UCF ATHLETICS ASSOCIATION, INC. INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES FOR THE YEAR ENDED JUNE 30, 2016

Transcription

1 UCF ATHLETICS ASSOCIATION, INC. INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES FOR THE YEAR ENDED JUNE 30, 2016

2 UCF ATHLETICS ASSOCIATION, INC. TABLE OF CONTENTS JUNE 30, 2016 Page(s) Independent Accountants Report on the Application of Agreed-Upon Procedures 1 13 Exhibits Exhibit I Statement of Revenues and Expenses 14 Exhibit II Notes to Statement of Revenues and Expenses Supplement to Statement of Revenues and Expenses Variation Analysis of the Total Revenues and Expenses to Prior Period Amounts and Budget Estimates 21

3 INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES Dr. John C. Hitt, President, University of Central Florida: We have performed the procedures enumerated below, which were agreed to by the president of the University of Central Florida (the University), solely to assist the University in evaluating whether the accompanying statement of revenues and expenses (Exhibit I) of the UCF Athletics Association, Inc. (the Association) is in compliance with the National Collegiate Athletic Program (NCAA) Bylaw for the year ended June 30, The University s management is responsible for the statement of revenues and expenses (the Statement) and the statement s compliance with those requirements. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Exceptions totaling the lesser of $90,000 or 10% of the line item total to which an agreed-upon procedure has been applied to, other than exceptions related to internal control procedures of the Association, for which there are no thresholds, have been reported. The procedures that we performed and our findings are as follows: Agreed-Upon Procedures Related to the Statement of Revenues and Expenses Procedure Finding All Revenue Categories Compare and agree each operating revenue category reported in the statement during the reporting period to supporting schedules provided by the Program. If a specific reporting category is less than 0.5% of the total revenues, no procedures are required for that specific category. Compare and agree a sample of operating revenue receipts obtained from the above operating revenue supporting schedules to adequate supporting documentation. Compare each major revenue account over 10% of the total revenues to prior period amounts and budget estimates. Obtain and document an understanding of any variations over the lesser of $1 million or 10%. Report the analysis as a supplement to the final Agreed- Upon procedures report. No exceptions noted and amounts and explanations for variations from the prior period are included in the supplement on page

4 Procedure Finding Ticket Sales 1. Compare tickets sold during the reporting period, complimentary tickets provided during the reporting period and unsold tickets to the related revenue reported by the Program in the statement and the related attendance figures and recalculate totals. Student Fees 2. Compare and agree student fees reported by the Program in the statement for the reporting to student enrollments during the same reporting period and recalculate totals. 3. Obtain and document an understanding of Program s methodology for allocating student fees to intercollegiate athletics programs. 4. If the athletics department is reporting that an allocation of student fees should be countable as generated revenue, recalculate the totals of their methodology for supporting that they are able to count each sport. Tie the calculation to supporting documents such as seat manifests, ticket sales reports and student fee totals. An understanding of the institution s methodology was gained, and we noted that the allocation was in accordance with the University s methodology. We recalculated the allocation of student fees, noting the calculation is based on a fixed student fee per credit hour and is allocated to the Association and is not calculated by sport. Direct State or Other Governmental Support 5. Compare direct state or other governmental support recorded by the Program during the reporting period with state appropriations, institutional authorizations and/or other corroborative supporting documentation and recalculate totals. Direct Institutional Support 6. Compare the direct institutional support recorded by the Program during the reporting period with the institutional supporting budget transfers documentation and other corroborative supporting documentation and recalculate totals. Transfers Back to Institution 7. Compare the transfers back to the Institution with permanent transfers back to the Institution from the athletics department and recalculate totals. As there were no transfers to the institution for the year ended June 30, 2016, procedure was not performed

