Massachusetts Institute of Technology Reports on the Audit Of
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MASSACHUSETTS INSTITUTE OF TECHNOLOGY REPORTS ON THE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS IN ACCORDANCE WITH OMB CIRCULAR A-133 FOR THE YEAR ENDED JUNE 30, 2012 MASSACHUSETTS INSTITUTE OF TECHNOLOGY Reports on the Audit of Federal Financial Assistance Programs in Accordance with OMB Circular A-133 For the Year Ended June 30, 2012 ______________________________________________________________________ __ Table of Contents I. Financial Reports Report of Independent Auditors …………………..…………………..……………… 2 Basic Financial Statements of the Institute for the Year Ended June 30, 2012………. 4 II. Schedule of Expenditures of Federal Awards Schedule of Expenditures of Federal Awards for the Year Ended June 30, 2012 …... 38 Notes to the Schedule of Expenditures of Federal Awards………………………….. 40 Appendices to the Schedule of Federal Awards…………………………………….. 42 III. Reports on Internal Control and Compliance and Summary of Auditor's Results Report of Independent Auditors on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards …………………… 258 Report of Independent Auditors on Compliance with Requirements that could have a Direct and Material Effect on each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133…………………………. 260 Schedule of Findings and Questioned Costs …………………………………………. 263 Summary Schedule of Prior Audit Findings …………………………………….…… 266 Management Response to Schedule of Findings and Questioned Costs……………… 267 SECTION I FINANCIAL REPORTS Report of Independent Auditors To the Audit Committee of the Massachusetts Institute of Technology In our opinion, the accompanying consolidated statement of financial position and the related statement of activities and cash flows present fairly, in all material respects, the financial position of the Massachusetts Institute of Technology (the “Institute”) as of June 30, 2012, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Institute’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Institute's 2011 financial statements, and in our report dated September 15, 2011, we expressed an unqualified opinion on those financial statements. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In accordance with Government Auditing Standards, we have also issued our report dated September 14, 2012 on our consideration of the Institute’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters for the year ended June 30, 2012. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying Schedule of Expenditures of Federal Awards, including the related Appendices A, B, and C, is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. The information is the responsibility of management and was PricewaterhouseCoopers LLP, 125 High Street, Boston, MA 02110 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us 2 derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The Schedule of Expenditures of Federal Awards, including the related Appendices A, B, and C, have been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or the financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards, including the related Appendices A, B, and C, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. September 14, 2012 3 Massachusetts Institute of Technology Statements of Financial Position at June 30, 2012 and 2011 (in thousands of dollars) 2012 2011 Assets Cash ...................................................................... $ 239,377 $ 131,471 Accounts receivable, net ...................................................... 208,297 261,206 Pledges receivable, net, at fair value............................................. 479,659 385,885 Contracts in progress, principally U.S. Government ............................... 66,724 68,411 Deferred charges, inventories and other assets .................................... 93,499 71,735 Student notes receivable, net .................................................. 49,529 49,757 Investments, at fair value...................................................... 12,847,866 12,236,531 Noncontrolling interests...................................................... 304,436 282,041 Retirement plan asset-overfunded status ......................................... – 113,715 Land, buildings & equipment (at cost of $3,546,351 for June 2012; $3,406,169 for June 2011), net of accumulated depreciation .............................................. 2,497,711 2,451,479 Total assets.............................................................. $ 16,787,098 $ 16,052,231 Liabilities and Net Assets Liabilities: Accounts payable, accruals and other liabilities .................................... $ 378,369 $ 366,161 Liabilities due under life income fund agreements, at fair value....................... 87,899 84,225 Deferred revenue and other credits ............................................. 155,476 124,848 Advance payments ........................................................... 428,507 389,478 Borrowings................................................................. 2,460,002 2,467,825 Government advances for student loans.......................................... 34,103 33,754 Accrued benefit liabilities ..................................................... 443,398 198,209 Total liabilities ........................................................... 3,987,754 3,664,500 Net Assets: Unrestricted net assets controlled by the Institute ................................. $ 4,584,516 $ 4,603,280 Unrestricted net assets attributable to noncontrolling interests ....................... 304,436 282,041 Total unrestricted net assets ................................................ 4,888,952 4,885,321 Temporarily restricted........................................................ 5,297,554 5,044,519 Permanently restricted ....................................................... 2,612,838 2,457,891 Total net assets .......................................................... 12,799,344 12,387,731 Total liabilities and net assets ............................................... $ 16,787,098 $ 16,052,231 The accompanying notes are an integral part of the financial statements. 4 financial statements Massachusetts Institute of Technology Statement of Activities for the year ended June 30, 2012 (with summarized fi nancial information for the year ended June 30, 2011) (in thousands of dollars) 2012 Total Temporarily Permanently Unrestricted Restricted Restricted 2012 2011 Operating Activities Operating Revenues: Tuition and similar revenues, net of discount of $251,709 in 2012 and $240,299 in 2011 . $ 275,993 $ – $ – $ 275,993 $ 253,478 Research revenues: Direct. 1,319,112 – – 1,319,112 1,250,388 Indirect. 208,738 – – 208,738 196,818 ____________ ___________ __________ ___________ ___________ Total research revenues. $____________ 1,527,850 $ ___________ – $ __________– $ ___________ 1,527,850 $ ___________ 1,447,206 Gifts and bequests for current use . 156,172 – – 156,172 111,114 Fees and services . 219,391 – – 219,391 198,971 Other programs. 104,556 – – 104,556 87,133 Support from investments: Endowment. 468,604 – – 468,604 444,836 Other investments.