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2.11.1 Financial Resources

The institution has a sound financial base and demonstrated financial stability to support the mission of the institution and the scope of its programs and services.

The member institution provides the following financial statements: (1) an institutional audit (or Standard Review Report issued in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA for those institutions audited as part of a systemwide or statewide audit) and written institutional management letter for the most recent fiscal year prepared by an independent certified public accountant and/or an appropriate governmental auditing agency employing the appropriate audit (or Standard Review Report) guide; (2) a statement of financial position of unrestricted net assets, exclusive of plant assets and plant-related debt, which represents the change in unrestricted net assets attributable to operations for the most recent year; and (3) an annual budget that is preceded by sound planning, is subject to sound fiscal procedures, and is approved by the governing board.

Audit requirements for applicant institutions may be found in the Commission policy “Accreditation Procedures for Applicant Institutions.” (Financial Resources)

Judgment of Compliance
Partial Compliance

Sam Houston State University (SHSU) is a member of The Texas State University System (TSUS) “under the management and control of the Board of Regents, Texas State University System” as specified in the Texas Statues Education Code, Chapter 96.61[1].

SHSU has a sound financial base and has demonstrated by various means the financial stability to support the mission [2] of the institution and the scope of its programs and services.

Institutional Audit
The fiscal year 2008 audit requirement is fulfilled by a Standard Review Report performed by the Texas State Auditor’s Office [3]. The fiscal year 2008 Standard Review Report is anticipated to be finished and available to SACS by January 15, 2009.

The Texas State Auditor’s Office provides audit services to Texas state agencies, including audits of annual financial statements [4]. As an agency of the State of Texas, SHSU is included annually in a statewide audit. There have been no findings regarding SHSU in the State Auditor’s Statewide Audit since the last SACS reaffirmation in 1997-1998.

SHSU also has an internal audit function which reports directly to the Board of Regents and is described on the TSUS website [5]. The Finance and Audit Committee of the Board of Regents oversees this function [6].

Financial Position and Reporting
The Vice President for Finance and Operations has designated the Director of Business Office as the financial reporting officer who is responsible for the integrity of the Annual Financial Report (AFR) and for the establishment of effective internal controls for its preparation. SHSU’s AFRs for fiscal years 2004 [7], 2005 [8], 2006 [9], 2007 [10], and 2008 [11] (available January 2009) have been prepared in accordance with Government Accounting Standards Board requirements and in accordance with SHSU policy [12], TSUS policies [13] on AFR preparation, and with the Texas State Comptroller of Public Accounts’ Reporting Requirements for Annual Financial Reports of State Agencies and Universities [14]. The AFR is submitted annually to the TSUS Office and is included in the combined TSUS AFR. That report is then submitted to the Comptroller of the State of Texas and is included in the Consolidated Annual Financial Report (CAFR) for the State of Texas.

The financial history of SHSU demonstrates financial stability. The Statement of Change in Unrestricted Net Assets exclusive of Plant [15] has remained relatively consistent from fiscal year 2004 to fiscal year 2007. These statements demonstrate that SHSU has a sound financial base and financial stability.

SHSU’s tuition and fee collections from 2004 through 2007 show a solid increase each year which indicates financial stability. The increases are a function of increases in hourly fee rates as well as increases in the student population. The following graph shows those increases:

Endowment Funds and the Capital Campaign
SHSU began serious preparations for its first capital campaign in 2003, launching a feasibility study in 2004 that revealed that a goal of $50 million was attainable. The $50 million Share the Vision Campaign [16] was launched publicly on March 30, 2006, with $24.5 million having been received in gifts, pledges, and expectancies.

For the five-year period prior to the feasibility study, SHSU had averaged less that $2.5 million per year in gift income from an average of slightly more than 1,900 donors. Prior to January 1, 2004, only 37 living individuals had given $25,000 or more cumulatively in their lifetime. For the fiscal year ending August 31, 2007, SHSU had received $8.1 million in gifts from approximately 6,100 donors. For fiscal year 2008, these figures were $7.0 million in gifts from approximately 5,700 donors, through July 31. The Share the Vision Campaign has received more than $40 million in contributions, pledges, and gift expectancies. Nearly 110 individuals have made gifts of $25,000 or more, including 11 gifts of at least $1 million.

The campaign focuses primarily on endowment, with $42 million of the $50 million goal being targeted for faculty, scholarship, and academic program endowments. The TSUS Board of Regents authorizes each of its component institution’s presidents to establish the requirements for a new endowment account [17]. SHSU has established $25,000 as the minimum requirement for donors to establish an endowment. This amount can be achieved by donors spreading their commitment over five years.

