Compliance Status

Louisiana State University and A&M College is in compliance with this principle.

Narrative

Louisiana State University and Agricultural and Mechanical College (LSU) has a long history of financial stability.  Financial resources are sufficient for the university’s mission and the scope of its programs and services.  From the adoption of an annual operating budget to the preparation of financial statements, the university has maintained consistent operating performance.  Despite significant reductions in state appropriations, LSU has demonstrated a stable financial outlook.  LSU has continued to show growth in enrollment, graduation rates, and self-generated revenue.  The supporting information is evidence of financial stability and a well-managed financial organization. 

Financial Statements

The narrative in Core Requirement 2.11.1 demonstrates that LSU has a strong and sustained history of financial stability as indicated by the data in the Restatement of Net Assets Without Plant and Plant Related Debt [1], Statement of Financial Position of Unrestricted Net Assets [2], and the Public Institution Financial Worksheet for FY 2009-2012 [3].

The annual audited financial statements for the university for fiscal year ending June 30, 2009, through June 30, 2012, reflect a growth of 21.3% in ending net assets.  LSU’s net assets as of June 30, 2012, were $619,346,296 (see Figure 1) and have shown consistent growth over the past four years [4] [5] [6] [7].  Because the fiscal year for Louisiana and the LSU System ends on June 30, the audit report will not be completed by the September 2013 submission of the compliance report [8].

Figure 1. LSU Ending Net Assets 2009-2012

LSU receives income from state appropriations, tuition and fees, auxiliary enterprises, and other sources, such as sales and services, grants, endowments, and interest on investments.  While there have been significant reductions in state appropriations from 2009 to 2012, increases in Tuition & Fees, Auxiliary, and other revenues have been used to mitigate these reductions.  Total revenues for the university have increased $31 million from 2009 to 2012.  This demonstrates the university’s ability to continue to generate revenue despite reductions in support from the state.  Tuition and fee increases have been modeled to provide revenue stabilization to meet annual expenditures.

Tuition and fees account for approximately 68% of the total FY 2014 unrestricted operating budget of the university.  Tuition and fee increases are approved by the Louisiana Legislature, Board of Regents and the LSU Board of Supervisors.  Under provisions of the Louisiana Granting Resources and Autonomy for Diplomas Act (LA GRAD) [9], LSU has been able to increase resident tuition and fees by 10% per year and non-resident tuition and fees by 15% per year since FY 2011.  In 2011-2012, the most recent data available, LSU’s undergraduate resident tuition is 29% below its Southern Regional Education Board (SREB) peers.  Therefore, LSU maintains additional capacity to increase tuition without compromising its competitive advantage with enrollment.

LSU’s student enrollment and demand has remained steady or increased over the past several years despite increasing tuition and fees each year.   Enrollment has increased by more than 5% from FY 2009 to FY 2012.  The application statistics indicates there is still a strong demand from students to enroll at LSU even in the current economic environment of tuition increases each fiscal year.  The enrollment trends indicate LSU has the capacity to increase tuition and fees without dramatically affecting the enrollment population at the university.  This capacity has led to financial stability over a period of dwindling state resources.     

Budget

LSU annually prepares a balanced operating budget based on sound planning and development processes. The university maintains a system of strong budgetary control over the operating budget. The university submits financial quarterly reports to the LSU Board of Supervisors that includes a comparison of the operating budget to the actual revenue and expenditures each quarter of the fiscal year.  At the individual unit level, LSU requires unrestricted budget to actual comparisons by account number and object code on a quarterly basis for each budget unit. To aid in this analysis, various financial reports are available online through the myLSU portal for units to check account balances and transactions at any time.  A report titled “University Overdrawn Accounts” was created for the units to view each account and summary object code that is overdrawn.  The accounts on this report require review, explanation, or action on a quarterly basis.  The units must process a budget adjustment in the general ledger system to address the overdraft or to document why no action was taken prior to the end of the quarter.  Documentation is maintained by each unit to demonstrate that the quarterly analysis has been completed and the appropriate action has been taken. 

