REPORT NO. 2009-160 MARCH 2009 UNIVERSITY OF CENTRAL FLORIDA_part5 docx

MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -33- accounts, and the individual members allocate contributions and account balances among various approved investment choices. There were 527 University participants during the 2007-08 fiscal year. Required contributions made to the PEORP totaled $1,667,757. Financial statements and other supplementary information of the FRS are included in the State’s Comprehensive Annual Financial Report, which is available from the Florida Department of Financial Services. An annual report on the FRS, which includes its financial statements, required supplementary information, actuarial report, and other relevant information, is available from the Florida Department of Management Services, Division of Retirement. State University System Optional Retirement Program . Section 121.35, Florida Statutes, provides for an Optional Retirement Program (Program) for eligible university instructors and administrators. The Program is designed to aid State universities in recruiting employees by offering more portability to employees not expected to remain in the FRS for six or more years. The Program is a defined contribution plan, which provides full and immediate vesting of all contributions submitted to the participating companies on behalf of the participant. Employees in eligible positions can make an irrevocable election to participate in the Program, rather than the FRS, and purchase retirement and death benefits through contracts provided by certain insurance carriers. The employing university contributes on behalf of the participant 10.43 percent of the participant’s salary, less a small amount used to cover administrative costs. The remaining contribution is invested in the company or companies selected by the participant to create a fund for the purchase of annuities at retirement. The participant may contribute, by payroll deduction, an amount not to exceed the percentage contributed by the university to the participant’s annuity account. There were 2,435 University participants during the 2007-08 fiscal year. Required employer contributions made to the Program totaled $15,708,222 and employee contributions totaled $7,203,301. 15. CONSTRUCTION COMMITMENTS The University’s major construction commitments at June 30, 2008, are as follows: This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -34- Project Description Total Completed Balance Commitment to Date Committed Burnett Biomedical Science Center 73,275,421$ 49,590,192$ 23,685,229$ Physical Science Building 18,246,432 9,619,890 8,626,542 Medical School 6,624,012 3,331,924 3,292,088 Arts Complex II 3,490,324 1,704,253 1,786,071 Others 5,103,894 3,147,609 1,956,285 Total 106,740,083$ 67,393,868$ 39,346,215$ 16. OPERATING LEASE COMMITMENTS The University leased buildings under operating leases, which expire in 2016. These leased assets and the related commitments are not reported on the University’s statement of net assets. Operating lease payments are recorded as expenses when paid or incurred. Outstanding commitments resulting from these lease agreements are contingent upon future appropriations. Future minimum lease commitments for noncancelable operating leases are as follows: Fiscal Year Ending June 30 Amount 2009 12,015,573$ 2010 5,494,625 2011 2,527,445 2012 461,558 2013 472,928 2014-16 1,389,306 Total Minimum Payments Required 22,361,435$ 17. RISK MANAGEMENT PROGRAMS The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Pursuant to Section 1001.72(3), Florida Statutes, the University participates in State self-insurance programs providing insurance for property and casualty, workers’ compensation, general liability, and fleet automotive liability. During the 2007-08 fiscal year, the State retained the first $2 million of losses for each occurrence with an annual aggregate retention of $40 million for named wind and flood losses and no annual aggregate retention for all other named perils. After the annual aggregate retention, losses in excess of $2 million per occurrence were commercially insured up to $50 million for named wind and flood. For perils other than named wind and flood, losses in excess of $2 million per occurrence were commercially insured up to $200 million; and losses exceeding those amounts were retained by the State. No excess insurance coverage is provided for This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -35- workers’ compensation, general and automotive liability, Federal Civil Rights and employment action coverage. All losses in these categories are completely self-insured by the State through the State Risk Management Trust Fund established pursuant to Chapter 284, Florida Statutes. Payments on tort claims are limited to $100,000 per person and $200,000 per occurrence as set by Section 768.28, Florida Statutes. Calculation of premiums considers the cash needs of the program and the amount of risk exposure for each participant. Settlements have not exceeded insurance coverage during the past three years. Pursuant to Section 110.123, Florida Statutes, University employees may obtain health care services through participation in the State group health insurance plan or through membership in a health maintenance organization plan under contract with the State. The State’s risk financing activities associated with State group health insurance, such as risk of loss related to medical and prescription drug claims, are administered through the State Employees Group Health Insurance Trust Fund. It is the practice of the State not to purchase commercial coverage for the risk of loss covered by this Fund. Additional information on the State’s group health insurance plan, including the actuarial report, is available from the Florida Department of Management Services, Division of State Group Insurance. 