REPORT NO. 2011-106 FEBRUARY 2011 FLORIDA GULF COAST UNIVERSITY Financial Audit_part4 ppt

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 30 The University’s liability for participation is limited to the payment of the required contribution at the rates and frequencies established by law on future payrolls of the University. The University’s contributions for the fiscal years ended June 30, 2008, June 30, 2009, and June 30, 2010, totaled $1,776,309, $1,963,059, and $2,052,008, respectively, which were equal to the required contributions for each fiscal year. As provided in Section 121.4501, Florida Statutes, eligible FRS members may elect to participate in the PEORP in lieu of the FRS defined-benefit plan. University employees already participating in the State University System Optional Retirement Program or the DROP are not eligible to participate in this program. Employer contributions are defined by law, but the ultimate benefit depends in part on the performance of investment funds. The PEORP is funded by employer contributions that are based on salary and membership class (Regular Class, Senior Management Service Class, etc.). Contributions are directed to individual member accounts, and the individual members allocate contributions and account balances among various approved investment choices. Employees in PEORP vest at one year of service. There were 142 University participants during the 2009-10 fiscal year. Required contributions made to the PEORP totaled $581,685. 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 479 University participants during the 2009-10 fiscal year. Required employer contributions made to the Program totaled $3,239,991 and employee contributions totaled $1,368,987. 10. CONSTRUCTION COMMITMENTS The University’s major construction commitments at June 30, 2010, are as follows: This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO FINANCIAL STATEMENTS (C ONTINUED) J UNE 30, 2010 31 Project Description Total Completed Balance Committed to Date Committed Academic 7 1,260,797$ 20,924$ 1,239,873$ Academic 8 11,000,016 680,836 10,319,180 Fine Arts Phase II 12,587,104 9,313,777 3,273,327 FY10 Infrastructure 5,396,650 1,684,324 3,712,326 Student Union Addition 12,382,250 1,662,619 10,719,631 Sugden Hospitality 1,759,628 296,369 1,463,259 Subtotal 44,386,445 13,658,849 30,727,596 Project Balances Under $1 Million 7,513,389 4,791,334 2,722,055 Total 51,899,834$ 18,450,183$ 33,449,651$ 11. 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(2), Florida Statutes, the University participates in State self-insurance programs providing insurance for property and casualty, workers’ compensation, general liability, fleet automotive liability, Federal Civil Rights, and employment discrimination liability. During the 2009-10 fiscal year, for property losses, 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 $40 million for named wind and flood through February 14, 2010, and increased to $58.75 million starting February 15, 2010. 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 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 fiscal years. Pursuant to Section 110.123, Florida Statutes, University employees may obtain healthcare 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. 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 32 12. 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: Functional Classification Amount Instruction 42,823,345$ Research 3,620,257 Public Services 3,645,095 Academic Support 12,944,972 Student Services 9,062,094 Institutional Support 18,363,334 Operation and Maintenance of Plant 8,536,825 Scholarships and Fellowships 14,098,661 Depreciation 11,735,957 Auxiliary Enterprises 19,712,772 Total Operating Expenses 144,543,312$ 13. 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 Housing, Parking, and Student Services Center facilities represents identifiable activities for which one or more bonds are outstanding: 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 33 Housing Parking Student Revenue Revenue Services Bonds Bonds Revenue Bonds Assets Current Assets 16,938,065$ 2,672,607$ 6,196,871$ Capital Assets, Net 93,894,859 24,134,573 2,613,711 Total Assets 110,832,924 26,807,180 8,810,582 Liabilities Current Liabilities 4,153,051 676,396 834,568 Noncurrent Liabilities 94,886,234 23,402,503 5,700,000 Total Liabilities 99,039,285 24,078,899 6,534,568 Net Assets Invested in Capital Assets, Net of Related Debt (3,131,375) 2,088,314 682,752 Restricted - Expendable 1,000,000 Unrestricted 13,925,014 639,967 1,593,262 Total Net Assets 11,793,639$ 2,728,281$ 2,276,014$ Condensed Statement of Net Assets Housing Parking Student Revenue Revenue Services Bonds Bonds Revenue Bonds Operating Revenues 15,952,637$ 2,431,420$ 1,133,763$ Depreciation Expense (1,990,309) (423,902) Other Operating Expenses (10,724,976) (1,503,056) (514,193) Operating Income 3,237,352 504,462 619,570 Nonoperating Revenues (Expenses): Nonoperating Revenues 348,262 31,493 45,790 Nonoperating Expenses (1,578,903) (124,036) (255,908) Net Nonoperating Expenses (1,230,641) (92,543) (210,118) Increase in Net Assets 2,006,711 411,919 409,452 Net Assets, Beginning of Year 9,786,928 2,316,362 1,866,562 Net Assets, End of Year 11,793,639$ 2,728,281$ 2,276,014$ Condensed Statement of Revenues, Expenses, and Changes in Net Assets 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 34 Housing Parking Student Revenue Revenue Services Bonds Bonds Revenue Bonds Net Cash Provided (Used) by: Operating Activities 6,956,926$ 1,092,749$ 748,297$ Noncapital Financing Activities (1,892,556) (209,770) (112,898) Capital and Related Financing Activities (6,711,087) (3,703,643) (2,071,676) Investing Activities (3,181,285) (492,979) (535,400) Net Decrease in Cash and Cash Equivalents (4,828,002) (3,313,643) (1,971,677) Cash and Cash Equivalents, Beginning of Year 4,828,402 4,224,265 5,840,717 Cash and Cash Equivalents, End of Year 400$ 910,622$ 3,869,040$ Condensed Statement of Cash Flows 14. RELATED PARTY TRANSACTIONS University and Blended Component Unit . As part of a Master Ground and Operating Lease Agreement (see note 8), the University operates and pays all operating costs of the facilities leased from the Florida Gulf Coast University Financing Corporation (Corporation) from the gross rental income from the respective student residences and parking facilities. The net rental income is then paid to the Corporation by the University in arrears based on collections. The University provides office space and related occupancy costs such as utilities and use of other office machines as well as accounting and record keeping services at no cost to the Corporation. On June 10, 2010, the Corporation entered into a contract to purchase an existing apartment complex located on Ben Hill Griffin Parkway (property), approximately one mile from the main campus