Summary of Significant Accounting Policies
The financial statements of the San Diego campus displayed in this report are not separately audited. Financial activity of the ten-campus University of California is consolidated and the independent auditorsÕ report is published in the University of California annual financial report.

Accrual Basis of Accounting
The financial statements of the university have been prepared on the accrual basis, except that depreciation is not provided for educational plant and equipment. In addition, certain accruals and deferrals, such as interest receivable on notes receivable in loan funds, accrued interest payable on plant funds, amortized bond premium or discount, and accrued compensated absences are omitted. The inclusion of such amounts would not have a significant effect on the universityÕs financial statements. The statement of changes in funds balances and other schedules present financial activities of the current reporting period, but are not intended to represent the results of operations or Ònet incomeÓ for the year as would commercial financial statements. To the extent that current funds are used to finance capital assets, the amounts provided are accounted for as: expenditures for equipment, library books, and minor improvements; ÒmandatoryÓ fund transfers in the case of provisions for debt retirement; or ÒnonmandatoryÓ fund transfers in all other cases.

Fund Accounting
In order to ensure the observance of limitations and restrictions placed on the resources available to the university, the accounts are maintained in accordance with the principles of fund accounting. (See Financial Overview section.)

Related Organizations
The operation of certain related but inde-pendent organizations, such as the UC San Diego Foundation, student organizations, and alumni associations, are not included in the accompany- ing financial statements.

Pledges
Pledges of private gifts and grants due the university totaling approximately $13.5 million at June 30, 2000, are not included in the financial statements. The net realizable value of such pledges cannot be estimated. Additionally, pledges due the UC San Diego Foundation of $27 million are not included in this financial report.

Transfers
Most indirect cost recoveries received by the campus in conjunction with the universityÕs performance under contracts and grants are transferred to the Office of the President. These recoveries are then incorporated into the campusÕs annual budgetary allocations from the Office of the President after giving effect to recovery-sharing arrangements with the state of California.

Short-Term Investment Pool
All fund groups participate in a temp-orary investment pool that is administered by the Office of the President. Income earned on investments is distributed based on average investments in the pool. This pool invests primarily in commercial paper and bank certificates of deposit; cost approximates market value.

Fixed Assets
The value of physical plant and equip-ment is stated at cost at date of acquisition, or fair-market value at date of donation in the case of gifts. Interest on borrowings to finance facilities is capitalized during construction, net of investment income earned during the temporary investment of project borrowings. Lease Commitments Operating lease expenditures and other rental costs for the year ended June 30, 2000, totaled $10.9 million. Future commitments on these leases are $57.9 million.

Other Commitments and Contingencies
Substantial amounts are received and expended by the university under federal and state grants and contracts, and are subject to audit by cognizant governmental agencies. The university is contingently liable in connection with claims and contracts arising in the normal course of its activities. The university is self-insured for workerÕs comp-ensation and certain other risks; independent insurers provide excess liability coverage.

Long-Term Indebtedness
Long-term indebtedness is incurred for the purchase or construction of campus and UCSD Medical Center facilities and the purchase of capital equipment. Future pay-ments on long-term indebtedness approximate $1.1 billion. An additional $46.7 million external financing has been approved for the San Diego campus.