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

2. 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. 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. 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. 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. 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. 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. 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. 9 QUESTIONS?