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

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1 Financial Summary June 30, 2016 The University of Mississippi Medical Center Jackson

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3 TABLE OF CONTENTS YEAR END SUMMARY FISCAL YEAR ENDED JUNE 30, 2016 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 61 Schedule IV Schedule of Unrestricted General Fund Revenues, Additions, Expenditures and Transfer Consolidations 77 Schedule V Schedule of Auxiliary Enterprise Operations 78 Schedule VI Schedule of Designated Funds 80 Schedule VII Schedule of Restricted Funds 95 Schedule VIII Schedule of Loan Funds 134 Schedule IX Schedule of Endowment and Similar Funds 136 Schedule X Schedule of Unexpended Plant Funds 140 Schedule XI Schedule of Renewals and Replacements 145 Schedule XII Schedule of Retirement of Indebtedness 146 Schedule XIII Schedule of Transfers 147 Schedule XIV Schedule of Cash and Investments 148 Schedule XV Schedule of Investments 152 Schedule XVI Schedule of Investment in Plant 165 Schedule XVII Schedule of Land 166 Schedule XVIII Schedule of Buildings 167 Schedule XIX Schedule of Departmental Equipment Inventory 169 Schedule XX Schedule of Improvements Other Than Buildings 183 Schedule XXI Schedule of Library Books 185 Schedule XXII Schedule of Construction in Progress 186 Schedule XXIII Schedule of Leasehold Improvements 187 Schedule XXIV Schedule of Service Area Allocations 188 Schedule XXV Schedule of Balance Sheet Consolidation - Unrestricted General 190

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5 BALANCE SHEET JUNE 30, 2016 WITH COMPARATIVE FIGURES AT JUNE 30, 2015 STATEMENT A ASSETS LIABILITIES AND FUND BALANCES June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 CURRENT FUNDS Unrestricted-General CURRENT FUNDS Unrestricted-General Cash & Investments $ 479,633,090 $ 405,450,839 Checks Outstanding in Excess of Accounts Receivable - State Appropriation 639,622 1,595,614 Bank Balance $ 218,323,772 $ 127,472,824 Student Accounts Receivable (Less Allowance Accrued Wages 27,030,761 21,138,992 for Doubtful Accounts of $292,440 in 2016 and Accounts Payable 54,999,758 43,913,846 $230,122 in 2015) 4,397,063 3,860,920 Refunds to Students 113, ,469 Patient Accounts Receivable (Less Allowances for Unearned Student Fees 6,305,335 5,518,007 Contractual Adjustments, Bad Debt, and Other Accrued Expenses 23,571,319 30,757,715 Free Care of $3,504,176,328 in 2016 Unearned Revenue 1,350 - and $3,282,536,209 in 2015) 146,222, ,593,981 Accrued Leave 55,882,283 52,322,752 Due from Third Party Payors 8,516,684 - Due to Medicaid - 8,403,637 Other Accounts Receivable 14,321,593 6,636,633 Contingent Liability - Third Party Payor 22,562,285 21,906,064 Inventories 25,023,331 23,657,920 Tort Fund Claims Liability 33,000,000 33,000,000 Prepaid Medicaid Transfers Fund Balances: Prepaid Expenditures 6,816,058 3,310,446 Allocated 209,407, ,031,012 Deposits 515, ,000 Unallocated 34,887,358 33,016,035 Total Unrestricted-General $ 686,084,594 $ 563,621,353 Total Unrestricted-General $ 686,084,594 $ 563,621,353 Unrestricted - Auxiliary Enterprises Unrestricted - Auxiliary Enterprises Cash & Investments $ 11,822,743 $ 10,446,407 Checks Outstanding in Excess of Accounts Receivable (Less Allowance for Bank Balance $ 2,053,517 $ 1,546,545 Doubtful Accounts of $1,439,933 in 2016 and Accrued Wages 55,806 48,807 $1,439,933 in 2015) 12,181 3,660 Accounts Payable 175, ,895 Accounts Receivable - Vendors 16,105 14,346 Accrued Leave 101, ,056 Inventories 1,128,464 1,258,659 Fund Balances: