- The PricewaterhouseCoopers is the auditor for Vanderbilt University for the financial statements as at June 30, 2012. The opinion of the auditors is unqualified, and they make an assertion that in their opinion, the statements present fairly, in all material respects, the financial position of Vanderbilt University as June 30, 2012 and June 30, 2011. This opinion means that after examination of the statements, the auditors did not find any issues which could have affected the materiality and objectivity. This essentially implies that it is the opinion of the auditors that the financial statements were prepared in accordance with the established standards and policies of accounting and financial reporting.
- If the university was reporting as a special purpose government, its report would be in the form of segments. It would report on both aspects of the operation, the governmental part which would give the surplus or deficit of that part of the operation and the commercial part which would indicate the profit or loss made in that particular period. The advantage of reporting under this mode is that there is a more clear presentation of information for funding from various sources. It however may be expensive and tedious to make a reporting for all the segments of the operations of the university. Reporting as a commercial entity has the advantage of having very clear policy guidelines.
- If the university were reporting as a public university, its cash flow statement would differ in that it would be condensed. It would only divulge the relevant information and its details would not be as detailed as it would be if it was reporting as a commercial entity. The cash flow would only be composed on only the essential details and would not have the detailed components and disclosures that are normal with the cash flow statement of profit making enterprises.
- The likely difference between auxiliary services and other services would be in their source. Auxiliary services are the services that the university offers to make life for students, members of faculty and non academic staff more lively and productive but fall away from the core services that are offered by the university, and thus would be classified comprehensively under this categorization. These services are offered as support to the core services of universities of teaching and research, and thus in the financial statements, they are categorized differently from the other services. This is because sometimes, these auxiliary services are offered under a profit making mechanism, and operate as independent profit making enterprises that but report under the university. Examples of these auxiliary services are cafeterias and bookshops operated in universities by the university management.
Another piece of evidence that faculty are not paid is an analysis of the average pay received by individuals of the same skill and experience in other areas of the public sector and the private sector. A look at the pay of individuals in such levels indicates that indeed members of faculty are averagely on the same pay with individuals with the same level of education, skill and experience.
- The program expense ratio is calculated as a ration of the cost of a particular program to the total expenses incurred by an entity. It basically shows the level of expenses used to finance a program. The program expense ratio is low as per the university’s financial statements, and this is indicative that the level of costs of programs in the university is a small part of the expenses of the university as a whole.
- The financial statements give a reason to question the level of investment in plant, equipment and other capital assets. This is because the ratios from the last five years which measure the university’s annual investments in property, plant and equipment as a percentage of annual operating revenues indicate a gradual decrease from 9.3% in 2008 to 3.9% in 2012. This is a drastic change which is indicative that the university has not been increasing its investment in property, plant and equipment. The ratio indicates a very low level of investment in plant, property and equipment which may be inadequate considering the rise in annual revenues of the university.
This reduction in the ratios indicates that the investment that the university has been making over the last five years has been reducing while at the same time the revenues that have accrued to the university have been rising at a level which has been higher. It would be expected that the increase in revenues would have had a proportionate increase as the revenues rose.
Houston, Joel F.; Brigham, Eugene F. (2009). Fundamentals of Financial Management. [Cincinnati, Ohio]: South-Western College Publishing
Vanderbilt University 2012 Financial Report, available from http://financialreport.vanderbilt.edu/
Weygandt, J. J., Kieso, D. E., & Kell, W. G. (1996). Accounting Principles (4th ed.). New York, Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc. p. 801-802.
Williams, Jan R.; Susan F. Haka, Mark S. Bettner, Joseph V. Carcello (2008). Financial & Managerial Accounting. McGraw-Hill Irwin