Financial Summary. June 30, The University of Mississippi Medical Center Jackson

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1 Financial Summary June 30, 2015 The University of Mississippi Medical Center Jackson

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3 TABLE OF CONTENTS YEAR END SUMMARY FISCAL YEAR ENDED JUNE 30, 2015 Reference Page Number FINANCIAL SUMMARY Statement A Balance Sheet 1 Statement B Statement of Changes in Fund Balance 7 Statement C Statement of Current Fund Revenues, Additions, Expenditures and Other Changes 13 Summary of Significant Accounting Policies 17 Notes to Financial Summary 21 OTHER FINANCIAL INFORMATION Schedule I Schedule of Current Fund Revenues and Other Additions 29 Schedule II Schedule of Current Fund Expenditures and Transfers 31 Schedule III Schedule of General Fund Expenditures and Transfers 59 Schedule IV Schedule of Unrestricted General Fund Revenues, Additions, Expenditures and Transfer Consolidations 73 Schedule V Schedule of Auxiliary Enterprise Operations 74 Schedule VI Schedule of Designated Funds 76 Schedule VII Schedule of Restricted Funds 88 Schedule VIII Schedule of Loan Funds 117 Schedule IX Schedule of Endowment and Similar Funds 119 Schedule X Schedule of Unexpended Plant Funds 123 Schedule XI Schedule of Renewals and Replacements 128 Schedule XII Schedule of Retirement of Indebtedness 129 Schedule XIII Schedule of Transfers 130 Schedule XIV Schedule of Cash and Investments 131 Schedule XV Schedule of Investments 135 Schedule XVI Schedule of Investment in Plant 148 Schedule XVII Schedule of Land 149 Schedule XVIII Schedule of Buildings 150 Schedule XIX Schedule of Departmental Equipment Inventory 152 Schedule XX Schedule of Improvements Other Than Buildings 168 Schedule XXI Schedule of Library Books 170 Schedule XXII Schedule of Construction in Progress 171 Schedule XXIII Schedule of Leasehold Improvements 173 Schedule XXIV Schedule of Service Area Allocations 174 Schedule XXV Schedule of Balance Sheet Consolidation - Unrestricted General 176

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5 BALANCE SHEET JUNE 30, 2015 WITH COMPARATIVE FIGURES AT JUNE 30, 2014 STATEMENT A ASSETS LIABILITIES AND FUND BALANCES June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 CURRENT FUNDS Unrestricted-General CURRENT FUNDS Unrestricted-General Cash & Investments $ 415,922,817 $ 271,891,267 Checks Outstanding in Excess of Accounts Receivable - State Appropriation 1,595, ,007 Bank Balance $ 127,472,824 $ 48,796,154 Student Accounts Receivable (Less Allowance Accrued Wages 21,138,992 18,165,138 for Doubtful Accounts of $230,122 in 2015 and Accounts Payable 43,913,846 31,008,873 $186,039 in 2014) 3,860,920 3,256,472 Refunds to Students 140,469 44,601 Patient Accounts Receivable (Less Allowances for Unearned Student Fees 5,518,007 5,035,582 Contractual Adjustments, Bad Debt, and Other Accrued Expenses 30,757,715 38,451,499 Free Care of $3,282,536,209 in 2015 Accrued Leave 52,322,752 48,961,677 and $3,171,645,146 in 2014) 118,593, ,102,302 Unearned Revenue - 1,400 Due from Third Party Payors - 436,160 Due to Medicaid 8,403,637 8,403,637 Other Accounts Receivable 6,636,633 7,268,774 Contingent Liability - Third Party Payor 21,906,064 15,138,465 Inventories 23,657,920 22,207,002 Tort Fund Claims Liability 33,000,000 32,265,000 Prepaid Expenditures 3,270,223 3,483,247 Fund Balances: Deposits 515, ,492 Allocated 186,030, ,624,596 Unallocated 43,448,417 52,226,101 Total Unrestricted-General $ 574,053,108 $ 422,122,723 Total Unrestricted-General $ 574,053,108 $ 422,122,723 Unrestricted - Auxiliary Enterprises Unrestricted - Auxiliary Enterprises Cash & Investments $ 10,446,407 $ 9,430,042 Checks Outstanding in Excess of Accounts Receivable (Less Allowance for Bank Balance $ 12,018,523 $ 1,548,168 Doubtful Accounts of $1,439,933 in 2015 and Accrued Wages 48,807 40,109 $1,439,933 in 2014) 3,660 4,216 Accounts Payable 116, ,799 Accounts Receivable - Vendors 14, ,938 Accrued Leave 104,056 95,870 Inventories 1,258,659 1,449,397 Fund Balances: Prepaid Expenditures 50,151 Allocated 1,363, ,363 Unallocated (1,878,328) 8,573,284 Total Unrestricted - Auxiliary Enterprises $ 11,773,223 $ 11,026,593 Total Unrestricted - Auxiliary Enterprises $ 11,773,223 $ 11,026,593 Designated Funds Designated Funds Cash & Investments $ 75,987,888 $ 61,424,167 Accrued Wages $ 125,112 $ 64,244 Accounts Receivable 3,476,385 6,014,468 Accounts Payable 344, ,217 Accrued Leave 336, ,488 Fund Balances: Allocated 1,068,505 1,140,208 Unallocated 77,590,033 65,808,478 Total Designated Funds $ 79,464,273 $ 67,438,635 Total Designated Funds $ 79,464,273 $ 67,438,635 1