5 Procedure Finding Indirect Institutional Support 8. Compare the indirect institutional support recorded by the Program during the reporting period with expense payments, cost allocation detail and other corroborative supporting documentation and recalculate totals. As there was no indirect institutional support for the year ended June 30, 2016, procedure was not performed. Guarantees 9. Select a sample of settlement reports for away games during the reporting period and agree each selection to the Program s general ledger and/or the statement and recalculate totals. 10. Select a sample of contractual agreements pertaining to revenues derived from guaranteed contests during the reporting period and compare and agree each selection to the Program s general ledger and/or the statement and recalculate totals. Contributions 11. Any contributions of moneys, goods or services received directly by an intercollegiate athletics program from any affiliated or outside organization, agency or group of individuals (two or more) not included above (e.g., contributions by corporate sponsors) that constitutes 10 percent or more in aggregate for the reporting year of all contributions received for intercollegiate athletics during the reporting periods shall obtain and review supporting documentation for each contribution and recalculate totals. In-Kind 12. Compare the in-kind recorded by the Program during the reporting period with a schedule of in-kind donations and recalculate totals. As there was no in-kind revenue for the year ended June 30, 2016, procedure was not performed. Compensation and Benefits Provided by a Third-Party 13. Obtain the summary of revenues from affiliated and outside organizations (the "Summary") as of the end of the reporting period from the Program and select a sample of funds from the Summary and compare and agree each selection to supporting documentation, the Program's general ledger and/or the Summary and recalculate totals. 14. If the third party was audited by independent auditors, obtain the related independent auditors' report. As there were no third party support for the year ended June 30, 2016, this procedure was not performed. As there were no third party support for the year ended June 30, 2016, this procedure was not performed

6 Procedure Finding Media Rights 15. Obtain and inspect agreements to understand the institution's total media (broadcast, television, radio) rights received by the Program or through their conference offices as reported in the statement. 16. Compare and agree the media right revenues to a summary statement of all media rights identified, if applicable, and the Program s general ledger and recalculate totals. Ledger totals may be different for total conference distributions if media rights are not broken out separately. Media rights revenue was paid through conference distributions and not separately reported for the year ended June 30, Media rights revenue was paid through conference distributions and not separately reported for the year ended June 30, NCAA Distributions 17. Compare the amounts recorded in the revenue and expense reporting to general ledger detail for NCAA distributions and other corroborative supporting documents and recalculate totals. Conference Distributions 18. Obtain and inspect agreements related to the Program's conference distributions and participation in revenues from tournaments during the reporting period to gain an understanding of the relevant terms and conditions. 19. Compare and agree the related revenues to the Program's general ledger, and/or the statement and recalculate totals. Agreements were obtained and an understanding of the relevant terms and conditions was gained. Program Sales, Concessions, Novelty Sales and Parking 20. Compare the amount recorded in the revenue reporting category to a general ledger detail of program sales, concessions, novelty sales and parking as well as any other corroborative supporting documents and recalculate totals. Royalties, Licensing, Advertisements and Sponsorships 21. Compare the amount recorded in the revenue reporting category to a general ledger detail of program sales, concessions, novelty sales and parking as well as any other corroborative supporting documents and recalculate totals. 22. Compare and agree the related revenues to the Association's general ledger, and/or the statement and recalculate totals. Agreements were obtained and an understanding of the relevant terms and conditions was gained

7 Procedure Finding Sports Camp Revenues 23. Inspect sports camp contract(s) between the institution and person(s) conducting institutional sports-camps or clinics during the reporting period to obtain an understanding of the Program's methodology for recording revenues from sports camps. 24. Obtain schedules of camp participants and select a sample of individual camp participant cash receipts from the schedule of sports-camp participants and agree each selection to the Program's general ledger, and/or the statement and recalculate totals. As there were no sports camp revenue for the year ended June 30, 2016, this procedure was not performed. As there were no sports camp revenue for the year ended June 30, 2016, this procedure was not performed. Athletics Restricted Endowment and Investment Income 25. Obtain and inspect endowment agreements (if any) to gain an understanding of the relevant terms and conditions. 26. Compare and agree the classification and use of endowment and investment income reported in the statement during the reporting period to the uses of income deferred within the related endowment agreement and recalculate totals. As the athletics restricted endowment and investment income for the year ended June 30, 2016, were below 0.5% of total revenue, this procedure was not performed. As the athletics restricted endowment and investment income for the year ended June 30, 2016, were below 0.5% of total revenue, this procedure was not performed. Other 27. Perform minimum agreed-upon procedures referenced for all revenue categories and recalculate totals. Other operating revenues exceeded 10% of total revenues. The top three activities included in operating revenue are the amounts released from debt service restrictions, the transfer from Athletics reserves, and the income for contracted turf management. All Expense Categories Compare and agree each expense category reported in the statement during the reporting period to supporting schedules provided by the institution. If a specific reporting category is less than 0.5% of the total expenses, no procedures are required for that specific category. Compare and agree a sample of expenses obtained from the above operating expense supporting schedules to adequate supporting documentation

