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Section II: SACS Core Requirement

II-11.  The institution has a sound financial base and demonstrated financial stability, and adequate physical resources to support the mission of the institution and the scope of its programs and services. The institution provides the following financial statements:

a.  an institutional audit (as distinct from a system-wide or state-wide audit) and management letter for the most recent fiscal year prepared by an independent certified public accountant or an appropriate governing auditing agency employing the appropriate audit guide,

b.  an annual budget that is preceded by sound planning, is subject to sound fiscal procedures, and is approved by the governing board, and

c.  schedule of net surplus/deficit from operations.

JUDGMENT OF COMPLIANCE

Yes, East Tennessee State University is able to provide a portfolio of evidence supporting compliance.

STATEMENT OF RATIONALE FOR JUDGMENT OF COMPLIANCE

East Tennessee State University defines having a sound financial base, demonstrated financial stability, and adequate physical resources as the ability to offer quality educational and cultural experiences and maintain all facilities, grounds, and environmental systems. Documentation that ETSU has a sound financial base and demonstrated financial stability is contained in the response to SACS Standard V-1. Documentation that ETSU has adequate physical resources to support the mission of the institution and the scope of its programs and services is contained in the response to SACS Standard V-6.

A. Institutional Audit

East Tennessee State University is audited annually by the State of Tennessee, Comptroller of the Treasury, Division of Audit. The Tennessee Division of Audit is authorized to post-audit all accounts and other financial records of any department, institution, office, or agency of the state government, in accordance with generally accepted auditing standards and with such procedures as may be established by the state comptroller (Tennessee Code Annotated, Department of Audit, Powers and Duties). The Tennessee Comptroller of the Treasury is authorized to audit any books and records of any state governmental entity that handles public funds when the Comptroller considers an audit to be necessary or appropriate (Tennessee Code Annotated, Comptroller of the Treasury, Audits of Governmental Entites). An institutional audit report and management letter, if necessary, is issued at the completion of the audit. An institutional audit report is on file for the year ended June 30, 2000 (State Audit Report for ETSU). There was no separate management letter issued for this audit.

B.  Annual Budget

East Tennessee State University has a sound planning system, which is overseen by the ETSU Strategic Planning and Institutional Effectiveness Committee. This committee communicates annual budget preparation guidance to the university community (Budget Planning Guidance Memo). The committee also is charged with developing a strategic plan that is based on university goals and objectives (Strategic Planning Goals & Measures). With these goals as a guide, each unit within the university develops objectives for the next fiscal year. The funds needed to accomplish each objective are estimated and requested by each unit. The unit budget requests are submitted to the appropriate immediate supervisor (dean, director, or associate vice president), who prioritizes requests from their areas and makes recommendations to the appropriate vice president. Each vice president then prioritizes requests from their areas and makes recommendations to the president.

Revenue projections are completed as early as possible to provide the president with data needed to make informed budgetary decisions. Revenue estimates become the ceiling within which the expenditure budget must be developed. The president, after consulting with the vice presidents, makes final decisions relating to budget allocations. Allocations are forwarded to the Office of Budget, where they are reviewed to ensure compliance with Tennessee Board of Regents (TBR) financial guidelines (TBR Budget Guidelines). These guidelines also are used to prepare the annual operating budget for the institution (ETSU Budget Summary). The budget is submitted to TBR for approval (TBR Manual Policy, Budget Control; TBR Minutes).

C. Schedule of Net Surplus/Deficit

Annual financial statements are prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). East Tennessee State University uses the guidance provided in Audits of Colleges and Universities prepared by the American Institute of Certified Public Accountants for accounting and financial reporting. Surplus or deficits from operations for the fiscal year are included in the "Statement of Changes in Fund Balance" and the "Statement of Current Funds Revenues, Expenditures and Other Changes" (ETSU Financial Report, 1999-2000). Financial statements are audited by the Comptroller of the State of Tennessee (State Audit Report for ETSU).

Effective with the 2001-2002 fiscal year, GASB has provided a new financial statement format, as detailed in GASB Statement 34 and GASB Statement 35. The new standards will substantially change the way public colleges and universities report their financial statements. East Tennessee State University will prepare statements in accordance with the new format effective with the year ending June 30, 2002.

DOCUMENTATION

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