Prepaid Expenditures 9,774 9,928 Allocated 807,025 1,362,643 Unallocated 9,795,593 8,554,054 Total Unrestricted - Auxiliary Enterprises $ 12,989,267 $ 11,733,000 Total Unrestricted - Auxiliary Enterprises $ 12,989,267 $ 11,733,000 Designated Funds Designated Funds Cash & Investments $ 79,201,287 $ 75,987,888 Accrued Wages $ 132,236 $ 125,112 Investments 5,775,323 - Accounts Payable 205, ,363 Accounts Receivable 3,187,199 3,476,385 Accrued Leave 323, ,260 Fund Balances: Allocated 809,445 1,068,505 Unallocated 86,693,957 77,590,033 Total Designated Funds $ 88,163,809 $ 79,464,273 Total Designated Funds $ 88,163,809 $ 79,464,273 1

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7 BALANCE SHEET JUNE 30, 2016 WITH COMPARATIVE FIGURES AT JUNE 30, 2015 STATEMENT A ASSETS LIABILITIES AND FUND BALANCES June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Restricted Funds Restricted Funds Cash & Investments $ 21,895,024 $ 23,383,732 Accrued Wages $ 983,540 $ 804,825 Accounts Receivable 24,951,691 20,365,742 Accounts Payable 2,197,256 1,091,635 Accrued Leave 2,400,125 2,284,756 Unearned Revenue 10,033,732 8,711,292 Fund Balances: Allocated 10,539,053 14,916,406 Unallocated 20,693,009 15,940,560 Total Restricted Funds 46,846,715 43,749,474 Total Restricted Funds 46,846,715 43,749,474 TOTAL CURRENT FUNDS $ 834,084,385 $ 698,568,100 TOTAL CURRENT FUNDS $ 834,084,385 $ 698,568,100 LOAN FUNDS LOAN FUNDS Cash & Investments $ 1,368,235 $ 1,185,593 Federal Portion of Federal Student Loans $ 4,830,323 $ 5,043,985 Accounts Receivable 416, ,036 Fund Balances: Notes Receivable: Federal Student Loan Fund 2,448,620 2,484,876 Federal Student Loans (Less Allowance Institutional Student Loan Fund 1,941,735 1,550,113 for Doubtful Accounts of $711,829 in 2016 and $727,957 in 2015) 6,439,750 6,807,014 Institutional Student Loans (Less Allowance for Doubtful Accounts of $1,258,015 in 2016 and $1,720,240 in 2015) 995, ,331 TOTAL LOAN FUNDS $ 9,220,678 $ 9,078,974 TOTAL LOAN FUNDS $ 9,220,678 $ 9,078,974 ENDOWMENT & SIMILAR FUNDS ENDOWMENT & SIMILAR FUNDS Cash & Investments $ 7,641,374 $ 8,848,865 Fund Balances: Investments Held by Trustees 157, ,044 Endowment Funds - Restricted $ 37,154,447 $ 38,603,753 Investments 72,817,372 75,309,691 Quasi-Endowment Funds - Restricted 43,490,585 45,712,847 Accounts Receivable 28,808 TOTAL ENDOWMENT & SIMILAR FUNDS $ 80,645,032 $ 84,316,600 TOTAL ENDOWMENT & SIMILAR FUNDS $ 80,645,032 $ 84,316,600 3

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9 BALANCE SHEET JUNE 30, 2016 WITH COMPARATIVE FIGURES AT JUNE 30, 2015 STATEMENT A ASSETS LIABILITIES AND FUND BALANCES June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 PLANT FUNDS PLANT FUNDS Cash & Investments $ 46,779,558 $ 41,874,709 Accounts Payable $ 180,728 $ 179,199 Cash - Retirement of Indebtedness 2,995,175 2,994,625 Fund Balances: Prepaid Expenditures - Building Commission 170, ,000 State of MS Office of Buildings 170, ,000 Investment in Plant: University Funds 46,598,830 41,695,510 Land 8,452,078 9,269,480 Retirement of Indebtedness 2,995,175 2,994,625 Buildings (Less Accumulated Depreciation of Investment in Plant 398,695, ,331,673 $90,785,612 for 2016 and $86,628,330 for 2015) 100,627, ,379,327 Improvements Other Than Buildings (Less Accumulated Depreciation of $6,710,977 for 2016 and $6,248,186 for 2015) 4,972,285 4,340,756 Leasehold Improvements (Less Accumulated Depreciation of $9,626,230 for 2016 and $8,004,487 for 2015) 54,565,158 56,002,112 Equipment (Less Accumulated Depreciation of $216,461,891 for 2016 and $202,241,110 for 2015) 