18. LITIGATION The University is involved in several pending and threatened legal actions. The range of potential loss from all such claims and actions, as estimated by the University’s legal counsel and management, should not materially affect the University’s financial position. 19. FUNCTIONAL DISTRIBUTION OF OPERATING EXPENSES The functional classification of an operating expense (instruction, research, etc.) is assigned to a department based on the nature of the activity, which represents the material portion of the activity attributable to the department. For example, activities of academic departments for which the primary departmental function is instruction may include some activities other than direct instruction such as research and public service. However, when the primary mission of the department consists of instructional program elements, all expenses of the department are reported under the instruction classification. The operating expenses on the statement of revenues, expenses, and changes in net assets are presented by natural classifications. The following are those same expenses presented in functional classifications as recommended by NACUBO: This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -36- Functional Classification Amount Instruction 197,527,457$ Research 110,329,320 Public Service 1,316,586 Academic Support 40,252,587 Student Services 27,583,191 Institutional Support 54,936,811 Operation and Maintenance of Plant 18,233,733 Scholarships and Fellowships 49,324,636 Depreciation 47,025,821 Auxiliary Enterprises 80,345,052 Loan Operations 375,968 Total Operating Expenses 627,251,162$ 20. SEGMENT INFORMATION A segment is defined as an identifiable activity (or grouping of activities) that has one or more bonds or other debt instruments outstanding with a revenue stream pledged in support of that debt. In addition, the activity’s related revenues, expenses, gains, losses, assets, and liabilities are required to be accounted for separately. The following financial information for the University’s Bookstore, Housing, Parking, and Health Center facilities represents identifiable activities for which one or more bonds are outstanding: Bookstore Housing Facilit y Parking Facilit y Health Center Revenue Bonds Revenue Bonds Revenue Bonds Revenue Bonds Assets Current Assets 951,081$ 7,752,557$ 3,714,212$ 1,257,850$ Capital Assets, Net 3,272,907 73,678,878 42,055,835 9,579,888 Other Noncurrent Assets 514,622 4,603,790 4,050,107 1,212,829 Total Assets 4,738,610 86,035,225 49,820,154 12,050,567 Liabilities Current Liabilities 189,143 5,324,780 2,494,495 726,223 Noncurrent Liabilities 1,878,143 77,885,845 30,103,170 6,854,183 Total Liabilities 2,067,286 83,210,625 32,597,665 7,580,406 Net Assets Invested in Capital Assets, Net of Related Debt 1,254,100 (5,365,689) 10,541,765 2,878,701 Restricted - Expendable 472,781 3,559,823 3,562,277 1,114,427 Unrestricted 944,443 4,630,466 3,118,447 477,033 Total Net Assets 2,671,324$ 2,824,600$ 17,222,489$ 4,470,161$ Condensed Statement of Net Assets This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -37- Bookstore Housin g Facilit y Parkin g Facilit y Health Center Revenue Bonds Revenue Bonds Revenue Bonds Revenue Bonds Operating Revenues 2,276,564$ 20,361,472$ 13,672,685$ 12,400,058$ Depreciation Expenses (155,355) (3,542,963) (1,593,628) (439,416) Other Operating Expenses (361,196) (10,842,923) (7,112,998) (10,506,166) Operating Income 1,760,013 5,975,586 4,966,059 1,454,476 Nonoperating Revenues (Expenses): Nonoperating Revenue 43,043 1,329,104 956,198 140,514 Interest Expense (119,673) (4,047,569) (1,510,015) (319,240) Nonoperating Expenses (132) (2,425,311) (2,360) (25,528) Net Nonoperating Expenses (76,762) (5,143,776) (556,177) (204,254) Income Before Other Revenues, Expenses, Gains, or Losses 1,683,251 831,810 4,409,882 1,250,222 Other Revenue, Expenses, Gains, or Losses (1,528,800) 2,134,526 (341,671) (643,583) Increase in Net Assets 154,451 2,966,336 4,068,211 606,639 Net Assets, Beginning of Year 2,516,873 (141,736) 13,154,278 3,863,522 Net Assets, End of Year 2,671,324$ 2,824,600$ 17,222,489$ 4,470,161$ Condensed Statement of Revenues, Expenses, and Changes in Net Assets Bookstore Housing Facility Parking Facility Health Center Revenue Bonds Revenue Bonds Revenue Bonds Revenue Bonds Net Cash Provided (Used) by: Operating Activities 1,865,668$ 9,873,898$ 6,692,952$ 1,945,714$ Noncapital Financing Activities (1,528,866) 246,865 (625,541) (656,846) Capital and Related Financing Activities (269,399) (11,685,514) (4,402,451) (763,241) Investing Activities (903,273) 1,109,919 (2,695,659) (1,337,019) Net Decrease in Cash and Cash Equivalents (835,870) (454,832) (1,030,699) (811,392) Cash and Cash Equivalents, Beginning of Year 984,216 1,918,026 1,919,331 