REPORT NO. 2011-106 FEBRUARY 2011 FLORIDA GULF COAST UNIVERSITY Financial Audit_part2 pdf

FEBRUARY 2011 REPORT NO. 2011-106 8 Cash flows from investing activities show the net source and use of cash related to purchasing or selling investments, and earning income on those investments. Cash flows from the noncapital financing activities include those activities not covered in other sections. The following summarizes cash flows for the 2009-10 and 2008-09 fiscal years: Condensed Statement of Cash Flows (In Thousands) 2009-10 2008-09 Cash Provided (Used) by: Operating Activities (64,038)$ (55,511)$ Noncapital Financing Activities 71,708 66,942 Capital and Related Financing Activities (15,312) (34,410) Investing Activities (2,279) 4,784 Net Decrease in Cash and Cash Equivalents (9,921) (18,195) Cash and Cash Equivalents, Beginning of Year 15,212 33,407 Cash and Cash Equivalents, End of Year 5,291$ 15,212$ Major sources of funds included in operating activities are net student tuition and fees of $35.1 million; Federal and State and local grants and contracts of $12.9 million; and sales and services of auxiliary enterprises of $16.6 million. Major uses of funds were payments made to and on behalf of employees totaling $83.7 million; payments to suppliers totaling $31.3 million; and payments to and on behalf of students for scholarships totaling $14.1 million. The increase in cash used from operating activities was due primarily to an increase in tuition and fee revenue collections offset by increased payments to students for scholarships, fellowships and waivers, as well as increased payments to suppliers for services and supplies, and payments to employees for salaries and benefits. The largest source of inflow of cash for noncapital financing activities was State appropriations in the amount of $46.5 million. Also included in noncapital financing revenues was Federal and State student financial aid of $21.5 million. The overall increase of $4.8 million in cash provided by noncapital financing activities was primarily due to an increase in Federal and State student financial aid of $5.3 million, the receipt of $3.6 million in State appropriated ARRA funds, offset with a decrease in State appropriations of $5.4 million. Cash used by capital and related financing activities was $15.3 million, a decrease of $19.1 million. Net cash used was primarily due from the purchase or construction of capital assets in the amount of $45 million and principal and interest paid on debt and leases in the amount of $6.7 million offset with capital appropriations in the amount of $36.4 million. Cash used by investing activities was $2.3 million, an increase of $7.1 million from the net purchases of investments. CAPITAL ASSETS, CAPITAL EXPENSES AND COMMITMENTS, AND DEBT ADMINISTRATION C APITAL ASSETS At June 30, 2010, the University had $479.9 million in capital assets, less accumulated depreciation of $72.4 million, for net capital assets of $407.5 million. Depreciation charges for the current fiscal year totaled $11.7 million. The following table summarizes the University’s capital assets, net of accumulated depreciation, at June 30: This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 9 Capital Assets, Net at June 30 (In Thousands) 2010 2009 Land 32,681$ 32,605$ Buildings 314,566 261,108 Construction in Progress 18,450 47,659 Infrastructure and Other Improvements 19,266 16,533 Furniture and Equipment 19,137 16,392 Library Resources 1,136 1,055 Property Under Capital Leases 366 658 Works of Art and Historical Treasures 1,767 273 Other Capital Assets 128 125 Total Capital Assets, Net 407,497$ 376,408$ Additional information about the University’s capital assets is presented in the notes to financial statements. C APITAL EXPENSES AND COMMITMENTS The University’s major capital commitments at June 30, 2010, are as follows: Total Committed 51,899$ Completed to Date (18,450) Balance Committed 33,449 $ Amount (In Thousands) Additional information about the University’s capital commitments is presented in the notes to financial statements. D EBT ADMINISTRATION As of June 30, 2010, the University had $131.4 million in outstanding bonds payable, loan payable, and capital leases payable, representing a decrease of $9.2 million, or 6.5 percent, from the prior fiscal year. Apart from debt service payments of $2.7 million, a prior period adjustment occurred from a change in the accounting for State University System Capital Improvement Trust Fund Revenue Bonds. It has been determined these bonds are not the debt of the University since repayment is the responsibility of the Florida Board of Governors. The change is reflected in a $6.5 million decrease in the University’s bonds payable and an increase in the University’s beginning net assets. Additional information about the change in reporting capital debt is included in note 2 to the financial statements. The following table summarizes the outstanding long-term debt by type for the fiscal years ended June 30: Long-Term Debt, at June 30 (In Thousands) 2010 2009 Bonds Payable 125,783$ 134,729$ Loan Payable 5,000 5,000 Capital Leases Payable 663 897 Total 131,446$ 140,626$ Additional information about the University’s long-term debt is presented in the notes to financial statements. