Chapter 7- Management’s Discussion and Analysis (MD&A)

1. Chapter 7- Management’s Discussion and Analysis (MD&A) Presented by Steve DeVetter Partner – KPMG LLP

2. MD&A - What is it? • Required supplementary information (RSI) which precedes the audited financial statements • Management’s opportunity to communicate key financial activities of the Campus • MD&A requirements • Minimum and maximum requirements • General rather than specific • See “Guide to Preparation of MD&A” (Chapter 7, Appendix 1) for discussion of required elements (GASB 34, par. 11)

3. MD&A Overview • Discussion of the basic financial statements including the relationship of the statements to each other • Analysis of financial activities based on currently known facts, decisions or conditions • Discussion of current year results in comparison with prior year, with emphasis on the current year • Use of charts, graphs, and tables to facilitate understanding of management’s analysis

4. MD&A Overview (cont’d.) • Focus of analysis should be on the Campus as the primary reporting entity, with component units (auxiliary organizations) included if considered significant • Reference to the component unit’s separately issued financial statements, when appropriate

5. MD&A Overview (cont’d.) • Presentation of condensed financial information comparing current year to prior year for each year presented • Overall financial position and result of operations • Description of significant capital assets and long-term debt activity • For comparative financial statements, must provide two-year comparative analysis (i.e. 2004 vs. 2003 and 2003 vs. 2002) • Description of currently known facts, decisions, or conditions that are expected to have a significant financial impact

6. Preparation of MD&A • “Guide to Preparation of MD&A” (refer to Chapter 7, Appendix 1) • Starting point – comprehensive variance analysis • Identification of significant changes, and the reasons for significant changes, from the prior year • Coordination with appropriate Campus personnel to identify: • Underlying causes for the changes • Key decisions, transactions, events and conditions • Expected changes, based on existing Campus decisions and circumstances (i.e. known facts). Examples include: • Changes in enrollment • Campus master plan • Debt • New construction

7. Preparation of MD&A (cont’d.) • Completion of MD&A Checklist • Helps ensure all required elements have been included in the MD&A • Review and approval signature by appropriate level of management • Other resource tools • MD&A Resource Guide (refer to Chapter 7, Appendix 2) • Pro-forma financial statements (refer to Chapter 12) - one-year and comparative presentations

8. MD&A – Highlights of Significant Changes for 2004 • Year 3 under GASB 34 • Presentation of comparative financial statements – Must provide “comparative” MD&A that includes: • Comparative financial information and related analysis for both years presented • Three years of financial information (2004, 2003, and 2002) • MD&A Checklist – to be completed by Campus and provided to KPMG audit team along with draft MD&A • Draft MD&A (approved by Campus management and reviewed by KPMG) must be submitted to the Chancellor’s Office by November 12, 2004

9. QUESTIONS?