University Planning and Budget September 1, 2016

Iowa State University Financial Reports Iowa State University financial reports are posted online: http://www.controller.iastate.edu/far/financial%20 report.htm The financial reports are prepared in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB).

Iowa State University Financial Reports Statement of Net Position Presents the financial position of the University at the end of the fiscal year and includes all assets, liabilities, and deferred inflows/outflows of the resources of the University. Statement of Revenues, Expenses, and Changes in Net Position The purpose of this statement is to present the operating and non- operating revenues earned by the university, the operating and non- operating expenses incurred by the University, and any other revenues, expenses, gains and losses earned or incurred by the University. Statement of Cash Flows The primary purpose of the Statement of Cash Flows is to provide information about the cash receipts and disbursements of the University for the fiscal year.

Statement of Net Position We’re going to dig in a small bit on the Statement of Net Position. The financial reports for the year ended June 30, 2016 are not yet available so what we have here is the financial reports from the year ended June 30, 2015, which also includes a side-by-side comparison of the two previous years. Couple of things to note here: Total Net Position is approximately $1.4 billion. The net position has been increasing over the last three years. It has increased approximately $169 million between 2013 and 2015. I’m not sure what happened in 2014, but you can see that the current liabilities were more than the current assets. We turned that around in 2015 and it’s a good position to be in when you current assets can cover your current liabilities. Current liabilities means what is coming due in a year or less and current assets are cash and other assets that are expected to be converted to cash within a year.

Iowa State University Financial Reports The Statement of Net Position, and the related Statements of Revenues, Expenses, and Changes in Net Position and Cash Flows are independently audited by the Auditor of State, State of Iowa. The 2015 audit opinion concluded that the financial statements presented fairly, in all material respects, the respective financial position of Iowa State University.

Iowa State University Cash vs. Accrual Basis Under the cash basis of accounting, revenue is recognized when cash is received and expenses are recognized when cash is paid. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when an obligation is incurred. I’m going to make a distinction here. At Iowa State, our financial management system is very much on a cash method basis. What happens to you accounts? There’s a transaction when you receive cash and there’s a transaction when an expense is paid. Then we have the consolidated financial reports which are prepared under the accrual basis of accounting. Revenues are recognized when earned, earned meaning when we have a claim to that revenue, and expenses are recorded when we have an obligation, so we not have paid yet, but we have an obligation to pay. Everything is rolling up to a very high level. So if you’ll recall at our August council meeting, CFO Miles Lackey talked about preparing financial statements for business units under the accrual basis of accounting. Here’s my interpretation of that, as a whole, we have Iowa State University consolidated financial reports prepared under the accrual basis of accounting. Everything is rolling up to a very high level. From an individual business unit level, you have financial reports in the financial system that are cash basis. So I think what he’s getting at is having accrual basis financial reports at individual business unit levels and when you have financial reports in the accrual basis of accounting plus the financial management system in the cash basis, this might lead to identifying some trends that will be helpful in making business decisions.