Other than financial and investment policies and procedures that are established and reviewed by the TSUS Board of Regents, a system-wide policy does not exist specifically for the expenditure of gifts. Donors may designate the targets areas for their contributions. Endowments are governed by a written agreement executed by the donor(s) and one or more representatives of the University. These agreements are maintained in the Development Office and copies are in the appropriate SHSU department [18]. They specify the use of the endowment’s earnings, including the reinvestment of a portion back into the endowment’s corpus. The SHSU Vice President for Finance and Operations has strict oversight of the corpus of the endowments, which cannot be expended.

These funds are infused into the strategic plan [19] which will further expand students’ educational experience and encompass the President’s three broad-based initiatives: (1) upgrading academic standards, (2) improving the visibility and image of the University, and (3) enhancing the campus, while maintaining its very special culture and character. This infusion of funding into the University demonstrates a strong financial position and financial stability now and in the future.

The success of the Capital Campaign and the graph below further demonstrate the financial stability of SHSU. The graph below illustrates the increases in endowment balances from fiscal year 2003 to the present.

Annual Budget
Legislative Appropriation Process – Educational & General
The Texas State Legislature meets in regular session every other year. The legislative session begins the second week of January in odd numbered years (i.e. 2007, 2005, 2003, etc.). The next regular session will begin the second week of January, 2009.

The first legislative bill introduced each regular session is the appropriation bill for the next biennium for all State of Texas agencies. Higher Education in Texas is Article III of the proposed appropriation bill. The next session will consider legislative appropriations for fiscal years 2010 and 2011. The fiscal year (FY) for Texas State Agencies begins September 1 and ends August 31 of each year (e.g., FY ’08 begins 09/01/07 and will end 08/31/08).

The appropriation process begins each July immediately preceding a legislative session.

Detailed instructions for developing the biennium legislative request is then received from the Texas Legislative Budget Board (LBB). A copy of the letter received pertaining to biennium FY ’08 and FY ‘09 is provided for review [20].

The legislative request contains formula-driven appropriations based on a variety of inputs (e.g., SCH, headcount, square footage, appraisal values, etc.) for “Instruction and Operations” and “Infrastructure” (physical plant, grounds, custodial and purchased utilities). Non-formula and special-items appropriations are also requested utilizing the LBB instructions.

The instructions for the current biennium (FY ’08 and FY ’09) asked for only non-formula and special item requests. The formula items are determined by the Legislative Budget Board following instructions from the Lieutenant Governor and Speaker of The House. A summary of the SHSU Biennium Request is provided for review [21].

During the legislative session (January through May), Sam Houston State University (SHSU) representatives will be asked to appear before the Senate Finance Committee, The Higher Appropriations Committee and the Higher Education Sub-Committee of the House Appropriations Committee. During these meetings, questions from committee are answered, and the University President presents comments regarding the fiscal needs of SHSU for the next two year biennium.

Generally, in late March or early April, two appropriation bills, one Senate version and one House version are presented. This then creates the need for a conference committee of Senate and House members. The conference committee reviews and determines the final appropriation draft sent to both legislative houses. Generally, on the last night of the legislative session, an appropriation bill is passed. It is then forwarded to the Governor for consideration. A final bill is signed into law by the Governor.

Copies of three biennium summaries of Legislative Appropriate Requests for fiscal years ’02-’03, 04’-’05, and ’06-’07 are provided [22] [23] [24].

Categories of Legislative Appropriations – Educational and General
The major categories of the appropriation for SHSU are as follows:

1. Formula-Instruction/Operations – Uses semester credit hours in the formula for Operations and Support.

2. Non-Formula – Instruction/Operations

a. Teaching Experience Supplement
b. Staff Group Insurance Premiums
c. Worker’s Compensation
d. Texas Public Education Grants
e. Organized Activities – University Farm
f. Excellence Funding

3. Infrastructure Support – Formula

a. Educational & General Space Support

4. Tuition Revenue Bond Retirement – Non Formula-Infrastructure Support

5. Special Item Support

a. Academic Enrichment Center
b. Sam Houston Museum
c. Business & Economic Development Center
d. Law Enforcement Management Institute
e. Correctional Management Institute
f. Crime Victims Institute
g. Environmental Studies Institute
h. Institutional Enhancement

6. Research Development

Posting of Appropriations
The Office of the State of Texas Comptroller posts the appropriations passed by legislature in a timely manner. Funds are available for utilization by the Agency on the first day of September of each year.

The posting of appropriations are receivables for SHSU, and this posting is posted in a timely manner by the Texas Comptroller. The posting of appropriations provides the funds for the operational “bottom line” for SHSU’s educational budget.

