REPORT NO. 2011-106 FEBRUARY 2011 FLORIDA GULF COAST UNIVERSITY Financial Audit_part3 potx

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 19 pool. Disclosures for the State Treasury investment pool are included in the notes to financial statements of the State’s Comprehensive Annual Financial Report. Cash and Cash Equivalent – Component Unit . Cash and cash equivalents of the Foundation (discretely presented component unit) consist of bank deposits of which $490,659 is insured by the Federal deposit insurance with the remainder of $3,540,505 collateralized under the Florida Public Deposits Program. The amount reported as unrestricted cash and cash equivalents for the Foundation at June 30, 2010, includes at fair value $5,040,115 of Foundation moneys held in the State Treasury SPIA investment pool representing ownership of a share of the pool, not the underlying securities. The SPIA carried a credit rating of Af by Standard & Poor’s and had an effective duration of 1.81 years at June 30, 2010. The Foundation relies on policies developed by the State Treasury for managing interest rate risk or credit risk for this investment pool. Disclosures for the State Treasury investment pool are included in the notes to financial statements of the State’s Comprehensive Annual Financial Report. Capital Assets . University capital assets consist of land, construction in progress, buildings, infrastructure and other improvements, furniture and equipment, property under capital leases, library resources, works of art and historical treasures, and other capital assets. These assets are capitalized and recorded at cost at the date of acquisition or at estimated fair value at the date received in the case of gifts and purchases of State surplus property. Additions, improvements, and other outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. The University has a capitalization threshold of $1,000 for tangible personal property and $100,000 for buildings and other improvements. Depreciation is computed on the straight-line basis over the following estimated useful lives:  Buildings – 35 to 50 years  Infrastructure and Other Improvements – 10 to 50 years  Property Under Capital Lease – 8 to 10 years  Furniture and Equipment:  Equipment (Other than Moveable) – 10 to 25 years  Computer Equipment – 3 to 6 years  Moveable Equipment – 5 to 20 years  Library Resources – 10 years  Works of Art and Historical Treasures – 20 years  Other Capital Assets – 4 to 10 years Noncurrent Liabilities . Noncurrent liabilities include principal amounts of bonds payable, loan payable, capital leases payable, compensated absences payable, and other postemployment benefits payable that are not scheduled to be paid within the next fiscal year. Bonds payable are reported net of unamortized 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 20 premium or discount. The University amortizes bond premiums and discounts over the life of the bonds using the straight-line method. 2. PRIOR PERIOD ADJUSTMENT The University’s beginning net assets was increased by $6,449,391 as a result of a change in the reporting of bonds payable for State University System Capital Improvement Trust Fund Revenue Bonds. In prior fiscal years the liability for these bonds was reported on the University’s statement of net assets. It has subsequently been determined that these bonds are not debt of the University. Although proceeds from the bonds were provided to the University for capital projects, the University is not responsible for the repayment of the bonds. Repayment of the bonds is the responsibility of the Florida Board of Governors to be paid from capital improvement fees collected by all universities and remitted in total to the Florida Department of Education. 3. INVESTMENTS Section 1011.42(5), Florida Statutes, authorizes universities to invest funds with the State Treasury and State Board of Administration, and requires that universities comply with the statutory requirements governing investment of public funds by local governments. Accordingly, universities are subject to the requirements of Chapter 218, Part IV, Florida Statutes. The University’s Board of Trustees has not adopted a written investment policy. As such, pursuant to Section 218.415(17), Florida Statutes, the University is authorized to invest in the Local Government Surplus Funds Trust Fund investment pool administered by the State Board of Administration; interest-bearing time deposits and savings accounts in qualified public depositories, as defined in Section 280.02, Florida Statutes; direct obligations of the United States