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My first step was to set-up my Excel template for the Statement of Activities by using the information provided in the closing entries for Lee College for the year ended December 31 , 2014. This gave me insight into the active accounts and what the closing account balance for each was. It also provided visibility into the type of revenue and expense (unrestricted, temporarily restricted, and permanently restricted). First I pulled in what I considered the items that were easily identifiable and didn’t require any calculations such as the expenses and some of the revenue accounts.
Net tuition and fees was calculated as $11 less $375,000 for tuition discount- unrestricted -student aid $10,625,000. My next step was to complete the net asset section. For the net assets 1/1/15, I used the net assets balances provided in the exercise ($1 unrestricted, $300,000 temporarily restricted, $1,760,000 permanently restricted). The increase(decrease) in net assets was calculated as the difference between total revenues and total expenses. The net assets balances for 12/31115 are the sum of the increase(decrease) in net assets and net assets as of 1/1/15.
Using the Statement of Activities as a reference, proceeded with the Statement of Revenues, Expenses and Other Changes in Unrestricted Net Assets. I pulled in information according to classification. I made sure that the data I put in the Statement of Revenues tied to the Statement of Activities. The last step of completing the Financial Statements was to construct the Statement of Changes in Net Assets. Again, using my carefully crafted Statement of Activities, I prepared the Statement of Changes in Net Assets.
It was relatively easy in that I had already classified my assets by type. Under the temporarily restricted assets, the net assets released from restrictions are the sum of satisfaction of plant acquisition and satisfaction of aerogram restrictions. Increase in Net Assets is the sum of increase/decrease in unrestricted net assets, increase in temporarily restricted net assets and increase in permanently restricted net assets. Net Assets, 12/31/15 is the sum of ending balances given in the exercise and the increase in net assets.
Again it was important to check to make sure this tied back to the Statement of Activities and the Statement of Unrestricted Revenues, Expenses and Other Changes in Unrestricted Net Assets. Now for the in-depth financial analysis of Lee College. Lee College is a private, not-for-profit college. By looking at the Statement of Activities, Lee College looks healthy. While there is a decrease in unrestricted assets for the year, the overall increase in net assets is approximately $3. MM.
One concern could be the lack of unrestricted surplus which may be needed for establishing working capital, expanding/replacing facilities, retiring debt or continuing a program beyond the period of initial funding. My assumption is that these types of expenses are not planned for the new accounting year. The ratio of program services expense to total expense for Lee College is 88%. This Asia measures how efficient Lee College is in using its resources for its mission, rather than for fund raising and administration.
The Better Business Bureau recommends a minimum ratio of 60% when evaluating Knops. Lee College is 22 points higher. Being unfamiliar with the structure of Lee College, I used the $1. MM of institutional support as management/administration and fund raising expenses. Sales and services from auxiliary services represent 30% of revenues (ATA healthy profit ratio) for the year ended 12/31/15. This a great source of unrestricted assets. This was a very interesting assignment which was a lot of fun. Reference Copley, P. A. (2015).