STATE OF ILLINOIS SOUTHERN ILLINOIS UNIVERSITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2004 Performed as Special Assistant Auditors for the Auditor General, State of Illinois _part2 potx

Capital Asset and Debt Administration Long-term debt activity included the issuance of Series 2004A Certificates of Participation (COPS) on June 17, 2004, in the par amount of $32,740,000 The COPS were issued to finance, in combination with University funds, the renovation of Morris Library, the construction of a library storage facility, the construction of a Research Park, the replacement of campus signage, the purchase of computer and research equipment, and energy conservation measures, all at Carbondale; the construction of a Pharmacy building and the renovation of the Dental School building, both at Edwardsville; and energy performance measures at the School of Medicine in Springfield For additional information concerning the University’s Capital Assets and Debt Administration, see Note in the Notes to Financial Statements Economic Outlook Fiscal year 2005 appropriations for higher education operations were approved at the same funding level as the fiscal year 2004 original appropriations The Governor and legislative leadership signed a memorandum of understanding stating that there would be no reserve or other spending restrictions imposed by the State on the amounts appropriated to the Illinois public universities for fiscal year 2005 The State continues to request that public universities contribute toward the cost of group health insurance premiums, a cost previously paid in full by the State on behalf of the universities Southern Illinois University’s portion of the payment for health insurance is approximately $7 million per year Effective for fiscal year 2005, all public universities in the state of Illinois were required to implement a “guaranteed tuition program” in which charges to enrolling undergraduate resident freshmen students remain constant for four continuous academic years following the initial enrollment The implementation of this program required a hard look at the budget process to assure that tuition levels approved balanced both operational needs with student affordability Southern Illinois University approved tuition increases for first time resident freshmen of 7.9% at Carbondale and 7.4% at Edwardsville for fall 2005 As state funding has declined, Southern Illinois University will continue to develop and expand its resource base to seek more funding from tuition and fees, grants, contracts, and fund raising activities This is demonstrated in the fiscal year 2005 budget in which, despite level funding levels from the state, there is a projected increase in revenues of 2.4% As part of the university’s normal budgetary process, 2% of state appropriated funds and tuition income are held as a contingency reserve During fiscal year 2004, Southern Illinois University successfully reduced administrative costs by 27.3% or $19.67 million from the 2002 budget level and will continue to streamline operations, reallocate funds, review priorities, and utilize other efficiency measures into fiscal year 2005 Facts, Decisions or Conditions Significantly Affecting Net Assets There are no facts, decisions, or conditions significantly affecting net assets other than those items explained in the previous section of this discussion and analysis Please see the notes to the financial statements for additional details and further explanations of the data presented in the other sections of this discussion and analysis The notes are an integral part of the financial statements and should be included as part of any review or analysis This is trial version www.adultpdf.com Southern Illinois University Statement of Net Assets June 30, 2004 (with comparative totals for 2003) UNIVERSITY RELATED ORGANIZATIONS UNIVERSITY 2004 ASSETS Current Assets: Cash and cash equivalents (Note 3) Short-term investments (Note 3) Deposits with University Appropriations receivable from State of Illinois General Revenue Appropriations receivable from State of Illinois Capital Development Reimbursement due from State Treasurer Accounts receivable, net (Note 6) Notes receivable, net (Note 6) Accrued interest receivable Due from related organizations Inventories Prepaid expenses and other assets 32,559,288 60,470,238 193,411 2,901 2,232,337 27,471,903 