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7 BALANCE SHEET JUNE 30, 2015 WITH COMPARATIVE FIGURES AT JUNE 30, 2014 STATEMENT A ASSETS LIABILITIES AND FUND BALANCES June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Restricted Funds Restricted Funds Cash & Investments $ 23,383,732 $ 17,467,805 Accrued Wages $ 804,825 $ 733,214 Accounts Receivable 20,365,742 21,633,847 Accounts Payable 1,091, ,850 Accrued Leave 2,284,756 2,575,632 Unearned Revenue 8,711,292 7,571,225 Fund Balances: Allocated 14,916,406 17,325,808 Unallocated 15,940,560 9,909,923 Total Restricted Funds 43,749,474 39,101,652 Total Restricted Funds 43,749,474 39,101,652 TOTAL CURRENT FUNDS $ 709,040,078 $ 539,689,603 TOTAL CURRENT FUNDS $ 709,040,078 $ 539,689,603 LOAN FUNDS LOAN FUNDS Cash & Investments $ 1,185,593 $ 1,392,696 Accounts Payable $ - $ 525 Accounts Receivable 406, ,875 Federal Portion of Federal Student Loans 5,043,985 5,498,769 Notes Receivable: Fund Balances: Federal Student Loans (Less Allowance Federal Student Loan Fund 2,484,876 2,543,393 for Doubtful Accounts of $727,957 in 2015 Institutional Student Loan Fund 1,550,113 2,406,955 and $567,868 in 2014) 6,807,014 7,088,254 Institutional Student Loans (Less Allowance for Doubtful Accounts of $1,720,240 in 2015 and $1,129,190 in 2014) 680,331 1,625,817 TOTAL LOAN FUNDS $ 9,078,974 $ 10,449,642 TOTAL LOAN FUNDS $ 9,078,974 $ 10,449,642 ENDOWMENT & SIMILAR FUNDS ENDOWMENT & SIMILAR FUNDS Cash & Investments $ 8,848,865 $ 9,024,657 Other Accrued Expenses $ - $ 27,634 Investments Held by Trustees 158, ,972 Fund Balances: Investments 75,309,691 72,593,079 Endowment Funds - Restricted 38,603,753 37,941,467 Quasi-Endowment Funds - Restricted 45,712,847 43,804,607 TOTAL ENDOWMENT & SIMILAR FUNDS $ 84,316,600 $ 81,773,708 TOTAL ENDOWMENT & SIMILAR FUNDS $ 84,316,600 $ 81,773,708 3

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9 BALANCE SHEET JUNE 30, 2015 WITH COMPARATIVE FIGURES AT JUNE 30, 2014 STATEMENT A ASSETS LIABILITIES AND FUND BALANCES June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 PLANT FUNDS PLANT FUNDS Cash & Investments $ 41,874,709 $ 37,321,473 Accounts Payable $ 179,199 $ 2,099,647 Cash - Retirement of Indebtedness 2,994,625 3,014,759 Fund Balances: Accounts Receivable - 507,002 State of MS Office of Buildings 420, ,000 Prepaid Expenditures - Building Commission 420, ,000 University Funds 41,695,510 35,727,243 Investment in Plant: Retirement of Indebtedness 2,994,625 3,016,344 Land 9,269,480 6,785,095 Investment in Plant 368,331, ,774,982 Buildings (Less Accumulated Depreciation of $86,628,330 for 2015 and $82,539,457 for 2014) 104,379, ,469,838 Improvements Other Than Buildings (Less Accumulated Depreciation of $6,248,186 for 2015 and $5,787,234 for 2014) 4,340,756 4,775,875 Leasehold Improvements (Less Accumulated Depreciation of $8,004,487 for 2015 and $6,403,109 for 2014) 56,002,112 56,459,409 Equipment (Less Accumulated Depreciation of $202,241,110 for 2015 and $184,882,402 for 2014) 106,890, ,178,042 Library Books (Less Accumulated Depreciation of $39,307,636 for 2015 and $37,032,816 for 2014) 12,047,666 11,622,614 Capitalized Software (Less Amortization of $19,388,150 for 2015 and $13,171,704 for 2014) 38,494,806 44,090,730 Construction in Progress - Capital Assets 36,907,174 22,014,771 Construction in Progress - Software Implementation - 378,608 Total Investment in Plant 368,331, ,774,982 Total Fund Balances 413,441, ,938,569 TOTAL PLANT FUNDS $ 413,621,007 $ 396,038,216 TOTAL PLANT FUNDS $ 413,621,007 $ 396,038,216 AGENCY FUNDS AGENCY FUNDS Cash & Investments $ 278,544 $ 347,383 Due to Depositors $ 274,661 $ 346,665 Accounts Receivable - 21,506 Accounts Payable 3,883 - Accrued Leave - 22,224 TOTAL AGENCY FUNDS $ 278,544 $ 368,889 TOTAL AGENCY FUNDS $ 278,544 $ 368,889 5

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11 STATEMENT OF CHANGES IN FUND BALANCE STATEMENT B Current Funds Endowment Plant Funds Unrestricted Loan & Similar Retirement of Investment General Auxiliary Designated Restricted Total Funds Funds Unexpended Indebtedness in Plant REVENUES AND OTHER ADDITIONS Tuition and Fees $ 29,114,499 $ - $ - $ - $ 29,114,499 $ - $ - $ - $ - $ - State of Mississippi Appropriations 175,650, ,650, ,285, Capital Expense Fund 4,446, ,446,915 - Education Enhancement Fund 6,888, ,888, Healthcare Expendable Fund 2,380, ,380, Federal Grants and Contracts 9,308, ,979,861 52,288, ,222,507 State Grants and Contracts 15, ,881,287 10,896, Private Gifts, Grants, and Contracts 592,541-5,636,110 11,761,277 17,989,928 42,608 3,341, Sales and Services of Educational Departments 846, , Sales and Services of Hospitals 1,043,115, ,043,115, Sales and Services of Auxiliary Enterprises - 8,955, ,955, Investment Income 822,482-64,119 33, , , Net Increase (Decrease) In The Fair Value of Investments 242, ,832-1,815, Endowment Income , , ,659 6, Interest on Loans Receivable , Additions to Plant Facilities ,695,392 Bond Proceeds ,356, Scholarship to Loan Conversion , Other Income 45,960,369-1,368, ,088 48,250,207 6, , TOTAL REVENUES AND OTHER ADDITIONS $ 1,319,384,282 $ 8,955,996 $ 7,109,620 $ 67,270,002 $ 1,402,719,900 $ 178,039 $ 5,157,234 $ 8,149,109 $ - $ 54,917,899 7