Over the past six fiscal years, FY 2009 – FY 2014, the university’s operating budget revenue mix has changed, while the total funds available have remained reasonably stable.  The state General Fund appropriation to LSU declined by $122.3 million, or 52 percent, from FY 2009 to FY 2014.  Tuition, fees, and other self-generated revenue increases mitigated most of the reduction, and now comprise more than 70 percent of the total operating budget revenue.  Reliance on non-state revenue sources is a national trend among the public flagship state universities.  In all, the total operating budget decreased from $451.3 million in FY 2009 to a low point of $430.5 million in FY 2010 before returning to a $453 million budget in FY 2014 (Table 1).  Despite the budget challenges, student enrollment has grown over the past three years and is expected to grow again this fall.

Sponsored Programs

LSU is one of only 21 universities nationwide designated as a land-, sea-, and space-grant institution.  The Carnegie Foundation for the Advancement of Teaching has designated LSU as an institution of “very high research activity.” LSU is one of 73 public and 35 private research universities, and the only public university in Louisiana to earn this distinction.  The university is Louisiana’s flagship public research university.

LSU’s external sponsored program funding during fiscal year 2009 reached an all-time high of $156.3 million. With support from national sources like the National Science Foundation, the National Institutes of Health, the National Endowment for the Humanities, Department of Homeland Security, and NASA, LSU is forging new frontiers in hurricane response and preparedness, bioscience, national security, technology, literature, coastal sciences, and genetics. At any given time, there are more than 2,000 sponsored research projects being conducted by the more than 6,000 faculty and graduate students at LSU.

Obligated awards for sponsored programs at LSU was $142.8 million in fiscal year 2012.  Of these awards, 59% came from the federal government. However, LSU has a diversity of award sources without overreliance on any one source.  Sponsored program expenditures totaled $147.7 million in fiscal year 2012.

Endowments and Investments

In June 2006, the Forever LSU campaign was publicly announced to establish a fund-raising goal of $750 million.  The campaign’s four pillars were student support, faculty support, university-wide support, and campus infrastructure.  In November 2010, it was announced that the campaign was successful with private donor contributions totaling approximately $753 million.  Contributions to Forever LSU have enabled the establishment of 426 professorships, 38 chairs, and 794 scholarships.  In addition, the campaign has allowed LSU to invest in major capital projects.   

Alumni gifts generated through the LSU Alumni Association are used to support academic scholarships, alumni professorships, student jobs, faculty awards, and alumni programs, reunions, and publications.  In calendar year 2011 the Alumni Association received more than $2.2 million from alumni and friends.

The contributions to the Tiger Athletic Foundation benefit every athlete and team at LSU through scholarship and academic awards, as well as through the construction and maintenance of athletic facilities.  For the calendar year 2011, the Tiger Athletic Foundation received over $40.4 million in cash contributions. 

Private giving through the LSU Foundation focuses on building its endowment for the university’s benefit and on gifts designated for specific purposes in the colleges and schools within the university, including professorships, scholarships, library and museum acquisitions, equipment and facilities, distinguished faculty chairs and fellowships, and other purposes that cannot be supported entirely with state funds.  In fiscal year 2012, the LSU Foundation received total gifts and pledges of $28.8 million.  On June 30, 2012, the market value of total assets was $533 million.  The endowments are governed by the LSU Foundation Investment Policy Statement [10].

In addition, the university and the LSU Foundation have entered into an agreement whereby the foundation manages the investments of the university.  The university’s investments are governed by Louisiana Revised Statute 49:327, LSU System Permanent Memorandum 9, and Finance and Administrative Services Operating Procedures – 17 Investment Management [11] [12] [13].  The policies define the roles and responsibilities of the foundation and the university along with the goals of maintaining a high level of liquidity to maintain access to funds at minimal risk levels while maximizing investment income.  LSU’s net investment income for the year ending June 30, 2012, was $33.5 million compared to $13.1 million as of June 30, 2009. 

Capital Projects and Debt Management

LSU has approximately $1.5 billion invested in capital assets as of June 30, 2012, an increase of $92.7 million over June 30, 2011.  Annual depreciation expense was $39.8 million.  Accumulated depreciation for the year ended June 30, 2012, was $671 million compared to $635 million in 2011 [14] [15] [16] [17].