Treasury; and Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency. Of the reported investments, $1 million is restricted by the covenants of the bond reimbursement agreement for the Capital Improvement Revenue Bonds, Series 2008A. Investments set aside to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital assets are classified as restricted. External Investment Pools The University reported investments at fair value totaling $53,605,579 at June 30, 2010, in the State Treasury Special Purpose Investment Account (SPIA) investment pool, representing ownership of a share of the pool, not the underlying securities. The SPIA carried a credit rating of Af by Standard and Poor’s and had an effective duration of 1.81 years at June 30, 2010. The University relies on policies developed by the State Treasury for managing interest rate risk or credit risk for this investment pool. Disclosures for the State Treasury investment pool are included in the notes to financial statements of the State’s Comprehensive Annual Financial Report. Component Unit Investments Investments held by the University’s discretely presented component unit (Foundation) at June 30, 2010, are reported at fair value, as follows: This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 21 Investment Type Amount U.S. Government and Federal Agency Obligations 4,236,387$ Bonds, Notes and Other Debt Securities 4,601,059 Stocks and Other Equity Securities 5,207,845 Mutual Funds 28,834,330 Other Investments 2,346,867 Total Component Unit Investments 45,226,488$ The Foundation’s investment policy allows for investments in equity securities traded on the three principal United States Stock Exchanges (NYSE, AMEX, and NASDAQ), and the Foundation only purchases securities of companies with at least a market capitalization of $1 billion. For fixed income instruments, the Foundation’s policy allows investments in bonds issued by the United States Government and an agency of the United States Government, public traded corporations or their affiliates, taxable municipal bonds, preferred stocks, and real estate investment trusts. Interest Rate Risk: The Foundation’s investment policy does not limit debt obligation maturities. The Foundation’s investments in debt securities at June 30, 2010, are reported at fair value as follows: Investment Type Fair Value Less than 1 - 5 5 - 10 Over 10 1 Year Years Years Years U.S. Government and Federal Agency Obligations 4,236,387$ 53,213$ 1,548,538$ 1,641,932$ 992,704$ Bonds, Notes, and Other Debt Securities 4,601,059 233,180 2,036,517 1,471,360 860,002 Total 8,837,446$ 286,393$ 3,585,055$ 3,113,292$ 1,852,706$ Investment Maturities (In Years) Credit Risk: As required by the Foundation’s investment policy, all corporate bond issues are rated BAA or BBB or better by Moody’s or Standard & Poor’s rating services, respectively. The Foundation’s mutual funds are not rated by a nationally recognized statistical rating organization. Custodial Credit Risk: The Foundation utilizes the services of eight investment managers. All investments, except for certificates of deposit and debt securities, are held by the investment managers and are uninsured and unregistered, with securities held by the counter-party’s trust department or agent in the Foundation’s name. The Foundation has $8,837,446 in debt securities, of which $3,130,567 is held by the investment managers and is uninsured and unregistered, with securities held by the counter-party’s trust department or agent in the Foundation’s name. The Foundation’s mutual fund investments totaling $28,834,330 at June 30, 2010, are not exposed to custodial credit risk as they are not evidenced by securities that exist in physical or book entry form. There were no losses during the period due to default by counter-parties to investment transactions. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 22 Concentration of Credit Risk: The Foundation’s investment policy limits investment in a single corporation’s stock to 10 percent of the market value of each of its equity manager’s portfolio, and also limits investments in debt securities of a single corporate issue to 10 percent of the market value of each of its fixed income manager’s portfolio. 