STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY FINANCIAL AUDIT_PART2 potx

Capital Assets Land and Land Improvements Site Improvements Building Equipment Construction in Prosress Total Less : Accumulated Depreciation Net Capital Assets STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS decrease in long-term investment of $1.1 million, and increase in capital assets of $13.6 million. The decrease in restricted cash and cash equivalents reflects expenditures on capital projects. The increase in capital assets is primarily due to the construction projects; the remodeling of Building C and the construction of a multi-level parking structure, which is substantially complete. Capital Assets, Net as of June 30, 2005 and 2004 (dollars in thousands) lncrease Percent Change 89% 2.6% r.9% s]% r92.3% 2005 2004 (Decrease) 158,368 16,582 TT.7% 57 ,449 3,024 s.6% $ 100,919 $ 97,367 $ 13,558 t5.s% Current Liabilities - Current liabilities consist primarily of accounts payable and accrued liabilities of $5.5 million, deferred revenues for summer tuition of $2.5 million, and the current portion of the liability for compensated absences of $2.9 million. Total current liabilities increased by $1.7 million. This increase is primarily due to the $1.4 million increase in accounts payable and accrued liabilities, the $.2 million increase in the deferred revenue, and the $.1 million increase in the current portion of compensated absences, which is estimated based on the current year's usage. Non-current Liabilities - Non-current liabilities consist of long-term debt and other obligations for which the principal is due more than one year from the statement of net assets date. Long- term debt totaled S30.1 million at June 30,2005 as compared to $30.0 million at June 30,,2004. The increase of the $.1 million is due to the $.4 million increase in the compensated absences, and $.3 million decrease in the revenue bonds payable. The University's current Revenue Bonds payable consists of University Facilities Revenue Bonds Series I973, University Facilities System Revenue Bonds Series 1997 and University Facilities System Revenue Bonds Series 2004. Fiscal year 2005 principal repayments for the three revenue bonds are as follows: s 7,508 5,931 95,,464 30,449 19,016 $ 6,894 5,780 93,644 29,963 6,505 l4l,7g6 54,,425 $ 614 151 1,820 1,496 12,511 10 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS Debt Type Principal Paid in FY 2005 Revenue Bonds Series 1973 $ 1 15,00C Revenue Bonds Series 1997 $ 175,00C Revenue Bonds Series 2004* $C Iotal Principal Paid $290,00c * No principal repayment until year 2014 Total Net Assets - Net assets are divided into three major categories. The first category, invested in capital assets, net of related debt, reports the lJniversity net equity in property, plant and equipment. The second category, restricted net assets, reports net assets that are owned by the lJniversity, but the use or purpose of the funds is restricted by an external source or entity. The third category is unrestricted net assets, which are available to be used for any lawful purpose of the University. The total net assets decreased by $.1 million over the prior year. This decrease is a net result of 3 items; a $4.1 million increase in invested capital assets, net of related debts, a $.2 million increase in restricted net assets, and a $4.4 million decrease in unrestricted net assets, which is primarily due to the increase in employee salaries and the cost of supplies. The followine is a breakdown of the $8.0 million restricted net assets: Restricted Net Assets as of June 30, 2005 and 2004 (dollars in thousands) 2005 2004 Grants and Contracts Student loans Debt Service Other Total Restricted Net Assets $ 1,269 S 1,193 2,921 2,7 45 1,611 1J12 2,238 2,196 - $ 8,039 $ 7,846 Total Net Assets - June 30. 2005 il lnvested in Capital Assets 93.v'h This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS Statements of Bevenues. Expenses. and Changes in Net assets 2005 2004 OPERATING REVENUES Net Tuition and Fees Grants and Contracts Auxilliary Enterprises On Behalf Payments Other Total Operating Revenues OPERATING EXPENSES Instruction Public Service Academic Support Student Services and Programs Institutional Support - Operations Institutional Support - On Behalf Payments Operations and Maintenance of Plant Depreciation Expense Auxiliary Other Total Operating Expenses Operating Loss NONOPERATING REVENUES (EXPENSES) State Appropriations 38,362 Other Nonoperating Revenues Other Nonoperating Expenses Total Nonoperating Revenues NET LOSS Loss on Disposal of Capital Assets Capital Additions Provided by State of Illinois CHANGES IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR 37,989 (92) 2,622 (2,7 14) -103.5% 99,059 85,437 2,622 3.1% _$ 81 967_ _q_88,0se_ _q___e2- _-0.r% Condensed Statement of Revenues, Expenses, and Changes in Net Assets For the Years Ended June 30, 2005 and 2004 (dollars in thousands) Increase Percent (Decrease) Change 