Budget and Finance

UNIVERSITY OF CINCINNATI JUNE 30, 2008

NOTES TO FINANCIAL STATEMENTS

For the Years Ended June 30, 2008 and 2007

1. Organization and Summary of Significant Accounting Policies

A) Organization

The University of Cincinnati (the University) was founded in 1819 with the first charter granted by the State of

Ohio in 1870. The University, formerly city owned, became a State University on July 1, 1977. As such, it is

a component unit of the State of Ohio. Under provisions of the Internal Revenue Code, Section 115, and the

applicable income tax regulations of the State of Ohio, the University, as a state institution, is exempt from

taxes on income other than unrelated business income. Since the University has no material net unrelated

business income during the year ended June 30, 2008, no provision for income taxes has been made.

The accompanying financial statements consist of the accounts of the University and the accounts of the

University of Cincinnati Foundation (the Foundation). The Foundation, which is a component unit of the

University in accordance with the provisions of the Governmental Accounting Standards Board (GASB)

Statement 14, The Financial Reporting Entity, is described more fully in Note 16. The Foundation is exempt

from Federal income taxes under the provisions of Internal Revenue Code Section 501(c)(3).

B) Basis of Presentation

The financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America, as prescribed by the GASB. The University has elected not to apply those
Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989.

The University’s financial resources are classified for accounting and reporting purposes into the following three

net asset categories:

Invested in Capital Assets Net of Related Debt—Capital assets, net of accumulated depreciation and
outstanding principal balances of debt attributable to the acquisition, construction or improvement of those
assets.

Restricted—Nonexpendable restricted net assets are subject to externally imposed stipulations that they be

maintained permanently by the University. Such assets include the University’s permanent endowment funds.

Restricted—Expendable restricted net assets are subject to externally imposed stipulations that can be fulfilled

by actions of the University pursuant to those stipulations or that expire by the passage of time.

Unrestricted—Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may

be designated for specific purposes by action of management or the Board of Trustees or may otherwise be

limited by contractual agreements with outside parties. Substantially all unrestricted net assets are designated

for academic and research programs and initiatives and for capital programs.

C) Summary of Significant Accounting Policies

The accompanying financial statements have been prepared on the accrual basis. The University reports as

a Business Type Activity as defined by GASB Statement No. 35. A Business Type Activity is financed in

whole or in part by fees charged to external parties for goods or services.

Investments in marketable securities (other than the University’s alternative investments) are carried at fair

value as established by the major securities markets (quoted market prices). Investment income is recorded

on the accrual basis. Realized and unrealized gains and losses are reported as non-operating revenues

(expenses).