1,043,054 Cash and Cash Equivalents, End of Year 148,346$ 1,463,194$ 888,632$ 231,662$ Condensed Statement of Cash Flows 21. COMPONENT UNITS The University has five discretely presented component units as discussed in note 1. These component units comprise 100 percent of the transactions and account balances of the aggregate discretely presented component units’ columns of the financial statements. The following financial information is from the most recently available audited financial statements for the component units: This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -38- University of University of UCF UCF Golden Total Central Florida Central Florida Athletics Convocation Knights Foundation, Research Association, Corporation Corporation Inc. Foundation, Inc. Inc. Condensed Statement of Net Assets Assets: Current Assets 44,673,792$ 4,795,678$ 6,085,467$ 37,719,983$ 10,834,126$ 104,109,046$ Capital Assets, Net 75,086,607 14,769,722 201,479,075 58,031,967 349,367,371 Other Noncurrent Assets 135,513,392 432,312 10,189,874 1,925,846 148,061,424 Total Assets 255,273,791 5,227,990 20,855,189 249,388,932 70,791,939 601,537,841 Liabilities: Current Liabilities 18,699,449 4,049,458 10,728,801 13,003,360 3,944,089 50,425,157 Noncurrent Liabilities 26,411,774 10,709,761 244,132,245 62,874,718 344,128,498 Total Liabilities 45,111,223 4,049,458 21,438,562 257,135,605 66,818,807 394,553,655 Net Assets: Invested in Capital Assets, Net of Related Debt 41,910,270 9,284,179 (3,607,527) (4,842,751) 42,744,171 Restricted 153,432,190 8,417,985 161,850,175 Unrestricted 14,820,108 1,178,532 (9,867,552) (4,139,146) 397,898 2,389,840 Total Net Assets 210,162,568$ 1,178,532$ (583,373)$ (7,746,673)$ 3,973,132$ 206,984,186$ Condensed Statement of Revenues, Expenses, and Changes in Net Assets Operating Revenues 23,569,270$ 3,144,103$ 29,000,829$ 24,449,630$ 3,103,866$ 83,267,698$ Operating Expenses 49,983,292 2,998,661 31,275,027 20,588,563 3,778,783 108,624,326 Operating Income (Loss) (26,414,022) 145,442 (2,274,198) 3,861,067 (674,917) (25,356,628) Net Nonoperating Revenues (Expenses) 3,389,999 144,078 2,123,082 (9,448,675) 1,716,142 (2,075,374) Other Revenues, Expenses, Gains and Losses 10,809,768 10,809,768 Increase (Decrease) in Net Assets (12,214,255) 289,520 (151,116) (5,587,608) 1,041,225 (16,622,234) Net Assets, Beginning of Year 222,376,823 889,012 (432,257) (2,159,065) 2,931,907 223,606,420 Net Assets, End of Year 210,162,568$ 1,178,532$ (583,373)$ (7,746,673)$ 3,973,132$ 206,984,186$ This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1450 DAVID W. MARTIN, CP A AUDITOR GENERAL PHONE: 850-488-5534 FAX: 850-488-6975 The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We audited the financial statements of the University of Central Florida, a component unit of the State of Florida, and its aggregate discretely presented component units as of and for the fiscal year ended June 30, 2008, which collectively comprise the University’s basic financial statements, and have issued our report thereon included under the heading INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS. Our report on the financial statements was modified to include a reference to other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Other auditors audited the financial statements of the aggregate discretely presented component units as described in our report on the University’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting In planning and performing our audit, we considered the University’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purposes of expressing an opinion on the effectiveness of the University’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the University’s internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the -39- This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 University’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the University’s financial statements that is more than inconsequential will not be prevented or detected by the University’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the University’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the University’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, rules, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Pursuant to Section 11.45(4), Florida Statutes, this report is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this report is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, Federal and other granting agencies, and applicable management and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, David W. Martin, CPA February 26, 2009 -40- This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 -41- PRIOR AUDIT FOLLOW-UP The University had taken corrective actions for findings included in our report No. 2008-129. This is trial version www.adultpdf.com . version www.adultpdf.com MARCH 2009 REPORT NO. 2009- 160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2008 -38- University of University. Condensed Statement of Net Assets This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009- 160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL. No excess insurance coverage is provided for This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009- 160 UNIVERSITY OF CENTRAL FLORIDA A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES