Financial Data 2022-23
Financial Statements Summary
PSU established an effective financial planning and management control system to sustain the programs and services offered and efficiently managed in keeping with program requirements and institutional priorities. The university also has efficient budgetary and forecasting process, financial delegations and accountability to ensure suppleness, institutional oversight and risk management. Regarding this process, the university prepares annual master budget, annual report and interim report, and engages stakeholders including senior management, faculty members and admin staff. PSU has centralized approach for overseeing the overall budgeting and financial management control system. The economic sustainability of PSU is based upon Strategic Theme 6 of PSU Strategic Plan.
Financial Resources and Budget
The financial planning and budgeting process of PSU involves various stakeholders incorporating a clear and specified delegation of authority. All the Deans, program Chairs, center directors, administrative unit heads and cost center units submit their budget requirements for the forthcoming academic year. In the case of Colleges, the Office of the Vice President for Administrative and Financial Affairs seeks queries regarding the needs of academics from the colleges and departments and these are reflected in the annual budget. On an annual basis, all academic and administrative units submit their budget requirements for the forthcoming academic year to their administrative head.
Major infrastructure requirements and other projected expenditures are included in the annual budget submission. Other specified requirements in this standard are undertaken at the university administration level in consultation with respective Deans and Directors of Units/Centers. For all major institutional expenditures, proposals are prepared and passed through regular channels of deliberation and evaluation prior to their approval. Once the project/program is approved, the university goes through a process of bidding from at least three different suppliers who are able to offer the best price and quality of product, maintenance and service for the university. One of the strengths of the budgeting process is adopting a flexible budget approach in which immediate needs can be accommodated at any time during the financial year (which indicates the budget is not static and fixed). The Office of the Vice President for Administrative and Financial Affairs prepares this master budget (Annual budget); the university President reviews this budget and then presents it to the Board of Trustees (BOT) for evaluation and approval. The involvement of various stakeholders and systematic process of approval of the annual budget reflects a transparent process.
PSU accounting procedures comply with the Saudi Arabian laws and international accounting standards. Regarding the strength of financial stability and effective financial management, it is noted that PSU is in general a very financially healthy organization when using the Composite Financial Index (CFI) developed by KPMPG which paints a composite picture of overall financial health of private not for profit universities. The Index is based on the values of its four component ratios: Primary Reserve Ratio, Net Income Ratio, Return on Net Assets and Viability Ratio. The CFI scores range from -1 to 10. More recently, Tahey, Salluzzo, Prager, Mezzina, and Cowen (2010, p. 96) argue that the CFI score falls on a scale from 4 to 10. A CFI score of 3.0 is considered the threshold for institutional financial health by the developers of the tool; a score of less than 3.0 suggests the need to address the institution’s financial condition; and a score of greater than 3.0 indicates an opportunity for strategic investment to optimize the achievement of institutional mission. Figure 1 shows the Composite Financial Index (CFI Score) of PSU (2012-2022). Figure 2a and Figure 2b also shows the detailed components of Composite Financial Index (CFI) scores for 2021 and Figure 3 presents the PSU Profit/Surplus (SAR) 2012-2022.
PSU has an internal audit department managed by the Auditing Section under the Office of the Vice Rector for Administrative and Financial Affairs. The external auditor also ensures an effective internal control and risk management of PSU. According to the Sarbanes-Oxley Act 2002 (SOX, Section 404 Guideline, page 3),‘The greater the internal control risk, the more evidence you'll need to support a conclusion that the control is effective’. The risk management committee is responsible for reviewing the effectiveness of PSU’s risk management reporting in each financial year based on information provided by the unit manager. For each significant risk identified, the risk management committee will review the prior year and examine the institution’s track record on risk management.
Due to the expansion of the university, PSU recognized broad based risks as 'the threat or opportunity that an action or event will adversely or beneficially affect PSU’s ability to achieve its strategic goals and objectives'. The university's view of acceptable risk is based on a balanced view of all the risks in its operating environment. Risks are prioritized drawing on qualitative and quantitative measures. In doing so, PSU follows Corporate Governance (CG) Framework 2010 issued by the Capital Market Authority, Saudi Arabia (Resolution No. 1/212/2006, dated 21/10/1427AH (corresponding to 12/11/2006; based on the Capital Market Law issued by Royal Decree No. M/30 dated 2/6/1424AH; amended in 2010). The CG framework entails ‘Ensuring the implementation of control procedures appropriate for risk management by forecasting the risks that the company could encounter and disclosing them with transparency’ (page 11 of the Law). Three types of risks will be identified:
The process of risk management of PSU is shown in Figure 5:
Risks are assessed using two elements: the likelihood/probability of occurrence and impact of the risk occurrence. Each element is assessed on a 3-point scale.