CHAPEL HILL – UNC-Chapel Hill reported net assets for the 2004 fiscal year of $2.2 billion, an increase of $216 million, according to an audit recently released by State Auditor Les Merritt.
That same audit also cited reporting violations at UNC-Chapel Hill regarding the institution’s noncompliance with the state’s daily deposit and reporting law. In spite of these minor auditing violations, the report states that the school’s financial position “remained solid.”
“Management’s view is that the [u]niversity is well positioned to continue demonstrating excellence in teaching, discovery, and public service,” the audit states. “Management believes that, although national and [s]tate economic conditions have affected resources in prior years, fiscal year 2003-2004, demonstrated an improved fiscal condition.”
The net asset increase of $216 million represented a 10.7 percent change from the 2003 fiscal year. According to the audit, the school had net assets in 2003 of just a little more than $2 billion.
Total assets for the school were $3.6 billion, a 14.7 percent increase from 2003 total assets of $3.1 billion. The majority of the assets came from capital assets, such as buildings. Liabilities were up 22.1 percent from 2003 at $1.3 billion compared to $1.1 billion in 2003. Most of the school’s liabilities were tied up in the payment of long-term debt and capital projects.
UNC-Chapel Hill had operating losses again in 2004; however those losses were smaller than those from 2003. Operating losses for 2004 were $500 million, compared to $540 million in 2003.
According to the audit, the school brought in $1.1 billion in operating revenues, a 9.9 percent increase from 2003, including $153 million in net funding from student tuition and fees, and nearly $500 million in grants and contracts. However, the school paid more than $917 million in salaries and benefits in 2004, up from $876 million in 2003. The school also increased its spending in regards to supplies and materials ($151 million spent), services ($380 million), scholarships and fellowships ($47 million), and utilities ($46 million).
State appropriations were increased by 3.4 percent to UNC-Chapel Hill compared to 2003 figures. The school received $380 million in state funding, compared to $368 million in 2003. At the same time, the school received increases in noncapital grants and noncapital gifts.
UNC also saw a net increase of 185.6 percent in investment income with $135 million in investment income in 2004, while receiving $47 million in 2003.
Instruction spending had a marginal increase from 2003 to 2004 at $532 million in 2004 compared to $531 million in 2003. The school spent $257 million in research, a 4.2 percent increase from 2003, and $78 million in public service projects, an increase of 3.8 percent from 2003.
While the audit highlighted the university’s financial position, it also showed a weakness in UNC-Chapel Hill’s adherence to the daily deposit and reporting law. According to the audit, the school “did not have adequate controls over the receipting process to ensure that all receipts were deposited intact and deposited timely.” A test of 39 departmental receipts showed that seven were deposited two to three months after receipt.
“When deposits are delayed, revenues may be lost and inappropriate or fraudulent activity may go undetected,” the audit states.
According to the audit, the university has created a new position – financial controls manager – to address some of the issues found in the audit. The new position is responsible for assisting “central offices and campus units in strengthening their internal controls.”
Shannon Blosser (sblosser@popecenter.org) is a staff writer with the John W. Pope Center for Higher Education Policy in Chapel Hill.