Review the financial statements of the University of Virginia in Table 13-1 of the text.
1. For purposes of internal accounting, the university maintains several funds. Why must the university maintain so many funds? Provide examples of the funds most likely maintained by this (or for that matter any major public university).
2. What is the most likely distinction between the net assets classified as "expendable" and those as "nonexpendable"?
3. Suppose that the university financed the construction of its dormitories by issuing bonds secured by revenues from student room fees. The dormitories are accounted for as an auxiliary enterprise. What information about the auxiliary enterprise would the university have to include in its CAFR? Why?
4. Suppose that the university elected to report as a special-purpose government engaged in both governmental and business-type activities. How would the financial statements differ from those presented? Which set of financial statements would provide more comprehensive information? Explain.
5. The university attributes some of its revenues to "auxiliary enterprises." What is the most likely distinction between auxiliary enterprises and other academic or service units of the university? Provideexamples.
6. The university reports unrestricted net assets of over $2.49 billion. Suppose that a faculty member complained in a letter to the university president that the institution is holding back resources that should properly be used to increase faculty salaries, acquire computers and library books, and improve classroom facilities. What might be an obvious response to the faculty member's complaint?
7. The university reports a significant ($359 million) operating loss. Why might you argue that such is misleading and, indeed, should be expected?
8. The university's reported operating loss exceeded its operating cash outflow. What was the primary reason for the difference?
9. Do the financial statements provide you with any reason to question whether the university is investing adequately in plant, equipment, and other capital assets?