CORE REQUIREMENT 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 systemwide or statewide audit) and management letter for the most recent fiscal year prepared by an independent certified public accountant or an appropriate 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) a schedule of changes in unrestricted net assets, excluding plant and plant related-debt (short and long-term debt attached to physical assets).

 

STATEMENT OF COMPLIANCE: The Citadel is in compliance with Core Requirement 11.

RATIONALE FOR JUDGMENT OF COMPLIANCE:

The Citadel defines having a sound financial base, demonstrating financial stability, and adequate physical resources as the ability "to educate and prepare graduates to become principled leaders in all walks of life" (Reference 1). The Citadel provides evidence to substantiate financial stability and adequate physical resources in the responses to SACS Comprehensive Standard R1 and SACS Comprehensive Standard R7, respectively.

A. Institutional Audit

Prior to FY 2002, the South Carolina State Auditor, working in conjunction with an independent accounting firm, performed an annual Statewide Single Audit (Reference 2) on The Citadel's financial statements. An institutional audit report and management letter, if necessary, was issued at the completion of each audit. Beginning FY 2002, the State Comptroller reviews the Statewide Single Audit (Reference 3). There were no findings related to financial stability reported for The Citadel in the Independent Auditor's Report for FY 2002.

B. Annual Budget

Under the direction of the Vice President for Finance and Business Affairs (VPFBA), The Citadel performs a three-tiered budget planning system (Reference 4) that supports the strategic requirements of the college as prescribed by the Strategic Planning Committee (SPC) (Reference 5).

The first tier of the budget planning process is the Strategic Budget Plan Out-Year (two years prior to budget execution). Based on the department assessment reports, current budget allocations, and guidance from the senior administrators, each budgeted department presents its annual plan for the coming academic year. The SPC reviews the annual plans from the perspective of addressing goals of the Strategic Plan. Following the review, the SPC proposes priorities for the upcoming budget development and communicates them through the President to the Board of Visitors (BOV) for approval.

The second tier of the budget planning process is the Budget Development Year (one year prior to budget execution); which begins after the budget priorities are approved by the BOV. During this year the Budget Office, using the approved budget priorities, builds a State Authorization Budget for approval by the South Carolina State Legislators in the fall. Using this budget, the State allocates a State Appropriations funding level for The Citadel. Once funding requirements of the college are determined, tuition and fees levels are proposed and approved by the BOV. Concurrently, The Citadel departments determine what funding requirements they will need to operate over the next fiscal year and communicate those needs to their respective Vice Presidents and the Budget Office at least twice during the year (winter and spring) for consideration in the budget development. Based on the strategic direction of the college, the vice presidents prioritize all departmental requirements and provide direction to the Budget Office in building the next fiscal year's budget. Once the budget is completed, it is sent to the President and BOV for final approval prior to the beginning of the next fiscal year.

The third tier of the budget planning process is the Budget Execution Year (beginning July 1 of the new fiscal year). All departments validate their budgets and begin using funds in the operation of their mission. Over the course of the year, the Budget Office periodically reviews the status of spending versus budget in order to assist departments in the management of their budgets, predict end-of-year actual college spending and revenue levels, and identify any potential surplus funds that can be used to fund the college's most critical unfunded requirements (UFR). The first formal opportunity for departments to identify and communicate any unfunded requirements that they may have is at the November mid-year review and then again near the end of the fiscal year. The vice presidents prioritize these UFRs and determine how many, if any, can be funded.

Budget documentation for Fiscal Year 1998/1999 through 2002/2003 is available in the supporting document (Reference 6).

C. Schedule of Net Surplus/Deficit

The Citadel prepares annual financial statements consistent with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB) (Reference 7). In addition, The Citadel referenced guidelines published in the Audits of Colleges and Universities (Reference 8) prepared by the American Institute of Certified Public Accountants for accounting and financial reporting for years prior to FY 2002. Operational surplus or deficits for years prior to FY 2002 (Reference 2) are included in the "Statement of Changes in Fund Balance" and the "Statement of Current Funds Revenues Expenditures and Other Changes."

The Citadel prepared FY 2002 financial statements (Reference 3) in accordance with the new reporting standard set forth by GASB. Detailed in GASB Statement 34 and GASB Statement 35, this revised format significantly changed the way public colleges and universities report their financial statements.

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