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 10 ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on its financial position or operations during the 2010-11 fiscal year. The University’s financial outlook for the future continues to be positive. The level of State support, compensation and benefit increases, and student tuition and fee increases impact the University’s ability to expand programs, undertake new initiatives, and meet its core mission and ongoing operational needs. State appropriations, as a percentage of operating revenues and nonoperating revenues, represent approximately 31.5 percent of the total of these combined revenues. The level of State support is, therefore, one of the key factors influencing the University’s activities. Financial and political support from State government is expected to remain at lower levels in the short term until economic conditions improve and will be managed through tuition increases, targeted expenditure reductions, and efficiencies. The budget that the Florida Legislature adopted for the 2010-11 fiscal year provided a 1.3 percent decrease for the University’s State appropriations and is partially offset with $3.4 million of State appropriated ARRA funds. Regarding the University’s legislative priorities, the Legislature did not provide a salary increase for State university employees; however, the University will fund a two percent salary increase starting January 1, 2011, and a $1,000 one-time lump sum bonus for employees. The Legislature did not provide additional funding for enrollment growth at State universities. Another significant factor in the University’s economic position relates to its ability to recruit and retain high quality students. The Fall 2010 enrollment of 12,103 students increased 7.9 percent over the Fall 2009 enrollment of 11,219 students. First time-in-college freshman admission of 2,250 students represents a 12.3 percent increase over the 2009-10 fiscal year. Efforts to improve retention such as an aggressive marketing plan to recruit qualified students and enhanced intervention to assist academic success will help assure total enrollment continues a positive trend. In the 2010-11 fiscal year, the University expects an increase in revenue from student tuition and fees due to a combination of increased enrollment and increased student tuition and fees. The State has approved and appropriated funds to the University’s capital budget for the 2010-11 fiscal year in the amount of $15.9 million. Public Education Capital Outlay appropriations for the 2010-11 fiscal year were for the Academic VIII building in the amount of $12.5 million, Infrastructure in the amount of $3 million, and Repairs and Maintenance in the amount of $410 thousand. REQUESTS FOR INFORMATION Questions concerning information provided in the MD&A, financial statements and notes thereto, and other required supplemental information, or requests for additional financial information should be addressed to Dr. Joseph Shepard, Vice President of Administration and Finance, Florida Gulf Coast University, 10501 FGCU Boulevard South, Fort Myers, Florida 33965. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 11 BASIC FINANCIAL STATEMENTS University Component Unit ASSETS Current Assets: Cash and Cash Equivalents 13,281$ 9,071,279$ Investments 48,274,273 Accounts Receivable, Net 2,622,029 89,410 Loans Receivable 58,543 Due from State 24,516,773 Other Current Assets 300,000 Total Current Assets 75,784,899 9,160,689 Noncurrent Assets: Restricted Cash and Cash Equivalents 5,277,402 Investments 611,356 Restricted Investments 5,331,306 44,615,132 Accounts and Pledges Receivable, Net 1,832,566 Note Receivable 6,857,192 5,000,000 Real Estate Held for Investment 4,551,500 Depreciable Capital Assets, Net 354,603,085 4,021 Nondepreciable Capital Assets 52,894,407 Other Noncurrent Assets 52,512 Total Noncurrent Assets 424,963,392 56,667,087 TOTAL ASSETS 500,748,291$ 65,827,776$ LIABILITIES Current Liabilities: Accounts Payable 5,295,811$ 55,433$ Interest Payable 48,751 Construction Contracts Payable 2,852,862 Salaries and Wages Payable 3,658,524 Deposits Payable 2,644,670 Deferred Revenue 1,151,488 24,000 Long-Term Liabilities - Current Portion: Bonds Payable 2,705,000 Capital Leases Payable 246,196 Compensated Absences Payable 440,595 Gifts Annuities Payable 14,360 Total Current Liabilities 18,995,146 142,544 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORID A STATEMENT OF NET ASSETS June 30, 2010 This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 12 University Component Unit LIABILITIES (Continued) Noncurrent Liabilities: Bonds Payable 123,078,115$ $ Loan Payable 5,000,000 7,000,000 Capital Leases Payable 416,612 Compensated Absences Payable 6,584,836 