4. RECEIVABLES Accounts Receivable . Accounts receivable represent amounts for student tuition and fees, contract and grant reimbursements due from third parties, various sales and services provided to students and third parties, and interest accrued on investments and loans receivable. As of June 30, 2010, the University reported the following amounts as accounts receivable: Description Amount Contracts and Grants 1,080,021$ Student Tuition and Fees 1,414,307 Other 127,701 Total Accounts Receivable, Net 2,622,029$ Loans Receivable . Loans receivable consist of short-term loans made to students pending the receipt of student financial aid. University management considers these loans to be fully collectible. Note Receivable . On July 1, 2009, the Florida Gulf Coast University Financing Corporation entered into a loan in the form of a Promissory Note (Note) in the amount of $7,000,000 with the contractor of the solar photovoltaic generation facility (Solar Facility) as part of the construction of the Solar Facility. Interest accrues under this Note at a rate of 4.36 percent per annum, compounded annually, from the date the principal is disbursed to the contractor but not due and payable until July 1, 2029, the maturity date of the Note. The personal property of the Solar Facilities serves as collateral, securing the contractor’s obligations under the Note. At June 30, 2010, the amount of the Note disbursed to the contractor was $6,668,950 leaving an undisbursed balance under the Note of $331,050, which may be disbursed if additional work is required. Interest earned under this Note to the Financing Corporation during the fiscal year ended June 30, 2010, was $188,242. Description Beginning Additions Reductions Ending Balance Balance Promissory Note $ 6,668,950$ $ 6,668,950$ Interest Receivable 188,242 188,242 Note Receivable $ 6,857,192$ $ 6,857,192$ Allowance for Uncollectible Receivables . Allowances for uncollectible accounts receivable are reported based on management’s best estimate as of fiscal year-end considering type, age, collection history, and other factors considered appropriate. Accounts receivable are reported net of allowances of $564,789 at June 30, 2010. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 23 No allowance has been accrued for contracts and grants receivable. University management considers these to be fully collectible. 5. DUE FROM STATE This amount primarily consists of Public Education Capital Outlay (PECO) and Educational Enhancement (Lottery). PECO amounts due from the State to the University are for construction of University facilities. 6. CAPITAL ASSETS Capital assets activity for the fiscal year ended June 30, 2010, is shown below: Description Beginning Additions Reductions Ending Balance Balance Nondepreciable Capital Assets: Land 32,604,734$ 76,332$ $ 32,681,066$ Works of Art and Historical Treasures 268,956 1,494,202 1,763,158 Construction in Progress 47,658,624 39,033,530 68,241,971 18,450,183 Total Nondepreciable Capital Assets 80,532,314$ 40,604,064$ 68,241,971$ 52,894,407$ Depreciable Capital Assets: Buildings 288,727,175$ 60,213,647$ $ 348,940,822$ Infrastructure and Other Improvements 21,364,706 3,544,870 24,909,576 Furniture and Equipment 36,070,896 6,417,928 1,342,883 41,145,941 Library Resources 8,781,146 427,858 17,977 9,191,027 Property Under Capital Leases 1,671,342 1,671,342 Works of Art and Historical Treasures 5,488 5,488 Other Capital Assets 1,039,560 66,773 4,055 1,102,278 Total Depreciable Capital Assets 357,660,313 70,671,076 1,364,915 426,966,474 Less, Accumulated Depreciation: Buildings 27,619,378 6,756,020 34,375,398 Infrastructure and Other Improvements 4,831,935 811,590 5,643,525 Furniture and Equipment 19,679,057 3,464,821 1,135,208 22,008,670 Library Resources 7,725,970 346,621 17,977 8,054,614 Property Under Capital Leases 1,012,909 292,541 1,305,450 Works of Art and Historical Treasures 1,278 275 1,553 Other Capital Assets 914,145 64,089 4,055 974,179 Total Accumulated Depreciation 61,784,672 11,735,957 1,157,240 72,363,389 Total Depreciable Capital Assets, Net 295,875,641$ 58,935,119$ 207,675$ 354,603,085$ 7. DEFERRED REVENUE Deferred revenue consists of grants and contracts received prior to fiscal year-end related to subsequent accounting periods. 8. LONG-TERM LIABILITIES Long-term liabilities of the University at June 30, 2010, include bonds payable, loan payable, capital leases payable, compensated absences payable, and other postemployment benefits payable. Long-term liabilities activity for the fiscal year ended June 30, 2010, is shown below: 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 24 Description Beginning Additions Reductions Ending Current Balance Balance Portion Bonds Payable (1) 134,729,417$ $ 8,946,302$ 125,783,115$ 2,705,000$ Loan Payable 5,000,000 5,000,000 Capital Leases Payable 897,239 234,431 662,808 246,196 Compensated Absences Payable 6,797,144 607,488 379,201 7,025,431 440,595 Other Postemployment Benefits Payable 1,804,000 1,968,000 3,772,000 Total Long-Term Liabilities 149,227,800$ 2,575,488$ 9,559,934$ 