8 Procedure Compare each major expense account over 10% of the total expenses to prior period amounts and budget estimates. Obtain and document an understanding of any variations over the lesser of $1 million or 10%. Report the analysis as a supplement to the final Agreed- Upon procedures report. Finding No exceptions noted and amounts and explanations for variations from the prior period are included in the supplement on page 21. Athletic Student Aid 28. Select a sample of students (no less than 10% of the total student-athletes for institutions who have used NCAA's Compliance Assistant (CA) software to prepare athletic aid detail and no less than 20% of total student-athletes for institutions who have not) from the listing of institutional student aid recipients during the reporting period. 29. Obtain individual student account detail for each selection and compare total aid allocated from the related aid award letter to the student's account. 30. Perform a check of each student selected to ensure their information was reported accurately in either the NCAA s CA software or entered directly into the NCAA Membership Financial Reporting System using the following criteria: The equivalency value for each student-athlete in all sports, including head-count sports, need to be converted to a full-time equivalency value. The full-time equivalency value is calculated using the athletic grant amount reported on the squad list as the numerator and the full grant amount which is the total cost for tuition, fees, books, room and board for an academic year as the denominator. If using the NCAA Compliance Assistant software, this equivalency value should already be calculated on that squad list labeled Rev. Dist. Equivalent Award. If an athlete participates in more than one sport, the Rev. Dist. Equivalent Award can only be included in one sport. NCAA Compliance Assistant software will place an asterisk by the student athlete within the sport that is not countable towards grants-in-aid revenue distribution. All equivalency calculations should be rounded to two decimal places. The NCAA Compliance Assistant software and the on-line summary form will automatically round to two decimal places. A sample of forty-four student aid recipients was selected

9 Procedure The full grant amount should be the full cost of tuition for an academic year, not semester. If a sport is discontinued and the grant(s) are still being honored by the institution, the grant(s) may be included in the total. Student-athletes receiving athletic aid who have exhausted their athletics eligibility or are inactive due to medical reasons should be included in the grants-in-aid calculation, marked properly on the squad list and on the Grants-in-Aid submission form. Only athletic grants awarded in sports in which the NCAA conducts championship competitions, emerging sports for women and football should be included in the calculations. Finding As there were no discontinued sports for the year ended June 30, 2016, this procedure was not performed. 31. Recalculate totals for each sport and overall. Guarantees 32. Obtain and inspect visiting institution's away-game settlement reports received by the institution during the reporting period and agree related expenses to the Association s general ledger and/or the statement and recalculate totals. 33. Obtain and inspect contractual agreements pertaining to expenses recorded by the Association from guaranteed contests during the reporting period. Compare and agree related amounts expensed by the institution during to the Association s general ledger and/or the statement and recalculate totals. Contractual agreements were obtained and inspected. Coaching Salaries, Benefits, and Bonuses Paid by the University and Related Entities 34. Obtain and inspect a listing of coaches employed by the Association and related entities during the reporting period. Select a sample of coaches' contracts that must include football, and men's and women's basketball from the listing. 35. Compare and agree the financial terms and conditions of each selection to the related coaching salaries, benefits, and bonuses recorded by the Association and related entities in the statement during the reporting period. 36. Obtain and inspect payroll summary registers for the reporting year for each selection. Compare and agree payroll summary registers from the reporting period to the related coaching salaries, benefits and bonuses paid by the Association and related entities expense recorded by the Association in the statement during the reporting period A listing of all coaches employed by the Association was obtained. A sample of seven coaches was selected, including the football, men s basketball, and women s basketball head coach.