111,351, ,890,352 Surgical Instruments (Less Accumulated Depreciation of $62,906 for 2016) 314,532 - Library Books (Less Accumulated Depreciation of $41,863,090 for 2016 and $39,307,636 for 2015) 12,580,211 12,047,666 Capitalized Software (Less Amortization of $25,556,173 for 2016 and $19,388,150 for 2015) 32,326,783 38,494,806 Construction in Progress - Capital Assets 73,497,142 36,907,174 Construction in Progress - Software Implementation 8,677 - Total Investment in Plant 398,695, ,331,673 Total Fund Balances 448,459, ,441,808 TOTAL PLANT FUNDS $ 448,640,166 $ 413,621,007 TOTAL PLANT FUNDS $ 448,640,166 $ 413,621,007 AGENCY FUNDS AGENCY FUNDS Cash & Investments $ 272,442 $ 278,544 Due to Depositors $ 275,689 $ 274,661 Prepaid Expenditures 3,247 - Accounts Payable - 3,883 TOTAL AGENCY FUNDS $ 275,689 $ 278,544 TOTAL AGENCY FUNDS $ 275,689 $ 278,544 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 $ 30,891,071 $ - $ - $ - $ 30,891,071 $ - $ - $ - $ - $ - State of Mississippi Appropriations 175,839, ,839, ,195, Capital Expense Fund 617, , Education Enhancement Fund 6,826, ,826, Healthcare Expendable Fund 2,380, ,380, Federal Grants and Contracts 9,514, ,449,096 50,963, ,984 State Grants and Contracts 201, ,346,596 13,547, Private Gifts, Grants, and Contracts 1,294,185-1,397,940 18,453,192 21,145,317 42, , Sales and Services of Educational Departments 974, , Sales and Services of Hospitals 1,077,801, ,077,801, Sales and Services of Auxiliary Enterprises - 7,508, ,508, Investment Income 1,063, ,236 41,033 1,286, , Net Increase (Decrease) in the Fair Value of Investments 284,152-4,638,584-4,922,736 - (4,459,333) Endowment Income ,535 1,705,472 1,808,007 14, Interest on Loans Receivable , Additions to Plant Facilities ,477,669 Bond Proceeds , Other Income 68,361,030-1,067, ,819 70,205,326 31, , TOTAL REVENUES AND OTHER ADDITIONS $ 1,376,049,614 $ 7,508,627 $ 7,388,772 $ 75,772,208 $ 1,466,719,221 $ 283,494 $ (4,036,593) $ 22,808,371 $ - $ 71,637,653 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 $ 128,232,200 $ - $ 3,179,161 $ 1,755,687 $ 133,167,048 $ - $ - $ - $ - $ - Academic Support 17,752, , ,530 19,187, Student Services 1,198, ,533 56,615 1,373, Institutional Support 122,595,731-2,895,986 7,832, ,323, Operation and Maintenance of Physical Plant 35,768, ,768, Public Service ,680 13,224,994 13,648, Research 1,270,783-2,489,851 36,494,230 40,254, Scholarships and Fellowships ,230,318 11,230, Total Educational and General 306,817,855-9,565,944 71,569, ,953, Hospital Instruction 41,108, ,108, Other Hospital Services 965,973, ,973, Auxiliary Enterprises - 6,233, ,233, Principal and Interest Write-Offs , Loan Fund Expenses , Expended for Capital Outlay ,624, Expended for Repairs and Maintenance ,279, Retirement of Indebtedness-MCEBC ,355,000 - Interest Expense-MCEBC ,982,578 - Provision for Uncollectible Accounts (458,831) Depreciation Expense ,306,820 Other Deductions ,770 1,007,153. Total Expenditures and Other Deductions 1,313,900,190 6,233,640 9,565,944 71,569,494 1,401,269,268 (303,252) - 32,903,858 17,373,348 39,313,973 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 $ 11,744,839 $ 219,075 $ - $ - $ 11,963,914 $ - $ - $ - $ (11,963,914) $ - Transfer to Retire Debt - Bond Principal 5,039, , ,373, (5,373,750) - Loan Match Fund 13, (13,310) Remarketing / Transfer Fee 34,301 1, , (36,234) - Total Mandatory 16,831, ,573 - (13,310) 17,373, (17,373,898) - Non-Mandatory: Equipment 463, ,558 (160,399) - 468, (468,871) - - Renovations and Repairs 126,717 - (126,717) Indirect Costs 3,148,883 - (3,148,883) Other 10,179,730 (42,280) (8,983,193) (2,159,072) (1,004,815) 231,380 (365,025) (821,510) - 1,959,970 Capital Outlay Non-Equipment 6,151,105 (89,785) 1,397,156 6,000,000 13,458, (13,458,476) - - Total Non-Mandatory 20,070,147 33,493 (11,022,036) 3,840,928 12,922, ,380 (365,025) (14,748,857) - 1,959,970 Total Transfers 36,901, ,066 (11,022,036) 3,827,618 30,296, ,380 (365,025) (14,748,857) (17,373,898) 1,959,970 TOTAL EXPENDITURES, TRANSFERS AND OTHER DEDUCTIONS 1,350,801,972 6,822,706 (1,456,092) 75,397,112 1,431,565,698 (71,872) (365,025) 18,155,001 (550) 41,273,943 NET INCREASE FOR THE YEAR 25,247, ,921 8,844, ,096 35,153, ,366 (3,671,568) 4,653, ,363,710 FUND BALANCE - JUNE 30, 2015 PREVIOUSLY REPORTED 229,478,802 (515,058) 78,658,538 30,856, ,479,248 4,034,989 84,316,600 42,115,510 2,994, ,331,673 PRIOR PERIOD ADJUSTMENT (Note 15) (10,431,755) 10,431, FUND BALANCE - JUNE 30, 2015 RESTATED 219,047,047 9,916,697 78,658,538 30,856, ,479,248 4,034,989 84,316,600 42,115,510 2,994, ,331,673 FUND BALANCE - JUNE 30, 2016 $ 244,294,689 $ 10,602,618 $ 87,503,402 $ 31,232,062 $ 373,632,771 $ 4,390,355 $ 80,645,032 $ 46,768,880 $ 2,995,175 $ 398,695,383 11

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17 STATEMENT OF CURRENT FUND REVENUES, ADDITIONS, EXPENDITURES AND OTHER CHANGES WITH COMPARATIVE FIGURES AT JUNE 30, 2015 STATEMENT C Revenues and Other Additions Current Year Prior Year Unrestricted Restricted Total Total Tuition and Fees $ 30,891,071 $ - $ 30,891,071 $ 29,114,499 State of Mississippi Appropriations 175,839, ,839, ,650,152 Capital Expense Fund 617, ,038 4,446,915 Education Enhancement Fund 6,826,218-6,826,218 6,888,029 Healthcare Expendable Fund 2,380,431-2,380,431 2,380,431 Federal Grants and Contracts 9,514,637 41,449,096 50,963,733 52,288,291 State Grants and Contracts 201,250 13,346,596 13,547,846 10,896,693 Private Gifts, Grants and Contracts 2,692,125 18,453,192 21,145,317 17,989,928 Endowment Income 102,535 1,705,472 1,808, ,659 Net Increase (Decrease) In The Fair Value of Investments 4,922,736-4,922, ,832 Investment Income 1,245,381 41,033 1,286, ,072 Educational Activities 974, , ,359 Auxiliary Activities 7,508,627-7,508,627 8,955,996 Sales and Services of Hospitals 1,077,801,668-1,077,801,668 1,043,115,837 Other Income 69,428, ,819 70,205,326 48,250,207 Total Revenues and Other Additions 1,390,947,013 75,772,208 1,466,719,221 1,402,719,900 Expenditures and Mandatory Transfers Educational and General: Instruction 131,411,361 1,755, ,167, ,423,388 Academic Support 18,211, ,530 19,187,338 21,619,390 Student Services 1,316,472 56,615 1,373,087 1,501,784 Institutional Support 125,491,717 7,832, ,323, ,135,551 Operation and Maintenance of Plant 35,768,127-35,768,127 32,945,839 Public Service 423,680 13,224,994 13,648,674 13,457,807 Research 3,760,634 36,494,230 40,254,864 39,217,049 Scholarships and Fellowships - 11,230,318 11,230,318 10,115,374 Total Educational and General Expenditures 316,383,799 71,569, ,953, ,416,182 Mandatory Transfers: Loan Match Funds 13,310 (13,310) - - Remarketing/Transfer Fees 7,533-7,533 9,033 Transfers to Retire Debt - Bond Interest - MCEBC 3,887,541-3,887,541 4,059,057 Transfers to Retire Debt - Bond Principal - MCEBC 290, , ,516 Total Educational and General 320,582,595 71,556, ,138, ,866,788 13