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13 STATEMENT OF CHANGES IN FUND BALANCE STATEMENT B Current Funds Endowment Plant Funds Unrestricted Loan & Similar Retirement of Investment General Auxiliary Designated Restricted Total Funds Funds Unexpended Indebtedness in Plant EXPENDITURES AND OTHER DEDUCTIONS Educational and General: Instruction $ 123,101,327 $ - $ 2,975,238 $ 1,346, ,423,388 $ - $ - $ - $ - $ - Academic Support 20,424, , ,735 21,619, Student Services 1,186, , ,538 1,501, Institutional Support 109,982,110-2,709,198 6,444, ,135, Operation and Maintenance of Physical Plant 32,945, ,945, Public Service ,733 13,038,074 13,457, Research 17,130-1,742,563 37,457,356 39,217, Scholarships and Fellowships ,115,374 10,115, Total Educational and General 287,657,560-8,381,479 69,377, ,416, Hospital Instruction 38,616, ,616, Other Hospital Services 896,123, ,123, Auxiliary Enterprises - 18,385, ,385, Principal and Interest Write-Offs , Loan Fund Expenses , Expended for Capital Outlay ,193, Expended for Repairs and Maintenance ,499, Retirement of Indebtedness-MCEBC ,150,000 - Interest Expense-MCEBC ,189,635 - Provision for Uncollectible Accounts , Depreciation Expense ,022,841 Other Deductions ,550 2,338,367. Total Expenditures and Other Deductions 1,222,397,402 18,385,513 8,381,479 69,377,143 1,318,541, ,082-12,693,276 17,364,185 41,361,208 9

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15 STATEMENT OF CHANGES IN FUND BALANCE STATEMENT B Current Funds Endowment Plant Funds Unrestricted Loan & Similar Retirement of Investment General Auxiliary Designated Restricted Total Funds Funds Unexpended Indebtedness in Plant TRANSFERS AMONG FUNDS Mandatory: Transfer to Retire Debt - Bond Interest $ 12,078,604 $ 58,281 $ - $ - $ 12,136,885 $ - $ - $ - $ (12,136,885) $ - Transfer to Retire Debt - Bond Principal 5,079,278 87, ,167, (5,167,083) - Loan Match Fund 12, (12,905) Remarketing / Transfer Fee 36,151 2, , (38,498) - Total Mandatory 17,206, ,433 - (12,905) 17,342, (17,342,466) - - Non-Mandatory: Equipment (6,906) 196,100 (196,100) - (6,906) - - 6, Renovations and Repairs 458,569 - (126,717) - 331, (331,852) - - Indirect Costs 5,123,734 - (5,123,734) Other 15,304,103 48,390 (7,535,160) (5,715,471) 2,101, ,316 2,586,708 (4,995,886) - - Capital Outlay Non-Equipment 5,272,337 (80,735) - - 5,191, (5,191,602) - - Total Non-Mandatory 26,151, ,755 (12,981,711) (5,715,471) 7,618, ,316 2,586,708 (10,512,434) - - Total Transfers 43,358, ,188 (12,981,711) (5,728,376) 24,960, ,316 2,586,708 (10,512,434) (17,342,466) TOTAL EXPENDITURES, TRANSFERS AND OTHER DEDUCTIONS 1,265,756,177 18,697,701 (4,600,232) 63,648,767 1,343,502,413 1,093,398 2,586,708 2,180,842 21,719 41,361,208 NET INCREASE FOR THE YEAR 53,628,105 (9,741,705) 11,709,852 3,621,235 59,217,487 (915,359) 2,570,526 5,968,267 (21,719) 13,556,691 FUND BALANCE - JUNE 30, 2014 PREVIOUSLY REPORTED 175,850,697 9,226,647 66,948,686 27,235, ,261,761 4,950,348 81,746,074 36,147,243 3,016, ,774,982 FUND BALANCE - JUNE 30, 2015 $ 229,478,802 $ (515,058) $ 78,658,538 $ 30,856,966 $ 338,479,248 $ 4,034,989 $ 84,316,600 $ 42,115,510 $ 2,994,625 $ 368,331,673 11

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17 STATEMENT OF CURRENT FUND REVENUES, ADDITIONS, EXPENDITURES AND OTHER CHANGES WITH COMPARATIVE FIGURES AT JUNE 30, 2014 STATEMENT C Revenues and Other Additions Current Year Prior Year Unrestricted Restricted Total Total Tuition and Fees $ 29,114,499 $ - $ 29,114,499 $ 27,196,477 State of Mississippi Appropriations 175,650, ,650, ,850,152 Capital Expense Fund 4,446,915-4,446,915 - Education Enhancement Fund 6,888,029-6,888,029 6,888,029 Healthcare Expendable Fund 2,380,431-2,380,431 3,780,431 Federal Grants and Contracts 9,308,430 42,979,861 52,288,291 47,957,812 State Grants and Contracts 15,406 10,881,287 10,896,693 10,761,203 Private Gifts, Grants and Contracts 6,228,651 11,761,277 17,989,928 12,281,922 Endowment Income 40, , ,659 1,129,879 Net Increase (Decrease) In The Fair Value of Investments 242, ,832 52,949 Investment Income 886,601 33, ,072 1,098,797 Educational Activities 846, , ,254 Auxiliary Activities 8,955,996-8,955,996 7,073,651 Sales and Services of Hospitals 1,043,115,837-1,043,115, ,051,960 Other Income 47,329, ,088 48,250,207 44,211,478 Total Revenues and Other Additions 1,335,449,898 67,270,002 1,402,719,900 1,249,134,994 Expenditures and Mandatory Transfers Educational and General: Instruction 126,076,565 1,346, ,423, ,532,221 Academic Support 20,778, ,735 21,619,390 22,005,227 Student Services 1,367, ,538 1,501,784 1,411,936 Institutional Support 112,691,308 6,444, ,135, ,443,025 Operation and Maintenance of Plant 32,945,839-32,945,839 31,376,811 Public Service 419,733 13,038,074 13,457,807 13,748,867 Research 1,759,693 37,457,356 39,217,049 38,575,906 Scholarships and Fellowships - 10,115,374 10,115,374 9,607,504 Total Educational and General Expenditures 296,039,039 69,377, ,416, ,701,497 Mandatory Transfers: Loan Match Funds 12,905 (12,905) - - Remarketing/Transfer Fees 9,033-9,033 9,254 Transfers to Retire Debt - Bond Interest - MCEBC 4,059,057-4,059,057 4,242,281 Transfers to Retire Debt - Bond Principal - MCEBC 382, , ,818 Total Educational and General 300,502,550 69,364, ,866, ,285,850 13