5,115,493 1,467,335 2,380,522 6,159,935 1,250,171 $ 42,379,832 36,831,293 534,575 429,701 10,042,819 32,248,499 4,509,277 1,500,971 1,504,748 6,600,554 858,835 2004 $ 594,712 29,082,979 9,895,974 11,967,680 678,876 108,712 508,322 629,783 2003 $ 1,309,378 26,763,892 6,690,484 10,354,523 102,639 208,551 815,156 139,303,534 48,570 61,835,127 27,040 7,669,625 757,490 2,766,819 540,830,890 94,325,277 73,104,671 678,271,994 147,792,315 119,349,294 20,508,322 313,939 1,042,741 7,270,663 4,224,198 8,142,996 1,593,513 1,244,336 4,214,627 9,895,974 1,197,490 47,460,922 112,787 508,322 17,751,983 624,397 1,073,497 6,379,593 4,604,437 7,347,066 359,512 1,597,098 4,504,533 6,690,484 1,078,502 51,092,228 111,139 206,228 746,817 308,239 34,444 2,859,893 367,886 53,341 434,116 2,380,522 913,006 147,670 22,275 2,717,332 361,971 37,539 362,412 1,507,071 103,420,697 7,185,258 6,069,276 669,247 40,205,928 139,190,892 34,881,856 2,320,329 14,565,994 16,642,668 572,914 137,850 191,645 - 983,186 42,105,257 143,354,747 3,823,317 3,617,796 17,287,026 16,301,803 757,490 135,836 201,677 - 1,204,264 1,650,000 3,629,144 1,233,026 1,740,087 725,075 1,650,000 3,480,361 1,361,784 67,826 228,568,135 9,456,521 7,285,046 357,110,153 NET ASSETS Invested in capital assets, net of related debt Restricted for: Nonexpendable Expendable Quasi-endowment Scholarships, research, instruction and other Loans Capital projects and debt service Unrestricted 48,542 76,682,583 29,791 13,630,688 572,914 3,360,759 249,379,323 Total Noncurrent Liabilities TOTAL LIABILITIES 1,105,181 90,352,407 14,028,104 2,910,771 432,434,427 107,730,830 Total Current Liabilities Noncurrent Liabilities: Notes payable (Note 5) Accrued compensated absences (Note 5) Revenue bonds payable (Note 5) Certificates of participation (Note 5) Liabilities under capitalized leases (Note 5) Annuities payable (Note 5) Accrued liability for self-insurance (Notes and 5) Federal loan program contributions refundable (Note 5) Due to related organizations (Note 5) Housing deposits (Note 5) Other accrued liabilities (Note 5) Deposits held in custody for others (Note 5) 46,244,623 712,540,715 LIABILITIES Current Liabilities: Accounts payable Notes payable (Note 5) Accrued interest payable Accrued payroll Accrued compensated absences (Note 5) Revenue bonds payable (Note 5) Certificates of participation (Note 5) Liabilities under capitalized leases (Note 5) Annuities payable (Note 5) Accrued liability for self-insurance (Notes and 5) Deposits held for University related organizations Deposits held in custody for others (Note 5) Deferred revenue Housing deposits (Note 5) Due to related organizations (Note 5) 53,467,038 573,237,181 Total Noncurrent Assets TOTAL ASSETS 137,441,104 3,179,552 100,795,663 14,521,247 4,838,308 449,902,411 Total Current Assets Noncurrent Assets: Cash and cash equivalents (Note 3) Long-term investments (Note 3) Notes receivable, net (Note 6) Prepaid expenses and other assets Due from related organizations Capital assets, net (Note 7) TOTAL NET ASSETS $ 2003 (Restated) 331,988,832 16,641,779 13,354,322 303,479,541 284,455,612 1,316,952 1,116,819 3,780,020 3,009,559 57,610,111 50,129,307 213,711 8,693,709 3,880,665 24,168,223 11,214,693 251,121 6,805,080 5,533,816 28,531,472 17,696,502 43,272,936 202,163 2,329,006 26,419,368 30,268,830 127,970 2,483,168 21,868,878 $ 355,430,562 $ 346,283,162 $ 131,150,536 $ 105,994,972 This is trial version www.adultpdf.com The accompanying notes are an integral part of this statement Southern Illinois University Statement of Revenues, Expenses and Changes in Net Assets For the Year Ended June 30, 2004 (with comparative totals for 2003) UNIVERSITY UNIVERSITY RELATED ORGANIZATIONS 2004 Total Operating Revenues EXPENSES Operating Expenses: Instruction Research Public service Academic support Student services Institutional support Operation and maintenance of plant Scholarships and fellowships Depreciation (Note 7) Auxiliary enterprises: Funded debt enterprises Other auxiliary enterprises Additional on behalf SURS allocation for unfunded liability (Note 2) Provision for doubtful notes receivable Loan cancellations Loan administrative expenses 2003 (Restated) $ 128,651,935 37,459,244 23,713,814 6,241,787 20,595,461 72,907,124 $ 114,958,280 33,162,133 30,086,737 5,128,571 13,616,055 69,202,526 64,090,248 6,588,766 325,567 142,519 55,176,630 9,738,334 257,961 