77,308 38,388 15,605 6,080 7 ,535 12,733 17,439 9,997 3,563 2,378 95,472 36,277 12,643 6,490 7 ,161 9,966 4l,69l 9,924 4,394 2,228 ( 1 8,1 64) 2,llI 2,962 (410) 374 2,7 67 (24,253) 73 (831) 150 -19.0% 58% 23.4% -6.3% s.2% 27.8% -s8.2% 0.7% -r8.9% 6.7% $ 28,186 26,540 3,090 17,438 2,054 (2,860) (r42) 2,910 $ 25,452 23,514 2,733 41,69r 2,082 $ 2,734 3,026 357 (24,253) r0.7% 12.9% 13.r% -s8.2% -r.3% 5,214 5,4t1 (t97) -3.6% 1 1 8,93 1 136,1 85 (17 ,254) -12.7% 2.2% 2.2% 496.8% rr3.7% 2.0% (2,724) (l 80) 5,526 (136) s.0% 38 -2r.r% (2,616) -47.3% 12 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS Total Revenue by Source - June 30,2005 State Appropriations 33.8% On Behalf Payments 15.0% Depreciation Expense 3.0% Operations and maintenance of Plant 8.4% Institutional Support 25.4% Other Revenues 1.4% Net Tuition and Fees 24.3Yo Grants and Gontracts 22.9% Auxiliary Activities 2.6% Operating Expenses - June 30, 2005 Auxiliary 2.0% Other ' 4.4% Student Services and Programs 6.3% Academic Support 5.1% lnstruction 32.3% Public Service 13.1% 13 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS Operating Revenue - Total operating revenues decreased by $ 18.2 million. This is the result of the increase in tuition and fees of $2.7 million due to a4.5oh increase in the undergraduate tuition and fee rates and a modest increase in student enrollment, the increase in the Federal grants of $2.8 million and the decrease in the On Behalf Payments of $24.3 million, which is a result of an extraordinary payment allocation of $30.7 million received in fiscal year 2004 by the State Universities Retirement System on behalf of Northeastern, primarily from the State of Illinois Pension Bonds. Operating Expenses - Instruction accounted for the largest portion of operating expenses at $38.4 million. Institutional Support is the next largest at $30.2 million. These two sources, plus Public Service at $15.6 million, Student Services at $7.5 million and Academic Support at $6.1 million, account for approximately 82% of the operating expenses of the University. Operating expenses decreased by $ 17.3 million. This decrease is a net result of 3 items; employee salaries, which represents 560/o of total operating expenses, increased by $3.7 million due to a 4.7o/o average salary increases throughout every functional category, Public Service increased by $3.0 million, which is in line with the increase of Federal awards, and On Behalf Payments under Institutional Support decreased by $24.3 million as a result of the payment allocation for the retirement contribution in fiscal year 2004. Nonoperating Revenues (Expenses) - Consist of State appropriations, gifts and donations, investment income, and other nonoperating revenues, less interest on capital assets related debt. Total nonoperating revenues increased by $.8 million from the prior year. This increase is primarily due to the increase of $.9 million in State appropriations. 14 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTIIEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS Statements of Cash Flows Condensed Statement of Cash Flows For the Years Ended June 3O 2005 and 2004 (dollars in thousands) Increase Percent 2005 20M (decrease) Change Cashprovidedbyoperatingactivities $ 59,990 $ 58,142 $ 1,848 3.2% Cashusedinoperatingactivities (100,341) (94,471) (5,870) 6.2% Net cash used in operating activities (40,351) (36,329) (4,U2) lt.lyo Net cash provided by noncapital financing activities 39,447 38,402 1,045 2.7' Net cash provided by (used in) capital financing activities (15,125) 8,288 Q3,4I3) -282.5% Net cash provided by (used in) investing activities 488 (6,255) 6,743 -107.8% Net increase (decrease) in cash (15,541) 4,lM (19,647) 478.5% Cash - beginning of the year 24,269 20,163 4,106 20.4% cash-endoftheyear -SlJrs @@ -64.0" The primary cash receipts from operating activities consist of tuition and fees of$27.8 million and grants and contracts of $24.4 miliion. Cash outlays included payments to employees of $66.0 million, pa)rynents for fringe benefits of $2.1 million and payments to suppliers of $26.7 million. The State appropriation of$39.2 million is the primary source ofnoncapital frnancing. The accounting standards require the University to reflect this source ofrevenue as nonoperating even though the University's budget depends on this to continue the current level ofoperations. The main capital financing activities included the purchases ofcapital assets and construction of $14.0 million, and debt service payment of $1.1 million. Investing activities reflect purchases, sales and interest income eamed on investrnents. The rise in interest rate and unrealized market fluctuation resulted in an increase of $.4 million in investment income. The total net cash decreased by $19.6 million compared to the fiscal year 2004. The decrease is primarily due to the expenditures on capital projects. 