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19 STATEMENT OF CURRENT FUND REVENUES, ADDITIONS, EXPENDITURES AND OTHER CHANGES WITH COMPARATIVE FIGURES AT JUNE 30, 2014 STATEMENT C Current Year Unrestricted Restricted Total Total Auxiliary Enterprises: Expenditures $ 18,385,513 $ - $ 18,385,513 $ 5,443,603 Mandatory Transfers: Remarketing / Trustee Fees 2,347-2, Transfer to Retire Debt - Bond Interest - MCEBC 58,281-58,281 61,665 Transfer to Retire Debt - Bond Principal - MCEBC 87,805-87, ,065 Total Auxiliary Enterprises 18,533,946-18,533,946 5,626,833 Hospital: Expenditures 934,739, ,739, ,757,466 Mandatory Transfers: Remarketing / Trustee Fees 27,118-27,118 27,396 Transfer to Retire Debt - Bond Interest - MCEBC 8,019,547-8,019,547 8,388,236 Transfer to Retire Debt - Bond Principal - MCEBC 4,696,762-4,696,762 4,521,950 Total Hospital 947,483, ,483, ,695,048 Total Expenditures and Mandatory Transfers 1,266,519,765 69,364,238 1,335,884,003 1,220,607,731 Other Transfers - Additions (Deductions): Equipment 6,906-6,906 (135,532) Renovations and Repairs (331,852) - (331,852) (3,181) Indirect Costs Other (7,817,333) 5,715,471 (2,101,862) (1,120,592) Capital Outlay Non-Equipment (5,191,602) - (5,191,602) (4,521,835) Total Other Transfers - Additions (Deductions) (13,333,881) 5,715,471 (7,618,410) (5,781,140) NET CHANGE IN FUND BALANCE $ 55,596,252 $ 3,621,235 $ 59,217,487 $ 22,746,123 15

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21 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed by the University of Mississippi Medical Center are described below to enhance the usefulness of the financial schedules to the reader. (1) Basis of Accounting. The financial schedules have been prepared generally in accordance with the accounting principles outlined in College and University Business Administration, and the American Institute of Certified Public Accountants Industry Audit Guide on Audits of Colleges and Universities. A significant portion of the University's operations are those of the University Hospital. Thus, the amounts included in these financial schedules for the hospital do not purport to present the results of operations following generally accepted accounting principles for hospitals. The accompanying financial schedules have been prepared generally on the accrual basis with the following exceptions, which are common practices in colleges and universities: A. To the extent that Current Funds are used to finance plant assets, the amounts so provided are accounted for as: (a) expenditures, in the case of normal acquisition and/or replacement of moveable equipment and library books; (b) mandatory transfers, in the case of required provisions for debt amortization and interest, and equipment renewals and replacement; and (c) transfers of a non-mandatory nature for all other cases. B. Interest on student loans is recorded only when received. C. Interest expense on debt is recorded when paid. Gifts, grants and pledges are generally recorded when received or when billable. Property, buildings and equipment are stated at cost at the date of acquisition or fair market value at date of donation. Improvements made as part of repair and renovation projects are capitalized based upon engineering estimates which approximate cost. Public domain (infrastructure) fixed assets consisting of certain improvements other than buildings, such as roads, bridges, sidewalks, drainage systems, lighting systems and similar assets that are immovable and of value only to the institution are capitalized. Inventories consist of various hospital inventories, dental school gold, central supply inventories, auxiliary inventories, printing, and storeroom inventories. These inventories are generally valued at lower of cost or market, on either the first-in, firstout ( FIFO ) basis or the average cost basis. All revenues and related expenditures incurred in connection with the current school sessions ending after June 30 are deferred until the following year. Encumbrances represent outstanding purchase orders for goods or services not yet delivered or received and are reflected as an allocation of the General and Hospital Fund Balances. The related expenditures will be recorded in (2) Fund Accounting. In order to insure observance of limitations and restrictions placed on the use of the resources available, the accounts of the institution are maintained in accordance with the accounting practice known as "fund accounting." This accounting practice is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified. Separate accounts are maintained for each fund; however, in the accompanying financial schedules, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group. 17