106,337 64,729,267 54,643,971 360,716,465 REVENUES Operating Revenues: Student Tuition and Fees (net of scholarship allowances of $20,992,469) Federal grants and contracts State of Illinois grants and contracts Other government grants and contracts Private grants and contracts Sales and services of educational departments Auxiliary enterprises: Funded debt enterprises (net of scholarship allowances of $4,397,968) Other auxiliary enterprises (net of scholarship allowances of $939,645) Loan interest income Other operating revenues 331,433,564 64,729,267 54,643,971 225,548,481 48,493,944 52,498,428 92,270,967 47,787,416 58,298,105 59,610,827 18,501,136 29,140,624 215,399,317 45,042,557 53,751,664 80,617,219 42,418,011 57,209,271 59,180,579 18,032,631 28,585,677 74,048,122 199,817 67,039,659 180,491 62,597,481 8,040,135 141,111,746 (183,894) 77,535 196,687 49,676,540 11,370,054 (233,883) 66,435 101,981 2004 $ 2003 - $ - - - - - 843,989,618 661,218,053 74,247,939 67,220,150 (483,273,153) (329,784,489) (9,518,672) (12,576,179) NONOPERATING REVENUES (EXPENSES) State appropriations - General Revenue Fund State appropriations - Education Assistance Fund Gifts and contributions Investment income (Note 3) Grants and contracts Interest on capital asset-related debt Accretion on bonds payable University related organizations Payments on behalf of the university (Note 2) Additional on behalf SURS allocation for unfunded liability (Note 2) Other nonoperating revenues 213,458,064 7,840,550 569,096 25,512,441 (4,417,034) (3,979,140) (2,291,754) 92,928,477 141,111,746 968,349 195,609,913 31,796,200 7,179,972 10,230,629 26,884,002 (4,165,370) (3,884,204) 737,778 75,905,748 1,339,777 9,046,021 10,199,109 (112,043) - 13,126,155 3,902,223 (125,755) - 6,140,359 2,155,002 Net Nonoperating Revenues 471,700,795 341,634,445 25,273,446 19,057,625 Income (Loss) Before Other Revenues Other Revenues: Capital state appropriations Additions to permanent endowments Capital grants and gifts (11,572,358) 11,849,956 15,754,774 6,481,446 17,072,430 3,647,328 32,796,342 555,034 12,168,173 3,587,322 5,813,468 1,246,642 664,081 Total Other Revenues 20,719,758 45,519,549 9,400,790 1,910,723 Increase in Net Assets 9,147,400 57,369,505 25,155,564 8,392,169 NET ASSETS Net assets at beginning of year, as previously reported Restatement of net assets (Note 2) Activity from inception through June 30, 2002 332,207,010 14,076,152 - 273,680,561 15,233,096 - 105,994,972 - 98,449,682 (929,179) 82,300 Net assets at beginning of year, as restated 346,283,162 288,913,657 105,994,972 97,602,803 $ 131,150,536 $ 105,994,972 Total Operating Expenses Operating Loss Net Assets at End of Year This is trial version www.adultpdf.com The accompanying notes are an integral part of this statement 10 $ 355,430,562 $ 346,283,162 Southern Illinois University Statement of Cash Flows For the Year Ended June 30, 2004 (with comparative totals for 2003) UNIVERSITY RELATED ORGANIZATIONS 2004 2003 UNIVERSITY 2004 2003 (Restated) Cash Flows from Operating Activities Tuition and fees Grants and contracts Sales and services of educational activities Auxiliary enterprise revenues: Funded debt Other auxiliary Payments to employees for salaries and benefits Payments to suppliers Payments for scholarships and fellowships Loans issued to students Interest earned on loans to students Collection of loans from students Patient service revenue Other operating receipts $ 142,649,900 83,132,389 71,317,328 $ 126,936,367 78,825,849 61,645,267 $ - $ - 67,725,505 7,582,185 (390,034,765) (212,749,366) (44,582,700) (6,335,126) 309,456 5,406,218 64,139,280 59,186,295 9,925,290 (387,396,443) (196,194,950) (35,843,453) (1,625,994) 254,289 1,249,492 56,773,380 (20,485,310) (41,800,545) (4,903,564) 52,280,282 2,504,427 (18,006,299) (37,378,214) (3,814,705) 47,265,381 3,037,384 Net cash used by operating activities (211,439,696) (226,264,611) (12,404,710) (8,896,453) Cash Flows from Noncapital Financing Activities State appropriations Direct lending receipts Direct lending payments Grants and contracts Government advances for federal loan funds Payments to annuitants Other Gifts for other than capital purposes 213,799,227 120,708,468 (120,470,794) 25,512,441 401,396 (3,395,639) 10,866,902 229,711,438 99,130,495 (99,189,107) 27,769,412 293,434 (486,874) 7,289,902 (317,778) 2,017,173 15,447,218 (312,883) 273,945 13,619,835 Net cash provided by noncapital financing activities 247,422,001 264,518,700 17,146,613 13,580,897 Cash Flows from Capital and Related Financing Activities Capital appropriations Capital gifts received Capital grants Payments received on capital financing leases Retained bond proceeds Deposit to bond escrow account Sale of capital assets Purchases of capital assets Proceeds from long-term debt Proceeds from 2004A Certificates of Participation Issuance costs paid on new debt issue Principal paid on capital debt Interest paid on capital debt 18,004,647 18,000 (48,622,675) 32,648,520 (434,733) (7,820,000) (4,189,211) 21,189,475 11,220,111 17,020,000 (8,391,544) 24,000 (71,380,888) (7,160,000) (4,399,182) 827,768 232,940 400,000 (281,955) (153,863) (96,938) 664,081 218,415 (147,417) (493,311) (151,897) Net cash provided (used) by capital and related financing activities (10,395,452) (41,878,028) 927,952 89,871 Cash Flows from Investing Activities Purchases of investments Proceeds from sales of investments and maturities Investment income (104,245,825) 65,610,138 5,302,661 (57,060,900) 63,376,255 8,613,156 (10,783,125) 2,155,044 2,243,532 (9,114,670) 2,127,558 2,107,030 Net cash provided (used) by investing activities (4,880,082) (33,333,026) 14,928,511 (6,384,549) Net increase (decrease) in cash (7,746,173) 11,304,572 (714,694) Cash and cash equivalents, beginning of the year 43,485,013 32,180,441 Cash and cash equivalents, end of the year $ 35,738,840 $ 43,485,013 This is trial version www.adultpdf.com (105,767) 1,357,948 $ 643,254 1,463,715 $ 1,357,948 11 Southern Illinois University Statement of Cash Flows (Continued) For the Year Ended June 30, 2004 (with comparative totals for 2003) UNIVERSITY RELATED ORGANIZATIONS 2004 2003 UNIVERSITY 2004 2003 (Restated) Reconciliation of Operating Loss to Net Cash Used in Operating Activities Operating loss Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation expense Impairment loss Amortization expense Noncash grants to University Noncash expenditures for the benefit of the University Budget expended at University Payments on behalf of the university Change in assets and liabilities: Accounts receivable (net) Deposits with University Reimbursement due from State Treasurer Inventories Prepaid expenses Other assets Accounts payable Accrued payroll Deferred revenue Compensated absences Deposits held for others Other liabilities Due to/from related organizations $ (483,273,153) $ (329,784,489) 29,140,624 3,787,837 (170,150) 234,040,223 28,585,677 (155,801) 75,905,748 199,817 193,443 1,181,247 1,301 - 180,491 1,911,540 775,016 - 979,183 7,810,483 440,619 (362,677) 111,531 3,661,329 891,070 (3,076,212) (2,279,568) (19,195) (3,007,277) (114,363) 161,422 810,843 (23,853) 535,920 (190,095) (2,243,510) 452,267 1,158,795 (2,088,888) (247,617) 689,134 169,836 (1,205,561) (177,663) 7,604 (3,667,629) 700,797 (42,634) (2,900) 16,202 (90,062) 901,905 (177,408) (7,691) (1,150,996) 1,185,578 (11,117) 115 2,737 69,556 Net cash used in operating activities $ (211,439,696) $ (226,264,611) The accompanying notes are an integral part of this statement 12 This is trial version www.adultpdf.com $ $ (9,518,672) (12,404,710) $ $ (12,576,179) (8,896,453) Southern Illinois University Notes to Financial Statements June 30, 2004 Note - The financial reporting entity and component unit disclosures Southern Illinois University (the "University"), a component unit of the State of Illinois (the "State"), conducts education, research, public service, and related activities principally at its two campuses One is in Carbondale and includes the School of Medicine in Springfield The other is in Edwardsville and includes the School of Dental Medicine in Alton and the East St Louis Center The governing body of the University is the Board of Trustees of Southern Illinois University (the "Board") As required by accounting principles generally accepted in the United States of America, these financial statements present the financial position and financial activities of the University (the primary unit) and its component units as well as certain activities and expenditures funded by other State agencies on behalf of the University or its employees The component units discussed below are included in the University's financial reporting entity because of the significance of their financial relationship with the University The