Financial Data 2023

Financial Statements Summary

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.

Financial management is effectively managed in accordance with PSU’s strategic plan. The delegation of spending authority is effectively monitored. All IT requirements of the departments are purchased through the ITCS. Normally, three quotations are required and considered before any purchase transaction is made. For all departments of colleges and administrative heads have petty cash ranging from SAR 3,000 to 5,000 (continuous part of budgeting). Minor purchases and other related expenses can be made using this petty cash. Receipts are liquidated to the Accounts Office prior to requesting any new petty cash for the departmental or administrative units’ needs. In terms of processing requests for petty cash or any other approved minor purchases, cheques are processed within five to seven working days prior to their release from the Accounting Office. The university has an internal audit system managed by the Auditing Section under the Office of the Vice President for Administrative and Financial Affairs. The Auditing Section provides an audit of daily transactions. Annually, an external auditor from an established accounting firm conducts auditing activities for the university. These processes provide adequate checks and balances of the financial resources of the university. The budgetary process of PSU involves various stakeholders including cost center units. 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)1 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, Figure 2b and Figure 2c also shows the detailed components of Composite Financial Index (CFI) scores for 2021-2023 and Figure 3 presents the PSU Profit/Surplus (SAR) 2012-2023.

Figure 2a. Composite Financial Index (CFI) scores in 2021 = 9.12

Figure 2b. Composite Financial Index (CFI) scores in 2022 = 8.60

Figure 2c. Composite Financial Index (CFI) scores in 2023 = 8.80

Risk Management

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:

•Academic Risks

•Financial Risks

•Other Risks

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.