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23 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Current Funds are used primarily to account for transactions which are expended in performing the primary and support objectives of the institution. Current Funds consist of the following: A. The Unrestricted Fund which is used to account for; 1. The appropriated budget as approved by the Mississippi State Legislature and the Board of Trustees of State Institutions of Higher Learning. 2. The unrestricted resources designated for specific purposes by the institution's administration. 3. The transactions of substantially self-supporting activities that primarily provide services for students, faculty and staff. B. The Restricted Fund which is used to account for Current Funds expended for operating purposes but restricted by donors or other outside agencies as to the specific purpose for which they may be expended. Other funds consist of the following: A. The Loan Funds are used to account for loans to students. Resources to provide loans are derived primarily from the federal government. Provisions of the federal loan program stipulate that; 1. The institution matches one-ninth of the federal contributions from Health and Human Services ("HHS"). The institution matched 25% of federal contributions from the Office of Education ("OE"). 2. A portion of the loan principal and interest (maximum of 30% per year) will be canceled and absorbed by the federal government, if the recipient completes certain employment requirements. B. Endowment Funds are subject to the restrictions of donor gift instruments requiring that the principal be invested in perpetuity and that only the income be utilized. Funds functioning as endowments are used to report resources that the Medical Center, rather than the donor, has determined are to be retained and managed like endowments where the principal and income may be utilized at the discretion of the Medical Center. C. The Plant Funds which are used to account for the transactions relating to institution physical properties include; 1. The Unexpended Plant Fund which is comprised of amounts which have been appropriated or designated for the purchase of institution physical properties or the repair and maintenance of such physical properties. 2. The Renewals and Replacements Plant Fund which represents reserves to provide for maintenance and equipment replacement established primarily pursuant to terms of bond indentures. 3. The Retirement of Indebtedness Plant Fund which represents resources held for the retirement of the interest on debt and includes sinking funds established under bond indentures and note and lease amortization payments accumulated, but not yet due. 4. The Investment in Plant Fund which represents the total physical properties in service by the institution and all construction in progress as well as any associated liabilities. D. Agency Funds account for assets held by the institution as custodian or fiscal agent for others. Consequently, the transactions of these funds do not affect the statement of changes in fund balances. 19

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25 NOTES TO FINANCIAL SUMMARY (1) Financial Reporting Entity The University of Mississippi Medical Center ("the Medical Center") is the Jackson campus of the University of Mississippi. The financial schedules include the hospital and the schools of medicine, dentistry, nursing and health related professions and their related service organizations. The assets, liabilities and fund balances related to the parent institution, the University of Mississippi, and the alumni fund are not included. (2) Component Unit The Medical Center Educational Building Corporation (The Corporation) is a non-profit corporation, incorporated on June 26, 1991, in the State of Mississippi with the approval of the Board of Trustees of State Institutions of Higher Learning for the State of Mississippi. The purpose of the Corporation is for the acquisition, construction, and equipping of facilities and land for the Medical Center. The Board of Directors of the Corporation is composed of designated institutional officers of the Medical Center. The assets, liabilities, and fund balances of the Corporation are not included in the accompanying financial schedules of the Medical Center. The condensed financial schedules of the Corporation are as follows: Medical Center Educational Building Corporation Condensed Statement of Net Position June 30, 2015 Unrestricted Plant Total Fund Funds Funds _ Assets Current Assets $ - $ 5,446,464 $ 5,446,464 Capital Lease Receivable 1,002, ,795, ,797,728 Noncurrent Assets - 50,650,125 50,650,125 Total Assets $ 1,002,104 $ 256,892,213 $ 257,894,317 Deferred Outflows of Resource Deferred Amount on Refunding $ - $ 4,518,800 $ 4,518,800 Total Assets and Deferred Outflows of Resources $1,002,104 $ 261,411,013 $ 262,413,117 Liabilities Current Liabilities $ 2,860 $ 6,448,567 $ 6,451,427 Revenue Bonds - 252,740, ,740,000 Noncurrent liabilities - 4,298,369 4,298,369 Total Liabilities 2, ,486, ,489,796 Net Position 999,244 (2,075,923) (1,076,679) Total Liabilities and Net Position $ 1,002,104 $ 261,411,013 $ 262,413,117 Condensed Statement of Changes in Net Position Year Ended June 30, 2015 Unrestricted Plant Fund Funds _ Revenues $ 17,372,082 $ 13,511,474 Expenditures Operating and Other 27,410 8,007,983 Debt Service - 22,161,043 Transfers 17,364,185 (17,364,185) Net Increase (Decrease) (19,513) 706,633 Net Position (Deficits) at June 30, ,018,757 (2,424,842) Net Position deduction at June 30, (357,714) Net Position at June 30, 2015 $ 999,244 $ (2,075,923) Complete financial schedules of the Corporation may be obtained by contacting: Secretary - Treasurer Medical Center Educational Building Corporation 2500 North State Street Jackson, Mississippi (3) Appropriations-General Operations The Medical Center is a state supported institution that receives annual appropriations for operations from the state of Mississippi. The laws of the state and the policies and procedures specified by the state for state agencies and institutions are applicable to the activities of the institution. (4) Accrued Personal Leave Full-time staff, faculty and employees and certain part-time employees can earn personal leave up to twenty-seven days per year, based on length of continuous employment. Personal leave is payable upon termination for accumulated time up to thirty days. Accrued personal leave at June 30, 2015 and 2014 amounted to $55,047,824 and $51,948,891, respectively. (5) Current Restricted Fund Revenues In the attached financial schedule, current restricted fund revenues are recognized only to the extent of expenditures and transfers of the fund. The amount recognized for the year ended June 30, 2015, was $67,270,002, as reported on the Schedule of Current Fund Revenues. Total current restricted fund revenues and additions as reported on the Statement of Changes in Fund Balance amounted to $67,270,

