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UNMSANDOVALREGIONALMEDICALCENTER,INC.

(AComponentUnitoftheUniversityofNewMexico)

FINANCIALSTATEMENTS

JUNE30,2014AND2013


(AComponentUnitoftheUniversityofNewMexico)

OfficialRosterJune30,2014

BOARDOFDIRECTORS

PaulRoth,MD Chairperson(Termexpires6/30/17,Regentappointed)Albuquerque,NMBradCushnyr,MDMember(Termexpires6/30/15,Regentappointed)Albuquerque,NMCharlotteGarcia Member(Termexpires6/30/15,Countyappointed)Albuquerque,NMSteveMcKernan Member(Termexpires6/30/16,Regentappointed)Albuquerque,NMMichaelRichards,MD Member(Termexpires6/30/16,Regentappointed)Albuquerque,NMJerryGeist Member(Termexpires6/30/16,Regentappointed)Albuquerque,NMManuRainBird Member(Termexpires6/30/17,Countyappointed)Albuquerque,NM


(AComponentUnitoftheUniversityofNewMexico)OfficialRoster(continued)

June30,2014

ADMINISTRATIVEOFFICERS

JamieSilva‐Steele ChiefExecutiveOfficer–SandovalRegionalMedicalCenterTonyOgborn,MD ChiefMedicalOfficer–SandovalRegionalMedicalCenterPamelaDemarest ChiefNursingOfficer–SandovalRegionalMedicalCenterEllaWatt InterimChiefFinancialOfficer–SandovalRegionalMedical

CenterandInterimChiefFinancialOfficer–UNMHealthSystem

UNMSANDOVALREGIONALMEDICALCENTER,INC.(AComponentUnitoftheUniversityofNewMexico)

TABLEOFCONTENTS PageReportofIndependentAuditors 1‐2Management’sDiscussionandAnalysis 3‐14FinancialStatements:

StatementsofNetPosition 15 StatementsofRevenues,ExpensesandChangesinNetPosition 16

StatementsofCashFlows 17‐18 NotestoFinancialStatements 19‐41ReportofIndependentAuditorsonInternalControlOver FinancialReportingandonComplianceandOther MattersBasedonanAuditofFinancialStatements PerformedinAccordancewithGovernmentAuditingStandards 42‐43ScheduleofFindingsandResponses 44ExitConference 45

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REPORTOFINDEPENDENTAUDITORSTheBoardofDirectorsUNMSandovalRegionalMedicalCenter,Inc.andMr.HectorBalderas,StateAuditorReportontheFinancialStatements

WehaveauditedtheaccompanyingfinancialstatementsofSandovalRegionalMedicalCenterInc.(SRMC),acomponentunitoftheUniversityofNewMexico,StateofNewMexico,operatedbytheUniversityofNewMexicoHealthSciencesCenterClinicalOperations,asofandfortheyearsendedJune30,2014and2013,and therelatednotes to the financial statements,whichcollectivelycomprise theCenter’sbasic financialstatementsaslistedinthetableofcontents.Management’sResponsibilityfortheFinancialStatements

Management is responsible for the preparation and fair presentation of these financial statements andbudget comparison in accordance with accounting principles generally accepted in the United States ofAmerica; this includes the design, implementation, and maintenance of internal control relevant to thepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditor’sResponsibility

Ourresponsibilityistoexpressopinionsonthesefinancialstatementsbasedonouraudits.WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaandthestandards applicable to financial audits contained in Government Auditing Standards, issued by theComptrollerGeneralof theUnitedStates.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCenter’sinternalcontrol.Accordingly,weexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinions.Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancialpositionofSRMCasof June30,2014and2013,andthechanges in its financialpositionand itscash flows for the years then ended in accordancewith accounting principles generally accepted in theUnitedStatesofAmerica.

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TheBoardofDirectorsUNMSandovalRegionalMedicalCenter,Inc.andMr.HectorBalderas,StateAuditorEmphasisofMatter

AsdiscussedinNote1,thefinancialstatementspresentonlySRMCandarenotintendedtopresentfairlythefinancialpositionoftheUniversityofNewMexicoasofJune30,2014and2013,andthechangesinitsfinancialpositionfortheyearsthenendedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.OtherMattersRequiredSupplementaryInformation

Accounting principles generally accepted in the United States of America require thatmanagement’sdiscussionandanalysisonpages3‐14bepresentedtosupplementthebasicfinancialstatements.Suchinformation, although not a part of the basic financial statements, is required by the GovernmentalAccountingStandardsBoardwhoconsiders it tobeanessentialpartof financialreporting forplacingthebasic financial statements inanappropriateoperational, economic,orhistorical context.Wehaveapplied certain limited procedures to the required supplementary information in accordance withauditingstandardsgenerallyaccepted in theUnitedStatesofAmerica,whichconsistedof inquiriesofmanagement about the methods of preparing the information and comparing the information forconsistencywithmanagement's responses to our inquiries, the basic financial statements, and otherknowledgeweobtainedduringourauditofthebasicfinancialstatements.Wedonotexpressanopinionor provide any assurance on the information because the limited procedures do not provide uswithsufficientevidencetoexpressanopinionorprovideanyassurance.OtherReportingRequiredbyGovernmentAuditingStandards

InaccordancewithGovernmentAuditingStandards,wehavealso issuedourreportdatedOctober31,2014onourconsiderationoftheCenter'sinternalcontroloverfinancialreportingandonourtestsofitscompliance with certain provisions of laws, regulations, contracts, and grant agreements and othermatters. The purpose of that report is to describe the scope of our testing of internal control overfinancial reporting and compliance and the results of that testing, and not to provide an opinion oninternal control over financial reportingor on compliance.That report is an integral part of an auditperformed in accordance with Government Auditing Standards in considering the Center’s internalcontroloverfinancialreportingandcompliance.

Albuquerque,NewMexicoOctober31,2014

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSISJUNE30,2014AND2013The followingdiscussionandanalysisprovidesanoverviewof the financialpositionandactivitiesofUNMSandovalRegionalMedicalCenter(MedicalCenter)asofandforthefiscalyearsendedJune30,2014,2013and2012.Thisdiscussionshouldbereadinconjunctionwith the accompanying financial statements and notes. Management has prepared thebasicfinancialstatementsandtherelatednotedisclosuresalongwiththisdiscussionandanalysis.Assuch,thefinancialstatements,notes,andthisdiscussionaretheresponsibilityoftheMedicalCenter’smanagement.UsingThisAnnualReportThis annual report consists of financial statements prepared in accordance withGovernmental Accounting Standards Board (GASB) Statement No.34, Basic FinancialStatements–andManagement’sDiscussionandAnalysis–forStateandLocalGovernments,asamended.The financial statements prescribed by GASB 34, as amended, (thestatement of netposition,statementofrevenues,expenses,andchangesinnetposition,andthestatementofcashflows)present financial information ina formsimilarto thatusedbycommercialcorporations.Theyarepreparedundertheaccrualbasisofaccounting,wherebyrevenuesand assets are recognizedwhen the service is provided, and expenses and liabilities arerecognizedwhenothersprovidetheserviceorgoodsarereceived,regardlessofwhencashisexchanged.The statements of net position include all assets and liabilities. Over time, increases ordecreasesinnetposition(thedifferencebetweenassetsandliabilities)isoneindicatoroftheimprovementorerosionoftheMedicalCenter’sfinancialhealthwhenconsideredwithnonfinancial facts suchaspatient statisticsand the conditionof facilities.This statementincludesallassetsandliabilitiesusingtheaccrualbasisofaccounting,whichisconsistentwith the accounting method used by non‐governmental hospitals and healthcareorganizations.The statements of revenues, expenses, and changes innetpositionpresent the revenuesearnedandexpensesincurredduringtheyear.Activitiesarereportedaseitheroperatingornonoperating.Theutilizationofcapitalassetsisreflectedinthefinancialstatementsasdepreciation,whichamortizesthecostofanassetoveritsexpectedusefullife.The statement of cash flows presents information related to cash inflows and outflowssummarizedbyoperating,capitalandnoncapitalfinancing,andinvestingactivities.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013OverviewofEntityInAugust2009,RegentsoftheUniversityofNewMexico(UNM)approvedtheformationoftheMedicalCenter,aNewMexicononprofitcorporationorganizationunderandpursuanttotheNewMexicoUniversityResearchParkandEconomicDevelopmentAct.TheMedicalCenter was organized for the development, construction and operation of a licensedgeneral, community teaching Medical Center in Sandoval County and to facilitate anddevelop the clinical andmedicalpracticesof the facultyof theUniversityofNewMexicoSchoolofMedicine(UNMSOM).AsofJuly2012,theconstructionofthephysicalfacilityoftheMedicalCenterwascomplete,with the Medical Center receiving a Medical Center license from the New MexicoDepartmentofHealthonJuly12,2012. OnAugust17,2012,theMedicalCenterreceivednotice from theCenters forMedicareandMedicaidServices (“CMS”) that the facilityhadmetallfederalrequirementsforparticipationintheMedicareandMedicaidprograms.Atthattime,theMedicalCenterwasassignedaprovidernumberbyCMStobeginbillingtheMedicareprogramforMedicarebeneficiaries.ThefollowingsummarizesthehealthcareservicesthatareofferedbytheMedicalCenter:

InpatientCare‐Acutecareprovidedbypractitionersin48acutemedical‐surgicalbeds,12 intensive care unit beds and 12 dedicated behavioral health beds. The MedicalCenter is equippedwith anemergencydepartmentwith11examrooms, two traumarooms and two triage rooms. Additionally, the Medical Center is equipped with sixoperatingroomsandthreeminorprocedurerooms.OutpatientCare‐Comprehensiveofferingof laboratory,radiology,diagnosticservices,medicalandsurgicalclinics.SurgicalServices‐Anesthesia,GeneralSurgery,Orthopedic(includinghand),Podiatry,Otolaryngology, Urologic, Gynecologic, Urogynecologic, Bariatric, minimally invasivespinesurgeryandoutpatientlaparoscopicsurgery.PhysicianServices‐theMedicalCenterhasan"open"medicalstaff,allowingcommunityphysiciansinadditiontotheUNMSOMproviderstobemembersoftheactivemedicalstaffandtoadmitandfollowtheirpatientsattheMedicalCenter.Therearecurrently492 physicians credentialed ofwhich 375 are School ofMedicine physicians and theremaining117arecommunityphysicians.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013

AsofJune30,2014 2013 2012

AssetsCurrentassets $ 40,841,685 36,983,806 71,942,268Capitalassets,net 128,091,305 136,485,863 129,759,992Noncurrentassets 3,480,942 1,677,025 ‐

Totalassets $ 172,413,932 175,146,694 201,702,260

LiabilitiesCurrentliabilities $ 24,079,883 15,362,628 24,760,374Noncurrentliabilities 131,880,000 140,765,000 143,925,000

Totalliabilities $ 155,959,883 156,127,628 168,685,374

NetPositionNetinvestmentincapitalassets $ ‐ ‐ 2,344,125Restrictednetposition,expendable 24,100,300 10,094,941 37,124,103Unrestricted (7,646,251) 8,924,125 (6,451,342)

Totalnetposition $ 16,454,049 19,019,066 33,016,886

At June30, 2014, total Medical Center assets were $172.4 million compared to$175.1million at June30, 2013. TheMedical Center’smost significant assets at June30,2014werenetcapitalassetsof$128.1million,cashandcashequivalentsof$25.2millionfollowedbypatientreceivablesof$6.1million.Theincreaseincashreflectsthetransferoftheprepaidmortgagepaymentsof$2.8millionmade during fiscal year 2013 plus the accumulation of the monthly principal mortgagepayments of $3.2 million made during fiscal year 2014. On July 21, 2014, these cashbalancesplustheJuly2014mortgagepaymentwereusedtomakebondpaymentsof$6.17millionontheSeries2010Abonds.At June30, 2013, total Medical Center assets were $175.1million compared to$201.7million at June30, 2012. TheMedical Center’smost significant assets at June30,2013werenetcapitalassetsof$136.5million,cashandcashequivalentsof$19.3millionfollowedbypatientreceivablesof$6.0million.TheMedicalCenter’sliabilitiestotaled$156.0millionatJune30,2014comparedto$156.1million at June 30, 2013. At June 30, 2014, current and non‐current bonds payable of$143.4millionwasthelargestliability,followedbyaccountspayableof$3.6million.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013The Medical Center’s liabilities totaled $156.1 million at June30, 2013 compared to$168.7millionatJune30,2012.AtJune30,2013,currentandnon‐currentbondspayableof$143.4millionwasthelargestliability,followedbyaccountspayableof$4.6million.AtJune30,2014,2013and2012,theMedicalCenter’scurrentassetsof$40.8million,$37.0millionand$71.9million,respectively,weresufficienttocovercurrentliabilitiesof$24.1million (current ratio of 1.70), $15.4 million (current ratio of 2.41) and $24.8 million(currentratioof2.91),respectively.Total net position as of June30, 2014 decreased by $2.6million to $16.4million, whichincludedanoperatinglossof$5.3millionpartiallyoffsetbynetnon‐operatingrevenuesof$2.7million.Unrestrictednetpositiontotalednegative$7.6millionatJune30,2014.Total net positionas of June30, 2013decreasedby $14.0million to $19.0million,whichincludedanoperatinglossof$30.0millionpartiallyoffsetbynetnon‐operatingrevenuesof$16.0million.Unrestrictednetpositiontotaled$8.9millionatJune30,2013.