University Related Organizations’ column in the financial statements includes the financial data of the University’s component units which consist of the following seven entities: the Southern Illinois University Foundation (at Carbondale) and the Southern Illinois University at Edwardsville Foundation (the “Foundations”), The Association of Alumni, Former Students and Friends of Southern Illinois University, Incorporated, and The Alumni Association of Southern Illinois University at Edwardsville (the “Alumni Associations”), University Park, Southern Illinois University at Edwardsville, Inc (“University Park”), Southern Illinois Research Park, Inc., Carbondale, and SIU Physicians & Surgeons, Inc The University’s related organizations are reported in a separate column to emphasize that they are Illinois non-profit organizations legally separate from the University These entities are University Related Organizations as defined under University Guidelines adopted by the State of Illinois Legislative Audit Commission in 1982 and amended in 1997 The Foundations were formed for the purpose of providing fund raising and other assistance to the University in order to attract private gifts to support the University's education, research, and public service goals In this capacity, the Foundations solicit, receive, hold, and administer gifts for the benefit of the University Complete financial statements for the Foundations may be obtained by writing: Southern Illinois University Foundation (at Carbondale), MC 6805, 1235 Douglas, Carbondale, IL 62901-6805 and Southern Illinois University at Edwardsville Foundation, Edwardsville, IL 62026-1082 The Alumni Associations were formed to promote the general welfare of the University and to encourage and stimulate interest among students, former students, and others in the University's programs In this capacity, the Alumni Associations offer memberships to former students, conduct various activities for students and alumni, and publish periodicals for the benefit of the alumni Complete financial statements for the Alumni Associations may be obtained by writing: The Association of Alumni, Former Students and Friends of Southern Illinois University, Incorporated, MC 6809, Colyer Hall, Carbondale, IL 62901-6809 and The Alumni Association of Southern Illinois University at Edwardsville, Southern Illinois University, Edwardsville, IL 62026-1031 University Park, Southern Illinois University at Edwardsville, Inc was formed for the purpose of providing such management, administrative, and other services as deemed essential to the operation and development of the University Park facility Complete financial statements for the University Park may be obtained by writing: University Park, Southern Illinois University at Edwardsville, Inc., Southern Illinois University, Edwardsville, IL 62026-1333 Southern Illinois Research Park, Inc.was formed to promote high technology and knowledge-based enterprise development within Carbondale and southern Illinois Complete financial statements for the Research Park may be obtained by writing: Southern Illinois Research Park, 150 East Pleasant Hill Road, Carbondale, IL 62901-6891 SIU Physicians & Surgeons, Inc was formed to aid in the education and training of medical students, residents, fellows, and physicians for the delivery of cost-effective, high-quality patient care and the conduct of medical and other scientific investigations Complete financial statements for SIU Physicians & Surgeons, Inc may be obtained by writing: SIU Physicians & Surgeons, Inc., SIU School of Medicine, P.O Box 19606, Springfield, IL 62794-9606 This is trial version www.adultpdf.com 13 Note - The financial reporting entity and component unit disclosures – Continued The University is a component unit of the State of Illinois for financial reporting purposes The financial balances and activities included in these financial statements are, therefore, also included in the State's comprehensive annual financial report Note - Summary of significant accounting policies Basis of presentation These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB), including Statement No 35, Basic Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities The University now follows the business-type activity reporting requirements of GASB Statement No 35 that provides a comprehensive, entity-wide perspective of