Other Postemployment Benefits Payable 3,772,000 Gift Annuities Payable 136,141 Deferred Revenue 24,000 Other Noncurrent Liabilities 52,512 Total Noncurrent Liabilities 138,851,563 7,212,653 TOTAL LIABILITIES 157,846,709 7,355,197 NET ASSETS Invested in Capital Assets, Net of Related Debt 280,117,419 4,021 Restricted for Nonexpendable: Endowment 42,227,890 Restricted for Expendable: Debt Service 1,000,000 Loans 518,611 Capital Projects 25,827,262 Other 3,976,256 11,178,975 Unrestricted 31,462,034 5,061,693 TOTAL NET ASSETS 342,901,582 58,472,579 TOTAL LIABILITIES AND NET ASSETS 500,748,291$ 65,827,776$ The accompanying notes to financial statements are an integral part of this statement. FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORID A STATEMENT OF NET ASSETS ( Continued ) June 30, 2010 This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 13 University Component Unit REVENUES Operating Revenues: Student Tuition and Fees, Net of Scholarship Allowances of $ 17,529,969 35,107,487$ $ Federal Grants and Contracts 5,890,714 State and Local Grants and Contracts 2,551,548 Nongovernmental Grants and Contracts 4,227,919 Sales and Services of Auxiliary Enterprises 23,433,722 Gifts and Donations 4,159,350 Rental Income and Other 1,355,147 Other Operating Revenues 1,199,698 Total Operating Revenues 72,411,088 5,514,497 EXPENSES Operating Expenses: Compensation and Employee Benefits 86,226,933 Services and Supplies 28,020,181 Utilities and Communications 4,461,580 Scholarships, Fellowships, and Waivers 14,098,661 1,331,816 Depreciation 11,735,957 6,828 General and Administrative 1,044,289 University Support 1,182,154 Program Services 3,745,520 Other Operating Expenses 500,000 Total Operating Expenses 144,543,312 7,810,607 Operating Loss (72,132,224) (2,296,110) NONOPERATING REVENUES (EXPENSES) State Appropriations 46,319,727 State Appropriated American Recovery and Reinvestment Act Funds 3,573,134 Federal and State Student Financial Aid 21,536,585 Investment Income 3,096,656 4,316,567 Interest on Capital Asset-Related Debt (3,994,341) (186,242) Other Nonoperating Expenses (228,106) Net Nonoperating Revenues 70,303,655 4,130,325 Income (Loss) Before Other Revenues, Expenses, Gains, or Losses (1,828,569) 1,834,215 Capital Appropriations 8,441,266 Capital Grants, Contracts, Donations, and Fees 2,017,565 2,898,862 Increase in Net Assets 8,630,262 4,733,077 Net Assets, Beginning of Year 327,821,929 53,739,502 Adjustment to Beginning Net Assets 6,449,391 Net Assets, Beginning of Year, as Restated 334,271,320 53,739,502 Net Assets, End of Year 342,901,582$ 58,472,579$ T he accompanying notes to financial statements are an integral part of this statement. FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORID A STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Fiscal Year Ended June 30, 2010 This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 14 University CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees, Net 35,120,367$ Grants and Contracts 12,941,379 Sales and Services of Auxiliary Enterprises 16,576,530 Other Operating Receipts 489,808 Payments to Employees (83,718,921) Payments to Suppliers for Goods and Services (31,334,755) Payments to Students for Scholarships and Fellowships (14,098,661) Net Loans Issued to Students (14,208) Net Cash Used by Operating Activities (64,038,461) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations 46,484,520 State Appropriated American Recovery and Reinvestment Act Funds 3,573,134 Federal and State Student Financial Aid 21,536,585 Net Change in Funds Held for Others 113,829 Net Cash Provided by Noncapital Financing Activities 71,708,068 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Appropriations 36,394,250 Purchase or Construction of Capital Assets (45,013,188) Principal Paid on Capital Debt and Leases (2,684,431) Interest Paid on Capital Debt and Leases (4,008,926) Net Cash Used by Capital and Related Financing Activities (15,312,295) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Investments, Net (3,681,434) Investment Income 1,402,438 Net Cash Used by Investing Activities (2,278,996) Net Decrease in Cash and Cash Equivalents (9,921,684) Cash and Cash Equivalents, Beginning of Year 15,212,367 Cash and Cash Equivalents, End of Year 5,290,683$ FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORID A STATEMENT OF CASH FLOWS For the Fiscal Year Ended June 30, 2010 This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 15 University RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES Operating Loss (72,132,224)$ Adjustments to Reconcile Operating Loss to Net Cash Used by Operating Activities: Depreciation Expense 11,735,957 Change in Assets and Liabilities: Receivables, Net (7,214,646) Other Current Assets (300,000) Accounts Payable 1,442,563 Salaries and Wages Payable 311,724 Deposits Payable (97,538) Compensated Absences Payable 228,287 Deferred Revenue 19,416 Other Postemployment Benefits Payable 1,968,000 NET CASH USED BY OPERATING ACTIVITIES (64,038,461)$ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES 1,665,000$ The accompanying notes to financial statements are an integral part of this statement. Unrealized gains were recognized as increases in investment income on the statement of revenues, expenses, and changes in net assets, but are not cash transactions for the statement of cash flows. FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORID A STATEMENT OF CASH FLOWS ( Continued ) For the Fiscal Year Ended June 30, 2010 This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS J UNE 30, 2010 16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity . The University is a separate public instrumentality that is part of the State university system of public universities, which is under the general direction and control of the Florida Board of Governors. The University is directly governed by a Board of Trustees (Trustees) consisting of 13 members. The Governor appoints six citizen members and the Board of Governors appoints five citizen members. These members are confirmed by the Florida Senate and serve staggered terms of five years. The chair of the faculty senate and the president of the student body of the University are also members. The Board of Governors establishes the powers and duties of the Trustees. The Trustees are responsible for setting policies for the University, which provide governance in accordance with State law and Board of Governors’ Regulations. The Trustees select the University President. The University President serves as the executive officer and the corporate secretary of the Trustees, and is responsible for administering the policies prescribed by the Trustees. Criteria for defining the reporting entity are identified and described in the Governmental Accounting Standards Board’s Codification of Governmental Accounting and Financial Reporting Standards, Sections 2100 and 2600. These criteria were used to evaluate potential component units for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the primary government’s financial statements to be misleading or incomplete. Based on the application of these criteria, the University is a component unit of the State of Florida, and its financial balances and activity are reported in the State’s Comprehensive Annual Financial Report by discrete presentation. Blended Component Unit . Based on the application of the criteria for determining component units, the Florida Gulf Coast University Financing Corporation (Corporation) is included within the University reporting entity as a blended component unit. The Corporation was incorporated on April 11, 2003, as a not-for-profit Florida corporation under the provisions of Chapter 617, Florida Statutes, and is a direct-support organization of the University. The Corporation was established to receive, hold, invest, and administer property and to make expenditures for the exclusive benefit of the University. Due to the substantial economic relationship between the Corporation and the University, the financial activities of the Corporation are included in the University’s financial statements. An annual audit of the Corporation is conducted by independent certified public accountants and is submitted to the Auditor General and the University Board of Trustees. Additional information on the Corporation, including copies of audit reports, is available by contacting the University Controller’s Office. Discretely Presented Component Unit . Based on the application of the criteria for determining component units, the Florida Gulf Coast University Foundation, Inc. (Foundation), as provided for in Section 1004.28, Florida Statutes, and Board of Governors Regulation 9.011, is included within the University reporting entity as a discretely presented component unit. The Foundation was incorporated on April 19, 1993, as a not-for-profit Florida corporation under the provisions of Chapter 617, Florida Statutes, and is a direct-support organization of the University. Its purpose is to encourage, solicit, collect, receive, This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 17 and administer gifts and bequests of property and funds for scientific, educational, and charitable purposes, all for the advancement of the University and its objectives. An annual audit of the Foundation is conducted by independent certified public accountants and is submitted to the Auditor General and the University Board of Trustees. Additional information on the Foundation, including copies of audit reports, is available by contacting the University Controller’s Office. Basis of Presentation . The University’s accounting policies conform with accounting principles generally accepted in the United States of America applicable to public colleges and universities as prescribed by the Governmental Accounting Standards Board (GASB). The National Association of College and University Business Officers (NACUBO) also provides the University with recommendations prescribed in accordance with generally accepted accounting