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Core Requirement 2.11.1  

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 system-wide or state-wide audit) (Financial Resources) 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, and subject to sound fiscal procedures, and is approved by the governing board. Audit requirements for applicant institution may be found in the Commission policy “accreditation procedures for applicant institutions.” (Financial Resources)  

Judgement: Compliant


The University of South Carolina’s (USC Upstate) operating budget and audited financial statements demonstrate a growing financial base in support of mission-driven programs and services.  Financial stability has been achieved by an integrated budgeting development process with financial decisions based on the University’s annually reviewed strategic plan and a responsive decision-making management structure that effectively addresses revenue and expenditure changes.  The long-term financial commitment of Spartanburg County in funding land acquisitions for dedicated use provides a permanent and stable master plan footprint for campus development at considerable savings to the university. 

Change in Net Assets
As reported in the statement of net assets in the audited financial statements, total net assets have increased 60.3% from $27.2 million for 2004-05 to $43.6 million in 2009-10.  This $16.4 million increase over the five years represents an average increase of 12% per year.  For consistency and comparison of information, financial reports for 2007, 2008, and 2009 have been reclassified to reflect the 2010 changes in accounting and reporting standards related to restricted and unrestricted funds, and operating and non-operating revenues (Summary of Changes in Net Assets from 2007 to 2010, Statement of Net Assets 2007, 2008, 2009 and 2010).

The percent change in operating revenue and expenses, including restricted and unrestricted funds, has increased each year from 2007 to 2010 from a total of $37.7 million to $46.6, an increase of $8.9 million or 23.6%.  State appropriation is reported as non-operating revenue, and state support declined from $15.2 million to $10.4, a reduction of $4.7 million or 31.2% (Summary of Revenues, Expenses and Changes in Net Assets from 2007 to 2010).  The most significant reductions in state appropriations occurred in 2008-09 and 2009-10.  The majority of the loss in state funding was absorbed by additional tuition and fee revenue from enrollment growth, tuition rate changes, operational efficiencies, and cost control measures.  However, net assets declined for the 2008-09 year by $1.3 million.  The assets were managed in the annually developed budget plan.  For the past decade, USC Upstate made a strategic decision to maintain a tuition rate at or below other South Carolina public comprehensive universities and has accomplished this goal.  The change in tuition over the past two years for USC Upstate has been the lowest among the South Carolina public comprehensive universities (In-State Undergraduate Fee Rate Increases Over the Past Two Years, 2008-09 to 2010-11). Therefore, the significant and rapid decline in state appropriations is being addressed without higher than average percentage increases in the tuition rate.


Change in Unrestricted Net Assets
Unrestricted net assets, reclassified for 2006-07, 2007-08 and 2008-09 for consistency with 2009-10 reporting requirements, grew from $5.6 million in 2006-07 to $9.5 million for 2009-10, an increase of $3.8 million or 67.6%.  The decline in 2009 represents a strategic decision to accommodate mid-year reductions in state appropriations (Statement of Revenues, Expenses and Changes in Unrestricted Net Assets, 2007 to 2010).


Net assets decreased in 2008-09 as a result of significant reductions in unrestricted state appropriations which declined by 30.4% from $14.6 million to $10.1 million.  This loss in state support was partially offset with revenue from enrollment growth and changes in tuition and fees which increased from $32.4 million to $44.2 million, a 36.3% increase.  Adjustments in operating expenditures and other cost control measures were implemented during the budgeting process.


The net result of the changes in the two major sources of revenue is an increase of 16.8% in operating and non-operating revenues from 2007-08 to 2009-10.

Capital Assets – Buildings and Equipment   
Capital assets, net of depreciation, increased significantly from $33.4 million in 2007 to $73.3 million in 2010 (Change in Capital Assets Net of Depreciation, 2007 to 2010).


Capital Assets – Land
Land, totaling approximately 350 acres for campus master plan development, has been acquired by Spartanburg County for use by USC Upstate.  These land assets, valued at $5,582,260, are in addition to the capital assets for building and equipment shown in the University’s financial statements.


State Budget Development Process
The state’s budget planning process involves the South Carolina Commission on Higher Education (SCCHE), the Governor, and the General Assembly.  The initial submission of budget requests is made to the SCCHE as required by SC Code of Laws, Section 59-103.  The funding base requirement is determined by the SCCHE approved formula computation called the Mission Resource Requirement (MRR) which considers student credit hours by discipline, average faculty salaries, and facilities data.  This provides a need-base for USC Upstate and all other higher education institutions with actual funding realized and shown as a percent of the MRR total.  The total funding need as computed by the SCCHE has primarily increased from growth in enrollment space as new facilities have been added.  Although some incremental state funding adjustments have been made using this formula, most have been made relative to the prior-year actual funding level with all institutions receiving a comparable adjustment.  This has been the case in the last two years with all higher education institutions receiving the same funding reduction percentage (State Budget Process for USC System, Fiscal Year 2010-11).

