Public University Analysis

Posted: August 7th, 2013

Public University Analysis

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Public University Analysis: Stanford University and Subsidiaries

Stanford University exercises a contributory retirement plan for its employees. The institution established the savings plan on 18 April 1957, which resulted in naming of scheme as the Stanford Contributory Retirement Plan (SCRP). This enables the employees of the entity to make individual contributions to the scheme for part of their retirement. The Governmental Accounting Standards Board (GASB) proposes to improve significantly the pension services. The proposals are aimed at changing how reporting and accounting of the pension benefits are conducted within all state and local government authorities and state entities (Governmental Accounting Standards Board (GASB) 2012).

The proposed changes would result in simplistic reporting of financial statements and information, which is aimed at reducing the complexity of financial information. This would make it easier for users of financial statements with the consideration that users have minimal knowledge in financial language or terms. The proposed changes only extend to changes within the financial reporting and accounting of items within the financial statements (Stanford University, 2011).

The advantage of using simple language in reporting and accounting for the items in the institution’s financial statements is aimed at ensuring that the organization is able to present information for all the employees and stakeholders to read and understand. Such also ensures an aspect of transparency in that complex terms could be used to conceal important information affecting the shareholder and the employee. Pensions are usually a sensitive part in reporting within the financial statements. Hence, such should be reported and presented in simple language to ensure even those without prior knowledge about financial information are able to understand the amounts which the have collectively accrued as part of the Stanford Contributory Retirement Plan (Stanford University, 2011).

The entity has been recording good returns from new students. However, the financial position of entity is likely to be affected by the financial crisis and the recession given that, such would reduce the amount of disposable funds available for many people in the society. Reduction or increases in tuition fees and access to higher education would influence the amount of income accrued by the organization for a specific financial period.

Federal grants, supplemental grants and work-study grants have a direct effect on the financial statements of the entity. Federal grants are divided for various purposes which the entity deems fit. They may be classified as unrestricted, temporarily restricted or permanently restricted assets depending on prior agreements with the government or donors on the purpose and need of the funds. Some of funds provided in the unrestricted net assets are released from restricted assets held by the organization. Holding assets as restricted are aimed at ensuring that the entity has adequate assets, which could be used later (Stanford University, 2011).

The endowments of the university are regarded as collection of all gifts set aside for the research and teaching activities for the institution. The institution has set out divisions of the endowment amounts and the use of such funds. 20% of the endowment funds are unrestricted in terms of use (Stanford University, 2011). Hence, the institutions uses the funds in a manner that is necessary or is deemed fit by the institution’s board. Earnings on endowments are reported as part of the institution’s revenue. The entity also provides for unrestricted and restricted net assets within the financial statements.

The entity provides for unrestricted, temporarily restricted and permanently restricted access assets. Such assets classified could be used or sold; others are only subject to approval by the shareholders, while others are not for use as they play an integral part in sustaining the image and competitiveness of the institution. The restricted net assets mainly comprise of the revenues accrued from the student income, which is mainly the largest channel of revenues.

Unrestricted net assets are defined by the institution as those, which are used to sustain the core activities of the institution. Such funds are specifically designated for ensuring that the organization is able to actualize its duties and responsibilities to the organization. On the other hand, temporarily restricted assets provided by the entity are defined as those, which include gifts and pledges received and are usually subject to expiry with the passage of time. They however change in classification for temporarily restricted assets to unrestricted assets after they are put to service before the expiry of the period. Other temporarily restricted assets include the institution’s net equity held in split agreements, which could be released after maturity.

Furthermore, the permanently restricted assets are defined as those, which are subject to donor restrictions and impositions specifically those demanding that the amounts provided be invested in eternity or perpetuity. Hence, these amounts could not be used immediately but the use is spread out over a long period as stipulated by the donor instructions (Stanford University, 2011).

The donor funds, government grants gifts, which were omitted within the revenues from operations are recognized as part of assets, which are unrestricted and could be used by the organization for any intended purpose. The government provides laws and regulations, which are used in the preparation of the financial statements within the government agencies. Permanently restricted assets of the entity are funds transferred from subsidiaries of the entity. Other funds recorded include the pledges, which are classified as receivables as they are not yet realized by the organization but are to be received. In essence, amounts received by the donors are indicated by the amount and donor name for reference and classification. Donor agreements usually specify the manner, which the funds are to be used by the institution (Stanford University, 2011). .

Reference:

Governmental Accounting Standards Board (GASB). (2012). Pronouncements. Retrieved from http://www.gasb.org/cs/ContentServer?site=GASB&c=Page&pagename=GASB%2FPage%2FGASBSectionPage&cid=1176160042391 on 28 August 2012.

Stanford University. (2011). Annual Financial Report: For the periods ended August 31, 2011 and 2010. Stanford, CA: Stanford Management Company.

Stanford University. (August 2011). Contributory Retirement Plan: Summary Plan Description. Stanford, CA: Stanford Benefits.