15 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS SIGNIFICANT FINANCIAL EVENTS IMPACTING FUTURE PERIODS The discussion of significant financial events that could impact future periods must be set in the context of two important themes - first, that the University's highest priority is our continuing commitment to furthering our mission and second, financial events and trends that continue to emerge, both internally and externally, that affect the University are dealt with based on our commitment to our mission. Regarding our mission, the University is focused and committed to the four principles contained in our mission statement: excellence, access, diversity and community. Our fall 2005 enrollments are at an all-time high of 12,227 students and demonstrate the demands from students for our courses and programs, and our success in providing an accessible and affordable education. In what can be described as challenging financial times, the University has continued to improve our educational programs by increasing the number of full-time, tenure-track faculty and increasing the number of course sections available to students. The University also established a committee to make recommendations that will lead to improvements in student retention and ways to shorten time-to-degree. We continue to be the most diverse university in the Midwest, according to US News and lMorld Report, and our partnerships with local schools, community colleges, government agencies and private foundations reinforce and extend our educational mission beyond our campus. These successes also present challenges. Most significantly, the State of Illinois continues to provide state funding to Illinois higher education and Northeastern at levels significantly below previous years. In fiscal year 2002, the University's state General Funds appropriation was $45.4 million. In fiscal year2006, our General Funds appropriation is $39.2 million. The Governor and Illinois General Assembly have not included appropriations increases in the University's operating budget for salary enhancements, deferred maintenance, instructional staffing and academic program enhancements for several years. Due to the State of Illinois budget situation, no new funds were appropriated to NEIU for these or other services in fiscal year 2006. However, the decline in state funding appears to have slowed as the University received level state funding in fiscal years 2005 and 2006; appropriations continued to be at the fiscal year 2004 appropriation level. Even with level state funding, our budget challenges continue. Over the past several years, as state funding declined, pressure built to address faculty and staff compensation levels and recruiting and retaining the best faculty and staff. While progress was made with salaries in fiscal years 2005 and 2006, salary competitiveness continues to be an issue. Our students need and demand the latest technology and the University is progressing with a multi-year plan to consolidate our currently disparate information systems into a fully integrated information system. Our projections for utility costs, primarily natural gas, show continuing budgetary pressures. Additional resources are needed to meet basic cost increases in equipment and supplies. And finally, with increased enrollments comes increased teaching and support needs, all of which have resource implications. t6 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS The University also will continue to pay a $ 1 . 1 million required contribution to the State of Illinois Health Insurance Reserve Fund. This mandate started in fiscal year 2002. In addition, beginning in fiscal year 2006, the University will be required to make a new contribution to the State Universities Retirement System for certain requirement benefits. The trend in shifting state costs to the public universities results in fewer state resources available for ongoing operations, even with level appropriations. For fiscal year 2006, the University implemented tuition increases of 9.60/o for undergraduate students and9.7%o for graduate students. The University is subject to the state-mandated Tuition Guarantee Program which holds tuition level for four years for new undergraduate students first enrolling in the University in fall2004 and thereafter. Students newly enrolling in fall 2005 are the second cohort at Northeastern under this legislation. The combination of level state funding and growth in tuition revenue results in an overall increase in the unrestricted operating budget of $3.0 million, or 4.3o/o, in fiscal year 2006. While the budget increase is betternews than in previous years, the University continues to encounter expenditure needs that exceed available resources. In addition, the tuition increases we are asking our students to pay, while not out of line with other Illinois public universities, are larger than we would like. Ideally, the University seeks a better balance between increasing state and student contributions. Overall, because of high student demand and the University's