2014 2013 2012

Totaloperatingrevenues $ 54,091,041 19,198,419 ‐Totaloperatingexpenses (59,373,188) (49,206,822) (6,347,010)

Operatingloss (5,282,147) (30,008,403) (6,347,010)Nonoperatingrevenues,expenseandotherrevenues 2,717,130 16,010,583 (3,853,679)

Totaldecreaseinnetposition (2,565,017) (13,997,820) (10,200,689)Netposition,beginningofyear 19,019,066 33,016,886 43,217,575Netposition,endofyear $ 16,454,049 19,019,066 33,016,886

YearEndedJune30,

OperatingRevenuesThesourcesofoperatingrevenuesfortheMedicalCenterarenetpatientservicesandotheroperatingrevenues,with themostsignificantsourcebeingnetpatientservicesrevenues.Operatingrevenueswere$54.1million,$19.2millionandzerofortheyearsendedJune30,2014,2013and2012,respectively.TheMedicalCenteropenedinJuly2012andreceivedlicensure in August 2012. Accordingly, there were no patient service revenues prior tofiscalyear2013.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013Net patient service revenue is comprised of gross patient revenue, net of contractualallowances, charitycare,provision fordoubtfulaccounts,andany thirdpartycost reportsettlements.Netpatient services revenueswere$52.7million, $18.3millionandzero fortheyearsendedJune30,2014,2013and2012respectively.Theincreaseof$34.4millionistheresultofanincreaseinpatientrevenueassociatedwiththesecondyearofoperations(Seechartbelow). YearEndedYearEnded June30,June30, 2014 2013InpatientDays 12,136 6,763Discharges 2,682 1,691OutpatientVisits 27,498 17,300EmergencyVisits 14,080 9,238Surgeries 3,517 1,731

Theaveragedailycensus(ADC)asofJune30,2014was33.2andincreasedby14.7patientsperdayfromanADCof18.5asofJune30,2013.Net patient service revenue for the fiscal year ended June 30, 2014 includes cost reportestimates for the Medicare and Medicaid programs in the amounts of $2 million and$228,093,respectively.Thecostreportestimateincludesanestimateforthesettlementofthe capital reimbursement component from theMedicare andMedicaid programs in theamountsof$2.4millionand$173,995,respectively. ThisfiscalyearendedJune30,2013,includes an estimate for the settlement of capital reimbursement component for theMedicare program in the amount of $1.3million. Payment toNewHospitals as definedunderC.F.R.§412.300(b),ispaidat85percentofitsallowableMedicareInpatienthospitalcapital‐related costs through its cost report ending at least 2 years after the hospitalacceptsitsfirstpatient.SRMCaccepteditsfirstpatientonJuly17,2012,thusthefirstcostreport period beginning at least two years after this date would be cost report periodJuly1, 2015 to June30, 2016. Beginning July1, 2016,UNMSRMCwill be subject to theprospectivefederalcapitalrate.ThroughDecember 31, 2013, theMedical Center saw patients thatwere enrolled in theNew Mexico SCI Medicaid plan. The Medical Center participates in the reimbursementagreement between UNMHospitals and the State of NewMexico. Fundingwasmodeledafter a capitated payment program. Funds were remitted to UNM Hospitals on a per‐member‐per‐monthbasis forall state‐approvedmembers.UNMHospitals remitted fundsto the Medical Center based on the pro rata share of the adjudicated claims for thesepatients. Funding under the SCI (“State Coverage Insurance”) program for fiscal yearsendedJune30,2014and2013was$973,477and$644,231,respectively,andisincludedinpremiumrevenue.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013TheMedical Center offers a financial assistance program called SRMC Care towhich alleligible patients are encouraged to apply. This program assigns patients primary careprovidersandenablesthemtoreceivecarethroughouttheMedicalCenterandatallcliniclocations.Thisprogram isavailable toBernalilloCounty residentswhoalsomeet certainincomeandassetthresholds.PatientsapplyingforcoverageunderSRMCCaremustapplyforcoverageunderMedicaidortheHealthInsuranceExchange(HIX), ifeligible.PatientsmaycontinuetoreceiveSRMCCareuntiltheyreceiveMedicaideligibilityornotificationofcoverage under the Exchange. Patients certified under Medicaid or the Exchange maycontinue toqualify forSRMCCareasa secondary coverage for copaysanddeductibles iftheymeetthe incomeguidelines. Ifapatienthasaccessto insurancecoverageundertheExchange,or throughothercoverageoptions, suchasanemployeror spouse thepatientwould be expected to obtain coverage through that source prior to eligibility for SRMCCare.TheMedicalCenterusesthesameslidingincomescaleastheAffordableCareActtodetermine if insurance coverage is considered affordable. If coverage is determined notaffordable, patients may be granted a hardship waiver, and would not be required topursue coverage under HIX. These patients would qualify for SRMC Care. The MedicalCenterdoesnotpursuecollectionofamountsdetermined toqualifyascharitycare,withthe exception of copayments. The cost of charity care provided under this program forfiscal years ended June30, 2014 and 2013 approximated $2.4 million and $875,000,respectively.

TheMedicalCenterprovidescare topatientswhoareeitheruninsuredorunder‐insuredandwhodonotmeet thecriteria for financialassistance.TheMedicalCenterencouragespatientstomeetwithafinancialcounselortodeveloppaymentarrangements.AlthoughtheMedicalCenterpursuescollectionoftheseaccountsusuallythroughanextendedpaymentplanoradiscountedrate,interestisnotchargedontheseaccounts,liensarenotplacedonproperty or assets, and judgments are not filed against the patients. These accounts arefullyreservedandrecordedasprovisionforuncollectibleaccounts.OperatingExpenses

OperatingexpensesfortheMedicalCenterincludeitemssuchasemployeecompensationandbenefits,medicalservices,medicalsupplies,andequipment.

For the year ended June 30, 2014, total operating expenses were $59.4 million andrepresentan increaseof$10.2million fromJune30,2013. Themostsignificantexpensewasanincreaseof$5.1million inmedicalandothersupplies,whichwastheresultofanincrease in patient volumes. The second largest was an increase of $2.5 million foremployee compensation. The number of employees increased from June 30, 2013 toJune30,2014asaresultofan increase instaffing levels tosupportclinicalvolumes.Thenext largestwasan increaseof$1.2million fordepreciationexpensedrivenmainly fromone less month of depreciation expense in fiscal year 2013 corresponding to when thehospitalfirstopened.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013NonoperatingRevenuesandExpensesFor theyearsended June30,2014and2013,netnonoperatingrevenues (expense)were$2.7millionand$16.0million,respectively.ThemostsignificantnonoperatingrevenueatJune30,2014,wastheSandovalCountymilllevy(the“milllevy”)taxsubsidytotaling$8.0millionin2014.Thistaxsubsidyisprovidedfor the general operations of the Medical Center. The Medical Center received this taxsubsidybyvoterendorsementfortheservicestheMedicalCenterprovides.PursuanttoaHealth FacilityAgreementwith theBoard of County Commissioners of Sandoval County,NewMexico,afteropening,theMedicalCenterwasentitledtoreceivetheproceedsofamilllevyadoptedbytheBoardofCountyCommissionersofSandovalCountyandapprovedbythevotersofSandovalCounty.TheMedicalCenterrecognizesMillLevyFundsbasedonthefiscalyearthatthelevyiscollectedbytheCounty,andrecordsthefundsreceivedasNon‐operatingrevenues.Duringfiscalyear2013,theMedicalCenterrecognizedasrevenuetheSandovalCountyproceedsoftheMillLevyaccumulatedpriortotheopeningoftheMedicalCenterinJuly2012intheamountof$13.8million.ThenextlargestsourceofnonoperatingrevenueinfiscalyearsendedJune30,2014,2013and2012wastheFederalBondSubsidyintheamountof$2.2million,$2.2millionand$2.3million, respectively. The Medical Center receives subsidy payments related to interestpayments under the federal Build America Bond and Taxable Revenue Recovery ZoneEconomic Development Bond programs. The Medical Center is eligible to receive cashsubsidy payments from the United States Department of Treasury equal to 35% of theinterest payable on the Build America Bonds (Series 2010A), and 45% of the interestpayableontheRecoveryZoneEconomicDevelopmentBonds(Series2010B).PursuanttotheBudgetControlActof2011,aspostponedbytheAmericanTaxpayerReliefActof2012,thebudgetsequestrationimpactwasareductionof7.2%,effectiveJuly1,2013.ThishadtheeffectofchangingthesubsidypaymentfromtheUnitedStatesDepartmentofTreasuryequal to32.48%of the interestpayableon theBuildAmericaBonds(Series2010A),and41.76%oftheinterestpayableontheRecoveryZoneEconomicDevelopmentBonds(Series2010B).Themostsignificantnonoperatingexpenserecordedfor fiscalyearsendedJune30,2014and2013was$6.5millionforbondinterestexpenseeachyear.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013CapitalAssets

At June30,2014, theMedicalCenterhad$128.1million invested in capital assets, netofaccumulated depreciation of $17.1 million. Depreciation charges for the year endedJune30,2014totaled$9.1million.

2014 2013 2012

Land,buildingandimprovements $ 104,937,400 105,435,945 ‐Buildingserviceequipment 2,690,802 2,651,112 ‐Fixedequipment 2,382,124 2,395,668 ‐Majormoveableequipment 34,749,109 33,961,464 ‐Constructioninprogress 397,709 ‐ 129,759,992

145,157,144 144,444,189 129,759,992Lessaccumulateddepreciation (17,065,839) (7,958,326) ‐

Netpropertyandequipment $ 128,091,305 136,485,863 129,759,992

YearEndedJune30,

During 2014 the largest capital increases were within major moveable equipment,$787,645andconstructioninprogress,$397,709. Thelargermajormoveableequipmentpurchases included a temperaturemanagement system used in the operating rooms, anEEGsystemusedtodetectelectricalactivityinthebrainandaneoprobeGDScontrolunitused in laparoscopicprocedures.Theconstruction inprogress isprimarily related to theadditionofaninterventionalradiologylabusedforbiopsiesoftheliverandkidney,aswellasforvascularaccessports.ThecompletionoftheinterventionalradiologylabisexpectedtobeinSeptember2014. DebtActivityThe Medical Center’s current and non‐current bonds payable totaled $143.4 million atJune30, 2014, 2013 and 2012. The current portion of this debt was $11.6 million,$4.7million and $1.5million at June30, 2014, 2013 and 2012, respectively. This debt isrelatedtoGNMACollateralizedSeries2010Aand2010Bbonds.FinalendorsementonthemortgageloanoccurredonJune18,2014.Atfinalendorsementcost certifications were completed to declare that the construction of the project iscomplete and that all advances were made to the mortgagor in accordance with theCertificate of Insurance on the dates and in the amounts set forth. Shortly after finalendorsement, the excess of the sale of the original bonds over the costs of constructionweretransferredtotheheldbytrusteefordebtserviceaccountandonJuly15,2014,were

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013usedtomakespecialmandatoryredemptionsof$3.48millionontheSeries2010Abondsand$260,000ontheSeries2010Bbonds.OnJuly21,2014,themortgagepaymentsmadeby theMedicalCenter for the timeperiodAugust2012 through July2014 totaling$6.17millionwereusedtoredeem$6.17millionoftheSeries2010Abonds.

