identifiable intangible assets in the statement of net assets and provides guidance
University management believes that any liabilities arising from such audits will not
for amortization of intangible assets unless they are considered to have an indefinite
have a material effect on the university’s financial position.
useful life. The university is evaluating the effect that Statement No. 51 will have on
its financial statements.
COMPARATIVE INFORMATION— In connection with the preparation of the June 30,
2009 statement of revenues, expenses and changes in net assets, the university
In June 2008, the GASB issued Statement No. 53, Accounting and Financial
concluded that internal departmental recharges associated with utility costs in 2008
Reporting for Derivative Instruments, also effective for the University’s fiscal year
should have been credited against utilities expense rather than other operating
beginning July 1, 2009. This statement requires the university to report its derivative
expenses. As a result, revisions in classification have been made in the June 30,
instruments at fair value. Changes in fair value for effective hedges that are achieved
2008 financial statements to reduce utilities expense and increase other operating
with derivative instruments are to be reported as deferrals in the statement of net
expenses by $26.0 million.
assets. Derivative instruments that either do not meet the criteria for an effective
UNIVERSITY OF CALIFORNIA RETIREMENT PLAN— The University of California
to be classified as investment derivative instruments. Changes in fair value of those
hedge or are associated with investments that are already reported at fair value are
Retirement Plan (UCRP) costs are funded by a combination of investment earnings,
derivative instruments are to be reported as net appreciation or depreciation in the
employee member and employer contributions. In 2006, the Regents updated the
fair value of investments.
funding policy for UCRP to provide for a targeted funding level of 100 percent over
the long term, and for university and UCRP member contributions at rates necessary
The university has determined that the interest rate swaps entered into in conjunction
to maintain that level within a range of 95 percent to 110 percent. The university
with certain Medical Center Pooled Revenue Bonds are derivative instruments that
will implement a multiyear contribution strategy under which shared employer and
meet the criteria for an effective hedge and is continuing to evaluate the effect that
employee contribution rates will increase gradually over time to 16 percent of covered
Statement No. 53 will have on its financial statements with respect to securities in
compensation, based upon UCRP’s current normal cost. The Regents have not yet
investment portfolios that may be derivative instruments.
authorized the initial resumption of shared employer and employee contributions.
Loca l i m p a c t
N a t i o n a l I n f l u e n c e
G l o b a l R e a c h
12