Washburn University - FY07 Audit - DRAFT

Finding one's way through a financial audit report can be an amazing, confusing, overwhelming experience. So, one normally defers to the "experts" for interpretation of the results.

Proclaiming the Good News

Some of the highlights that were shared with the Board members and other interested parties included:

    Total assets of the University increased by more than $11 million. (Note: The $7.4 million decline in Current Assets was offset with a $10 million increase in WEA related invested assets and the $8.6 million increase in capital assets.)
    Net assets derived from all sources increased by over $10 million. (Note: This increase was mostly due to the increase in gifts, investment income, and the decline in year-end transfers for capital projects.)
    Cash increased by $878,705 during FY 07. (Note: Not a particularly strong showing, given the increase in net assets.)

Hiding the Bad News

The administration was more reluctant about sharing some of the following information that is contained in the same FY 07 audit report.

    Student Receivables increased by 29%, indicating that revenues from enrollment may not be ultimately realized.
    Accounts payable increased by 67%, indicating a slowness in paying the bills, a warning sign that a business may be struggling. President Farley speculated that the increased balance may have been caused by the July 12, 2007 payment of $1.96 million to Ferrell Construction for the Stoffer Hall renovation project.
    Net operating results, similar to the calculation that a private business would use to evaluate operations, decreased by 6.1%.
    Memorial Union revenues, used as security for $10 million of revenue bonds, decreased by almost $1.7 million, a 30% drop in revenue. President Farley explained this decrease by pointing out the $2.0 million decline in Memorial Union expenses, due to outsourcing dining services to Chartwells. Perhaps the university's financial reports will provide better disclosure regarding the state of affairs in the auxiliary operations.
    Year end transfers (used by the administration to manipulate the "bottom line") from the general fund to other funds declined significantly, perhaps by over $2.0 million. The explanation provided for this decrease was the LLC window project. But these expenditures, charged to the Building Construction Fund, are not enough to explain away this change.
    Health claims incurred by WU employees under the university's self-insured plan increased 25%, by more than $1.0 million.

Getting Through the Maze

Although gifts and investment income were up by over $5.0 million, and the University "saved" over $2.0 million in other expenses, the unrestricted net assets (the equivalent of what the University has left over at year-end) increased by less than $1.0 million.

The disappointment continues in the Board member's willingness to accept Farley's "shoot from the hip" responses to some very serious questions, not the least of which was his response to Regent Blair's question about the university's failure to provide cash for future maintenance needs through the use of a sinking fund.

The Washburn University Board of Regents Audit Committee reviewed the draft audit report on November 29. Official, final audit results will not be available until the full WU Board of Regents accepts the audit report, scheduled for consideration at the December 14, 2007 meeting.