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27 NOTES TO FINANCIAL SUMMARY (6) Cash and Investments All state funds on deposit with banks in Mississippi are collateralized based upon a state agency collateral pool. These banks pledge securities according to statutory requirements based upon the daily deposit summaries. The State Treasury compares the deposit summaries to the Securities Inventory System maintained by the State Treasury to verify that each institution has adequate collateral pledged in accordance with Section , Mississippi code of 1972, Annotated. (7) Endowment Fund Investments The investments of most endowment funds and funds functioning as endowments are invested and administered in a common pool with income from such investments being distributed to the participating funds on the basis of fund balances. Investments are recorded at their fair market value with all investment income, including changes in the fair market value of investments, reported as revenue in the financial schedules. (8) Notes Receivable - Loan Funds Notes receivable bear interest primarily at 5% and are payable in installments over a five-to-ten year period, commencing three to twelve months from the date of separation from the institution. Unpaid Balance June 30, 2015 Notes receivable, less allowance of $2,448,197 $7,487,345 (9) Operating Leases Operational leases have been issued to cover rental of floor space at the Jackson Medical Mall, Grenada and various other locations in the state of Mississippi. The spaces are used as patient care facilities and administrative offices. The following is a schedule by year of the future minimum rental payments required under those operating leases: Fiscal Year Ending June 30 Amount 2016 $ 13,759, ,990, ,639, ,310, ,756, ,215, ,050, ,825,085 Total Minimum Payments Required $ 169,548,278 were renewed, for the fiscal year ending June 30, 2015 was $13,004,373. (10) Construction In Progress As of June 30, 2015, the Medical Center has construction in progress related to capital assets totaling $36,907,174 with estimated expenses to complete these projects totaling $90,972,626. All of the funding for our present construction in progress is provided by University funds. (11) Pension Plan Plan description The State of Mississippi Institutions of Higher Learning (IHL) participates in either the Public Employees Retirement System of Mississippi (PERS), a cost-sharing multipleemployer defined benefit pension plan or the Optional Retirement Plan (ORP), a multipleemployer defined contribution plan established in PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state law and may be amended only by the State of Mississippi Legislature. PERS issues a publicly available financial report that includes financial statements and required supplementary information. That information may be obtained by writing to the Public Employees Retirement System, PERS Building, 429 Mississippi Street, Jackson, MS or by calling (601) or PERS. Vesting Period In 2007, the Mississippi Legislature amended the PERS Plan to change the vesting period from four to eight years for members who entered the System after July 1, A member who entered the System prior to July 1, 2007 is still subject to the four year vesting period provided that the member does not subsequently refund their account balance. Funding Policy PERS members are required to contribute 9.00% of their annual salary and the institution is required to contribute at an actuarially determined rate. The actuarially determined rate was 15.75% of annual covered payroll as of June 30, 2015, 2014 and The contribution requirement of PERS members are established and may be amended only by the State of Mississippi Legislature. The institutional contributions to PERS for the years ending June 30, 2015, 2014 and 2013 were $69,234,501, $65,129,647 and $56,750,800, respectively. Such contributions equaled the required contributions for each respective year. The membership of the ORP is composed of teachers and administrators of the IHL appointed or employed on or after July 1, 1990, who elect to participate in ORP and reject membership in PERS. Membership in ORP is offered as a recruitment tool for the IHL. The Medical Center s contributions to ORP for the years ending June 30, 2015, 2014 and 2013 were $22,626,639, $21,411,984 and $17,745,403, respectively. Such contributions equaled the contributions for each respective year. (12) Income Tax Status The Medical Center has a tax determination letter from the Internal Revenue Service stating that it qualifies under the provisions of section 501(c)(3) of the Internal Revenue Code and is exempt from Federal income taxes. The total rental expense for all operating leases, except those with terms of a month or less that 23

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29 NOTES TO FINANCIAL SUMMARY (13) Hospital Reimbursement The University Hospitals and Health System (UHHS) Medicare cost reports have been audited and settled by the fiscal intermediary through the cost reports filed for the year ended June 30, 2011 for the Jackson campus and June, 2012 for Holmes County Hospital. During FY 2009, UHHS received notification that Medicare had designated the Recovery Audit Contractor (RAC) for the region that includes the State of Mississippi. The RAC program is intended to identify and recover improper Medicare payments made to health care providers as far back as three years from the current date. While UHHS believe all claims submitted to Medicare are supported by the services provided, the RAC could make adjustments based on differing interpretation of the regulations. Audits of Medicare claims began in FY 2010 and are expected to continue in the future. Based on recent audit experiences and reviews of planned future audit activities, the reserve balance at the end of fiscal year 2015 was held at $9.0 million, consistent with previous years. Over five years ago, the Division of Medicaid (DOM) notified all providers in the State of Mississippi of a change in the methodology used to reimburse outpatient services. DOM had adopted a payment methodology for outpatient services at a fixed cost to charge ratio that was increased each year by an inflationary index. At that time, DOM issued letters to all providers of an updated reimbursement percentage based on more current cost data. They also stated they intend to apply the revised methodology back to October 1, As a result of this change, UHHS recorded a reserve in the amount of $12.7 million as of June 30, 2008, as an estimate of potential outpatient claims adjustments to be made by DOM. Other reserves have been established each fiscal year for anticipated adjustments to estimated versus final payment rates for both inpatient and outpatient services. Since that time UHHS has repaid approximately $20.6 million through FY 2014 and repaid $1.2 million during FY 2015 to DOM for these and other claims adjustments. At June 30, 2015, UHHS maintains a reserve of approximately $12.1 million for Medicaid rate recalculations and other adjustments for prior fiscal years. (14) Grenada Lake Medical Center Grenada Lake Medical Center is a 156 bed community hospital owned by Grenada County, MS and located in Grenada, MS. On January 1, 2014 the Medical Center entered into a lease agreement to lease the Grenada Lake Medical Center from the Grenada County Board of Supervisors. The initial term of the lease agreement is for twenty years and will be automatically renewed for three additional terms of ten years each unless either party provides one year advance written notice. The monetary terms require the Medical Center to make monthly debt service payments to retire the debt owed by Grenada Lake Medical Center. Total rental payments for the year ended June 30, 2015 were $2,130,

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31 OTHER FINANCIAL INFORMATION 27