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19 STATEMENT OF CURRENT FUND REVENUES, ADDITIONS, EXPENDITURES AND OTHER CHANGES WITH COMPARATIVE FIGURES AT JUNE 30, 2015 STATEMENT C Current Year Prior Year Unrestricted Restricted Total Total Auxiliary Enterprises: Expenditures $ 6,233,640 $ - $ 6,233,640 $ 18,385,513 Mandatory Transfers: Remarketing / Trustee Fees 1,933-1,933 2,347 Transfer to Retire Debt - Bond Interest - MCEBC 219, ,075 58,281 Transfer to Retire Debt - Bond Principal - MCEBC 334, ,565 87,805 Total Auxiliary Enterprises 6,789,213-6,789,213 18,533,946 Hospital: Expenditures 1,007,082,335-1,007,082, ,739,842 Mandatory Transfers: Remarketing / Trustee Fees 26,768-26,768 27,118 Transfer to Retire Debt - Bond Interest - MCEBC 7,857,298-7,857,298 8,019,547 Transfer to Retire Debt - Bond Principal - MCEBC 4,748,773-4,748,773 4,696,762 Total Hospital 1,019,715,174-1,019,715, ,483,269 Total Expenditures and Mandatory Transfers 1,347,086,982 71,556,184 1,418,643,166 1,335,884,003 Other Transfers - Additions (Deductions): Equipment (468,871) - (468,871) 6,906 Renovations and Repairs (331,852) Indirect Costs Other (1,154,257) 2,159,072 1,004,815 (2,101,862) Capital Outlay Non-Equipment (7,458,476) (6,000,000) (13,458,476) (5,191,602) Total Other Transfers - Additions (Deductions) (9,081,604) (3,840,928) (12,922,532) (7,618,410) NET CHANGE IN FUND BALANCE $ 34,778,427 $ 375,096 $ 35,153,523 $ 59,217,487 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 net position of the Corporation are not included in the accompanying financial schedules of the Medical Center. The condensed financial statements of the Corporation are as follows: Medical Center Educational Building Corporation Condensed Statement of Net Position June 30, 2016 Unrestricted Plant Total Fund Funds Funds _ Assets Current Assets $ - $ 5,671,956 $ 5,671,956 Capital Lease Receivable 982, ,186, ,169,465 Noncurrent Assets - 27,615,326 27,615,326 Total Assets $ 982,920 $ 252,473,827 $ 253,456,747 Deferred Outflows of Resource Deferred Amount on Refunding $ - $ 4,283,040 $ 4,283,040 Total Assets and Deferred Outflows of Resources $ 982,920 $256,756,867 $ 257,739,787 Liabilities Current Liabilities $ - $ 6,654,875 $ 6,654,875 Revenue Bonds - 247,160, ,160,000 Noncurrent liabilities - 4,070,679 4,070,679 Total Liabilities - 257,885, ,885,554 Net Position 982,920 (1,128,687) (145,767) Total Liabilities and Net Position $ 982,920 $ 256,756,867 $ 257,739,787 Condensed Statement of Changes in Net Position Year Ended June 30, 2016 Unrestricted Plant Fund Funds _ Revenues $ 17,354,164 $ 31,734,836 Expenditures Operating and Other 32,910 25,451,680 Debt Service - 21,739,781 Transfers 17,337,578 (17,337,578) Net Increase (Decrease) (16,324) 1,880,953 Net Position (Deficits) at June 30, ,244 (2,075,923) Net Position deduction at June 30, (933,717) Net Position at June 30, 2016 $ 982,920 $ (1,128,687) 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, 2016 and 2015 amounted to $58,707,043 and $55,047,823, 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, 2016, was $75,772,208, 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 $75,772,

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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, 2016 Notes receivable, less allowance of $1,969,844 $7,435,713 (9) Operating Leases Operating 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 2017 $ 13,419, ,038, ,371, ,520, ,873, ,393, ,518, ,850,000 (10) Construction In Progress As of June 30, 2016, the Medical Center has construction in progress related to capital assets totaling $73,497,142 with estimated expenses to complete these projects totaling $78,029,341. 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, 2016, 2015 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, 2016, 2015 and 2014 were $72,698,781, $69,227,945, and $65,129,647, 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, 2016, 2015 and 2014 were $25,099,961, $22,626,639, and $21,411,984, 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. Total Minimum Payments Required $ 160,984,496 The total rental expense for all operating leases, except those with terms of a month or less that were renewed, for the fiscal year ending June 30, 2016, was $14,514,