142,243,354$ 3,391,791$ The University recorded an adjustment to beginning net assets to recognize a change in the reporting of Bonds Payable for State University System Capital Improvement Trust Fund Revenue Bonds totaling $6,449,391 which was net of deferred charges of $32,326. See Note 2. Note: (1) Revenue Bonds Payable . Capital Improvement Revenue Bonds were issued to construct University facilities, including parking garages and student housing facilities. Capital Improvement Revenue Bonds outstanding, which include both term and serial bonds, are secured by a pledge of housing rental revenues, traffic and parking fees, and an assessed transportation fee based on credit hours. In prior years, the Florida Gulf Coast University Financing Corporation (Corporation) issued Capital Improvement Revenue Bonds, Series 2003, 2005A, 2007A, and 2008A to construct student housing facilities, Series 2007B to construct and equip an addition to the Student Union Facility, and Series 2005B, 2007C, and 2009A to construct student parking garages. The University has entered into a Master Ground and Operating Lease Agreement with the Corporation. The University leases land to the Corporation for a rental fee of $1 per year. The land covered by the ground lease together with the improvements thereon is leased back to the University to manage and operate. The master lease will terminate on the date on which the Revenue Bonds and any related obligations are paid in full. Revenue from the student residence facilities and parking facilities is pledged to pay rent to the Corporation or its assignees equal to the debt service on the Revenue Bonds. The University had the following bonds payable outstanding at June 30, 2010: This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 25 Bond Type and Series Amount Amount Interest Maturity of Original Outstanding Rates Date Issue (1) (Percent) To Capital Improvement Revenue Bonds: 2003 Student Residence (Phase VI) 47,500,000$ 43,420,000$ 4.00 - 5.00 2034 2005A Student Residence (Phase VII) 8,000,000 7,400,000 .28 (2) 2035 2005B Student Parking (Phase I) 6,000,000 5,500,000 .28 (2) 2035 2007A Student Residence (Phase VIII) 25,000,000 24,616,234 4.00 - 5.00 2037 2007B Student Union Facility 6,000,000 5,800,000 .28 (2) 2037 2007C Student Parking (Phase II) 10,000,000 9,456,881 4.00 - 4.75 2037 2008A Student Residence (Phase IX) 22,000,000 21,590,000 .28 (2) 2038 2009A Student Parking (Phase III) 8,000,000 8,000,000 .29 (2) 2039 Total Auxiliary Revenue Bonds 132,500,000$ 125,783,115$ Notes: (1) Amount outstanding includes unamortized bond discounts and premiums. (2) Variable interest rate at June 30, 2010. Annual requirements to amortize all capital improvement revenue bonds outstanding as of June 30, 2010, are as follows: Fiscal Year Ending June 30 Principal Interest Total 2,705,000$ 3,611,631$ 6,316,631$ 2,900,000 3,532,499 6,432,499 2,900,000 3,455,262 6,355,262 3,005,000 3,375,561 6,380,561 3,210,000 3,292,483 6,502,483 2016-2020 18,330,000 14,990,283 33,320,283 2021-2025 22,610,000 11,867,908 34,477,908 2026-2030 28,040,000 8,036,467 36,076,467 2031-2035 31,740,000 3,144,666 34,884,666 2036-2039 9,970,000 245,931 10,215,931 Subtotal 125,410,000 55,552,691 180,962,691 Less: Net Discounts and Premiums 373,115 373,115 Total 125,783,115$ 55,552,691$ 181,335,806$ 2011 2012 2013 2014 2015 Loan Payable . On March 27, 2006, the Florida Gulf Coast University Financing Corporation (Corporation) entered into a Tax Exempt Note, Series 2005, in the amount of $5 million. The Corporation drew the entire $5 million to purchase land for the purpose of establishing a Naples Center which reflects the outstanding balance of the loan at June 30, 2010. Principal payments are equal to all funds collected by the Foundation pursuant to a capital campaign for the Florida Gulf Coast University Naples Center Project. The obligations under the loan are secured solely by the assignment of the capital campaign. As of June 30, 2010, the Foundation had raised $1 million of the $5 million capital campaign toward this project. Interest is assessed on the difference between the $5 million borrowed and the donations collected reduced by the amount of interest income earned during the year on the donations. Interest expense for the year ended June 30, 2010, was $76 thousand. A schedule of future minimum payments remaining under the loan This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 26 agreement cannot be amortized due to the unknown timing of capital campaign pledges and receipt of such pledges. The maturity date of the loan and all indebtedness outstanding was amended on April 1, 