of the University, in the amount of $14,750,000 for the land, existing buildings and all fixtures, furnishings, equipment and other personal property which is owned and used in connection with the operation of the property. The Corporation deposited $300,000 with an Escrow Agent and plans to proceed with the issuance of additional variable rate Capital Improvement Bonds in the amount of $17 million (Student Residence Phase XI) to accommodate the purchase and associated improvement costs. These new housing facilities would be placed into service during the 2010-11 fiscal year adding approximately 504 beds to the current housing system. Discretely Presented Component Unit . On March 15, 2006, the Florida Gulf Coast University Foundation, Inc. (Foundation), loaned $5 million to the Corporation to purchase a two-acre lot in Naples as the future location of the University’s Naples Center (Naples Center). The Naples Center will offer for- credit classes and house a 300-seat auditorium. The land purchase was deemed necessary to aid in the Foundation’s fundraising efforts for construction of the Naples Center. The Corporation is responsible for the interest due on the balance not raised by donations. The Foundation maintains a portion of its investments and had one outstanding line of credit with a financial institution. A Foundation board member was an officer of the financial institution during the fiscal year ending June 30, 2010. The Foundation investments managed by the financial institution at 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 35 June 30, 2010, totaled $11,211,215. The Foundation had an outstanding line of credit of $7 million with the financial institution at June 30, 2010, and paid $137,491 in interest during the fiscal year and owed $48,571 in interest as of the fiscal year ended June 30, 2010. The Foundation maintains a portion of its fixed income investments with an investment firm. A Foundation board member was an officer of the investment firm during the fiscal year ending June 30, 2010. The Foundation investments managed by the investment firm at June 30, 2010, totaled $5,740,985. On July 5, 2007, the University entered into a lease agreement with the Foundation for the use of waterfront property for the University’s Vester Marine Science and Environmental Education Center. The monthly lease payment of $20,000 covers the general operating and maintenance expenses incurred by the Foundation. 15. SUBSEQUENT EVENTS In July 2010, pursuant to Section 253.034, Florida Statutes, and Rule 18-2.019, Florida Administrative Code, the University received notification from the Florida Department of Environmental Protection that state-owned land, approximately 505 acres located on Buckingham Road in East Fort Myers, was being evaluated for sale, lease, or sublease. The University expressed interest in acquiring the land and incorporating it into the University’s existing ground lease with the Florida Department of Environmental Protection. The intended usage of the land would be for educational purposes including, but not limited to, research, education, environmental preservation, recreational usage, and community partnerships consistent with the University’s mission. The Board of Trustees of the Internal Improvement Trust Fund of the State of Florida extended the lease of this land to the University, which would continue the ownership of the land to the State of Florida. On July 28, 2010, the Corporation issued Capital Improvement Revenue Bonds, Series 2010A in the amount of $32,000,000 representing the par amount less the original issue discount in the amount of $138,451. The proceeds derived from the sale of the Series 2010A Revenue Bonds will be used to finance the construction and equipping of a new five story, 400 bed suite style private bedroom student residence facility with associated parking garage with approximately 1,200 parking spaces and related site improvements. Interest payable based upon fixed rates ranging from 3 to 5.5 percent paid semi-annually with principal payable in varying amounts annually on February 1, 2012, through 2040. This Student Residence Phase X would be the third mid-rise building and continue construction of mid-rise buildings in the south portion of the new student residence village on the University campus. These new student residence facilities would be placed in service during the 2011-12 fiscal year. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY OTHER REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS – OTHER POSTEMPLOYMENT BENEFITS PLAN 36 Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets (1) (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) [(b-a)/c] 7/1/2007 $ 10,557,000$ 10,557,000$ 0% 55,932,003$ 18.9% 7/1/2009 $ 17,315,000$ 17,315,000$ 0% 57,220,579$ 30.3% Note: (1) The actuarial cost method used b y the institution is the entr y -a g e actuarial cost method. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 FLORIDA GULF COAST UNIVERSITY OTHER REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION 37 1. SCHEDULE OF FUNDING PROGRESS – POSTEMPLOYMENT HEALTHCARE BENEFITS The July 1, 2009, unfunded actuarial liability of $17,315,000 was significantly higher than the July 1, 2007, liability of $10,557,000 primarily as a result of changes in the methodology used by the actuary to calculate this liability. The most significant of these modifications were due to changes in the long-term trend model, an increase in the coverage election assumption, and changes in the rates of decrement and mortality and the amortization factor. This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 38 AUDITOR GENERAL STATE OF FLORIDA G74 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1450 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 have audited the basic financial statements of Florida Gulf Coast University, a component unit of the State of Florida, and its discretely presented component unit as of and for the fiscal year ended June 30, 2010, 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 discretely presented component unit 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 deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the University’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting DAVID W. MARTIN, CP A AUDITOR GENERAL PHONE: 850-488-5534 F AX: 850-488-6975 This is trial version www.adultpdf.com FEBRUARY 2011 REPORT NO. 2011-106 39 that might be deficiencies, 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. We noted certain matters that we reported to University management in our operational report No. 2011-011. 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 17, 2011 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 30 The University s. 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. 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