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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, 2012, for the Jackson Campus and June 30, 2013 for Holmes County Hospital. No cost reports for UMMC Grenada have been audited. 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 believes 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 audit activities, the reserve balance at the end of fiscal year 2016 was $2.25 million. Over seven 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 verses final payment rates for both inpatient and outpatient services. Since that time UHHS has repaid approximately $21.8 million through FY 2015 and repaid $3.4 million in FY 2016 to DOM for these and other claims adjustments. At June 30, 2016, UHHS maintains a reserve of approximately $12.8 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 years ended June 30, 2016 and 2015 were $2,340,000 and $2,130,000, respectively. (15) Prior Period Adjustments For the year ended June 30, 2015, the Medical Center restated June 30, 2015, financials to reflect the following reclassifications: June 30, 2015 Reclassify UMMC Wellness Centers from Auxiliary to Hospital $(10,431,755) 25

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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, 2015 SCHEDULE I Unrestricted Auxiliary 6/30/16 6/30/15 General Enterprise Designated Subtotal Restricted Current Current Funds Funds Funds Unrestricted Funds Funds Funds Student Tuition $ 29,920, $ - $ - $ 29,920, $ - $ 29,920, $ 28,327, Other Student Fees Out-of-State Fees 179, , , , Out-of-State Fees - Graduate Students 436, , , , Distance Learning Fee 324, , , Thesis Binding 3, , , , Diploma Fees 20, , , , Instrument Fees , Miscellaneous 5, , , , State of Mississippi Appropriations Total Other Student Fees 970, , , , Total Tuition & Fees 30,891, ,891, ,891, ,114, State Appropriations 175,839, ,839, ,839, ,650, Education Enhancement Fund 6,826, ,826, ,826, ,888, Healthcare Expendable Fund 2,380, ,380, ,380, ,380, Capital Expense Fund 617, , , ,446, Federal Appropriations Total State of Mississippi Appropriations 185,663, ,663, ,663, ,365, Federal-PHS-NIH 9,100, ,100, ,942, ,042, ,651, Other Federal 414, , ,506, ,921, ,637, Total Federal Appropriations 9,514, ,514, ,449, ,963, ,288, State Grants & Contracts 201, , ,346, ,547, ,896, Private Gifts, Grants & Contracts Voluntary Health Agencies 65, , ,074, ,139, ,184, Industries 655, , ,190, ,846, ,919, Foundations 88, , ,647, ,736, ,865, Private Donations , , ,134, ,651, ,233, Laboratory & Testing Fees , , , , , Other 484, , ,343, ,145, ,488, ,614, Total Private Gifts, Grants & Contracts 1,294, ,397, ,692, ,453, ,145, ,989,

34 SCHEDULE OF CURRENT FUND REVENUES AND OTHER ADDITIONS WITH COMPARATIVE FIGURES AT JUNE 30, 2015 SCHEDULE I Unrestricted Auxiliary 6/30/16 6/30/15 General Enterprise Designated Subtotal Restricted Current Current Funds Funds Funds Unrestricted Funds Funds Funds Sales & Services of Educational Departments Sales & Services - Dental Clinic Income $ 974, $ - $ - $ 974, $ - $ 974, $ 846, Sales & Services of Hospitals Patient Revenues 3,798,894, ,798,894, ,798,894, ,477,630, LESS: Deduction from Patient Revenues for Contractual Adjustments, Bad