As of June 30, 1997
Organization and Purpose
The University of Virginia is an agency of the Commonwealth of
Virginia and is governed by the University's Board of Visitors. A
separate report is prepared for the Commonwealth of Virginia which
includes all agencies, boards, commissions, and authorities over
which the Commonwealth exercises or has the ability to exercise
oversight authority. The University is a component unit of the
Commonwealth of Virginia and is included in the general purpose
financial statements of the Commonwealth. The University consists of
three divisions. The Academic Division and Clinch Valley College
Division generate and disseminate knowledge in the humanities, arts,
scientific, and professional disciplines through instruction,
research, and public service. The Medical Center Division provides
routine and ancillary patient services through a full service
hospital and clinics.
Summary of Significant Accounting Policies
The financial statements of the University have been prepared in
accordance with the accounting guidance and reporting practices
applicable to colleges and universities, as outlined in the American
Institute of Certified Public Accountants' Industry Audit Guide,
Audits of Colleges and Universities. In compliance with the
aforementioned literature, the statement of current funds revenues,
expenditures, and other changes is a statement of financial
activities of current funds related to the respective reporting
period. It does not purport to represent the results of operations or
net income or loss for the period as would a statement of income or a
statement of revenues and expenses. The significant accounting
policies followed by the University are summarized below to enhance
the usefulness of the financial statements.
Reporting Entity
The financial statements and the accompanying notes of the University
include all funds and organizations for which the Board of Visitors
has oversight responsibility. There are currently 17 affiliated
foundations created and operated in support of the interests of the
University. Affiliated foundations are not-for-profit corporations
controlled by separate boards of directors and are not included in
the basic financial statements of the University.
Condensed financial statements for the following three foundations, whose boards include officers of the University, are disclosed in Note 6.
University of Virginia Health Services Foundation, an educational, scientific, and charitable organization established to assist the University in providing hospital and medical care services, medical education programs, medical research, and programs of public charity at the University.
University of Virginia Real Estate Foundation, established to promote, support, and aid the University in matters pertaining to real estate.
University of Virginia Auxiliary Services Foundation, established to promote, support, and aid the University in its operation and support of enterprises such as athletics, recreation, student health, and fellowship
Accrual Basis
The financial statements have been prepared on the accrual basis
of accounting except for depreciation. The University records gifts
and pledges when collected. No value is assigned to art, rare books,
and other collections received as gifts.
Fund Accounting
In order to ensure observance of limitations and restrictions placed
on the use of resources, the accounts of the University are
maintained in accordance with the principles of fund accounting. The
accounts relating to specified activities or objectives have been
classified into separate funds. Similar funds have been combined into
fund groups for financial reporting purposes. Within each fund group,
fund balances restricted by outside sources are so indicated and are
distinguished from designated funds allocated to specific purposes by
action of the Board of Visitors. Externally restricted funds may only
be utilized in accordance with the purposes established by the source
of such funds and are in contrast with unrestricted funds over which
the board retains full control to use in achieving its institutional
purposes.
Restricted gifts, grants, contracts, appropriations, endowment income, and other restricted resources are accounted for in the appropriate restricted funds. Revenues from current restricted funds are recognized when expenditures are incurred for current operating purposes. The excess of restricted receipts over amounts expended for restricted purposes is recognized as a fund balance addition to current restricted funds.
Endowment funds are subject to the restrictions of gift instruments requiring that the principal be invested in perpetuity and that only the resulting income may be utilized. Term endowment funds are similar to endowment funds, except that, upon passage of a stated period of time or the occurrence of a particular event, all or part of the principal may be expended. Quasi-endowment funds have been established by the board for the same purposes as endowment funds, except that any portion of quasi-endowment funds may be expended at the board's discretion.
Medical Center Sales and Services
A significant portion of the Medical Center services is rendered to
patients covered by Medicare, Medicaid, or Blue Cross. The Medical
Center has entered into contractual agreements with these third
parties to accept payment for services in amounts less than scheduled
charges. In accordance with these agreements, the difference between
the contractual payments due and the Medical Center scheduled billing
rates results in contractual adjustments. Contractual adjustments are
recorded as deductions from Medical Center revenues in the period in
which the related services are rendered.
Certain annual settlements of amounts due for Medical Center services covered by third parties are determined through cost reports which are subject to audit and retroactive adjustment by the third parties. Provisions for possible adjustments of cost reports have been estimated and reflected in the accompanying financial statements. Since the determination of settlements in prior years has been based on reasonable estimation, the difference in any year between the originally estimated amount and the final determination is reported in the year of determination as an adjustment to Medical Center revenues.
Investments
Investments in corporate stocks and marketable bonds are recorded at
market value. Mortgages held for investment by the endowment fund are
recorded at book value representing principal amounts due.
University-held real estate investments are recorded at market value.
Inventories
Inventories are valued at the lower of cost (generally determined on
the weighted average method) or market value.
Plant
Property, plant, equipment, and books (other than rare books) and
materials that are part of a catalogued library, are stated
principally at cost at the date of acquisition, or fair market value
at the date of donation in the case of gifts. Maintenance or
renovation expenditures of $50,000 or more are capitalized only to
the extent that such expenditures prolong the life of the asset, or
otherwise enhance its capacity to render service. Consistent with
current generally accepted accounting principles for public colleges
and universities, depreciation on plant assets is not recorded. Since
1991, the Academic Division has capitalized all equipment with an
original cost of $2,000 or more, and with a useful life of at least
two years.
Reclassifications
Certain 1996 activities and balances were reclassified to conform to
classifications currently in use.