TheloanguaranteeisconsideredfederalassistancesubjecttotherequirementsofOfficeofManagementandBudget(OMB)CircularA‐133andtheSingleAuditAct.Accordingly,theloanguarantee isconsidereda federalaward forpurposesofUNM’s June30,2014,2013and2012SingleAudit.ChangeinNetPosition

Total net position as of June30, 2014 decreased by $2.6million to $16.5million, whichincludedanoperatinglossof$5.3millionpartiallyoffsetbynetnon‐operatingrevenuesof$2.7million.Unrestrictednetpositiontotaledadeficiencyof$7.6millionatJune30,2014.Total net positionas of June30, 2013decreasedby $14.0million to $19.0million,whichincludedanoperatinglossof$30.0millionpartiallyoffsetbynetnon‐operatingrevenuesof$16.0million. Unrestricted net position totaled $8.9 million at June30, 2013. Total netposition(assetsminus liabilities) is classifiedby theMedicalCenter’sability touse theseassetstomeetoperatingneeds.UnrestrictednetpositionmaybeusedtomeetalloperatingneedsoftheMedicalCenter.AportionoftheMedicalCenter’snetpositionisrestrictedbythetrustindentureanddebtagreement.FactorsImpactingFuturePeriods

OnAugust4,2014,theCentersforMedicare&MedicaidServices(CMS)releasedthefiscalyear2015InpatientProspectivePayment(IPPS)FinalRule.TheIPPSrateswillincreasebyamarketbasketincreaseof2.9%,lessa0.5%productivityreductionmandatedunderthePatientProtectionandAffordableCareAct(PPACA),lessa0.8%documentationandcodingreduction mandated by the American Taxpayer Relief Act of 2012, and less a 0.2%reductiontooffsetprojectedincreasesassociatedwithnewadmissionandmedicalreviewcriteriaforinpatientservices.Thefinalruleincludesa2.2%mandatedincreasetonationalstandardized operating payment amounts for hospitals submitting data on qualitymeasuresandmeetingmeaningfuluseofelectronichealth records (EHRs) requirements.HospitalsnotsubmittingeitherqualitydataornotmeaningfuluseusersofEHRsinFY2013will receive an update of only 1.475%. Hospitals not meeting either requirement aresubject to only a 0.75% increase. The Final Rule did not provide policies or explanationregardinghowCMSwill identifyandnotifyappropriatehospitals that theyaresubject tomeaningful use payment penalties. TheMedical Center has submitted qualitymeasures;however, the Medical Center will not meet meaningful use measures for FY2013.MeaningfuluseofEHRrequiresafullyear(twelvemonths)costreporttobeonfile.Asthe

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013Medical Center received itsMedicare certification in August 2012, the FY2013Medicarecost encompasses only eleven months. The FY2015 IPPS impact is estimated to be areductionof0.88%or$36,000.On July 3, 2014, CMS issued the proposed calendar year 2015 Outpatient ProspectivePayment rule. CMS proposed to raise the base OPPS Payment rate by amarket basketincreaseof2.7%,lessaproductivityadjustmentof0.4%and0.2%forreductionsrequiredunderPPACA.Forhospitalsthatdonotreportthe22qualitymeasuresidentifiedbyCMS,theupdatewillbedecreasedby2.0percentagepoints,to0.1%.CMShasproposedcreating28comprehensiveambulatorypaymentclassifications(APCs),whichpackagerelateditemsand services into a single payment for the comprehensive primary service. Thesecomprehensive APCs will replace the existing device‐dependent APCs (proceduresrequiringadevicetoalsobecoded).TheproposedcomprehensiveAPCswillcovercertainancillary services with a geometric mean cost of less than $100 that are typically paidunder separate fee schedules (such as laboratory services and therapy services, anddurable medical equipment, prosthetic and orthotic supplies). These services will beconsidered adjunctive services that support the primary service and will not be paidseparately.Separatepaymentwillmadefortheancillaryserviceswhentheyarefurnishedbythemselves. CMSproposesusingthefinalFY2015IPPSwageindexforCY2015OPPSandthesamewage indextransitionperiodsas thoseused in IPPS. CMShasproposedtobegin collecting information thatwouldallow it toanalyze the services andpayment forservicesfurnishedinoff‐campusprovider‐basedhospitaldepartments.Theproposedrulewouldrequireamodifierbeaddedtophysicianservicesandoutpatienthospitalservicesprovidedinanoff‐campusprovider‐baseddepartmentofahospital.TheCY2015ProposedRuleisestimatedtoincreaseprogramreimbursementby$30,000.OnJuly31,2014,CentersforMedicare&MedicaidServices(CMS)releasedthefiscalyear2015InpatientPsychiatricFacilitiesProspectivePaymentSystem(IPF)FinalRule.TheIPFrateswillincreasebyamarketbasketincreaseof2.9%,lessa0.5%productivityreductionand an additional market basket reduction of 0.3% as mandated under the PatientProtection and Affordable Care Act (PPACA), and an increase of 0.4% resulting from anupdated outlier threshold. The Medical Center’s inpatient psychiatric facility becameMedicarecertifiedonJuly1,2013.ThenetmarketbasketupdateforFY2015of2.1%isnotexpectedtohaveamaterialimpacttototalprogramreimbursement.ThefirstcostreportfortheIPFwillbefiledNovember30,2014.ThePatientProtectionandAffordableCareAct(PPACA)wasenactedonMarch23,2010.PPACA expanded Medicaid eligibility provisions, Medicare and Medicaid reforms, andprivateinsurancemarketreforms.PPACAincludeslegislationonHealthExchanges.Health

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013Exchanges are expected to facilitate the purchase of health insurance for qualifiedindividualsandsmallemployers.FederalsubsidiesforpremiumsunderHealthExchangesbecame available beginning January 2014. On July 22, 2014, the D.C. Circuit Court ofAppeals inWashingtonruledthat thetextofPPACAforbids income‐taxsubsidies for lowandmiddle incomeAmericanswhose insurance is provided throughoneof the federallyruninsurancesexchanges(Halbigv.Burwell). TheCircuitCourtruledthattaxcreditscanonly be provided on coverage purchased through an exchange established by the state.Thirty‐six states currently use the federally run insurance exchanges, including NewMexico. On the same day, the 4th U.S. Circuit Court of Appeals in Virginia upheld thesubsidies provided for coverage purchased on federal exchanges (King v. Burwell). InAugust2014,plaintiffsintheVirginiacasepetitionedtheSupremeCourttohearthecase.If accepted by the Supreme Court, a ruling may not be made until after the next re‐enrollment period for 2015. New Mexico will continue to utilize the federal healthexchange for the next enrollment period andwill be impacted by any subsequent courtrulings.CMShasalsoidentifiedasignificantnumberofenrolleesnationallythathavenotprovidedallrequireddocumentationtosupportenrollmentonthefederalhealthexchange.If documentation is not provided, patients will be removed from the federal healthexchangeasofSeptember31,2014.ThenumberofNewMexicoenrolleesimpactedisnotknownatthistime.The Recovery Audit Contract (RAC) program was created through the MedicareModernizationActof2003(MMA)torecover inappropriatepaymentsmadetoprovidersfor fee‐for‐service Medicare. The RAC program encompassing New Mexico becameeffectiveinMarch2009,withConnollyConsultingAssociates,Inc.asthecontractor.CMSiscurrentlyintheprocurementprocessforthenextroundofRACcontractors. InFebruary2014, CMS issued deadlines by which current contractors could submit additionaldocumentation requests (ADRs) and improperpaymentadjustment files to theMedicareAdministrative Contractors (MACs) for adjustment. These deadlines were to allowcompletionofalloutstandingclaimsreviewsandotherprocessbytheendofthecurrentcontracts. On August 4, 2014, due to delays in awarding RAC contracts, CMS initiatedcontractmodifications tocurrentRACcontracts toallowarestartofsomereviews. CMSstatedthatmostreviewswillbeonanautomatedbasis,withalimitednumberofcomplexreviewsoftopicsselectedbyCMS.Duringtheextensionofthecurrentcontracts,RACswillnotreviewclaimstodetermineifthecarewasdeliveredintheappropriatesetting.SRMChasnotreceivedanyRACrequestsfrominceptionthroughJune30,2014.ManagementhasestablishedareserveforRACauditsintheamountof$312,148asofJune30,2014andisincludedinthecaption“estimatedthirdpartysettlements”.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)MANAGEMENT’SDISCUSSIONANDANALYSIS(CONTINUED)JUNE30,2014AND2013InJanuary2009,theDepartmentofHealthandHumanServices(HHS)publishedfinalruleson the adoption of International Classification of Diseases, 10th Revision, ClinicalModification (ICD‐10)as theHealth InsurancePortabilityandAccountabilityActof1996(HIPAA) standard code set to replace ICD‐9. This 2009 ICD‐10 final rule establishedOctober 1, 2013 as the compliance date for ICD‐10 coding of diagnosis and procedurecodes. In September 2012, HHS published a delay in the ICD‐10 compliance date fromOctober1,2013toOctober1,2014. OnApril1,2014, theProtectingAccesstoMedicareActof2014(PAMA)wassigneddelayingthetransitiontoICD‐10foratleastoneyear.OnJuly31,2014,HHSissuedafinalruleestablishingOctober1,2015asthecompliancedateforICD‐10.TheSandovalCountymilllevytheMedicalCenterreceivesisbasedonpropertyvalues.Itispossiblethattheamountofthemilllevymayremainflatorpotentiallydecreaseasaresultof reduced property values and slowdowns in the building construction industry. TheMedical Center receives mill levy proceeds pursuant to the Sandoval County HealthFacilities Agreement between the Board of County Commissioners of the County ofSandoval and the Medical Center. Through June 30, 2014, Mill levy proceeds weredistributedtotheMedicalCenterandPresbyterianHospitalunderthe“FixedDistributionPeriod”. TheMedical Center received 20% of the proceeds for operation of its inpatientbehavioralhealthservicesand50%oftheremainingproceeds.CommencingJuly1,2014,the Health Facilities Agreement calls for a distribution of mill levy proceeds under the“Volume‐BasedDistributionPeriod”. Underthismethodology, themill levyproceedswillbe distributed to the Medical Center and Presbyterian based on their proportion ofemergencyroomvisitsandinpatientdaystothetotalemergencyroomvisitsandinpatientdaysofbothorganizations. TheMedicalCenterhasnegotiatedwithSandovalCountyandPresbyterian Hospital to modify the distribution of mill levy funds. The agreementamendmentwasapprovedbytheSandovalCountyCommissiontodistributethemilllevyproceeds 45% to theMedical Center and 55% to Presbyterian Hospital effective July 1,2014.Theamendmentstatesthatthe20%paidtotheMedicalCenterinconsiderationforoperatingthebehavioralhealthservicesisincludedinits45%distribution.ContactingTheMedicalCenter’sFinancialManagementThis financial report is designed to provide the public with a general overview of theMedicalCenter’sfinancesandtoshowtheMedicalCenter’saccountabilityforthemoneyitreceives.Ifyouhavequestionsaboutthisreportorneedadditionalfinancialinformation,contacttheMedicalCenter’sController’sofficeatPOBox80600,Albuquerque,NM87198‐0600.

UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFUNIVERSITYOFNEWMEXICO)STATEMENTSOFNETPOSITIONJune30,2014and2013

Assets 2014 2013

Currentassets:Cashandcashequivalents $ 4,589,716 6,143,766Restrictedcashandcashequivalents:Heldbytrusteeforoperations 4,326,804 2,823,188Heldbytrusteefordebtservice 16,290,177 5,593,869Heldbytrusteeforcapitalacquisition ‐ 4,739,611

Totalcashandcashequivalents 25,206,697 19,300,434

Receivables:Patient(netofallowancefordoubtfulaccountsandcontractualallowanceofapproximately$18,635,064in2014and$30,108,400in2013) 6,125,618 6,016,748

DuefromUniversityofNewMexicoHealthSystem 2,130,605 1,298,586DuefromUNMMedicalGroup ‐ 2,498,459Estimatedthirdpartysettlements,net 2,285,081 1,574,229SandovalCountyTreasurer 102,821 126,280 Prudential 942,872 ‐ InterestReceivable‐BondProceeds 1,081,262 ‐ Other 231,188 633,977

Totalnetreceivables 12,899,447 12,148,279

Prepaidexpenses 1,026,830 1,224,545Prepaidmortgagepayments ‐ 2,760,569Inventories 1,708,711 1,549,979

Totalcurrentassets 40,841,685 36,983,806

Noncurrentassets:Restrictedinvestments:Heldbytrusteeformortgagereservefund 3,480,942 1,677,025

Totalrestrictedinvestments 3,480,942 1,677,025

Capitalassets,net 128,091,305 136,485,863

Totalnoncurrentassets 131,572,247 138,162,888

Totalassets $ 172,413,932 175,146,694

Liabilities

Currentliabilities:Accountspayable $ 3,585,249 4,573,118Accruedpayroll 1,027,658 735,842 DuetoUniversityofNewMexico 1,085,931 ‐ DuetoUniversityofNewMexicoHealthSystem 333,093 863,209 DuetoUNMMedicalGroup 2,040,000 36,266 Bondspayable–current 11,545,000 4,700,000Interestpayablebonds 3,252,063 3,252,063Accruedcompensatedabsences 1,210,889 1,202,130

Totalcurrentliabilities 24,079,883 15,362,628

Noncurrentliabilities:Bondspayable 131,880,000 138,725,000DuetoUNMMedicalGroup ‐ 2,040,000

Totalnoncurrentliabilities 131,880,000 140,765,000

Totalliabilities 155,959,883 156,127,628

NetPosition

Netinvestmentincapitalassets ‐ ‐

Restricted,expendableForexpendablebequests,andcontributions 2,375 858 Inaccordancewiththetrustindentureanddebtagreement 24,097,925 10,094,083

Unrestricted (7,646,251) 8,924,125

Totalnetposition $ 16,454,049 19,019,066

Seeaccompanyingnotestofinancialstatements.

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2014 2013

Operatingrevenues:Netpatientservicerevenue $ 52,678,045 18,282,944Premium 973,477 644,231Otheroperatingrevenues 439,519 271,244

Totaloperatingrevenues 54,091,041 19,198,419

Operatingexpenses:Employeecompensation 21,767,478 19,314,403Medicalandothersupplies 12,108,446 7,036,820Depreciation 9,111,618 7,958,326Medicalservices 4,507,414 3,516,365Benefits 3,964,273 4,049,759Purchasedservices 3,902,062 3,943,527Equipment 2,357,623 2,061,880Occupancy 1,244,938 874,951Other 409,336 450,791

Totaloperatingexpenses 59,373,188 49,206,822

Operatingloss (5,282,147) (30,008,403)

Nonoperatingrevenues(expenses):SandovalCountymilllevy 7,982,814 20,832,519Federalbondsubsidy 2,158,940 2,225,243Interestincome,net 255,078 604,479Interestonbonds (6,504,125) (6,504,125)Bequestsandcontributions 1,292 1,083Othernonoperatingexpense (1,176,869) (1,148,616)

Netnonoperatingrevenues(expenses) 2,717,130 16,010,583

Decreaseinnetposition (2,565,017) (13,997,820)

Netposition,beginningofyear 19,019,066 33,016,886

Netposition,endofyear $ 16,454,049 19,019,066


UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFUNIVERSITYOFNEWMEXICO)STATEMENTSOFREVENUES,EXPENSESANDCHANGESINNETPOSITIONYearsEndedJune30,2014and2013

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFUNIVERSITYOFNEWMEXICO)STATEMENTSOFCASHFLOWSYearsEndedJune30,2014and2013

2014 2013Cashflowsfromoperatingactivities:CashreceivedfromMedicareandMedicaid $ 13,482,045 2,854,165Cashreceivedfrominsuranceandpatients 39,349,755 7,645,951Cashpaymentstoemployees (21,466,903) (17,915,711)Cashpaymentstosuppliers (30,513,177) (35,934,744)CashpaymentstoUniversityofNewMexicoHealthSystem (832,019) (571,385)Cashpaymentsfrom/toUNMMedicalGroup 2,462,193 (1,996,517)CashpaymentsfromUniversityofNewMexico 1,085,931 ‐Otherreceipts 439,519 271,244

Netcashprovidedby(usedin)operatingactivities 4,007,344 (45,646,997)

Cashflowsfromnoncapitalfinancingactivities:CashreceivedfromSandovalCountymilllevy 8,006,273 20,706,239Cashreceivedfromcontributions 1,292 1,083

Netcashprovidedbynoncapitalfinancingactivities 8,007,565 20,707,322

Cashflowsfromcapitalfinancingactivities:Purchasesofcapitalassets (717,060) (14,684,197)Cashreceivedfromfederalbondsubsidy 1,077,678 2,225,243CashpaymentstoUNMMedicalGroupfornegativearbitragefund ‐ (2,600,000)Interestpaymentsonbonds (6,504,125) (6,504,125)Cashpaymentsformortgagereservefund (1,803,917) (1,677,025)Principalpaymentsonmortgage (3,154,862) (2,760,569)Inflows(outflows)totrusteeaccounts 5,915,431 ‐Cashpaymentsformortgage‐relatedactivities(Mortgageservicing,MIP,GNMAguaranty) (1,176,869) (789,272)

Netcashusedincapitalfinancingactivities (6,363,724) (26,789,945)

Cashflowsfrominvestingactivities:Interestoninvestments 255,078 604,479

Netcashprovidedbyinvestingactivities 255,078 604,479Netincrease(decrease)incashandcashequivalents 5,906,263 (51,125,141)

Cashandcashequivalents,beginningofyear 19,300,434 70,425,575

Cashandcashequivalents,endofyear $ 25,206,697 19,300,434


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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFUNIVERSITYOFNEWMEXICO)STATEMENTSOFCASHFLOWS(CONTINUED)YearsendedJune30,2014and2013

2014 2013

Reconciliationofoperatinglosstonetcashusedinoperatingactivities:Operatingloss $ (5,282,147) (30,008,403)Adjustmentstoreconcileoperatinglosstonetcashprovidedby(usedin)operatingactivities:Depreciationexpense 9,111,618 7,958,326Provisionfordoubtfulaccounts 19,575,755 9,478,955Changeinassetsandliabilities:Patientreceivables (19,684,625) (15,495,703)DuefromHealthSystem (832,019) (1,298,586)DuefromUNMMedicalGroup 2,498,459 (1,443,090)Estimatedthirdpartypayersettlements (710,852) (1,574,229)Otherreceivablesandprepaidexpenses (342,368) (1,452,291)Inventories (158,732) (1,494,886)DuetoHealthSystem (530,116) 655,154DuetoUniversityofNewMexico 1,085,931 ‐DuetoUNMMedicalGroup (36,266) 36,266Accruedpayroll 291,816 436,553Accruedcompensatedabsences 8,759 962,139Accountspayable (987,869) (12,407,202)

Netcashprovidedby(usedin)operatingactivities $ 4,007,344 (45,646,997)

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)NOTESTOFINANCIALSTATEMENTSJUNE30,2014AND2013

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NOTE1. DESCRIPTIONOFBUSINESSUNMSandovalRegionalMedicalCenterInc.(theMedicalCenter)isacorporationorganizedby the Regents of the University of New Mexico (UNM) and existing as a New Mexicogovernment non‐profit and University Research Park and Economic Development Act(URPEDA) corporation. The Medical Center is governed by its Board of Directors (theBoard), which is empowered to do all things necessary for the proper operation of theMedical Center. UNM, by and through its Board of Regents, is the sole member of theMedical Center. UNM made an initial equity contribution to the Medical Center of$46,000,000.The Medical Center is located in Rio Rancho, New Mexico. The Medical Center is acommunityteachingMedicalCenterhavingcompletedthefinalstagesofconstructionandopenedandbegantoprovidepatientcareonJuly16,2012. TheMedicalCenterprovidesinpatient and outpatient services primarily to the residents of Sandoval County,NewMexico.The Medical Center consists of an approximately 200,000 square foot, 72 acute bed,communityteachingMedicalCenterandcorresponding40,000squarefootmedicalofficebuildingonasite locatedadjacenttothenewCityCenterinRioRancho,NewMexico. In2006,UNM acquired the land uponwhich theMedical Center is located and owns it feesimple.TheMedicalCenterisacomponentunitoftheUNMandisreportedassuchinthebasicfinancialstatementsofUNM.TheMedicalCenterhasnocomponentunits.NOTE2. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESBasisofPresentation. The accompanying financial statements have been prepared usingthe economic resource measurement focus and the accrual basis of accounting, inaccordancewithU.S.generallyacceptedaccountingprinciplesforhealthcareorganizations,andarepresentedinaccordancewiththereportingmodelasprescribedinGovernmentalAccounting Standards Board (GASB) Statement No.34, Basic Financial Statements – andManagement’sDiscussionandAnalysis– forStateandLocalGovernments, as amendedbyGASBStatement No.37, Basic Financial Statements – and Management’s Discussion andAnalysis– forStateandLocalGovernments:Omnibus; andGASBStatementNo.38,CertainFinancial Statement Note Disclosures. The Hospital follows the business‐type activities’


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NOTE2. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)requirementsofGASBStatementNo.34.ThisapproachrequiresthefollowingcomponentsoftheHospital’sfinancialstatements:

Management’sdiscussionandanalysis.

Basic financial statements, including a statements of net position, statements ofrevenues,expenses,andchangesinnetposition,andstatementsofcashflowsusingthedirectmethodfortheHospitalasawhole.

Notestofinancialstatements.

GASBStatementNo.34,asamendedbyGASBStatementNo.63,establishedstandardsforexternal financial reporting and requires that resources be classified for accounting andreportingpurposesintothefollowingthreenetpositioncategories:

Net Investment inCapitalAssets – Capital assets, net of accumulated depreciationand outstanding principal balances of debt attributable to the acquisition,construction,orimprovementofthoseassets.

RestrictedNetPosition–Expendable–AssetswhoseusebytheMedicalCenteraresubject to externally imposed constraints that can be fulfilled by actions of theMedicalCenterpursuanttothoseconstraintsorthatexpirebythepassageoftime.

Unrestricted Net Position – Assets that are not subject to externally imposedconstraints. Unrestricted net positionmay be designated for specific purposes byactionoftheBoardofTrustees.

