Auburn University is stating that it is in “Partial Compliance,” since the Fiscal Year 2022 Annual Financial Report is not available as of the submission date. Auburn University will provide the Commission with the Report of the Independent Auditors for FY 2022 as soon as it becomes available, likely in late January 2023.

Definition of Scope: Auburn University Structure

As described in Section 14-5.a, as a legal entity, Auburn University is composed of four divisions—two separately accredited institutions and two units related to its land-grant mission. This includes Auburn University and its 3 SACSCOC-approved off-campus instructional sites, Alabama Agricultural Experiment Station, Alabama Cooperative Extension System, and Auburn University at Montgomery (AUM). AUM is separately accredited; therefore, for fiscal purposes and discussion throughout this narrative, three divisions—Auburn University, AAES, and ACES—will be referred to as “Auburn University.”

Financial Base and Physical Resources

Auburn University has a sound financial base and adequate physical resources to support its mission, programs, and services. This statement is supported by financial information provided in audited financial statements for the fiscal years ending September 30, 2018 through September 30, 2021 (FY 2022 will be available late January 2023),,,. These financial statements show a consistent pattern of growth in revenue, expenditures, and net position. During FY 2020, Auburn University experienced decreases in revenues and increases in some expenses relating to the global COVID-19 pandemic. Although this was a challenging time, in FY 2021, Auburn University’s revenues and expenses returned to pre-pandemic totals. The most recent audit confirms that Auburn University maintains a strong financial position with net position totaling $1,595,106,792, an increase of $211,583,208 over the prior year. Refer to Table 13-3.1, Schedule of Net Position (without AUM). The Statement of Changes in Net Position is shown in Table 13.3-3.

Table 13.3-1. Schedule of Net Position (without AUM)

(Source: Summarized Unaudited Divisional Information for Auburn University, AAES and ACES in the “Divisional

Financial Statements (Unaudited)” section of the Annual Financial Report)

Table 13.3-2. Schedule of Net Position (with AUM)

(Source: Annual Financial Report)

Table 13.3-3. Statement of Changes in Net Position (without AUM)

(Source: Summarized Unaudited Divisional Information for Auburn University,

AES and ACES in the “Divisional Financial Statements (Unaudited)” section of the Annual Financial Report)

Table 13.3-4. Statement of Changes in Net Position (with AUM)

(Source: Annual Financial Report)

Auburn University derives income from tuition and fees, federal and state appropriations, and other sources such as sales and services, grants, endowments, and interest on investments, as shown in Table 13.3-5.

Revenues by Source 

Table 13.3-5. Revenues (without AUM)

(Source: Summarized Unaudited Divisional Information for Auburn University, AAES and ACES in

the “Divisional Financial Statements (Unaudited)” section of the Annual Financial Report)

Table 13.3-6. Revenues (with AUM)

(Source: Annual Financial Report)

State Appropriations

Over the past few years, Auburn University has experienced significant decreases in state appropriations. In 2007, state appropriations were used to support 43 percent of Auburn University’s operating budget. By 2022, state appropriations only supported 21 percent. During the global COVID-19 pandemic, the university decreased operating expenditures by $13,741,560 (2020 vs 2019). The university suspended all travel, significantly reducing travel and entertainment expenses. Due to Auburn University’s strong financial position and diligence in controlling expenses, Auburn University has only assessed modest tuition increases. For FY 2022, Auburn University’s Tuition and Fees are among the middle third of our Southern Regional Education Board (SREB) peers. This has allowed Auburn University’s enrollment numbers to continue to grow, which is shown in Table 13.3-7.

Table 13.3-7. Enrollments

(Source: Institutional Research Enrollment Data)

Auburn University Master Plan 

In accordance with Auburn University’s Master Plan, construction projects have dramatically increased over the past ten years, as more fully discussed with reference to Standard 13.7 (Physical Resources) and Standard 13.8 (Institutional Environment). Auburn University chose to fund the majority of these projects by issuing bonds. Auburn University issued approximately $468 million in bonds over the last three years and has maintained high bond ratings from both Moody’s Investors Service and ratings from Standard & Poor’s Financial Services LLC of “Aa2” and "AA-", respectively. The debt-service coverage ratio (DSCR) is a measurement of an entity’s available cash flow to pay current debt obligations. The DSCR is calculated by taking net operating income and dividing it by total debt service (which includes the principal and interest payments on outstanding debt). The university’s debt-service coverage ratio is strong. As shown in Table 13.3-8, Debt-Service Ratio, Auburn University’s DSCR has continued to increase from 2018, even with additional outstanding debt.

TABLE: 13.3-8. Debt Service Ratio

(Source: Annual Financial Report)

Investment Activities

Cash flows from investing activities is the cash generated or spent from the purchases of physical assets, investments in securities, or the sale of securities or assets. Over the past four years, Auburn University's funds used in investing activities increased approximately 17.0 percent, while cash and cash equivalents, as well as operating and long-term investments, increased 28.5 percent, as shown in Table 13.3-9. As detailed in Table 13.3-11, Auburn University’s and Auburn University Foundation’s endowment portfolios increased approximately 32.3 percent over that same time period. Auburn University's non-endowment cash pool assets and endowment funds are invested in accordance with policies established by Auburn University's Board of Trustees (BOT),. Auburn University maintains centralized management of the non-endowment cash pool, while professional investment managers are engaged to manage the investments of the endowment funds. Auburn University monitors the investments of these funds on a contin ual basis.