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33 SCHEDULE OF CURRENT FUND REVENUES AND OTHER ADDITIONS WITH COMPARATIVE FIGURES AT JUNE 30, 2014 SCHEDULE I Unrestricted Auxiliary 6/30/15 6/30/14 General Enterprise Designated Subtotal Restricted Current Current Funds Funds Funds Unrestricted Funds Funds Funds Student Tuition $ 28,327, $ - $ - $ 28,327, $ - $ 28,327, $ 26,598, Other Student Fees Out-of-State Fees 244, , , , Out-of-State Fees - Graduate Students 511, , , , Thesis Binding 2, , , , Diploma Fees 23, , , , Instrument Fees 1, , , , Miscellaneous 2, , , , State of Mississippi Appropriations Total Other Student Fees 786, , , , Total Tuition & Fees 29,114, ,114, ,114, ,196, State Appropriations 175,650, ,650, ,650, ,850, Education Enhancement Fund 6,888, ,888, ,888, ,888, Healthcare Expendable Fund 2,380, ,380, ,380, ,780, Capital Expense Fund 4,446, ,446, ,446, Federal Appropriations Total State of Mississippi Appropriations 189,365, ,365, ,365, ,518, Federal-PHS-NIH 8,763, ,763, ,887, ,651, ,046, Other Federal 545, , ,091, ,637, ,911, Total Federal Appropriations 9,308, ,308, ,979, ,288, ,957, State Grants & Contracts 15, , ,881, ,896, ,761, Private Gifts, Grants & Contracts Voluntary Health Agencies 68, , ,115, ,184, ,062, Industries 434, , ,484, ,919, ,679, Foundations 43, , ,822, ,865, ,209, Private Donations - - 4,801, ,801, ,431, ,233, ,841, Laboratory & Testing Fees - - 7, , , , , Other 45, , , ,742, ,614, ,376, Total Private Gifts, Grants & Contracts 592, ,636, ,228, ,761, ,989, ,281,

34 SCHEDULE OF CURRENT FUND REVENUES AND OTHER ADDITIONS WITH COMPARATIVE FIGURES AT JUNE 30, 2014 SCHEDULE I Unrestricted Auxiliary 6/30/15 6/30/14 General Enterprise Designated Subtotal Restricted Current Current Funds Funds Funds Unrestricted Funds Funds Funds Sales & Services of Educational Departments Sales & Services - Dental Clinic Income $ 846, $ - $ - $ 846, $ - $ 846, $ 800, Sales & Services of Hospitals Patient Revenues 3,477,630, ,477,630, ,477,630, ,073,928, LESS: Deduction from Patient Revenues for Contractual Adjustments, Bad Debt and Free Care (2,555,142,529.66) - - (2,555,142,529.66) - (2,555,142,529.66) (2,269,219,983.66) Patient Revenue 922,487, ,487, ,487, ,708, DSH 79,817, ,817, ,817, ,621, UPL 40,810, ,810, ,810, ,722, Total Sales & Services of Hospitals 1,043,115, ,043,115, ,043,115, ,051, Investment Income Investment Income 822, , , , ,653, ,228, Net Increase (Decrease) In The Fair Value of Investments 242, , , , Auxiliary Enterprises Total Investment Income 1,065, , ,170, , ,896, ,281, Bookstore - 2,542, ,542, ,542, ,388, Printing - 1,211, ,211, ,211, ,130, Parking - 673, , , , Laboratory Animal Facilities - 1,360, ,360, ,360, ,297, Surplus Property - 3, , , , Student Union Fees - 228, , , , Vending - 164, , , , University Pavilion - 598, , , , Biostatistics - 183, , , , Farmers Market - 43, , , , School of Pharmacy - 256, , , , Courthouse - 1,690, ,690, ,690, Other Income Total Auxiliary - 8,955, ,955, ,955, ,073, Income from Allocation 287, , , , Dental Hygiene Fees 20, , , , Allocated Tort Fund Reserves 5,000, ,000, ,000, ,000, Electronic Health Record Incentive Income 1,215, ,215, ,215, ,841, Cafeteria 4,902, ,902, ,902, ,060, Pharmacy 25,244, ,244, ,244, ,835, Miscellaneous 9,290, ,368, ,659, , ,580, ,209, Total Other Income 45,960, ,368, ,329, , ,250, ,211, TOTAL REVENUES AND OTHER ADDITIONS $ 1,319,384, $ 8,955, $ 7,109, $ 1,335,449, $ 67,270, $ 1,402,719, $ 1,249,134,