continuing efforts to focus limited resources on our core missions - excellence, access, diversity and partnerships - the operating budget for fiscal year 2006 will minimally support the academic and support needs of our students, avoid layoffs to faculty and staff, and maintain the highest level of quality instruction. However, the continued lack of new funding from the State of Illinois continues to not only affect the financial contributions we are asking of our students but also impacts the University's ability to attract and retain faculty and staff, address student technology needs and deferred maintenance, and enhance academic quality and student support systems. CONTACTING NEIUOS FINANCIAL MANAGEMENT This financial report is designed to provide taxpayers, our bondholders, and other interested parties with a general overview of NEIU's finances and to showthe University's stewardship and accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mark Wilcockson, Vice President for Finance and Administration, or Peggy Ho, Director of Financial Affairs/Controller, at 5500 N. St. Louis Avenue, Chicago ,IL 60625. 17 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY STATEMENT OF NET ASSETS JUNE 30 ASSETS Current assets: Cash and cash equivalents Short-term investments Receivables Grants Student loans, net of allowance for doubtful accounts of $324,360 in 2005 and $407,920 in2004 Tuition and fees, net of allowance for doubtful accounts of $50 I ,48 2 tn 2005 and $406, I 1 5 in2004 Other receivables, net of allowance for doubtful accounts of $868,92 4 tn 2005 and $852,694 in2004 Inventories Deferred charges Other assets Total current assets Noncunent assets: Restricted cash and cash equivalents lnvestments Receivables Student loans, net of allowance for doubtful accounts of $404,344 in 2005 and $390,923 rn2004 Tuition and fees, net of allowance for doubtful accounts of $363,948 in 2005 and$283,223 in2004 Unamortized bond issue costs Capital assets Land and land improvements Site improvements, net of accumulated depreciation of $2,593,894 in 2005 and $2,348,955 in2004 Buildings and building improvements, net of accumulated depreciation of $3 7,939,40I in 2005 and $30,183,183 tn2004 Bquipment, net of accumulated depreciationof $22,915,785 in 2005 and 521,892,327 in2004 Construction in progress Other assets Total noncutent assets Total assets 2005 1,001,560 970,731 3,566,901 69,101 1,238,767 90,375 r72,643 18,823 3,326 2,276,794 57,65r 545,878 7,508,237 3,337,433 63,524,580 7,532,656 19,016,361 (Comparative totals only) 2004 - 810,209 7,397,366 71,418 - 2,202,447 - 42,751 - 583,524 - 6,893,876 - 3,437,040 - 63,460,590 - 7,0J0,872 - 6,504,746 Universify Foundation University Foundation $ 5,960,370 $ 302,068 $ 10,399,732 $ 345,22r 1,961,913 - 1,360,546 259,884 83,003 747,026 - 2,96'7 $ 14,020,453 1,216,125 13,712,375 1,158,397 2,767,284 2,276,770 13,869,697 9,797,555 - 9,902,077 1,181,658 - 2r,7r4 - 396"714 1,75,364,429 2,298,484 113,961,014 1,578,372 $ 129,384,882 $ 3,514,609 s r27,673,389 S 2,736,769 See accompanying notes to basic financial statements 18 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY STATEMENT OF NET ASSETS JUNE 30. 2005 (Comparative totals only) 2004 Universitv Foundation # Universitv Foundation LIABILITIES Current Iiubilities: Accounts payable and accrued liabilities Deferred revenues Liability for compensated absences Revenue bonds payable Funds held in custody for others Total current liubilities No nc u rre nt Iisb ilities : Liability for compensated absences Revenue bonds payable Total no nc uruent liubilities Totul liabilities NET ASSETS Invested in capital assets, net of related debts Restricted for: Nonexpendable Scholarships and charitable trust Expendable Grants and contracts Student loans Debt service Other Unrestricted Total net ussets $ 5,880 I I ,340,571 5,880 8,657 ,7 50 21,420,000 30.017,750 41,418,321 5,880 81,785,295 2.276,770 9,586,064 3,411 8,298,550 2l ,730,000 30,028,550 39,61 4,614 3,417 '71 671))4 1,556,658 $ 5,510,670 2,479,588 ) Rqs ?Rs 3 10,000 145,028 $ 4,128,270 2,265,919 2,832,494 290,000 69,321 s 3,417 1,268,782 2,921,161 I ,610,810 2.238,164 ( I ,857,657) $ 87,966,561 633,904 598,05 5 q_!,5!!l?2 I,193,268 2,141,423 l,lll,943 2,l96,3gl ) \1q {6 trJ t r)JLv $ s8ps8J?5 56? 705 Jvrtt vJ 6llqRq v\J)rv' *-*,\? * -J, , See accompanying notes to basic financial statements 19 This is trial version www.adultpdf.com . 2,736,769 See accompanying notes to basic financial statements 18 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY STATEMENT OF NET ASSETS JUNE 30. 2005 (Comparative. Director of Financial Affairs/Controller, at 5500 N. St. Louis Avenue, Chicago ,IL 60625. 17 This is trial version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY STATEMENT. version www.adultpdf.com STATE OF ILLINOIS NORTHEASTERN ILLINOIS UNIVERSITY MANAGEMENT'S DISCUSSION AND ANALYSIS SIGNIFICANT FINANCIAL EVENTS IMPACTING FUTURE PERIODS The discussion of significant financial