External Audit Report, UH Financial Statements and Independent
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ANNUAL FINANCIAL REPORT For the Year Ending August 31, 2017 Internal Audit 03/08/18 1 of 62 Internal Audit 03/08/18 2 of 62 UNIVERSITY of HOUSTON Table of Contents For the year ended August 31, 2017 INTRODUCTORY SECTION Organizational Data FINANCIAL SECTION Independent Accountants' Review Report 5 Management's Discussion and Analysis (Required Supplementary Information) 9 BASIC FINANCIAL STATEMENTS Statement of Net Position 18 Statement of Revenues, Expenses, and Changes in Fund Net Position 20 Statement of Cash Flows 22 Notes to Financial Statements 25 REQUIRED SUPPLEMENTARY INFORMATION Schedule of UH's Proportional Share of Net Pension Liability - TRS 53 Schedule of UH's Contributions - TRS 54 Internal Audit 03/08/18 3 of 62 (This page intentionally left blank.) Internal Audit 03/08/18 4 of 62 INTRODUCTORY SECTION Internal Audit 03/08/18 5 of 62 {This page intentionally left blank.) Internal Audit 03/08/18 6 of 62 UNIVERSITY of HOUSTON Organizational Data August31,2017 Board of Regents Spencer D. Armour, Ill, Midland Term Expires August 31, 2017 Roger F. Welder, Victoria Term Expires August 31, 2017 Welcome W. Wilson, Jr., Houston Term Expires August 31, 2017 Durga D. Agrawal, Houston Term Expires August 31, 2019 Paula M. Mendoza, Houston Term Expires August 31, 2019 Peter K. Taaffe, Houston Term Expires August 31, 2019 Tilman J. Fertitta, Houston Term Expires August 31, 2021 Beth Madison, Houston Term Expires August 31, 2021 Gerald W. McElvy, Houston Term Expires August 31, 2021 Neelesh C. Mutyala (Student Regent), Sugar Land Term Expires May 31, 2018 Officers of the Board (Fiscal Year 2017): Tilman J. Fertitta Chairman Welcome W. Wilson, Jr. Vice Chairman Spencer D. Armour, Ill Secretary Administrative Officers Renu Khator Chancellor/President Paula Myrick Short Senior Vice Chancellor for Academic Affairs Jim McShan Senior Vice Chancellor for Administration and Finance Amr Elnashai Vice Chancellor for Research and Technology Transfer Dona H. Cornell Vice Chancellor for Legal Affairs and General Counsel Eloise Dunn Brice Vice Chancellor for University Advancement J. Richard Walker Vice Chancellor for Student Affairs and Enrollment Services Jason Smith Vice Chancellor for Governmental Relations Michael Johnson Chief of Staff Lisa Holdeman Associate Vice President for University Marketing, Comm. and Media Relations Ramanan Krishnamoorti Chief Energy Officer Chris Pezman Vice President for Intercollegiate Athletics Stephan Spann Chief Health Officer and Planning Dean for Medical School Elwyn Lee Vice President for Neighborhood and Strategic Initiatives Internal Audit 03/08/18 7 of 62 Internal Audit 03/08/18 (This page intentionally left blank.) 8 of 62 2 FINANCIAL SECTION Internal Audit 03/08/18 9 of 62 3 Internal Audit 03/08/18 (This page intentionally left blank.) 10 of 62 4 INDEPENDENT ACCOUNTANTS' REVIEW REPORT To the Board of Regents of University of Houston University System: We have reviewed the accompanying Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; and Statement of Cash Flows of University of Houston (UH), an Agency of the State of Texas, as of and for the year ended August 31, 2017, and the related notes to the financial statements, which collectively comprise UH's basic financial statements. A review includes primarily applying analytical procedures to management's financial data and making inquiries of management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error. Accountant's Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. Accountants' Conclusion Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the financial statements of UH are intended to present the financial position and the changes in financial position and cash flows of only that portion of the business-type activities of the State of Texas that are attributable to the transactions of UH. They do not purport to, and do not, present fairly the financial position of the State of Texas as of August 31, 2017, the changes in its financial position, or, where applicable, its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. 5 1:llli!fil2!! Bellville Austin All Offices 3210 Bingle Rd., Ste. 300 PO. Box 826 100 Congress Ave., Ste. 2000 w,vw.texasauditors.com =: Governmental H ouston, TX 77055Internal Audit 03/08/18Bellville, TX 77418 Austin, TX 78701 info@ txauditors.com - 11Audit of 62 Quality Center 713.263.J 123 7) 3.263.1123 512.381.0222 713.263.1550 fax au Other Matters Required Supplementary Information and Additional Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, schedule of UH's proportionate share of the net pension liability, and schedule of UH's TRS employee contribution's be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Such information is the responsibility of management. The introductory section is additional supplementary information presented for purposes of additional analysis and is not a required parts of the basic financial statements. We have not audited, reviewed, or compiled the required supplementary information or additional supplementary information and we do not express an opinion, a conclusion, nor provide any assurance on it. ~ LT j]J;.RRIS ~ CHACEK, LLLP \._ _., Belt Harris Pechacek, LLLP Certified Public Accountants Houston, Texas March 6, 2018 6 Internal Audit 03/08/18 12 of 62 MANAGEMENT'S DISCUSSION AND ANALYSIS Internal Audit 03/08/18 13 of 62 7 Internal Audit 03/08/18 {This page intentionally left blank.) 14 of 62 8 UNIVERSITY of HOUSTON Management's Discussion and Analysis For the year ended August 31, 2017 INTRODUCTION The following Management's Discussion and Analys is (MD&A) section of University of Houston's (U H) annual financial report has been prepared to provide an overview of the activities and the financial performance of UH for the fiscal year ended August 31, 2017. This presentation is intended to offer a summary of significant current year activities, resulting changes, and currently known economic conditions and facts. This analysis should be read in conjunction with UH basic financial statements and the notes to the financial statements. BACKGROUND UH of Houston System (UH SYSTEM), serving the nation's fourth largest city and its metropolitan area, as well as the upper Texas Gulf Coast region, is part of the state-supported system of higher education in Texas. UH System is the region's largest provider of comprehensive (baccalaureate to doctorate) higher education services. The System is comprised of four universities and a supporting System Administration (UHSA). The four universities are University of Houston (UH), University of Houston - Clear Lake (U HCL), University of Houston - Downtown (UHD), and University of Houston - Victoria (UHV); all of which are located along the Texas Gulf Coast. UH is the flagship institution of the UH System, its principal doctoral degree-granting institution, and is a comprehensive research university. UH also has a sig nificant presence through off-campus teaching centers located throughout the Houston metropolitan area. From these facilities, UH is able to reach many students in Houston and beyond through extensive online programs, as well as through classroom instruction. UHSA is responsible for coordinating the off-site operations, as well as providing select centralized services. Among universities nationwide, UH remains a model of diversity and a reflection of the city and region it serves. The System's Board of Regents and Chancellor have led a comprehensive strategic planning process through which new mission statements, goals, principles, and accountability