FY 2005 - University of Missouri System

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N otes to Combined Financial StatementsF o r t h e y e a r s e n d e d J u n e 3 0 , 2 0 0 5 a n d 2 0 0 4financial statement purposes. Proceeds from the sale, exchange, or other disposal of any item belonging to a collectionof historical treasures must be applied to the acquisition of additional items for the same collection.Deferred Revenue – Deferred revenues include amounts received for tuition and fees and certain auxiliary activitiesprior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also includeamounts received from grant and contract sponsors that have not yet been earned.Net Assets – The University’s net assets are classified for financial reporting in the following net asset categories:• Invested in capital assets, net of related debt: This component of net assets includes capital assets, net ofaccumulated depreciation and outstanding principal debt balances related to the acquisition, construction orimprovement of those assets.• Restricted:Nonexpendable – Net assets subject to externally imposed stipulations that they be maintained permanently bythe University. Such assets include the University’s permanent endowment funds. The University’s policy permitsany realized and unrealized appreciation on the endowments to remain with the endowment after the 5% spendingdistribution discussed in Note 3.Expendable – Net assets whose use by the University is subject to externally imposed stipulations that can befulfilled by actions of the University pursuant to those stipulations or that expire by the passage of time.• Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may bedesignated for specific purposes by action of management or the Board of Curators. When an expense is incurredthat can be paid using either restricted or unrestricted resources, the University’s policy is to first apply the expensetowards restricted resources, and then towards unrestricted resources. Unrestricted net assets are used for expensesfor academics and general operation of the University.Scholarship Allowance – Tuition and fees and related housing, dining and other auxiliary enterprises revenues arepresented net of scholarships and fellowships applied to student accounts, while scholarships, fellowships and otherpayments made directly to students are presented as scholarship and fellowship expenses.Patient Medical Services, Net – Patient medical services revenues are reported net of contractual allowances andbad debt. Patient medical services are primarily provided through University of Missouri Hospitals and Clinics,Ellis Fischel Cancer Research Center, Columbia Regional Hospital, Missouri Rehabilitation Center and UniversityPhysicians (collectively, the “University of Missouri Healthcare”).The University of Missouri Healthcare has agreements with third-party payors that provide for payments at amountsdifferent from established rates. Payment arrangements include prospectively determined rates per discharge, reimbursedcosts, discount charges and per diem payments. Patient medical services revenue is reported at the estimated netrealizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactiveadjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on anestimated basis in the period the related services are rendered and adjusted in future periods as estimates are refinedand final settlements are determined. Patient medical services revenue is also shown net of estimated uncollectibleaccounts.Amounts receivable under Medicare and Medicaid reimbursements agreements are subject to examination andcertain retroactive adjustments by the related programs. These adjustments increased net patient services revenues by$5,518,000 and $4,001,000 for the years ended June 30, 2005 and 2004, respectively.2 0 0 5 F i n a n c i a l R e p o r t : U n i v e r s i t y o f M i s s o u r ia c o m p o n e n t u n i t o f t h e S t a t e o f M i s s o u r i 25
N otes to Combined Financial StatementsF o r t h e y e a r s e n d e d J u n e 3 0 , 2 0 0 5 a n d 2 0 0 4A percentage breakdown of gross patient accounts receivable by major payer classification of the University of MissouriHealthcare for the years ended June 30, 2005 and 2004, is as follows:2005 2004Medicare 29% 22%Commercial Insurance 10% 9%Medicaid 24% 21%Self Pay and Other 11% 13%Managed Care Agreements 26% 35%100% 100%The gross to net patient medical services revenue detail is reflected below for fiscal years 2005 and 2004. The Statementsof Revenues, Expenses and Changes in Net Assets reflect net patient medical services revenue as follows (in thousandsof dollars):2005 2004Patient Medical Services Revenue, Gross $ 1,063,495 $ 900,419Less Deductions for Contractuals (464,970) (385,174)Less Bad Debt Deductions (32,131) (23,016)Patient Medical Services Revenue, Net $ 566,394 $ 492,229Interest Rate Swap Agreements – The University enters into interest rate swap agreements to modify interest rateson outstanding debt. Other than the net payments resulting from those agreements, no amounts related to the interestrate swaps are recorded in the financial statements.New Accounting Pronouncements – The GASB issued GASB Statement No. 42, Accounting and Financial Reportingfor Impairment of Capital Assets and for Insurance Recoveries, effective for fiscal years beginning after December15, 2004. This statement establishes accounting and financial reporting standards for impairment of capital assets, aswell as clarifying and establishing accounting requirements for insurance recoveries. Impairment of a capital assetmay be the result of physical damage, technology changes, obsolescence, and construction stoppage. If impairment isdetermined to exist, the capital asset may be revalued and disclosed in accordance with the provisions of the statement.The University has not yet determined the effect that adoption of GASB Statement No. 42 may have on the financialstatements.The GASB issued GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans other thanPension Plans, effective for fiscal years beginning after December 15, 2005 and GASB Statement No. 45, Accountingand Financial Reporting by Employers for Postemployment Benefits other than Pensions, effective for fiscal yearsbeginning after December 15, 2006. The University’s postemployment benefit plan is self-insured and managed by theUniversity; therefore, both statements are applicable. The statements provide standards for measurement, recognitionand display of other postemployment benefit expenditures, assets, and liabilities, including applicable note disclosuresand supplementary information. The University has not yet determined the effect that adoption of GASB Statement No.43 and GASB Statement No. 45 may have on the financial statements.The GASB has also issued GASB Statement No. 46, Net Assets Restricted by Enabling Legislation, effective for fiscalyears beginning after June 15, 2005. This statement provides guidance to governments for determining when netassets have been restricted to a particular use by the passage of enabling legislation and specifies how those net assetsshould be reported in financial statements when there are changes in the circumstances surrounding such legislation.Enabling legislation is a specific type of legislation that both authorizes the raising of new resources and imposes legallyenforceable limits on how they may be used. This statement also requires governments to disclose in the notes to thefinancial statements the amount of net assets restricted by enabling legislation. The University has not yet determinedthe effect that adoption of GASB Statement No. 46 may have on the financial statements.The GASB has also issued GASB Statement No. 47, Accounting for Termination Benefits, effective for fiscal yearsbeginning after June 15, 2005. The statement provides accounting and reporting guidance for entities that offer benefits262 0 0 5 F i n a n c i a l R e p o r t : U n i v e r s i t y o f M i s s o u r ia c o m p o n e n t u n i t o f t h e S t a t e o f M i s s o u r i
Page 2 and 3: Table of ContentsGOVERNING BOARD AN
Page 4 and 5: G overning Board and Administrative
Page 7 and 8: Management’s Discussion and Analy
Page 17 and 18: I ndependent Auditors’ Report142
Page 20 and 21: S tatements of Net AssetsA S O F J
Page 22 and 23: Statements of Revenues, Expenses an
Page 24 and 25: S Ftatements of Cash FlowsO R T H E
Page 26: N otes to Combined Financial Statem
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FY 2005 - University of Missouri System

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