35 SCHEDULE OF CURRENT FUND EXPENDITURES AND TRANSFERS SCHEDULE II General Designated Restricted Total Salaries & Wages Fringe Benefits Travel Contractual Services Commodities Capital Outlay Transfers Service Area Instruction SER-Office-Vice Chancellor $ - $ - $ $ $ - $ - $ - $ - $ $ - $ SER-Assoc VC Academic Affairs , , , , , , (9,598.90) SER-Academic Information Svc , , , , SER-ROPE - - 6, , , Total Instruction , , , , , , , (9,598.90) Research SER-Office-Vice Chancellor SER-Cancer Institute - 75, ,195, ,271, , , , , , (1,021.22) (158,027.17) SER-Div Res & Sponsored Proj - 59, ,355, ,415, , , , , ,342, , SER-Assoc VC Academic Affairs - 453, , , , , , , , Total Research - 134, ,005, ,140, , , , , , ,343, , Public Service SER-Office-Vice Chancellor , , , , , , , , SER-Office of Development SER-Ctr for Emergency Services - - 1,170, ,170, , , , , , , SER-Cancer Institute SER-Div Res & Sponsored Proj - - (48.17) (48.17) - (48.17) SER-Assoc VC Academic Affairs - - 8, , , SER-Academic Information Svc , , , , , Total Public Service - - 1,666, ,666, , , , , , , Academic Support SER-Fin Affairs-Budget Office , SER-Office of Development - 202, , , , , , SER-Assoc VC Academic Affairs 2,033, , ,520, ,572, , , , , , SER-GWIMS 28, , , , , , , SER-E-Campus 374, , , , , , SER-Continuing Health Prof Ed 833, , , , , , , SER-Institutional Support Prog 3,381, ,381, , , , ,234, , , (75,694.86) SER-Media Production and Photo 465, , , , , , , , SER-Audiovisual Services 201, , , , , , , SER-Academic Information Svc 4,330, ,330, , , , , ,919, , SER-Student Union , SER-Laboratory Animal Facility 1,100, ,100, , , , , SER-ROPE 391, , , , , , , , SER-Debt Retirement ,654, SER-Simulation Center 665, , , , , , , , (969.95) Total Academic Support 13,805, , , ,496, ,501, ,325, , ,710, , ,362, ,443, Student Services SER-Accounting Department - - 1, , , SER-Office of Medical Educ , SER-Office of Financial Aid 385, , , , , , , , , (125,000.00) SER-Student Services & Records 800, , , , , , , Total Student Services 1,186, , ,321, , , , , , , (123,857.92) Institutional Support SER-Office-Vice Chancellor 4,229, ,229, ,307, , , , , , Chief Administrative Officer 217, , , , , SER-Fin Affairs-Budget Office 696, , (17,093.51) 814, , , , , (653,301.28) SER-Office of the Comptroller 120, ,396, , ,560, ,202, , , , (1,180,479.81) SER-Accounting Department 1,941, ,941, ,310, , , , , SER-Accounts Payable Dept 1,060, ,060, , , SER-Payroll Office 437, , , , , , SER-Decision Support 231, , , , , SER-Office of Medical Educ SER-Supervision 50, , , SER-Property Control 540, , , , , , SER-Property Control Surplus SER-Human Resources 6,207, ,207, ,067, ,122, , , , , SER-HR-Academics & Research 5, , , , , SER-HR-Employee Relations 18, , , , SER-HR-Total Rewards 98, , , , SER-HR-Workforce Plan/Recruit 6, , , ,

36 SCHEDULE OF CURRENT FUND EXPENDITURES AND TRANSFERS SCHEDULE II General Designated Restricted Total Salaries & Wages Fringe Benefits Travel Contractual Services Commodities Capital Outlay Transfers SER-HR-Talent Acquisition $ 169, $ - $ - $ 169, $ 124, $ 43, $ - $ - $ 1, $ - $ SER-HR-Org Dev & Mngmnt Cnslt 7, , , , SER-ARRA Stimulus (50.00) - - (50.00) (50.00) SER-Legal 2,340, , ,444, ,390, , , , , (120,000.00) SER-Chief Medical Officer-CMO 1,905, , ,907, ,475, , , , , SER-Medical Staff Services 5, , , , , , SER-Office of Development 1,936, , ,423, ,393, , , , , , (489,930.11) SER-Internal Auditor 404, , , , , , , , SER-Ctr for Emergency Services 859, , , , SER-Campus Police 4,847, ,847, ,212, ,068, , , , , SER-DIS-Core 29,078, ,078, ,180, ,218, , ,600, , ,375, , SER-DIS-Core-CTO 32, , , SER-DIS-Core-Telecommunication SER-DIS-Core-Dir IT PMO SER-DIS-Core Projects 140, , , (2,685.90) SER-DIS-Hospital 27,424, ,424, ,588, ,614, , ,013, , , , SER-DIS-Hospital-CTO 9, , , SER-DIS-Hospital-Dir IT PMO 1, , , SER-DIS-Hospital Projects 740, , , , , SER-DIS-Hospital-EPIC 2,965, ,965, , ,558, , , SER-Environ Health & Safety 1,037, ,037, , , , , , SER-Employee Health Service 1,377, ,377, , , , , , , SER-Transportation & Parking 1,027, ,027, , , , , SER-Integrity & Compliance 1,434, ,434, ,052, , , , , , SER-Alumni Activities 420, , , , , , , , SER-Public Affairs 1,294, ,295, , , , , , , SER-Cancer Institute 134, ,593, ,727, ,919, , , , , , SER-Assoc VC-Strat Rsrch Alli 21, , , , SER-Div Res & Sponsored Proj 1,467, , ,603, ,047, , , , , , SER-DRSP-Office of Research SER-DRSP-Cardiovasc Rnl Rsrch (8.68) SER-DRSP-CEDDR 2, , , , SER-Chief Financial Officer SER-Contracts Administration 1,019, ,019, , , , , , SER-Special Projects , SER-Marketing 4,096, ,096, , , , ,161, , SER-Grenada Lake Due Diligence 2, , , SER-Roll-Employee Health Svcs 29, , , SER-Roll-Alumni Activities 13, , , SER-Roll-Div Res & Spons Proj 60, , , SER-Roll-Assoc VC Acad Affrs (1,800.00) SER-Roll-ContinuingHlthProf Ed 6, , , , SER-Roll-Academic Infor Svcs 17, , , , (3,461.00) SER-Roll-Office Financial Aid 1, , , SER-Government Relations 551, , , , , , SER-IACUC 137, , , , SER-CRRC 20, , , , , , SER-Courthouse 25, , , SER-Ebola Preparedness 62, , , , , SER-CIA 139, , , , , , SER-Assoc VC Academic Affairs - 377, , , , , , , , SER-Institutional Support Prog - (760.38) - (760.38) (1,891.77) 1, Total Institutional Support 103,135, ,151, ,118, ,405, ,935, ,372, , ,400, ,309, ,890, (1,404,893.82) Operation & Maint of Plant SER-Div of Physical Facilities 828, , , , , , SER-Power Plant 14,646, ,646, , , ,677, , (694.07) SER-Building Maintenance 10,882, ,882, ,728, ,292, ,604, ,191, , ,450, SER-Ground Expense 66, , , , , SER-Bldg Maint-Carpenter Shop 154, , , ,