Changes inAccountingPoliciesandStatements.Effective July 1, 2012, theMedical Centeradopted GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources,DeferredInflowofResources,andNetPosition,andGASBStatementNo.65,ItemsPreviouslyReportedasAssetsandLiabilities. The primary effects of implementing GASB statementNo.63wastochangeallpreviousreferencesfrom“netassets”to“netposition,”changetheline item for “invested incapitalassets,netof relateddebt” to “net investment incapitalassets,” and to classify certain assets and liabilities as “deferred inflows” and “deferredoutflows.” At June 30, 2014, the Medical Center had no items meeting the criteria of“deferredinflows”or“deferredoutflows.”


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NOTE2. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED) UseofEstimates.ThepreparationoffinancialstatementsinaccordancewithU.S.generallyacceptedaccountingprinciplesrequiresmanagementtomakeestimatesandassumptionsthataffect thereportedamountsofassetsand liabilitiesandthedisclosureofcontingentassetsandliabilitiesatthefinancialstatementdates,andthereportedamountofrevenuesandexpensesduringthereportingperiods.Duetouncertaintiesinherentintheestimationprocess,actualresultscoulddifferfromthoseestimates.Cash and Cash Equivalents. The Medical Center considers all highly liquid investmentspurchasedwithanoriginalmaturityofthreemonthsorlesstobecashequivalents.TheMedicalCenterfollowsGASBStatementNo.40,DepositandInvestmentRiskDisclosures–anamendmentofGASBStatementNo.3.Thisstatementaddressescommondepositandinvestmentrisksrelatedtocreditrisk,concentrationofrisk,interestraterisk,andforeigncurrencyrisk, andalso requirescertaindisclosuresof investmentsat fairvalues thatarehighly sensitive to changes in interest rates, as well as deposit and investment policiesrelatedtotherisksidentifiedinthestatement.RestrictedCashandCashEquivalents.TheMedicalCenterhasthreetypesofrestrictedcashand cash equivalents. The first type is held by the trustee for operations and is theremainingbalanceoftheequitycontributedbyUNM.Theheldbytrusteefordebtserviceis used for the principal component of debt service. The held by trustee for capitalacquisitions consistsof remainingproceeds from theSeries2010bond in theamountofzeroand$4,739,611asofJune30,2014and2013,respectively.PatientReceivables.TheMedicalCenterrecordsthisbalanceattheestimatednetrealizablevalueafterdeductingcontractualdiscountsandallowances,freeserviceandallowanceforuncollectibleaccounts.Prepaid Mortgage Payments. Beginning August 2012, the Medical Center has madeprincipalpaymentsonthemortgage loanthatguaranteestheSeries2010bond issuance.The mortgage servicer retained the principal until final endorsement after which theprepaid mortgage payments were used to service the current portion of the principalamountoftheSeries2010bonds.Inventories. Inventories consisting of medical, surgical and maintenance supplies, andpharmaceuticals are stated at the lower of cost ormarket. Cost is determined using thefirst‐in, first‐out valuationmethod, except that the replacement costmethod is used forpharmacyandoperatingroominventories.


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NOTE2. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED) RestrictedInvestmentsNoncurrent.TheMedicalCenterhasestablishedaMortgageReserveFund in accordance with the requirements and conditions of the FHA RegulatoryAgreement. Notwithstanding any other provision in the Regulatory Agreement, theMortgage Reserve Fundmay be used byHUD if theMedical Center is unable tomake amortgage note payment on the due date. The Medical Center is required to makecontributionstothefundbasedontheMortgageReserveFundschedule.Capital Assets. Capital assets are stated at cost or at estimated fair value on date ofacquisition.TheMedicalCenter’scapitalizationpolicy forassets includesall itemswithaunit cost ofmore than $5,000 aswell as for the first year of capitalization, items in theaggregatewhosetotalcostismorethan$5,000.Depreciationoncapitalassetsiscalculatedusingthestraight‐linemethodovertheestimatedusefullivesoftheassetsasindicatedinthe “EstimatedUsefulLives ofDepreciableMedical CenterAssets,”Revised2008EditionpublishedbytheAmericanMedicalCenterAssociation.Repairsandmaintenancecostsarecharged to expense as incurred. On a quarterly basis, theMedical Center assesses long‐livedassetsinordertodeterminewhetherornotitisnecessarytoretire,replace,orimpairbasedonconditionoftheassetsandtheirintendeduse.Net Investment inCapitalAssets. Net investment in capital assets represents theMedicalCenter’stotalinvestmentincapitalassets,netofoutstandingdebtrelatedtothosecapitalassets. Since the outstanding debt at June 30, 2014 and 2013 is greater than theinvestment in capital assets, this category of Net Position is reported as zero in theStatementsofNetPosition.Totheextentdebthasbeenincurredbutnotyetexpendedforcapitalassets,suchamountsarenotincludedasacomponentofnetinvestmentincapitalassets. There are zero and $4,739,611 in unspent bond proceeds at June 30, 2014 and2013,respectively.OperatingRevenuesandExpenses. TheMedicalCenter’sstatementofrevenues,expenses,and changes innetpositiondistinguishesbetweenoperatingandnonoperating revenuesandexpenses.Operatingrevenues, suchaspatientservicerevenue, result fromexchangetransactionsassociatedwithprovidinghealthcareservices, theMedicalCenter’sprincipalactivity. Exchange transactions are those inwhich eachparty to the transaction receivesand gives up essentially equal values. Operating expenses are all expenses incurred toprovidehealthcareservices.


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NOTE2. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED) NetPatientServiceRevenues. Netpatientservicerevenuesarerecordedat theestimatednet realizable amount due from patients, third‐party payors, and others for servicesrendered. Retroactive adjustments under reimbursement agreements with third‐partypayorsareaccruedonanestimatedbasis in theperiodtherelatedservicesarerenderedandadjustedinfutureperiodsasfinalsettlementsaredetermined.Contractualadjustmentsresultingfromagreementswithvariousorganizationstoprovideservices for amounts that differ from billed charges, including services underMedicare,Medicaid, and certainmanaged care programs, are recorded as deductions from patientrevenues.Withrespect to theSCIprogram, funding ismodeledafteracapitatedpaymentprogram.RevenuewithrespecttoSCIisrecognizedintheperiodinwhichtheCenterisobligatedtoprovidecaretotheenrolledmembers.FundsareremittedtotheCenteronapermemberpermonthbasis for all state approvedmembers.Therefore, contractual adjustments arerecorded as a deduction from patient revenue in its entirety. Capitated payments arereceivedonamonthlybasisandarerecordedasanoffsettocontractualadjustmentsintheamountofapproximately$973,477and$644,231foryearsendedJune30,2014and2013,respectively. Accounts, when determined to be uncollectible, are charged against theallowancefordoubtfulaccounts.TheSCIprogramwasterminatedeffectiveDecember31,2013 with the implementation of the Medicaid Centennial Care program on January 1,2014.CharityCare.TheMedicalCenterprovidescaretopatientswhomeetcertaincriteriaunderits charity care policywithout charge or at amounts less than its established rates. TheMedical Center does not pursue collection of amounts determined to qualify as charitycare;therefore,theyaredeductedfromgrossrevenue,withtheexceptionofcopayments.NonoperatingRevenuesandExpenses. Nonoperatingrevenueincludesactivities thathavethecharacteristicsofnon‐exchangetransactions,suchasinvestment income,governmentlevies, and gifts. These revenue streams are recognized under GASBStatement No.33,AccountingandFinancialReporting forNon‐exchangeTransactions. Investment income isrecognized in theperiodwhen it isearned.Themill levy isrecognized in theperiod it iscollected by the County. Bequests and contributions are recognized when all applicableeligibility requirements have beenmet. Nonoperating expenses also include interest onbonds,mortgageservicingfeesandtheGNMAguarantyfees.


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NOTE2. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(CONTINUED) SandovalCountyMillLevyTaxes.TheamountofthepropertytaxlevyisassessedannuallyonJanuary1onthevaluationofpropertyasdeterminedbytheCountyAssessorandisduein equal semi‐annual installments on November10 and April10 of the next year. Taxesbecome delinquent 30days after the due date unless the original levy date has beenformally extended. Taxes are collected on behalf of the Medical Center by the CountyTreasurer and are remitted to the Medical Center in the month following collection.RevenueisrecognizedinthefiscalyearthelevyiscollectedbytheCounty.FederalBondSubsidy. TheMedical Center receives subsidypayments related to interestpayments under the federal Build America Bond and Taxable Revenue Recovery ZoneEconomicDevelopmentBondprograms.Thesesourcesoffundsareaccountedforasnon‐operating revenues and recorded as they are received. Under the program, theMedicalCenter applies for subsidy funds commensurate with each bond payment, so theapplicationforthesubsidyismadesemiannually. FortheyearsendedJune30,2014and2013, theMedicalCenter recognized$2,158,940and$2,225,243 in federalbond subsidyrevenue,respectively.IncomeTaxes. TheMedical Center has received a determination letter from the InternalRevenueService(IRS)thatitisanorganizationdescribedinInternalRevenueCodesection501(c)(3).Assuchitwouldbeexemptfromfederalincometaxonincomegeneratedfromactivities related to its exempt function. Furthermore, the Medical Center previouslyreceivedadiscretionaryrulingfromtheIRSunderRevenueProcedure95‐48,excludingitfrom the requirement to file certain information returns. Changesmade by the PensionProtection Act removed the IRS’s discretionary authority to waive these filingrequirements.Subsequentfailurestofilewouldresult inautomaticrevocationofexemptstatus.TheIRSisexpectedtoissuefurtherguidancetoassistorganizationswithRev.Proc.95‐48 rulings inmaintaining exempt status. TheMedical Center intends tomonitor andcomplywiththisguidance.Accordingly,noprovisionforincometaxeshasbeenmade.Classification. Certain 2013 amounts have been reclassified to conform to the 2014presentation.


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NOTE3. CASHANDCASHEQUIVALENTS,ANDINVESTMENTSCashandCashEquivalents

Deposits. The Medical Center’s deposits are held in demand accounts with a financialinstitution.The carrying amounts of the Medical Center’s deposits with financial institutions atJune30,2014and2013are$4,587,451and$6,141,966,respectively.BankbalancesarecategorizedatJune30,asfollows:

2014 2013

AmountinsuredbytheFederalDepositInsuranceCorporation(FDIC) $ 383,590 250,000

Othercash 5,220,827 5,988,820$ 5,604,417 6,238,820

Interest‐bearingdepositaccountsaresubjecttoFDIC’sstandarddepositinsuranceamountof$250,000.RestrictedCashandCashEquivalentsIn connection with the 2010 Financing Transaction, as a requirement of the TrustIndentureandtheFinancingAgreement,theMedicalCenterwasrequiredtoestablishtrustfunds for the deposit of restricted bondproceeds, the required capital contribution, andotherrestrictedcontributionsbytheMedicalCenter.The financialstatementbalancesofthetrustfundswereasfollowsatJune30:

2014 2013

Operatingcapitalescrowfund $ 4,326,804 2,823,188Debtservicefund 16,290,177 5,593,869Capitalacquisitionfund ‐ 4,739,611Totalrestrictedcashandcashequivalents $ 20,616,981 13,156,668

Operating Capital Escrow Fund – Established to hold the portion of the equitycontribution that was made for working capital purposes, as required by the FederalHousing Administration. Draws against this fund are requested from and approved byHUDtocovermonthlypre‐openingandpost‐openingexpenses.