principles promulgated by GASB and the Financial Accounting Standards Board (FASB). GASB allows public universities various reporting options. The University has elected to report as an entity engaged in only business-type activities. This election requires the adoption of the accrual basis of accounting and entitywide reporting including the following components:  Management’s Discussion and Analysis  Basic Financial Statements:  Statement of Net Assets  Statement of Revenues, Expenses, and Changes in Net Assets  Statement of Cash Flows  Notes to Financial Statements  Other Required Supplementary Information Basis of Accounting . Basis of accounting refers to when revenues, expenses, and related assets and liabilities are recognized in the accounts and reported in the financial statements. Specifically, it relates to the timing of the measurements made, regardless of the measurement focus applied. The University’s financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange activities are generally recognized when all applicable eligibility requirements, including time requirements, are met. The University’s blended and discretely presented component units use the accrual basis of accounting whereby revenues are earned and expenses are recognized when incurred, and follow GASB standards of accounting and financial reporting. The University applies all applicable GASB pronouncements and, in accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, has elected to apply only those FASB pronouncements issued on or before November 30, 1989, not in conflict with GASB standards. This is trial version www.adultpdf.com [...].. .FEBRUARY 2011 REPORT NO 2011- 106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2010 Significant interdepartmental sales between auxiliary service departments and other institutional departments have been accounted for as reductions of expenses and not revenues of those departments The University s principal... with GASB Statement No 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting Cash and Cash Equivalents - University Cash and cash equivalents consist of cash on hand, cash in demand accounts, and amounts held by a trustee for the Florida Gulf Coast University Financing Corporation (Corporation) University cash deposits are... University and the amount that is actually paid by a student or a third party making payment on behalf of the student The University applied “The Alternate Method” as prescribed in NACUBO Advisory Report 2000-05 to determine the reported net tuition scholarship allowances Under this method, the University computes these amounts by allocating the cash payments to students, excluding payments for services, on... (Corporation) University cash deposits are held in banks qualified as public depositories under Florida law All such deposits are insured by Federal depository insurance, up to specified limits, or collateralized with securities held in Florida s multiple financial institution collateral pool required by Chapter 280, Florida Statutes Cash and cash equivalents that are externally restricted to make debt service... is the University s policy to first apply the restricted resources to such programs, followed by the use of the unrestricted resources The statement of revenues, expenses, and changes in net assets is presented by major sources and is reported net of tuition scholarship allowances Tuition scholarship allowances are the differences between the stated charge for goods and services provided by the University. .. restricted to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital or other restricted assets, are classified as restricted The amount reported as restricted cash and cash equivalents for the University at June 30, 2010, includes at fair value $4,779,662 of Corporation moneys held in the State Treasury SPIA investment pool representing ownership of a share of the... these activities as well as administration, operation and maintenance of capital assets, and depreciation on capital assets Nonoperating revenues include State appropriations, Federal and State student financial aid, investment income (net of unrealized gains or losses on investments), and revenues for capital construction projects Interest on capital asset-related debt is a nonoperating expense The... duration of 1.81 years at June 30, 2010 The Corporation relies on policies developed by the State Treasury for managing interest rate risk or credit risk for this investment This is trial version www.adultpdf.com 18 . This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011- 106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS J UNE 30, 2010. FASB pronouncements issued on or before November 30, 1989, not in conflict with GASB standards. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011- 106 FLORIDA GULF COAST UNIVERSITY. Finance, Florida Gulf Coast University, 10501 FGCU Boulevard South, Fort Myers, Florida 33965. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011- 106 11 BASIC FINANCIAL