the University’s financial activities and replaces the fund group presentation previously required For financial reporting purposes, the University is considered a special-purpose government engaged only in businesstype activities Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting applicable to public colleges and universities Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation to pay has been incurred All significant intra-agency transactions have been eliminated The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB The University has elected to not apply FASB pronouncements issued after the applicable date The accounts of the University's financial reporting entity are still maintained internally in accordance with the principles of fund accounting Under fund accounting, resources are classified for accounting and reporting purposes into funds according to specified activities or objectives The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates Accounting Change and Restatement of Net Assets Cougar Village, Edwardsville: The financial statements for fiscal year 2003 have been restated to correct an error in the recording of a major renovation project at the Cougar Village apartment complex at the Edwardsville campus in 2001; the project was expensed rather than capitalized The effect of the restatement was to increase the beginning net assets for 2003 by $15,233,096 Additional depreciation expense totaled $1,156,944 for fiscal year 2003 and has resulted in an increase to the ending net assets invested in capital assets at June 30, 2003, of $14,076,152 Allowance for uncollectibles The University provides allowances for uncollectible accounts and notes receivable based upon management's best estimate of uncollectible accounts and notes at the statement of net assets date, considering type, age, collection history of receivables, and any other factors as considered appropriate The University’s accounts receivable and notes receivable are reported net of allowances of $7,790,487 and $2,371,818, respectively, at June 30, 2004 Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market with the exception of the Textbook Rental Service at the Edwardsville campus The rental books are recorded at depreciated cost with the related expense reported as depreciation expense 14 This is trial version www.adultpdf.com Note - Summary of significant accounting policies – Continued Student Financial Assistance In fiscal year 1996, the University was accepted to participate in the United States Department of Education Direct Student Loan Program at both campuses For fiscal year 2004, loans under the program amounted to $70,504,454 at the Carbondale campus and $41,181,672 at the Edwardsville campus The University has classified this loan program as Noncash Federal Awards in the Office of Management and Budget (OMB) Circular A-133, Schedule of Expenditures of Federal Awards, Note C in the Compliance Audit Report Accordingly, no revenue or expenditures are included in the financial statements of the University Capital assets Capital assets are recorded at cost at the date of acquisition or at the fair market value at the date of donation in the case of gifts In accordance with accounting principles generally accepted in the United States of America for public colleges and universities, depreciation is computed using the straight-line method over the estimated useful lives of the assets The following month prorate convention is being used, in which no depreciation is recorded in the month of acquisition and an entire month of depreciation is recorded in the month of disposition Capitalization thresholds and useful lives are as follows: Category Land Improvements Infrastructure Buildings Building improvements Equipment and library books Works of art, historical treasures Capitalization Threshold $ 25,000 1,000,000 100,000 25,000 5,000 5,000 Useful Life not depreciated 15 years 20 years 40 years 15 years 5-10 years not depreciated Vehicles and electronic data processing equipment are depreciated over five years Other equipment and books are depreciated over seven years Revenue and expense recognition In accordance with GASB Statement No 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, the University reported on-behalf payments of $92,928,477 for fiscal year 2004 for health care and retirement costs These costs are reflected in the Statement of Revenues, Expenses and Changes in Net Assets as nonoperating revenues entitled “Payments on behalf of the University” and as operating expenses under the appropriate functional classifications Substantially all employees participate in group health insurance plans administered by the State of Illinois The employer contributions to these plans for University employees paid from State appropriations and auxiliary enterprises are paid by the State on behalf of the University On-behalf payments for health care costs totaled $62,208,957 for the year ended June 30, 2004 The employer contributions to these plans for employees paid from other University held funds are paid by the University On-behalf payments of $30,719,520 for the year ended June 30, 2004, were made for retirement costs In addition, the State Universities Retirement System received a proportionate share of the proceeds from House Bill 3759 (PA 93-002), allocating an additional $1.432 billion to be applied against the unfunded liability This payment was in addition to the regular state appropriation received each year The University’s share of this allocation was $141,111,746 and has been reflected in the Statement of Revenues, Expenses and Changes in Net Assets as nonoperating revenues and as operating expenses entitled “Additional on behalf SURS allocation for unfunded liability.” This allocation is only for the year ended June 30, 2004 No such allocation was made for fiscal year 2003 This is trial version www.adultpdf.com 15 Note - Summary of significant accounting policies – Continued Revenues The University has classified its revenues as either operating or nonoperating revenues as follows: Operating Revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as student tuition and fees, sales and services of educational departments, sales and services of auxiliary enterprises, and most grants and contracts Tuition and fees are generally recognized as operating revenues as they are assessed The summer session tuition and fees are allocated between the two fiscal years Nonoperating Revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB Statement No 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Government Entities that Use Proprietary Fund Accounting, and GASB Statement No 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, such as state appropriations, investment income, and federal student aid programs Appropriations made to the University from the State of Illinois General Revenue Fund are recognized as nonoperating revenues in the year appropriated to the extent expended Other nonoperating revenues include transactions relating to capital and financing activities, noncapital financing activities, and investing activities Restricted grant revenues from external sources are recognized to the extent of related expenditures on the accrual basis Expenses Accrued compensated absences for University personnel are charged to current funds based on earned but unused vacation and sick leave days including the University's share of Social Security and Medicare taxes At June 30, 2004, the University estimates $35,672,206 will be paid from state appropriated accounts funded by the State of Illinois General Revenue Fund and the Income Fund, and $8,757,920 from local funds in subsequent years for a combined total of $44,430,126 Adoption of New Government Accounting Standards (GASB Statement Nos 40, 41, and 42) GASB Statement No 40, Deposit and Investment Risk Disclosures, an amendment of GASB Statement No 3, is effective for periods beginning after June 15, 2004 This statement addresses common deposit and investment risks related to credit risk, interest rate risk, and foreign currency risk The University will be required to disclose investments that have fair values that are highly sensitive to changes in interest rates and its deposit and investment policies related to these risks GASB Statement No 41, Budgetary Comparison Schedules-Perspective Differences-an amendment of GASB Statement No 34, clarifies the budgetary presentation requirements for governments It is not applicable to the University GASB Statement No 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, was established to recognize a reduction in the value of impaired capital assets whenever service utility has declined significantly and unexpectedly and is effective