The maintenance, acquisition, construction, and improvements of university facilities are a critical component of the university.  To fulfill its mission, LSU makes ongoing strategic capital investments for additional academic, student life, athletic, residential life, parking and other plan facilities using an appropriate mix of funding sources.  In fall 2012, the Business Education Complex (BEC) opened for classes.  The facility encompasses world-class teaching and learning, as faculty and students connect with information and business experts worldwide.  The facility includes 156,000 gross square feet of learning and research environments.  The BEC was funded through a joint venture between the State of Louisiana and private funds.

The university implemented a comprehensive housing plan n 2002 and a campus master plan in 2003, projecting capital expenditures throughout the campus.  Debt is utilized as a valuable source of capital project financing, and its use is limited to projects that support the mission and strategic objectives of the university. 

On June 30, 2012, LSU had $375,220,000 in outstanding revenue bond indebtedness as shown in Table 3 below:

The schedule of bonds payable for 2012, 2011, 2010, and 2009 are provided [18] [19] [20] [21].

Further evidence of LSU’s financial stability is demonstrated by maintenance of strong credit ratings for debt issuance for capital projects.  In 2013, the university issued revenue bonds for student housing facilities and upgrades and renovations to the University Recreation Center totaling $101,180,000.  In March 2013, Moody’s Investor Services assigned a rating of A1 (Positive Outlook) for this issue [22].  Fitch Ratings assigned an AA- for the same issue [23].  The current Continuing Disclosure document offers more detail regarding historical demographic information about the university [24].

Financial Management

Dr. F. King Alexander serves as president and chancellor of LSU.  Prior to this appointment, Dr. Alexander was president of California State University, Long Beach.  During his tenure at California State University, Long Beach, Dr. Alexander was twice named the California State University Student Association “President of the Year.”  Prior to his service at California State University, Long Beach, Dr. Alexander was president of Murray State University and was a faculty member at the University of Illinois, Champaign-Urbana, where he was the director of the graduate higher education program.  Dr. Alexander received his Ph.D. from the University of Wisconsin-Madison in higher education administration with a focus on finance and educational policy analysis, and a Master of Science degree from the University of Oxford.  Dr. Alexander has served on numerous U.S. higher education and statewide organizational leadership boards.  He has also been asked to represent public higher education colleges and universities on numerous occasions to the United States Congress on issues of college affordability, student indebtedness, and institutional efficiency and effectiveness in efforts to address many of the growing challenges facing American higher education. 

Mr. L. Robert (Bob) Kuhn serves as the Interim Vice Chancellor for Finance and Administrative Services and CFO.  Mr. Kuhn previously held the position of Vice-Provost for Fiscal Management and Associate Vice Chancellor for Finance and Administrative Services.  His responsibilities include the business services and auxiliary enterprises that provide the financial, administrative, and operational services to the university.  Mr. Kuhn serves as the chief financial officer and is the principal advisor to the chancellor on fiscal and administrative matters.  He is a member of the Chancellor’s Executive Council, the University Budget Committee, the University Planning Council, and the Council of Vice Chancellors.  Mr. Kuhn has held leadership roles in the Louisiana Association for Institutional Research, Southern Association for Institutional Research, National Study of Instructional Cost and Productivity Advisory Committee, National Association of College and University Business Officers (Institutional Advisory Board for Higher Education Benchmarking Program).  He has over 35 years of fiscal and administrative experience at LSU.  Mr. Kuhn holds a Bachelor of Science degree in Industrial Management and a Master’s in Business Administration, both from LSU. 

Ms. Donna K. Torres, CPA, serves as Associate Vice Chancellor for Finance and Administrative Services.  Her area of responsibility is Accounting Services, which performs the day-to-day financial activities, accounting, reporting, and record-keeping functions for the university.  The divisions included in Accounting Services are Payroll, Accounts Payable & Travel, Bursar Operations, Sponsored Program Accounting, and Financial Accounting and Reporting.  Ms. Torres holds Bachelor of Science in Accounting and Master of Accounting degrees from the university.  She is a licensed Certified Public Accountant, a member of LCPA and AICPA.  She previously held the position of payroll director for the university. 

In summary, LSU is in compliance with this requirement as evidenced by consistent, strong financial performance, conservative debt management, strong fund-raising, and highly competent leadership. Additional information on the financial well-being of the institution is found in Core Requirement 2.11.1 and Comprehensive Standards 3.10.2 and 3.10.3.