Debt and Free Care (2,842,706,852.71) - - (2,842,706,852.71) - (2,842,706,852.71) (2,555,142,529.66) Net Patient Revenue 956,187, ,187, ,187, ,487, DSH 104,299, ,299, ,299, ,817, UPL 17,314, ,314, ,314, ,810, Total Sales & Services of Hospitals 1,077,801, ,077,801, ,077,801, ,043,115, Investment Income Investment Income 1,063, , ,347, ,746, ,094, ,653, Net Increase (Decrease) In The Fair Value of Investments 284, ,638, ,922, ,922, , Auxiliary Enterprises Total Investment Income 1,347, ,923, ,270, ,746, ,017, ,896, Bookstore - 2,750, ,750, ,750, ,542, Printing - 1,221, ,221, ,221, ,211, Parking - 608, , , , Center for Comparative Research - 1,405, ,405, ,405, ,360, Surplus Property - 70, , , , Student Union Fees - 234, , , , Vending - 174, , , , University Pavilion - 598, , , , Biostatistics - 193, , , , Farmers Market - 40, , , , School of Pharmacy - 210, , , , Courthouse ,690, Other Income Total Auxiliary - 7,508, ,508, ,508, ,955, Income from Allocation 282, , , , Dental Hygiene Fees 22, , , , Allocated Tort Fund Reserves 5,000, ,000, ,000, ,000, Electronic Health Record Incentive Income 4,793, ,793, ,793, ,215, Cafeteria 5,653, ,653, ,653, ,902, Pharmacy 39,306, ,306, ,306, ,244, Telehealth 1,756, ,756, ,756, ,507, Trauma Care Trust Fund 3,720, ,720, ,720, ,155, Wellness Centers 3,242, ,242, ,242, Miscellaneous 4,583, ,067, ,651, , ,428, ,917, Total Other Income 68,361, ,067, ,428, , ,205, ,250, TOTAL REVENUES AND OTHER ADDITIONS $ 1,376,049, $ 7,508, $ 7,388, $ 1,390,947, $ 75,772, $ 1,466,719, $ 1,402,719,

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-Assoc VC Academic Affairs $ - $ - $ 20, $ 20, $ $ $ - $ 8, $ 2, $ 9, $ (785.00) SER-Academic Information Svc - - 4, , , , Total Instruction , , , , , , Research SER-Accounting Department , SER-Cancer Institute - 68, ,027, ,095, , , , , , , (97,136.76) SER-Div Res & Sponsored Proj - 244, ,826, ,071, , , , , ,831, (570,309.36) SER-Assoc VC Academic Affairs , , , , , , (321.66) - Total Research - 313, ,316, ,629, ,088, , , , , ,860, (665,559.06) Public Service SER-Office-Vice Chancellor SER-Ctr for Emergency Services , , , , , , , , SER-Assoc VC Academic Affairs - - (12,473.29) (12,473.29) (38,491.11) 26, SER-Academic Information Svc , , , , , Total Public Service , , , , , , , , Academic Support SER-Alumni Activities - 195, , , , , SER-Assoc VC Academic Affairs 2,957, , ,527, ,321, , , , , , SER-GWIMS 33, , , , , , , SER-E-Campus 333, , , , , , , SER-Continuing Health Prof Ed 360, , , , , , , SER-Institutional Support Prog (1,790,721.06) SER-Media Production and Photo 609, , , , , , , SER-Audiovisual Services 41, , (2,261.44) 1, , , , SER-Academic Information Svc 4,393, , ,481, , , , , , ,098, , SER-Center Comparative Resrch 1,055, ,055, , , , , SER-Health Careers Opportunity 407, , , , , , , SER-Simulation Center 669, , , , , , , , SER-Student Services & Records - 1, , , Total Academic Support 10,860, , , ,717, ,090, ,442, , ,102, , ,392, (1,719,571.05) Student Services SER-Accounting Department SER-Office of Medical Educ , SER-Office of Financial Aid 382, , , , , , , , , , SER-Student Services & Records 816, , , , , Total Student Services 1,198, , ,255, , , , , , , , Institutional Support SER-Office-Vice Chancellor 4,490, ,490, ,385, , , , , , , Chief Administrative Officer 475, , , , , , , SER-Fin Affairs-Budget Office 744, , (14,407.88) 1,353, , , , , , , SER-Office of the Comptroller 4, ,733, , ,781, ,266, , , , , , (1,512,545.00) SER-Accounting Department 1,938, ,938, ,400, , , , , SER-Accounts Payable Dept 1,255, ,255, , , , SER-Payroll Office 444, , , , , , SER-Decision Support 290, , , , , SER-Office of Medical Educ SER-Supervision 67, , , SER-Property Control 532, , , , , , SER-Property Control Surplus (96.31) - - (96.31) (96.31) SER-Human Resources 6,845, ,845, ,471, ,240, , ,006, , , SER-HR-Academics & Research SER-HR-Total Rewards SER-HR-Workforce Plan/Recruit 3, , , SER-HR-Talent Acquisition 35, , , , SER-ARRA Stimulus SER-Employee Tuition Benefit 184, , ,