Included here are SHSU’s biennial appropriations for fiscal years 02-03, 04-05, 06-07, and 08-09 [25] [26] [27] [28].

Capital Appropriations – Higher Education Assistance Fund (HEAF)
In 1986, the Texas Constitution was amended by voters to establish the Higher Education Assistance Funds (HEAF). The fund, $100 million per year, provides monies for capital improvements to SHSU and other institutions not eligible for Permanent University Fund disbursements. HEAF monies may only be spent for Educational and General capital equipment, major renovation and repair, new construction, real estate acquisition and library books, periodicals and binding.

SHSU received $9,916,306 for fiscal year ’08 for HEAF. The approved budget for FY ’08 is as follows:

  • Capital Equipment – Academics $
  • Repair and Renovations $
  • Computer Services $
  • Library $
  • Major Repairs and Renovations $
  • Capital Equipment – President $
  • Capital Equipment – VP-Academic Affairs & Graduate Studies $
  • Capital Equipment – VP-Student Services $
  • Capital Equipment – VP-University Relations & Development $
  • Capital Equipment – VP-Enrollment Management $
  • Capital Equipment – Texas Research Institute for Environmental Studies $
  • Capital Equipment – Finance & Operations $

The HEAF funds and proceeds from new construction bonds provide sufficient funding to offset depreciation expense.

Institutional Debt – SHSU
All debt of SHSU is held at the Texas State University System. The bonded indebtedness at TSUS for SHSU as of 08/31/07 was as follows:

  General Revenue Bonds    
  • Series 1998A $
  • Series 2004 $
  • Series 2005-Refunding 1998A $
  • Series 1998B (TRB Refunding Bonds) $
  • Series 2005-Refunding 1998B $
  • Series 2002 $
  Non-General Revenue Bonds  
  • Series 1998A-Costs (Academic Building V (ABV) & Law Enforcement Management Institute of Texas (LEMIT)) $
  • Series 2004-Cost for Refunding 1998 (ABV & LEMIT) $
  • Series 2005-Cost for Refunding 1998A (ABV & LEMIT) $
  • Series 2002-Costs (Farrington) $
  • Series 1998A (LEMIT) $
  • Series 2004-Refunding Series 1998A (LEMIT) $
  Institutional Funds Bonds  
  • Series 2000–General Purpose Bonds (Lowman Student Center (LSC)) $
  • Series 2004-Refunding Series 2000 (LSC) $
  • Series 2005-Refunding Series 2000 (LSC) $
  • Series 2002 (Recreational Sports) $
  • Series 2002 (Business Annex #1) $
  • Series 2002 (Business Annex #2) $
  • Series 2002 (Baseball/Softball Complex) $
  • Series 2002 (Parking) $
  • Series 2002 (Bearkat Village Housing) $
  • Series 2003 (Business Annex #3) $
  • Series 2003 (Baseball/Softball Complex #2) $
  • Series 2003 (Sam Houston Village Housing) $
  • Series 2005 (Raven Village Housing #3) $
                                                                                  Total Debt Service $

Total Revenue and Percentage of Revenue Provided By State of Texas Appropriation
The sources of revenue for SHSU’s fiscal budget year 2008 are as follows:

  Educational and General Funds    
% of Total
       State Appropriation (74.01%) $ 79,452,323  
       Tuition and Fees (25.99%) $ 27,905.497  
    Total Appropriated Funds $ 107,357,820 52.47%
  Auxiliary Enterprises Funds   $ 36,405,614 17.79%
  Designated Funds   $ 60,843,191 29.74%
    Total Estimated Revenues $ 204,606,625 100%

The percentage of funding by legislative appropriation has decreased steadily for the past ten years. The designated tuition fee per semester credit hour (locally collected) has increased from $13/SCH in FY 1998 to $84/SCH for FY 2008. The revenues from designated tuition and other fees have provided needed monies to provide additional faculty salaries and needed new academic space to meet the 38%+ increase in enrollments at SHSU. These trends have provided financial stability.

Preparation of the Budget
When the State appropriation process is finalized, the preparation of the SHSU budget begins.
The Vice President for Finance and Operations chairs the SHSU Budget Committee and is responsible for the preparation of the budget. The Budget Committee consists of faculty and staff including the Vice Presidents, Chair and Chair-elect of the University Faculty Senate, Chair and Chair-elect of the Staff Council and the Athletic Director. The budget is prepared with input from each of these individuals and is consistent with the SHSU Mission [2], Master Plan [29], Strategic Plan [19], and TSUS Board of Regents guidelines [30]. The SHSU Budget Procedures and Guidelines [31] hold preparers and users to high financial responsibility to ensure financial stability and good stewardship of public funds.