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NOTE3. CASHANDCASHEQUIVALENTS,ANDINVESTMENTS(CONTINUED)Debt Service Fund – Established to collect the interest income and necessary funds tomake the semi‐annual coupon payments for the bonds. This fund also includes adepository account for the proceeds received from the BuildAmericaBond andTaxableRevenueRecoveryZoneEconomicDevelopmentBondpayments.CapitalAcquisitionFund–Proceedsfromthesaleofthebondswereplacedinthisfund.Drawsonthisfundaremadetooffsetthecertificatesissuedfromthemortgagorduringtheconstructionperiod. This fundalso includestheCapitalEscrowFundestablishedtoholdtheportionoftheequitycontributionthatwasmadeforcapitalpurposes,asrequiredbythe Federal Housing Administration. Draws against this fund are requested from andapprovedbyHUDtopurchasecapitalassetsusedfortheconstructionofthebuilding.InterestRateRisk–Debt Investments ‐CashandCashEquivalents. Currently, theMedicalCenterdoesnothaveaspecificpolicytolimititsexposuretointerestraterisk.TheMedicalCenterholdsnoinvestmentsthataresubjecttointerestraterisk.AsummaryoftherestrictedcashandcashequivalentsatJune30,2014and2013andtheirexposuretointerestrateriskisasfollows:

Fair LessthanValue 1Year

Itemsnotsubjecttointerestraterisk:Moneymarketfund $ 20,616,984 20,616,984Itemsnotsubjecttointerestraterisk 20,616,984 20,616,984Totalrestrictedcashandcashequivalents $ 20,616,984 20,616,984

Fair LessthanValue 1Year

Itemsnotsubjecttointerestraterisk:Moneymarketfund $ 13,156,668 13,156,668Itemsnotsubjecttointerestraterisk 13,156,668 13,156,668Totalrestrictedcashandcashequivalents $ 13,156,668 13,156,668

June30,2014

June30,2013


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NOTE3. CASHANDCASHEQUIVALENTS,ANDINVESTMENTS(CONTINUED)CustodialCreditRisk–Debt Investments–CashandEquivalents. Asof June30,2014and2013,theMedicalCenterdebtinvestmentsthataresubjecttocustodialcreditrisk.

TheMedical Center’s custodial risk policy for the bond proceeds conforms to the TrustIndenture,andtheTrusteeholdstheinvestmentsinsafekeeping.CreditRisk–DebtInvestments.TheMedicalCenterisrequiredtodisclosecreditratingsofitsdebt investments inorder toassess credit risk.U.S.obligations, investmentsexplicitlyguaranteed by the U.S.government, and non‐debt investments are excluded from thisrequirement. Currently, the Medical Center does not have a specific policy to limit itsexposuretocreditrisk.

Long‐TermInvestments

Rating FairValue Rating FairValueItemssubjecttocreditrisk:Moneymarketfund NotRated $ 20,616,981 NotRated $ 13,156,668Totalitemssubjecttocreditrisk 20,616,981 13,156,668

Totalrestrictedcashandcashequivalents $ 20,616,981 $ 13,156,668

June30,2014 June30,2013

Interest Rate Risk – Debt Investments – Long Term Investments. Currently, the MedicalCenterdoesnothaveaspecificpolicytolimititsexposuretointerestraterisk.TheMedicalCenterholdsnoinvestmentsthataresubjecttointerestraterisks.AsummaryofthelongterminvestmentsatJune30,2014and2013andtheirexposuretointerestrateriskisasfollows:

Fair Lessthan Fair LessthanValue 1Year Value 1Year

Itemsnotsubjecttointerestraterisk:Moneymarketfund $ 3,480,942 3,480,942 1,677,025 1,677,025Itemsnotsubecttointerestraterisk 3,480,942 3,480,942 1,677,025 1,677,025Totallong‐terminvestments $ 3,480,942 3,480,942 1,677,025 1,677,025

June30,2014 June30,2013


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NOTE3. CASHANDCASHEQUIVALENTS,ANDINVESTMENTS(CONTINUED)CustodialCreditRisk–DebtInvestments.AsofJune30,2014and2013,theMedicalCenterheldnoU.S.governmentobligationsforlong‐terminvestmentpurposes.TheMedical Center’s custodial risk policy for the bond proceeds conforms to the TrustIndenture,andtheTrusteeholdstheinvestmentsinsafekeeping.CreditRisk–DebtInvestments–LongTermInvestments.TheMedicalCenterisrequiredtodisclosecreditratingsofitsdebtinvestmentsinordertoassesscreditrisk.U.S.obligations,investments explicitly guaranteed by theU.S.government, andnon‐debt investments areexcluded from this requirement. Currently, the Medical Center does not have a specificpolicytolimititsexposuretocreditrisk.

Rating FairValue Rating FairValueItemssubjecttocreditriskMoneymarketfund NotRated $ 3,480,942 NotRated $ 1,677,025Totalitemssubjecttocreditrisk 3,480,942 1,677,025

Totallongterminvestments $ 3,480,942 $ 1,677,025

June30,2014 June30,2013


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NOTE4. CONCENTRATIONOFRISKThe Medical Center receives payment for services rendered to patients under paymentarrangementswithpayors,whichinclude:(i)MedicareandMedicaid,(ii)otherthird‐partypayors including commercial carriers and health maintenance organizations, and (iii)others.ThefollowingsummarizespatientaccountsreceivableandthepercentageofgrossaccountsreceivablefromallpayorsasofJune30:

MedicareandMedicaid $ 13,414,540 54% 12,609,943 35%Otherthirdpartypayors 6,302,770 26% 13,750,828 38%Others 5,043,372 20% 9,764,377 27%

Totalpatientaccountsreceivable 24,760,682 100% 36,125,148 100%Lessallowanceforuncollectibleaccountsandcontractualadjustments (18,635,064) (30,108,400)

Patientaccountsreceivable,net $ 6,125,618 6,016,748

2014 2013

NOTE5. ESTIMATEDTHIRD‐PARTYPAYORSETTLEMENTSThe Medical Center is reimbursed by the Medicare and Medicaid programs on aprospective payment basis for hospital services, with certain items reimbursed at aninterimratewith final settlementdeterminedafter submissionofannual cost reportsbythe Medical Center. The annual cost reports are subject to audit by the MedicareAdministrative Contractor and the Medicaid audit agent. Under C.F.R. §412.300(b), theCenter is paid at 85 percent of its allowable Medicare Inpatient hospital capital‐relatedcosts through its cost report ending at least 2 years after the hospital accepts its firstpatient. SRMCaccepteditsfirstpatientonJuly17,2012,thusthefirstcostreportperiodbeginningatleasttwoyearsafterthisdatewouldbecostreportperiodJuly1,2015toJune30, 2016. Beginning July 1, 2016, UNM SRMCwill be subject to the prospective federalcapitalrate.Retroactivelycalculatedcontractualadjustmentsarisingunderreimbursementagreementswith third‐party payors are accruedon an estimatedbasis in the period therelated services are rendered and adjusted in future periods as final settlements aredetermined. The estimated settlements at June 30, 2014 and 2013 are receivables of$2,285,081and$1,574,299,respectively.


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NOTE6. CAPITALASSETSThemajorclassesofcapitalassetsatJune30andrelatedactivityfortheyearthenendedareasfollows:

Beginning EndingBalance Additions Transfers Retirements Balance

UNMSandovalCapitalAssetsnotbeingdepreciated:Constructioninprogress ‐ 426,509 (28,800) ‐ 397,709

‐ 426,509 (28,800) ‐ 397,709UNMSandovaldepreciablecapitalassets:Buildingandbuildingimprovements 105,435,945 (514,356) 15,813 104,937,402

Buildingserviceequipment 2,651,112 26,702 12,987 2,690,801Fixedequipment 2,395,668 ‐ ‐ (13,545) 2,382,123Majormoveableequipment 33,961,464 776,921 ‐ 10,725 34,749,110Totaldepreciablecapital 144,444,189 289,267 28,800 (2,820) 144,759,436assets

LessAccumulatedDepreciationfor:Buildingandbuildingimprovements (2,505,013) (2,530,574) ‐ ‐ (5,035,587)

Buildingserviceequipment (219,052) (276,613) ‐ ‐ (495,665)Fixedequipment (148,636) (161,384) ‐ 701 (309,319)Majormoveableequipment (5,085,625) (6,143,049) ‐ 3,405 (11,225,269)Totalaccumulateddepreciation (7,958,326) (9,111,620) ‐ 4,106 (17,065,840)

UNMSandovaldepreciablecapitalassets,net 136,485,863 (8,822,353) 28,800 1,286 127,693,596

UNMSandovalCapitalAssetsnotbeingdepreciated ‐ 426,509 (28,800) ‐ 397,709

UNMSandovaltotalcostofcapitalassets 144,444,189 715,776 ‐ (2,820) 145,157,145

Lessaccumulateddepreciation (7,958,326) (9,111,620) ‐ 4,106 (17,065,840)

UNMSandovalcapitalassets,net $ 136,485,863 (8,395,844) ‐ 1,286 128,091,305

YearEndedJune30,2014


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NOTE6. CAPITALASSETS(CONTINUED)

Beginning EndingBalance Additions Transfers Retirements Balance

UNMSandvoalCapitalAssetsnotbeingdepreciated:Constructioninprogress 129,759,992 15,294,218 (145,054,210) ‐ ‐

129,759,992 15,294,218 (145,054,210) ‐ ‐UNMSandovaldepreciablecapitalassets:Buildingandbuildingimprovements ‐ ‐ 105,435,945 ‐ 105,435,945

Buildingserviceequipment ‐ ‐ 2,651,112 ‐ 2,651,112Fixedequipment ‐ ‐ 2,395,668 ‐ 2,395,668Majormoveableequipment ‐ ‐ 34,571,485 (610,021) 33,961,464Totaldepreciablecapitalassets ‐ ‐ 145,054,210 (610,021) 144,444,189

LessAccumulatedDepreciationfor:Buildingandbuildingimprovements ‐ (2,505,013) ‐ ‐ (2,505,013)

Buildingserviceequipment ‐ (219,052) ‐ ‐ (219,052)Fixedequipment ‐ (148,636) ‐ ‐ (148,636)Majormoveableequipment ‐ (5,197,462) ‐ 111,837 (5,085,625)Totalaccumulateddepreciation ‐ (8,070,163) ‐ 111,837 (7,958,326)

UNMSandovaldepreciablecapitalassets,net ‐ (8,070,163) 145,054,210 (498,184) 136,485,863

UNMSandovalCapitalAssetsnotbeingdepreciated 129,759,992 15,294,218 (145,054,210) ‐ ‐

UNMSandovaltotalcostofcapitalassets 129,759,992 15,294,218 ‐ (610,021) 144,444,189

Lessaccumulateddepreciation ‐ (8,070,163) ‐ 111,837 (7,958,326)

UNMSandovalcapitalassets,net $ 129,759,992 7,224,055 ‐ (498,184) 136,485,863

YearEndedJune30,2013


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NOTE7. COMPENSATEDABSENCESQualifiedMedicalCenteremployeesareentitledtoaccruesick,holidayandannualleaveasoneinclusivePaidTimeOff(PTO)bankbasedontheirFull‐TimeEquivalent(FTE)status.Full‐timeemployeeswith zero to sevenyearsof service accrue11.07hoursofPTOeachpayperiod(36daysperannum)uptoamaximumof500hourstobeusedforsick,holidayandannualleave.Full‐timeemployeeswithyearsofserviceinexcessofsevenyearsaccrue12.61hoursofPTOeachpayperiod(41daysperannum)uptoamaximumof500hourstobe used for sick, holiday and annual leave. Part‐time employees earn PTO leave on aprorated basis each pay period. When publicized by the Medical Center each year,employeeshavetheopportunitytoexchangeforcashat80%oftheirhourlyrateallhoursaccumulated inexcessof80hours.At termination,employeesareeligible forpaymentofunusedaccumulatedhoursat100%oftheirregularhourlyrate.AccruedPTOasofJune30,2014 and 2013 of $1,210,889 and $1,202,130, respectively, is computed bymultiplyingeachemployee’scurrenthourlyratebythenumberofhoursaccrued.DuringtheyearsendedJune30,2014and2013,thefollowingchangesoccurredinaccruedcompensatedabsences:

Balance BalanceJuly1,2013 Increase Decrease June30,2014

1,202,130$ 2,370,824 (2,362,065) 1,210,889

Balance BalanceJuly1,2012 Increase Decrease June30,2013

239,991$ 1,782,741 (820,602) 1,202,130

Thebalancesabove includeannual leave, sick leave, andholidayasdisclosedabove.Theportionofaccruedcompensatedabsencesdueafteroneyearisnotmaterialand,therefore,isnotpresentedseparately.