2010, and become due on or before March 31, 2014. Capital Leases Payable . The University entered into an energy savings contract in July 2003 and acquired equipment under a capital lease. The stated interest rate is 4.3 percent. The University also entered into a capital lease for the Voice over Internet Protocol (VOIP) system in September 2006. The stated interest rate is 4.08 percent. Principal and interest requirements on the capital leases outstanding as of June 30, 2010, are presented in the following table: Fiscal Year Ending June 30 Amount 2011 270,185$ 2012 89,720 2013 91,637 2014 93,573 2015 95,526 2016 93,528 Total Minimum Payments 734,169 Less, Amount Representing Interest (71,361) Present Value of Minimum Payments 662,808$ Compensated Absences Payable . Employees earn the right to be compensated during absences for annual leave (vacation) and sick leave earned pursuant to Board of Governors regulations, University regulations, and bargaining agreements. Leave earned is accrued to the credit of the employee and records are kept on each employee’s unpaid (unused) leave balance. The University reports a liability for the accrued leave; however, State appropriations fund only the portion of accrued leave that is used or paid in the current fiscal year. Although the University expects the liability to be funded primarily from future appropriations, generally accepted accounting principles do not permit the recording of a receivable in anticipation of future appropriations. At June 30, 2010, the estimated liability for compensated absences, which includes the University’s share of the Florida Retirement System and FICA contributions, totaled $7,025,431. The current portion of the compensated absences liability is the amount expected to be paid in the coming fiscal year, and is based on actual payouts over the last three years calculated as a percentage of those years’ total compensated absences liability. Other Postemployment Benefits Payable . The University follows Governmental Accounting Standards Board (GASB) Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, for certain postemployment healthcare benefits administered by the State Group Health Insurance Program. Plan Description. Pursuant to the provisions of Section 112.0801, Florida Statutes, all employees who retire from the University are eligible to participate in the State Group Health Insurance Program, an agent multiple-employer defined-benefit plan (Plan). The University subsidizes the premium rates paid by retirees 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 27 by allowing them to participate in the Plan at reduced or blended group (implicitly subsidized) premium rates for both active and retired employees. These rates provide an implicit subsidy for retirees because, on an actuarial basis, their current and future claims are expected to result in higher costs to the Plan on average than those of active employees. Retirees are required to enroll in the Federal Medicare program for their primary coverage as soon as they are eligible. A stand-alone report is not issued and the Plan information is not included in the report of a public employee retirement system or another entity. Funding Policy. Plan benefits are pursuant to the provisions of Section 112.0801, Florida Statutes, and benefits and contributions can be amended by the Florida Legislature. The University has not advance-funded or established a funding methodology for the annual other postemployment benefit (OPEB) costs or the net OPEB obligation, and the Plan is financed on a pay-as-you-go basis. For the 2009-10 fiscal year, 39 retirees received postemployment healthcare benefits. The University provided required contributions of $119,000 toward the annual OPEB cost, comprised of benefit payments made on behalf of retirees for claims expenses (net of reinsurance), administrative expenses, and reinsurance premiums. Retiree contributions totaled $257,000. Annual OPEB Cost and Net OPEB Obligation. The University’s annual OPEB cost (expense) is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that if paid on an ongoing basis is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The following table shows the University’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the University’s net OPEB obligation: Description Amount Normal Cost (Service Cost for One Year) 1,418,000$ Amortization of Unfunded Actuarial Accrued Liability 577,000 Interest on Normal Cost and Amortization 80,000 Annual Required Contribution 2,075,000 Interest on Net OPEB Obligation 72,000 Adjustment to Annual Required Contribution (60,000) Annual OPEB Cost (Expense) 