USC Upstate receives designated state appropriations as passed by the Legislature in the annual appropriations bill.  For 2009-2010, the actual amount USC Upstate received was 38% of the computed MRR formula, considerably below the average for peer South Carolina Public Comprehensive Universities (State Funding Percentages for SC Public Comprehensive Universities for 2009-10).

Sources of Funding
The distribution among the sources of funding for the general operating budget changed during the past several years as a result of economic conditions, decreased state appropriations, and increased tuition and fee revenue. The tuition and fee increase resulted from enrollment growth and strategic changes in tuition and fee rates.  Consistent increases in enrollment and the higher percentage of full-time students expanded the revenue base.  USC Upstate maintained a tuition rate at the average among the SC public comprehensive universities (SC Comprehensive Universities In-State Undergraduate Fee Rate Comparison 2001-11).  For 2009-10, state support represented 19% while tuition and fees comprised 68% of the general operating budget (Sources of Operating and Non-Operating Revenues for Unrestricted Net Assets 2007-10).

With student revenue as the major source of funding, USC Upstate’s Office of Risk Management led the state to obtain business interruption insurance from the South Carolina’s Insurance Reserve Fund.  Insurance covers housing, bookstore, and campus academic facilities.  Business Interruption Insurance of $23,490,000 provides protection against loss of tuition and fee income caused by peril covered under the building and contents policy.  Coverage also provides for extra expenses incurred to deliver academic instruction during the period of loss recovery (Business Interruption Insurance for 2010).

Strategic Plan and the Budgeting Process
The strategic plan for USC Upstate guides both revenue and expenditure decisions in the budget development process.  Tactics are proposed with funding requests.  Allocation decisions are made for both capital and operating activities.  The strategic plan is updated annually to include prior-year accomplishments and to evaluate progress of new and revised initiatives.

The Chancellor initiates the annual budget development work and outlines the budget situation, the schedule, and the guidelines for budget requests.  The Strategic Issues Committee provides priorities to the Chancellor’s Cabinet.  In collaboration with their respective units, Cabinet members submit unit requests.  This information is consolidated and reviewed by the Cabinet.  A fee and scholarship committee, appointed by the Chancellor and chaired by the Associate Vice Chancellor for Enrollment Services, considers all new fee requests and changes and makes recommendations to the Cabinet (USC Upstate Budget Development Process for 2010-11).    

Consolidated unit requests, the strategic plan, and projected revenue are used to determine a balanced budget plan by the Chancellor’s Cabinet.  As approved by the Chancellor, this plan is presented to the USC System President (Strategic Planning Overview 2010-11).  Comprehensive budget information is submitted for review and approval by the USC Board of Trustees.  The budget plan for the coming year is aligned with state funding throughout the process.

For implementation purposes, budgets are loaded into the University management information system with Cabinet members and unit managers given responsibility to commit expenditures and control funds.  Budget and expenditure tracking can be accessed continually and a summary report is provided quarterly to the Cabinet by the budget office for further review and adjustments as necessary

Financial Reports and Audits
An independent audit was conducted for USC Upstate for fiscal year 2009-10.  Prior to that year, financial statements were conducted and reported within the audited financial report for the USC system.  Statements of net assets, revenue, expenses, and changes in net assets were included for USC Upstate.  The opinion of the independent certified public accountant is that the audited financial statements were presented fairly and conformed to generally accepted accounting principles. A Summary of Financial Information from audited financial statements from 2006-2007 to 2009-2010 highlights the financial stability of the institution.  (Audited Financial Statement June 2006, Audited Financial Statement June 2007, Statement of Net Assets June 2007 - Reclassified, Statement of Revenues, Expenses and Changes in Net Assets June 2007 - Reclassified, Audited Financial Statement June 2008, Statement of Net Assets June 2008 - Reclassified, Statement of Revenues, Expenses and Changes in Net Assets June 2008 - Reclassified, Audited Financial Statement June 2009, Statement of Net Assets June 2009, Statement of Revenues, Expenses and Changes in Net Assets June 2000 - Reclassified, Audited Financial Statement June 2010, Statement of Net Assets June 2010, Statement of Revenues, Expenses and Changes in Net Assets June 2010)

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USC Upstate
800 University Way
Spartanburg, SC 29303
Toll-free: 800-277-8727
Phone: 864-503-5000
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