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NOTE8. BONDSPAYABLEInNovember2010,theMedicalCenterissued$133,425,000inaggregateprincipalamountof its Taxable Revenue Build America Bonds (Direct Pay) (GNMA Collateralized ‐ UNMSandovalRegionalMedicalCenterProject) Series2010Awithamaturitydateof July20,2036 and $10,000,000 in aggregate principal amount of its Taxable Revenue RecoveryZone Economic Development Bonds (Direct Pay) (GNMA Collateralized ‐ UNM SandovalRegionalMedicalCenterProject)Series2010BwithamaturitydateofJuly20,2037.TheBonds were issued pursuant to a Trust Indenture, dated as of October 1, 2010, by andbetweentheMedicalCenterandWellsFargoBank,NationalAssociation,asTrusteeforthepurposeoffinancingtheMedicalCenterfacilityandtopaycertaincostsassociatedwiththeissuanceofthebonds.ThebondswereissuedasspeciallimitedobligationsoftheMedicalCenterandaresecuredprimarilybyfullymodifiedmortgagebackedsecuritiesintheaggregateprincipalamountof $143,425,000 (the “GNMA Securities”), to be issued by Prudential Huntoon PaigeAssociates,Ltd.(the“Lender”),guaranteedastoprincipalandinterestbytheGovernmentNationalMortgageAssociation(“GNMA”),withrespecttotheMortgageNote.Under the GNMAMortgage Backed Securities Program, the GNMA Securities are a “fullymodifiedpass‐through”mortgage‐backedsecurityissuedandservicedbytheLender.ThefaceamountoftheGNMASecuritiesistobethesameamountastheoutstandingprincipalbalanceoftheMortgageNote.TheLenderisrequiredtopassthroughtotheTrustee,astheholder of the GNMA Securities, by the 15th day of each month, the monthly scheduledinstallmentsofprincipalandinterestontheMortgageNote(lesstheGNMAguaranteefeeandtheLender’sservicingfee),whetherornottheLenderreceivessuchpaymentfromtheMedicalCenterundertheMortgageNote,plusanyunscheduledprepaymentsofprincipaloftheMortgageNotereceivedbytheLender.TheGNMASecuritiesareissuedsolelyforthebenefitoftheTrusteeonbehalfoftheBondholdersandanyandallpaymentsreceivedwithrespecttotheGNMASecuritiesaresolelyforthebenefitoftheBondholders.EffectiveOctober1,2010,theMedicalCenterenteredintoaFinancingAgreementwiththeLenderandtheTrustee.UndertheFinancingAgreement,theLenderagreedtooriginateaMortgageNoteinfavoroftheLenderandsecuredbyaleaseholdmortgageontheproject.TheMortgageNoteisinsuredbytheFederalHousingAdministration(“FHA”)pursuanttoSection242oftheNationalHousingActof1934andtoprovidesecurityfortheBonds,theTrustee will use the proceeds of the Bonds to purchase from the Lender the GNMASecurities. TheMedical Center has agreed to use the proceeds of theMortgageNote toacquire,construct,andequiptheconstructionoftheMedicalCenter.


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NOTE8. BONDSPAYABLE(CONTINUED)UnderthetermsoftheTrustIndenture,theMedicalCenterhasgrantedtotheTrusteeallrights, title, and interests to all revenues, receipts, interest, income, investment earningsandothermoniesreceivedortobereceivedbytheTrustee,includingmoniesreceivedorto be received from the GNMA Securities and all investment earnings from the GNMASecurities.UponissuanceoftheBonds,theproceedswereplacedintrustwiththeTrustee,and theproceedsare tobeused topurchase from the lender theGNMASecurities, or toredeem the bonds according to the various early, optional, and mandatory redemptionprovisionsoftheBonds.As of June30, 2014, thebalanceof theMortgagenote equaled the balanceof theGNMAsecurities.AsofJune30,2013,thebalanceoftheMortgagenotedidnotequalthebalanceof theGNMAsecurities since effectiveAugust2012, theMedical Centerwasobligated tomake monthly mortgage principal payments; therefore, the principal payments on themortgagearelistedasacurrentassetintheaccompanyingfinancialstatementsasprepaidmortgagepayments.ThetermsoftheBondsIssuedareasfollows: Maturity Principal Interest Bond Date Amount RateSeries2010A July20,2036 $ 133,425,000 4.50%Series2010B July20,2037 $ 10,000,000 5.00%TheMedical Center is eligible to receive cash subsidy payments from the United StatesDepartmentofTreasuryequalto35%oftheinterestpayableontheBuildAmericaBonds(Series 2010A), and 45% of the interest payable on the Recovery Zone EconomicDevelopmentBonds(Series2010B),payableonorabouteachrespectiveinterestpaymentdate,whichpaymentslowertheoveralltruecostofthebondsto3.33%. PursuanttotheBudgetControlActof2011,aspostponedbytheAmericanTaxPayerReliefActof2012,thebudget sequestration impactwasa reductionof7.2%,effectiveMarch1,2013. ThishadtheeffectofchangingthesubsidypaymentfromtheUnitedStatesDepartmentofTreasuryequal to32.48%of the interestpayableon theBuildAmericaBonds(Series2010A),and41.76%oftheinterestpayableontheRecoveryZoneEconomicDevelopmentBonds(Series2010B).


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NOTE8. BONDSPAYABLE(CONTINUED)The following schedule summarizes the special and scheduled mandatory redemptionrequirementsoftheSeries2010AandSeries2010BbondsasofJune30,2014:

FiscalYear Principal Interest Principal Interest Principal Interest

2015 $ 11,285,000 5,784,825 260,000 493,319 11,545,000 6,278,1442016 3,380,000 5,458,725 ‐ 487,000 3,380,000 5,945,7252017 3,540,000 5,304,938 ‐ 487,000 3,540,000 5,791,9382018 3,715,000 5,143,612 ‐ 487,000 3,715,000 5,630,6122019 3,890,000 4,974,525 ‐ 487,000 3,890,000 5,461,5252020‐2024 22,440,000 22,039,200 ‐ 2,435,000 22,440,000 24,474,2002025‐2029 28,375,000 16,415,213 ‐ 2,435,000 28,375,000 18,850,2132030‐2034 35,885,000 9,302,738 ‐ 2,435,000 35,885,000 11,737,7382035‐2038 20,915,000 1,413,788 9,740,000 1,567,250 30,655,000 2,981,038

$ 133,425,000 75,837,564 10,000,000 11,313,569 143,425,000 87,151,133

Series2010ABonds Series2010BBonds Total

ThebondsaresubjecttovariousredemptionprovisionsassetforthintheTrustIndenture,includingSpecialMandatoryRedemption,ScheduledMandatoryRedemption,andOptionalRedemption. The Special Mandatory Redemption provisions are contingent on variousevents, includingbutnot limitedtocircumstancesthatresult inthetrustestatereceivingearly payments on the GNMA Securities, or in the event the balance of GNMA Securitiesaftercompletionof theconstructionare lessthantheamountofoutstandingbonds. TheMedicalCentercompletedfinalendorsementoftheprojectonJune18,2014.ThebalanceoftheGNMASecuritieswaslessthantheamountoftheoutstandingbondsby$3.7million.Asaresult,onJuly15,2014,aspecialmandatoryredemptionoccurredintheamountsof$3.48millionfortheSeries2010Abondsand$260,000fortheSeries2010Bbonds.AsofJune 30, 2014 and 2013, the Medical Center has a balance of zero and $4.7 million,respectively, left from the original bond proceeds. On July 21, 2014, the scheduledmandatory redemption in the amount of $6.17 million for the Series 2010A bondsoccurred.


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NOTE8. BONDSPAYABLE(CONTINUED)MortgageNoteTheMortgageNotebearsinterestat4.61%.TheMortgageNotehasatermof299monthsfollowingthecommencementofamortizationandmaturesonJuly1,2037. Principalandinterestarepayableinequalmonthlyinstallmentsuponcommencementofamortization.Amortgageservicingfeeof12basispointsandaGNMAguarantyfeeof13basispointsarealsoincludedinthemonthlypayment,foratotalof4.86%.TheMortgageNoteissubjecttooptional prepayment beginning on January 20, 2021 or thereafter, and mandatoryprepaymentatanytimebasedontheoccurrenceofcertainevents,includingthereceiptofanymortgageinsuranceproceeds.In connectionwithGNMA insuring theMortgageNote, during2011 theRegents ofUNMmadeanequitycontributionof$46,000,000totheMedicalCenter,whichwasplacedintwoescrowaccounts,oneintheamountof$32,484,850inanaccounttitledOperatingCapitalEscrow Fund and the other in the amount of $13,515,150 in an account titled CapitalEscrow Fund with the Trustee. The Operating Capital funds were to sustain the pre‐opening operational costs andworking capital needs of theMedical Center. The CapitalEscrowFundwastheMedicalCenter’scapitalcontributiontothecostsofconstruction.NOTE9. NETPATIENTSERVICEREVENUESThemajorityoftheMedicalCenter’srevenueisgeneratedthroughagreementswiththird‐partypayors thatprovide for reimbursement to theMedicalCenter at amountsdifferentfrom its established charges.Approximately27%and16%of theMedical Center’s grosspatientrevenueforthefiscalyearendedJune30,2014,wasderivedfromtheMedicareandMedicaid programs, respectively, the continuation of which are dependent upongovernmental policies. For the fiscal year ended June 30, 2013, approximately 27% and28% were derived from the Medicare and Medicaid programs, respectively. Laws andregulations governing the Medicare andMedicaid programs are extremely complex andsubjecttointerpretation.Asaresult,thereisatleastareasonablepossibilitythatrecordedrevenueestimatescouldchangeasaresultofregulatoryreview.Contractualadjustmentsunderthird‐partyreimbursementprogramsrepresentthedifferencebetweentheMedicalCenter’sbillingsatestablishedchargesforservicesandamountsreimbursedbythird‐partypayors.Asummaryofthebasisofreimbursementfrommajorthird‐partypayorsfollows:


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NOTE9. NETPATIENTSERVICEREVENUES(CONTINUED)Medicare – Inpatientacutecareservices rendered toMedicareprogrambeneficiariesarepaid at prospectively determined rates per discharge. These Medical Severity DiagnosisRelated Group (MS‐DRG) rates vary according to a patient classification system that isbased on clinical, diagnostic, and other factors. Most Medicare outpatient services areprospectively paid through Medicare’s Outpatient Prospective Payment system (OPPS).Services excluded from theOPPS andpaidunder separate fee schedules include: clinicallab, certain rehabilitation services,durablemedical equipment, renaldialysis treatments,ambulanceservices,andprofessionalfeesofphysiciansandnonphysicianpractitioners.Medicaid – Inpatient acute care services rendered to Medicaid Fee‐for‐Service (FFS)programbeneficiariesarepaidatprospectivelydeterminedratesperdischargebasedupontheMS‐DRGsystem.Theseratesvaryaccordingtoclinicalfactorsandpatientdiagnosis.Inaddition,theMedicalCenterhasreimbursementagreementswithcertainManagedCareOrganizations (MCOs) that have contracted with the State of New Mexico SALUD! andCentennial Care programs to administer services to enrolledMedicaid beneficiaries. TheState of New Mexico terminated its SALUD! program effective December 31, 2013 andbeganitsCentennialCareprogrameffectiveJanuary1,2014.Thebasisforreimbursementundertheseagreementsincludesprospectivelydeterminedrates(MS‐DRG)orperdiemforinpatientservices,andprospectivelydeterminedpaymentsforoutpatientservices.TheMedicalCenterseespatients thatareenrolled in theNewMexicoSCIMedicaidplan.TheCenterparticipatesinthereimbursementagreementbetweenUNMHospitalsandtheStateofNewMexico.Funding ismodeledaftera capitatedpaymentprogram. Fundsareremitted to UNM Hospitals on a per‐member‐per‐month basis for all state‐approvedmembers.UNMHospitalsremitsfundstotheMedicalCenterbasedontheproratashareoftheadjudicatedclaimsforthesepatients. FundingundertheSCIprogramforfiscalyearsendedJune30,2014and2013was$973,477and644,231,respectively,andisincludedinnetpatientservicerevenue.ThestateofNewMexicoterminateditsSCIMedicaidprogrameffectiveDecember31,2013.Other–TheMedicalCenterhasalsoenteredintoreimbursementagreementswithcertaincommercial insurancecarriers,healthmaintenanceorganizations,andpreferredproviderorganizations.Thebasisforreimbursementundertheseagreementsincludesprospectivelydetermined rates‐per‐discharge, discounts from established charges, and prospectivelydeterminedperdiemrates.


