Accounts Receivable - assets due the University, primarily the receivables due from students (for tuition and fees); from federal, state, and private sponsors (for research); and from patients (treated by School of Medicine faculty)
Accrued Expenses - expenses reported in the period in which they occur but for which payment is made in a subsequent period. The vast majority of the University's accrued expenses are salaries and benefits earned but not paid as of the end of the fiscal year due to the State's pay date shift (shifting the final pay date for all State employees from June 30 to July 1 of each year).
Assets - resources held by the University
Capital Assets - the University's buildings, land, equipment, library books, and other tangible assets that are used to teach students, conduct research, and handle daily operations
Compensated Absences - the dollar value of paid time off earned but not yet used by University employees (sick leave, personal leave) plus employer-related payroll taxes
Current Assets - assets expected to be used within one year (like inventories) or that will convert to cash within one year (like current investments and current accounts receivable)
Current Liabilities - liabilities that will be paid within one year
Deferred Outflows - a consumption of resources applicable to a future reporting period (these are essentially assets)
Liabilities - claims against the University's resources (assets)
Net Position - assets plus deferred outflows less liabilities (essentially, the difference between resources and claims against those resources). Net position can either be positive (usually a good thing) or negative (probably a bad thing).
Noncurrent Assets - assets that exceed the one-year time frame
Noncurrent Liabilities - claims that exceed the one-year time frame
Nonoperating Revenues and Expenses - those amounts that are not directly related to the University's primary missions but are still important drivers of its financial results (major nonoperating revenues are the federal Pell Grant, gifts, and investment income ... major nonoperating expenses are investment losses and interest expense on the University's outstanding debt)
OPEB (other postemployment benefits) - health and other benefits provided to individuals after their University employment has ended but reported as a liability in the financial statements as the benefits are earned by the still-active employees
Operating Expenses - costs incurred in fulfilling the University's primary missions (classified by function, e.g., instruction, research, health services)
Operating Revenues - revenues (money) received from what the University does as its primary missions: teach, conduct research, auxiliary enterprises, and health services
Revenue Bonds - bonds payable from revenue sources specified in the debt agreements, normally issued to fund capital improvements. Revenue sources include auxiliary services (parking, dining, housing, athletics, etc.), research services, tuition (limited to ten percent of the University's total), capital student fees, and indirect cost recoveries (funds received, typically from the federal government, to pay for certain costs of managing funded research activity)
Unearned Revenue - payments for services that have come to the University in advance of the University providing those services (e.g., summer tuition and fees paid for courses that are not completed by June 30, and payment on grants and contracts prior to the research being conducted/work being performed). Unearned revenue is treated as a liability since the University has not yet performed the work (teaching, research, etc.) needed in order to “earn” that revenue.
Our starting point is where CU holds its resources and the claims against those resources. In the Annual Financial Report, this is reported in the Statements of Net Position, popularly known as the Balance Sheet.
Remember: The resources held by CU are called assets, the claims against those resources (assets) are called liabilities, and the difference between the two is called net position. Net position can either be positive (usually a good thing) or negative (probably a bad thing).
Assets and liabilities are broken into current and noncurrent. The ratio of current assets to current liabilities is one indicator of financial health. A ratio greater than 1 demonstrates an ability to pay obligations as they become due ... and is therefore favorable. The University maintained a ratio greater than 1 for the past 10 years.
Now that we've reviewed the different types of assets, let's take a look at CU's total assets over the last 10 years ... These represent the sum of what the University owns - some of these assets (such as buildings) are recorded at historical cost - and others (such as investments) are recorded at fair value. Increases in total assets over time are generally indicative of a growing institution.
Next, the Balance Sheet presents the claims on the University's assets - otherwise known as liabilities.
Net position is the difference between assets and deferred outflows less liabilities. Deferred outflows show consumption of resources (assets) applicable to a future reporting period.
CU's capital asset balance less debt issued to fund those capital assets - this is typically over 50% of CU's total net position but doesn't reflect spendable reserves.
Endowments received as gifts: only the investment earnings on the gift can be spent and then only on scholarships, endowed chairs, and the like.
Entire gift can be spent, not just the investment earnings. Funds can be spent only in accordance with restrictions established by external third parties.
Balances designated for use by leadership to address University needs.
Now that we have covered the Balance Sheet, let's move on to the Statements of Revenues, Expenses, and Changes in Net Position, commonly referred to as the Income Statement. The Income Statement shows where the University gets its money (revenues) and how it spends its money (expenses).
Operating Revenues are received from what CU does as its primary missions: teach, conduct research, auxiliary enterprises, and health services. Operating Expenses are costs incurred in fulfilling its primary missions.
CU's operations are classified by function - instruction, research, and health services - so you can see where CU is focusing its efforts. These 3 functional expense areas reflect a direct correlation to the top 3 revenue sources (tuition; federal, state, and private grants/contracts; health services).
Nonoperating Revenues and Expenses are those amounts that are not directly related to the University's mission, but are important drivers of its financial results. Major nonoperating revenues are the federal Pell grant, gifts, and investment income.
Major nonoperating expenses are investment losses and interest expense on the University's outstanding debt. Over the past several years, CU has refinanced much of its outstanding debt. So, while you were refinancing your home loan to save money, CU was doing essentially the same thing!
The main component of other revenues is capital gifts and grants. These are gifts made by donors to be used only for the construction of buildings or other capital assets. The gifts may also be donations of actual capital property.
You may have noticed that State appropriations are not among the major sources of nonoperating revenue.
In total, CU receives approximately five percent of its funding from the state. Absent changes in the state's fiscal structure, this amount is expected to remain low.
Financial reporting is a funny thing.
It does a great job of placing values on investments, capital assets, debt, and all the other items in a set of financial statements. But it completely misses something else -- something essential. The worth of any university is derived from more than numbers. Financial statements do not fully reflect the quality of an institution's faculty, the innovation of its research, or the strength of its management. More significantly, financial statements do not recognize the opportunities available to the graduates who have received an outstanding education from the institution. These items cannot be quantitatively measured, but they are important nonetheless.
For a publicly traded company, the stock price gives some indication of the value shareholders place on the company's position in its market, its future product line, its reputation, and its management. For the University of Colorado, as a public institution of higher education, there are no shares of stock traded in an exchange. It is up to the readers of our Annual Financial Report and this Illustrated Guide to come to their own conclusions about the true worth of this institution.
In the introduction, we stated our goal to present the University of Colorado's financial information in an easily understandable manner through the use of this website. So, how did we do? Is there something you think should be more fully explained? Please use this feedback form to let us know!
Transparency and clarity go hand-in-hand. We've taken an initial step to providing clarity to CU's financial statements. Now it is your turn to help us make additional strides in this ongoing effort. Thanks for your time and we look forward to reporting back to you next year!