TABLE: 13.3-9.

Cash & Cash Equivalents, Operating and Long-Term Investments (without AUM)

(Source: Summarized Unaudited Divisional Information for Auburn University, AAES and ACES in the

“Divisional Financial Statements (Unaudited)” section of the Annual Financial Report)

TABLE 13.3-10.

Cash & Cash Equivalents, Operating and Long-Term Investments (with AUM)

(Source: Annual Financial Report) 

TABLE 13.3-11. Auburn University and Auburn University Foundation Endowment Pool

(Source: Endowment Investment Management Statements)

Preservation of Capital

Preservation of capital is regarded as the highest priority in the investing of the cash pool. It is assumed that all investments will be suitable to be held to maturity. Auburn University’s investment portfolio is structured in such a manner to help ensure sufficient liquidity to pay obligations as they become due. The portfolio strives to provide a stable return consistent with investment policy. The Non-Endowment Cash Pool Investment Policy authorizes investments in the following: money market accounts, repurchase and reverse repurchase agreements, bankers’ acceptances, commercial paper, certificates of deposit, municipals, US Treasury obligations, US Agency securities, and mortgage-backed securities.

Endowed Funds

Diversification through asset allocation is utilized as a fundamental risk strategy for endowed funds. These strategic allocations represent a blend of assets best suited, over the long term, to achieve maximum returns without violating the risk parameters established by Board of Trustees. The Endowment Investment Policy authorizes the investment of the endowment portfolio to include the following: cash and cash equivalents, global fixed income, global equity securities, global private capital, absolute return/hedge funds, and real estate assets, collectively referred to as the endowment pool.

The BOT has adopted a spending plan whose long-term objective is to maintain the purchasing power of each endowment and provide a predictable and sustainable level of income to support current operations. In the endowment policy referenced above, spending for a given year equals 80 percent of spending in the previous year, adjusted for inflation (Consumer Price Index (CPI) within a range of 0 and 6 percent), plus 20 percent of the long-term spending rate applied to the 12-month rolling average of the market values. Over the last four years, the combined payout and foundation support averaged 4.43 percent per year.

Budget and Monitoring

In 2017, Auburn University transitioned its budget allocation process away from an historical model to an incentive-based model commonly called Responsibility Center Management. This new method employs an approach in which all revenues flow where the activities occur and institutional support costs, such as facility operations, academic support administration, and central administration, are allocated based on certain metrics. Auburn University’s annual budget process begins with Budget and Planning Services working closely with the Office of Governmental Affairs and the Vice President for Enrollment Management to estimate its revenue growth in its two largest sources of funding: state appropriations and tuition. In addition, the office provides cost estimates on salary and employee benefit increases as well as other mandatory costs, such as utilities, debt service, and software licensing agreements.

Auburn University’s administrative systems provide budgetary units with online access to their financial account data. Banner Finance was implemented in October 2005. The Banner System includes a number of self-service features which allow maximum collaboration between Auburn University constituents. Individual departments can generate account statements and other reports that provide current month and year-to-date activity,,. Financial reports are also provided to senior management showing the financial performance of the institution and to assess the financial performance of the institution. In 2019, Auburn University employed a budget and planning platform called Anaplan that helps streamline reporting for units and senior leadership by providing real-time data analysis and various other reporting capabilities which allow for better-informed decisions.

Business & Finance has developed and implemented policies and procedures to ensure Auburn University is maintaining the financial resources responsibly. Some specific policies are the Collections, Contributions, and Accounts Receivable Policies, Business Expense & Reimbursement Policy, Purchasing Card Policy, Spending Policies and Procedures, Travel Policies, and Unreimbursed and Unallowable Sponsored Projects Expenditures Policy. All Business & Finance policies are published on the University website.

External Review of Internal Controls 

The financial statement opinion included in the most recent Report of the Independent Auditors, dated January 21, 2022, is that Auburn University’s basic financial statements “present fairly, in all material respects, the respective financial position of the business-type activities and the aggregate discretely presented component units of Auburn University as of September 30, 2021 and 2020, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America.” In addition, the auditors did not identify any deficiencies in internal control over financial reporting that were considered to be material weaknesses.

Auburn University received an unqualified opinion for all audits in the accreditation period and has not received a Report to Management since 2009. The Report to Management “provides the auditors’ observations on certain matters involving the internal control structure and recommendation designed to help Auburn University make improvement and achieve operational efficiencies.” If the auditors had identified management letter comments, material weaknesses, or significant deficiencies in internal controls, they would have documented the issues in their required communications to the BOT audit committee. One main reason items have not been identified in the past two years is due to adherence to Auburn University’s strong fiscal policies.

Conclusion

Auburn University's growth in net position, increase in student enrollment, increase in capital construction, and effective investment policies substantiate that Auburn University has a sound financial base and adequate physical resources to support its mission, programs, and services.