for periods beginning after December 15, 2004 The University has elected earlier application and has reported an impairment loss of $3,787,837 due to mold contamination at the Edwardsville residence halls and $1,860,500 in mold remediation costs reported in maintenance and repairs in fiscal year 2004 Note – Cash and Investments It is University policy to invest funds in a manner which will provide investment returns and security consistent with good business practices, while meeting the daily cash flow demands of the University and conforming to all statutes governing the investments of funds Illinois Compiled Statutes, specifically the Public Funds Investment Act; the policies of the Board; and covenants provided from the University’s bond issuance activities authorize the University to invest in obligations of the U S Treasury, agencies, and instrumentalities; bank and savings and loan time deposits; corporate bonds, stocks, and commercial paper; repurchase agreements; and money market mutual funds 16 This is trial version www.adultpdf.com This is trial version www.adultpdf.com Note – Cash and Investments - Continued Western Asset Management manages a portion of the University’s operational funds, and The Northern Trust Company keeps custody of these funds and assists in the accounting and reporting functions related to these investments The funds are allocated into a Short Maturity Portfolio and an Intermediate Maturity Portfolio At June 30, 2004, the actual bank balances related to the cash deposits of the University and the University Related Organizations amounted to $22,157,674 and $6,716,635, respectively; all such balances were covered by federal depository insurance or collateral held by an agent in the University or its related organizations' name, except for $137,148 (foreign banks) which was uninsured and uncollateralized by the University The cash and investments have been classified into the following categories to reflect the University and University Related Organizations’ level of risk as of June 30, 2004: UNIVERSITY Category $ 135,958,388 25,307,513 $ 161,265,901 U.S Government securities Other Investments Total Investments Category $ $ Category $ $ Fair Value $ 135,958,388 25,307,513 161,265,901 The Illinois Funds Cash 28,496,787 7,242,053 Total Cash and Investments $ 197,004,741 UNIVERSITY RELATED ORGANIZATIONS U.S Government securities Stocks and corporate debt Fixed income securities Total Investments Mutual funds Money market funds Cash Certificates of Deposit Total Cash and Investments Category 1,217 2,015,008 177,792 $ 2,194,017 $ Category $ $ Category 4,287,078 4,880,991 1,400 $ 9,169,469 $ $ Fair Value 4,288,295 6,895,999 179,192 11,363,486 84,079,773 6,672,087 643,254 3,650,216 $ 106,408,816 Category 1: Includes investments that are insured or registered, or for which the securities are held by the University or its related organizations, or an agent in their name Category 2: Includes uninsured and unregistered investments for which the securities are held by the financial institutions' trust department or agent in the name of the University or its related organizations Category 3: Includes uninsured and unregistered investments for which the securities are held by the financial institution or by its trust department or agent but not in the name of the University or its related organizations Pooled funds, mutual funds, money markets, cash and certificates of deposit are not categorized because they are not evidenced by securities that exist in physical or book entry form The University Related Organizations' exposure to potential losses from the respective mutual funds’ and money market funds' investment in derivatives cannot be reasonably determined at June 30, 2004 18 This is trial version www.adultpdf.com ... 11 Southern Illinois University Statement of Cash Flows (Continued) For the Year Ended June 30, 2004 (with comparative totals for 2003) UNIVERSITY RELATED ORGANIZATIONS 2004 2003 UNIVERSITY 2004. .. www.adultpdf.com The accompanying notes are an integral part of this statement 10 $ 355, 430,5 62 $ 346,283,162 Southern Illinois University Statement of Cash Flows For the Year Ended June 30, 2004 (with.. .Southern Illinois University Statement of Net Assets June 30, 2004 (with comparative totals for 2003) UNIVERSITY RELATED ORGANIZATIONS UNIVERSITY 2004 ASSETS Current Assets: Cash and cash