Auditor: UPR’s $1.75 billion net deficit in FY 2022 is cause for concern

Although the University of Puerto Rico’s $1.75 billion net deficit for fiscal year 2022 was substantially lower than its net deficit from the preceding fiscal year, auditor Ernst & Young nonetheless expressed serious doubts about UPR’s ability to continue as a going concern due to its relationship with the commonwealth government, which just recently completed its bankruptcy restructuring.

By The Star Staff

The University of Puerto Rico (UPR) recorded a $1.75 billion net deficit in fiscal year (FY) 2022, raising questions about its ability to continue as a going concern, according to a market filing.

According to an audit by Ernst & Young, filed last week with the Electronic Municipal Market Access, UPR’s net deficit at the close of FY22, ended June 30, 2022, was 25.8% lower than the $2.36 billion net deficit recorded in FY21.

The auditor, nonetheless, expressed serious doubts about UPR’s ability to continue as a going concern due to its relationship with the commonwealth government, which just recently completed its bankruptcy restructuring.

“The university is highly dependent on commonwealth appropriations to finance its operations,” the report noted. “The recurring losses from operations, net capital deficiency, and the fact that the university is still negotiating its debt, raises substantial doubt about the university’s ability to continue as a going concern.”

The most significant fluctuations in the statement of net position came from changes in the net pension liability, which declined by 43.8% to $1.53 billion in FY22 from $2.72 billion in FY21.

“The decrease in the net pension liability in FY22 mainly resulted from the increase in the discount rates used to calculate the total pension liability, which amounted to 6.75% and 4.60% in fiscal years 2022 and 2021, respectively,” the report noted.

The university also recorded a $506 million operating loss in FY22, compared to a loss of $948.1 million in FY21. In fiscal year 2022, the total net nonoperating revenues, which amounted to $947.2 million, the additions to term and permanent endowment, which amounted to $162.7 million, and the capital grant contributions, which amounted to $6.3 million, exceeded by some $610.2 million the operating loss, which amounted to $506 million.

The decrease in the net operating loss of some $442.1 million, or 47%, in fiscal year 2022 was caused by a decrease in total operating expenses of some $483.4 million, or 36%, and a decrease in total operating revenues of some $41.3 million, or 11%. In fiscal year 2021, total net nonoperating revenues, which amounted to $955.6 million, exceeded by some $7.7 million the operating loss, which amounted to $948.1 million.

The financial statements did not audit the Molecular Sciences Research Center Inc. or Servicios Médicos Universitarios Inc. (the hospital), University of Puerto Rico Parking System Inc., or Material Characterization Center Inc., which represent 100% of the aggregate discretely presented component units, as of June 30, 2022.