Considerations in the budget process include appropriations from the Texas Legislature and anticipated revenue from tuition, fees, and auxiliary enterprises. Expense budgets are established not to exceed the anticipated revenues. Fiscal Year 2008 Budget Committee minutes show planning and discussions as the budget developed [32].

The budget draft is presented to the SHSU President for approval. When the budget is prepared and submitted to The Texas State University System Board of Regents for approval, a budget submittal letter is included [33]. The budget is then approved by the Board of Regents prior to the beginning of the fiscal year. During the year, all budget changes are approved by the Board of Regents at quarterly meetings.

Included are SHSU Budgets for fiscal years 2004 [34], 2005 [35], 2006 [36], 2007 [37], and 2008 [38].

Budget Summaries
Annually, the TSUS Board of Regents receives a Budget Summary and Questionnaire when the Budget for the upcoming year is submitted for approval [39] [40] [41] [42]. These summaries demonstrate that SHSU is financially stable and provides good stewardship of all funds.

Bond Rating
The TSUS bond rating is another indicator of financial stability at SHSU. The current rating is Aa3 (Moody’s) and A+ (S&P). SHSU bonds are issued through the Texas State University System and held in the name of the System. However, SHSU is responsible for principal and interest payments through transfers to the System where payments are disbursed. These payments are made from a combination of funds appropriated by the Texas State Legislature and from funds held on campus that are collected in student fees.

Supporting Documentation
Documentation Reference
Document Title
[1] Texas Statutes Education Code, Chapter 96, Section 96.61
[2] Mission Statement, SHSU
[3] Audit Engagement Letter from Vice President for Finance & Operations to Texas State Auditor, Fiscal Year 2008
[4] Texas Statutes Government Code 321.013
[5] The Texas State University System Audits and Analysis Webpage
[6] The Texas State University System, Rules and Regulations, Chapter III, Section 7
[7] Annual Financial Report, SHSU, 2004
[8] Annual Financial Report, SHSU, 2005
[9] Annual Financial Report, SHSU, 2006
[10] Annual Financial Report, SHSU, 2007
[11] Annual Financial Report, SHSU, 2008 (Available January 2009)
[12] Finance and Operations Policy FO-02 - Annual Reports
[13] The Texas State University System, Rules and Regulations, Chapter III, Section 6.73
[14] State Comptroller AFR Reporting Requirements for State Agencies and Universities, 2007
[15] Statement of Change in Net Assets Exclusive of Plant
[16] Share the Vision Capital Campaign, SHSU, Webpage
[17] The Texas State University System Rules and Regulations, Chapter III, Section 6(11)
[18] Endowment Example
[19] Strategic Plan, SHSU, 2006-2007
[20] Texas Legislative Budget Board Letter Pertaining to 08-09 Biennium from Legislative Budget Board to University President
[21] Biennium Request, Summary of the Fiscal Year 08-09, SHSU
[22] Biennium Request, Summary of the Fiscal Year 02-03, SHSU
[23] Biennium Request, Summary of the Fiscal Year 04-05, SHSU
[24] Biennium Request, Summary of the Fiscal Year 06-07, SHSU
[25] Biennial Appropriation for Fiscal Year 02-03, SHSU
[26] Biennial Appropriation for Fiscal Year 04-05, SHSU
[27] Biennial Appropriation for Fiscal Year 06-07, SHSU
[28] Biennial Appropriation for Fiscal Year 08-09, SHSU
[29] Master Plan, SHSU
[30] The Texas State University System, Rules and Regulations, Chapter II, Section 4.31
[31] Budget Procedures and Guidelines, SHSU
[32] Budget Committee, SHSU - Meeting Minutes, Fiscal Year 2008
[33] Budget Submittal Letter from University President to the Texas State University System Board of Regents
[34] Annual Budget, SHSU, Fiscal Year 2004
[35] Annual Budget, SHSU, Fiscal Year 2005
[36] Annual Budget, SHSU, Fiscal Year 2006
[37] Annual Budget, SHSU, Fiscal Year 2007
[38] Annual Budget, SHSU, Fiscal Year 2008
[39] Budget Summary and Questionnaire submitted to The Texas State University System Board of Regents, Fiscal Year 2005
[40] Budget Summary and Questionnaire submitted to The Texas State University System Board of Regents, Fiscal Year 2006
[41] Budget Summary and Questionnaire submitted to The Texas State University System Board of Regents, Fiscal Year 2007
[42] Budget Summary and Questionnaire submitted to The Texas State University System Board of Regents, Fiscal Year 2008

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Sam Houston State University
Huntsville, TX 77341
(936) 294-1111