2,087,000 Contribution Toward the OPEB Cost (119,000) Increase in Net OPEB Obligation 1,968,000 Net OPEB Obligation, Beginning of Year 1,804,000 Net OPEB Obligation, End of Year 3,772,000$ The University’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation as of June 30, 2010, and for the transition and preceding years, were as follows: 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 28 Fiscal Year Annual Percentage of Net OPEB OPEB Cost Annual Obligation OPEB Cost Contributed Beginning Balance, July 1, 2007 $ $ 2007-08 1,117,000 16.2% 936,000 2008-09 1,049,000 19.4% 1,804,000 2009-10 2,087,000 5.7% 3,772,000 Funded Status and Funding Progress. As of July 1, 2009, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $17,315,000, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability of $17,315,000 and a funded ratio of 0 percent. The covered payroll (annual payroll of active participating employees) was $57,220,579 for the 2009-10 fiscal year, and the ratio of the unfunded actuarial accrued liability to the covered payroll was 30.3 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment and termination, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following the notes to financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan provisions, as understood by the employer and participating members, and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and participating members. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The University’s OPEB actuarial valuation as of July 1, 2009, used the entry-age cost actuarial method to estimate the unfunded actuarial liability as of June 30, 2010, and the University’s 2009-10 fiscal year annual required contribution. This method was selected because it is the same method used for the valuation of the Florida Retirement System. Because the OPEB liability is currently unfunded, the actuarial assumptions included a 4 percent rate of return on invested assets. The actuarial assumptions also included a payroll growth rate of 4 percent per year. Initial healthcare cost trend rates for all retirees participating in the Preferred Provider Organization (PPO) plan were 10.32 percent and 8.84 percent for the first two years, respectively, and 10 percent for the first two years for all retirees participating in the Health Maintenance Organization (HMO) plan. The PPO and HMO healthcare cost trend rates are both 7 percent in the third year grading identically to 5.1 percent over 70 years. The unfunded actuarial accrued liability is being 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 amortized over 30 years using the level percentage of projected payroll on an open basis The remaining amortization period at June 30, 2010, was 27 years 9 RETIREMENT PROGRAMS Florida Retirement System Essentially... System Essentially all regular employees of the University are eligible to enroll as members of the State-administered Florida Retirement System (FRS) Provisions relating to FRS are established by Chapters 121 and 122, Florida Statutes; Chapter 112, Part IV, Florida Statutes; Chapter 238, Florida Statutes; and Florida Retirement System Rules, Chapter 60S, Florida Administrative Code, wherein eligibility,... are held in the FRS Trust Fund and accrue interest The State of Florida establishes contribution rates for participating employers Contribution rates during the 2009-10 fiscal year were as follows: Class Percent of Gross Salary Employee Employer (A) Florida Retirement System, Regular Florida Retirement System, Senior Management Service Florida Retirement System, Special Risk Deferred Retirement Option... member retires before his or her normal retirement date The Plan provides retirement, disability and death benefits, and annual cost-of-living adjustments DROP, subject to provisions of Section 121.091, Florida Statutes, permits employees eligible for normal retirement under the Plan to defer receipt of monthly benefit payments while continuing employment with an FRS employer An employee may participate... Retirement System, Regular Florida Retirement System, Senior Management Service Florida Retirement System, Special Risk Deferred Retirement Option Program - Applicable to Members from All of the Above Classes Florida Retirement System, Reemployed Retiree 0.00 0.00 0.00 9.85 13.12 20.92 0.00 (B) 10.91 (B) Notes: (A) Employer rates include 1.11 percent for the postemployment insurance subsidy Also, employer rates, . 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 23 No allowance. 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 26 agreement cannot. 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