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NOTE9. NETPATIENTSERVICEREVENUES(CONTINUED)AsummaryofnetpatientrevenuesfollowsfortheyearsendedJune30:

2014 2013

Chargesatestablishedrates $ 125,453,318 59,249,376Charitycare (5,068,930) (1,053,561)Contractualadjustments (48,130,588) (30,433,916)Provisionfordoubtfulaccounts (19,575,755) (9,478,955)Netpatientservicerevenues $ 52,678,045 18,282,944

NOTE10. CHARITYCARETheMedicalCentermaintains records to identifyandmonitor the levelof charity care itprovides.Theserecordsincludetheamountofchargesforegoneforservicesandsuppliesfurnished under its charity care policy. The following informationmeasures the level ofcharitycareprovidedduringtheyearsendedJune30:

2014 2013

Chargesforegone,basedonestablishedrates $ 5,068,930 1,053,561Estimatedcostsandexpensesincurredtoprovidecharitycare 2,397,603 874,982Equivalentpercentageofcharitycarechargesforgonetototalgrossrevenue 4% 2%

NOTE11. MALPRACTICEINSURANCEAs a University Research Park and Economic Development Act (URPEDA) corporation,UNM Sandoval RegionalMedical Center, Inc. enjoys immunity from suit for tort liabilityexcept as set forth in theNewMexicoTortClaimsAct (NMTCA). In this connection, theNewMexicoLegislaturewaivedtheState’sandtheUNMSandovalRegionalMedicalCenter,Inc. sovereign immunity for claims arising out of negligence out of the operation of itsMedicalCenter,thetreatmentoftheMedicalCenter’spatients,andthehealthcareservicesprovided by UNM Sandoval Regional Medical Center, Inc. employees. Additionally,consistent with the URPEDA, UNM Sandoval Regional Medical Center, Inc., elected topurchaseitsmedicalmalpractice,professionalandgeneralliabilitycoveragefromtheRiskManagementDivisionoftheStateofNewMexicoGeneralServicesDepartment(RMD),whoadministersthePublicLiabilityFundestablishedundertheNMTCA.


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NOTE11. MALPRACTICEINSURANCE(CONTINUED)TheNMTCAlimits,asanintegralpartofthiswaiverofimmunity,theamountofdamagesthatcanbeassessedagainstUNMSandovalRegionalMedicalCenter,Inc.onanytortclaimincluding medical malpractice, professional or general liability claims. The NMTCAprovides that total liability for all claims that arise out of a single occurrence shall notexceed$700,000setforthasfollows:(a)$200,000forrealproperty;(b)upto$300,000forpast and futuremedical andmedically relatedexpenses; and (c)up to$400,000 forpastandfuturenoneconomiclosses(suchaspainandsuffering)incurredortobeincurredbytheclaimant. While the languageof theNMTCAdoesnotexpresslyprovide forclaimsoflossofconsortium,NewMexicoappellatecourtdecisionshaveallowedclaimants toseekconsortium. As a result, if loss of consortium claims are presented, those claims cannotexceed$350,000 in theaggregate. Thus, if a claimpresentsbothdirect claimsand thirdparty claims, the maximum exposure of the Public Liability Fund and, therefore, UNMSandovalRegionalMedicalCenter, Inc., cannotexceed$1,050,000. TheNMTCAprohibitsthe award of punitive or exemplary damages against UNM Sandoval Regional MedicalCenter,Inc.TheURPEDAauthorizesURPEDAcorporationstoobtaintheirliabilitycoveragesfromRMDfor thosetortswheretheLegislaturehaswaivedtheState’s immunityuptothedamageslimits of theNMTCA, as described above, plus the cost incurred in defending any claimsand/orlawsuits(includingattorney’sfeesandexpenses),withnodeductibleandwithnoself‐insuredretentionbyUNMSandovalRegionalMedicalCenter,Inc.Asstatedpreviously,UNMSandovalRegionalMedicalCenter,Inc.,didelecttopurchase,anddidinfactpurchase,itsmedicalmalpractice,professionalandgeneralliabilitycoveragefromRMD.Asaresultof this, UNM Sandoval Regional Medical Center, Inc. is fully covered for claims and/orlawsuits relating tomedicalmalpractice or professional liability occurring at itsMedicalCenter.


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NOTE12. RELATEDPARTYTRANSACTIONSTheMedical Center provides professional services to UNM and other entities associatedwithUNM.TheMedicalCenterbilledthefollowingamounts,includedaseitherrevenueoras an expense reduction in the accompanying statements of revenues, expenses, andchangesinnetposition,forservicesrenderedduringtheyearsendedJune30:

2014 2013

UNMHealthSystem $ 6,820,917 ‐UNMHospital ‐ 836,082UNMDepartmentofOrthopedics 3,600 1,119

$ 6,824,517 837,201

The Medical Center reimburses UNM Hospital and UNM Medical Group for primarilyprofessionalserviceincurredonbehalfoftheMedicalCenter.TheMedicalCenterincurredexpenses, included in total expenses in the accompanying statements of revenues,expenses, and changes in net position, related to the following entities during the yearsendedJune30:

2014 2013

UniversityofNewMexico $ 1,221,160 ‐UNMHealthSystem 333,093 ‐UNMMedicalGroup 96,949 596,950UNMHospital ‐ 776,725

$ 1,651,202 1,373,675

Additionally,UNMMGextendedfundstotheMedicalCenterforthefundingoftheNegativeArbitrageAccount fund as required by the bond rating agencies. UNMMG advanced theMedicalCenter$10,125,000inNovemberof2010.DuringyearsendedJune30,2014,2013and2012,theMedicalCenterrepaid$0,$2,600,000and$3,800,000,respectively. Astherequired funds balance is recalculated every sixmonths, up until the final endorsementfromHUD,allfundsauthorizedtobereleasedareremittedtoUNMMG.FinalendorsementwascompletedonJune18,2014.ThefinalbalanceowedtoUNMMGforthefundingontheNegativeArbitragewaspaidonJuly29,2014intheamountof$2,040,000.


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NOTE12. RELATEDPARTYTRANSACTIONS(CONTINUED)UNMandtheMedicalCenterhaveentered intoaGroundLeaseunderwhich theMedicalCenter will lease approximately 18.4 acres of land from the UNM. The Ground leaseprovides for rent of $1.00 per year for the primary and extended terms of the GroundLease.TheGroundLeasefurtherprovidesthattheprimarytermoftheGroundLeasewillbe fora termof74yearsandgrants theMedicalCenter theoption torenewtheGroundLeaseforanextendedtermof25years.

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REPORTOFINDEPENDENTAUDITORSONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERS

BASEDONANAUDITOFFINANCIALSTATEMENTSPERFORMEDINACCORDANCEWITHGOVERNMENTAUDITINGSTANDARDS

TheBoardofDirectorsUNMSandovalRegionalMedicalCenter,Inc. andMr.HectorBalderas,StateAuditorWehaveaudited, inaccordancewiththeauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica and the standards applicable to financial audits contained inGovernmentAuditingStandardsissuedby theComptrollerGeneral of theUnitedStates, the financial statements of SandovalRegionalMedical Center, Inc. (SRMC), as of and for the year ended June30, 2014and the relatednotes to thefinancialstatements,whichcollectivelycompriseSRMC’sbasicfinancialstatementsandhaveissuedourreportthereondatedOctober31,2014.InternalControlOverFinancialReporting

Inplanningandperformingourauditofthefinancialstatements,weconsideredSRMC’sinternalcontroloverfinancialreporting(internalcontrol)todeterminetheauditproceduresthatareappropriateinthecircumstances for thepurposeofexpressingouropinionson the financial statements,butnot for thepurposeofexpressinganopinionontheeffectivenessofSRMC’sinternalcontrol.Accordingly,wedonotexpressanopinionontheeffectivenessofSRMC’sinternalcontrol.A deficiency in internal control exists when the design or operation of a control does not allowmanagementoremployees,inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetect and correct, misstatements on a timely basis. A material weakness is a deficiency, or acombinationofdeficiencies,ininternalcontrolsuchthatthereisareasonablepossibilitythatamaterialmisstatementoftheentity'sfinancialstatementswillnotbeprevented,ordetectedandcorrected,onatimelybasis.Asignificantdeficiency isadeficiency,oracombinationofdeficiencies,ininternalcontrolthatislessseverethanamaterialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Ourconsiderationofinternalcontrolwasforthelimitedpurposedescribedinthefirstparagraphofthissection and was not designed to identify all deficiencies in internal control that might be materialweaknessesorsignificantdeficiencies.Giventheselimitations,duringourauditwedidnotidentifyanydeficiencies in internal control that we consider to be material weaknesses. However, materialweaknessesmayexistthathavenotbeenidentified.

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TheBoardofDirectorsUNMSandovalRegionalMedicalCenter,Inc. andMr.HectorBalderas,StateAuditor ComplianceandOtherMatters

As part of obtaining reasonable assurance about whether SRMC’s financial statements are free frommaterial misstatement, we performed tests of its compliance with certain provisions of laws,regulations, contracts, and grant agreements, noncompliance with which could have a direct andmaterialeffectonthedeterminationoffinancialstatementamounts.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofouraudit,andaccordingly,wedonotexpresssuchanopinion.TheresultsofourtestsdisclosednoinstancesofnoncomplianceorothermattersthatarerequiredtobereportedunderGovernmentAuditingStandards.PurposeofthisReport

The purpose of this report is solely to describe the scope of our testing of internal control andcompliance and the results of that testing, and not to provide an opinion on the effectiveness of theentity’s internal control or on compliance. This report is an integral part of an audit performed inaccordance with Government Auditing Standards in considering the entity’s internal control andcompliance.Accordingly,thiscommunicationisnotsuitableforanyotherpurpose.

Albuquerque,NewMexicoOctober31,2014

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)SCHEDULEOFFINDINGSANDRESPONSESJUNE30,2014PriorYearAuditFinding13‐01EquipmentandRealPropertyManagement(OtherMatter)ThefindinghasbeenresolvedasofJune30,2014.

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UNMSANDOVALREGIONALMEDICALCENTER,INC.(ACOMPONENTUNITOFTHEUNIVERSITYOFNEWMEXICO)EXITCONFERENCEJUNE30,2014AnexitconferencewasconductedonOctober16,2014,withmembersoftheboardofdirectorsandmembersofSRMCmanagement. Duringthismeeting, thecontentsofthis report were discussed with the following board members, managementpersonnel,andMossAdamsLLPrepresentativespresent:SteveMcKernan BoardMember

JerryGeist BoardMemberJamieSilvaSteele PresidentandChiefExecutiveOfficerDarleneFernandez ChiefFinancialOfficer,SRMCLawrencePineda FinanceDirectorEllaWatt InterimChiefFinancialOfficer,UNMHealthSystemScotSauder DeputyUniversityCounsel,UNMHealthSciencesCorreenBales ExecutiveDirector,HumanResources

DeVonWiens Partner,MossAdamsLLP

SRMC’s management prepared the financial statements and is responsible for thecontents.

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