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-Legal $ 2,991, $ 100, $ - $ 3,092, $ 1,381, $ 310, $ 15, $ 1,377, $ 3, $ 3, $ (103,920.96) SER-Chief Medical Officer-CMO 2,652, ,652, ,029, , , , , , SER-Risk Management SER-Medical Staff Services 56, , , , , , , SER-Infection Control 841, , , , , , , SER-Performance Improvement 1,205, ,205, , , , , , , SER-Quality Administration 1,060, ,060, , , , , , , SER-Medical Dir &Support-Adult 1,240, ,240, ,057, , SER-Medical Dir & Support-Peds 127, , , , SER-Office of Development 1,742, , , ,331, ,225, , , , , , (148,625.29) SER-Internal Auditor 483, , , , , , , SER-Ctr for Emergency Services 1,451, ,451, , , , , , , SER-Mississippi Med-Com 8, , , , SER-Helicopter Transport 42, , , , SER-BCH Patient Transport 117, , , , , , SER-Campus Police 5,204, ,204, ,574, ,193, , , , SER-DIS-Core 1,889, ,889, (938,992.55) (147,645.03) ,894, , (10,667.58) (40,650.00) SER-DIS-Core-CIO 1,947, ,947, ,178, , , , , , SER-DIS-Core-CTO 12,934, ,934, ,449, ,541, , ,803, , , , SER-DIS-Core-Telecommunication 1,989, ,989, , , ,035, , SER-DIS-Core-Network Services 491, , , , , , , SER-DIS-Core-EndUser Dev/Perip 227, , , , , , , SER-DIS-Core-COO 1,216, ,216, , , , , , SER-DIS-Core-Dir IT PMO 1,455, ,455, ,085, , , , , , SER-DIS Core DIR, IT Bus Sys 2,322, ,322, , , , ,176, SER-DIS Core DIR, IT Sys Dev 1,698, ,698, , , , , , SER-DIS-Core Projects 1,731, ,731, , , ,242, SER-DIS-Hospital (339,712.25) - - (339,712.25) (1,161,447.17) (215,906.21) 4, , , , SER-DIS-Hospital-CIO 3,761, ,761, ,695, , , ,543, , , SER-DIS-Hospital-CTO 4,100, ,100, ,312, , , , , SER-DIS-Hosp-Telecommunication 346, , , , , , , , SER-DIS-Hospital-Network Srvc 7, , , , SER-DIS-Hospital-EndUsr Dev/P 27, , , , , SER-DIS-Hospital-Dir IT PMO 1,701, ,701, ,327, , , SER-DIS Hosp DIR, IT Bus Sys 779, , , , , , , , SER-DIS Hosp DIR, IT Sys Dev 631, , , , , , , SER-DIS-Hospital Projects 5,428, ,428, , , , ,839, SER-DIS-Hospital-EPIC 15,353, ,353, ,763, ,918, , ,383, , , SER-DIS-Hospital-Epic Optimiz 24, , , , SER-DIS-Hospital Reporting 301, , , , SER-DIS-Hospital-Non-Epic Clin 15, , , , SER-Environ Health & Safety 1,005, ,005, , , , , , SER-Employee Health Service 1,652, ,652, , , , , , , SER-Integrity & Compliance 1,871, ,871, ,147, , , , , , SER-Alumni Activities 480, , , , , , , , SER-Public Affairs 1,354, ,354, ,008, , , , , , SER-Cancer Institute 30, ,269, ,299, ,436, , , , , , SER-Assoc VC-Strat Rsrch Alli 2, , , SER-Div Res & Sponsored Proj 724, , , , , , , , , , SER-DRSP-Office of Research SER-DRSP-Cardiovasc Rnl Rsrch SER-DRSP-CEDDR 24, , , , , , SER-Chief Financial Officer SER-Contracts Administration 947, , , , , , , , SER-Special Projects , SER-Marketing 3,091, ,091, , , , ,059, , , SER-Roll-Office of Development 21, , , SER-Roll-Internal Auditor 2, , , SER-Roll-Employee Health Svcs SER-Roll-Div Res & Spons Proj 145, , , , , SER-Roll-Assoc VC Acad Affrs , SER-Roll-ContinuingHlthProf Ed 9, , , , SER-Roll-Academic Infor Svcs (536.31) - - (536.31) (536.31) SER-Roll-Office Financial Aid SER-Roll-Media Production & Ph 17, , , , SER-Roll-Simulation Center 55, , , SER-Government Relations 476, , , , , , , SER-IACUC 128, , , , SER-CRRC 15, , , , , , ,