10 Procedure 37. Compare and agree the totals recorded to any employment contracts executed for the sample selected and recalculate totals. Finding Coaching Other Compensation and Benefits Paid by a Third-Party 38. Obtain and inspect a listing of coaches employed by third parties during the reporting period. Select a sample of coaches' contracts that must include football, and men's and women's basketball from the listing. 39. Compare and agree the financial terms and conditions of each selection to the related coaching other compensation and benefits paid by a third party and recorded by the Association in the statement during the reporting period. 40. Obtain and inspect reporting period payroll summary registers for each selection. Compare and agree related payroll summary register to the coaching other compensation and benefits paid by a third party expenses recorded by the institution in the statement during the reporting period and recalculate totals. As there were no third party benefits or other compensation expenses for the year ended June 30, 2016, procedure was not performed. As there were no third party benefits or other compensation expenses for the year ended June 30, 2016, procedure was not performed. As there were no third party benefits or other compensation expenses for the year ended June 30, 2016, procedure was not performed. Support Staff/Administrative Salaries, Benefits and Bonuses Paid by the University and Related Entities 41. Select a sample of support staff/administrative personnel employed by the Association and related entities during the reporting period. 42. Obtain and inspect reporting period summary payroll register for each selection. Compare and agree related summary payroll register to the related support staff administrative salaries, benefits and bonuses paid by the Association and related entities expense recorded by the Association in the statement during the reporting period and recalculate totals. A sample of thirteen support staff/administrative personnel was selected. Support Staff/Administrative Other Compensation and Benefits Paid by a Third-Party 43. Select a sample of support staff/administrative personnel employed by the third parties during the reporting period. 44. Obtain and inspect reporting period payroll summary registers for each selection. Compare and agree related payroll summary registers to the related support staff administrative other compensation and benefits expense recorded by the Association in the statement during the reporting period and recalculate totals. As there were no third party benefits or other compensation expenses for the year ended June 30, 2016, procedure was not performed. As there were no third party benefits or other compensation expenses for the year ended June 30, 2016, procedure was not performed

11 Procedure Finding Severance Payments 45. Select a sample of employees receiving severance payments by the institution during the reporting period and agree each severance payment to the related termination letter or employment contract and recalculate totals. Recruiting 46. Obtain and document an understanding of the Association's recruiting expense policies. 47. Compare and agree to existing institutional- and NCAA-related policies. 48. Obtain general ledger detail and compare to the total expenses reported and recalculate totals. We obtained and documented an understanding of the Association s recruiting expense policies. No exceptions noted and policies are consistent with institutional and NCAA-related policies. Team Travel 49. Obtain and document an understanding of the Association's team travel policies. 50. Compare and agree to existing institutional- and NCAA-related policies. 51. Obtain general ledger detail and compare to the total expenses reported and recalculate totals. We obtained and documented an understanding of the Association s team travel policies. No exceptions noted and policies are consistent with institutional and NCAA-related policies. Equipment, Uniforms and Supplies 52. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. Game Expenses 53. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. Fund Raising, Marketing and Promotion 54. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals

12 Procedure Finding Sports Camp Expenses 55. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. As there were no sports camp expenses for the year ended June 30, 2016, procedure was not performed. Spirit Groups 56. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. As the spirit groups expenses for the year ended June 30, 2016, were below 0.5% of total expenses, this procedure was not performed. Athletic Facility Debt Service, Leases and Rental Fees 57. Obtain a listing of debt service schedules, lease payments and rental fees for athletics facilities for the reporting year. Compare a sample of facility payments including the top two highest facility payments to additional supporting documentation (e.g. debt financing agreements, leases, rental agreements). 58. Compare amounts recorded to amounts listed in the general ledger detail and recalculate totals. Direct Overhead and Administrative Expenses 59. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. Indirect Institutional Support 60. Compare the indirect institutional support recorded by the institution during the reporting period with expense payments, cost allocation detail and other corroborative supporting documentation and recalculate totals. As there was no indirect institutional support for the year ended June 30, 2016, procedure was not performed. Medical Expenses and Medical Insurance 61. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. Memberships and Dues 62. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. As the memberships and dues expense for the year ended June 30, 2016, were below 0.5% of total expenses, this procedure was not performed

13 Procedure Finding Other Operating Expenses and Transfers to Institution 63. Obtain general ledger detail and compare to the total expenses reported. Select a sample of transactions to validate existence of transaction and accuracy of recording and recalculate totals. Additional Minimum Agreed-Upon Procedures Compare and agree the sports sponsored reported in the NCAA Membership Financial Reporting System to the squad lists of the institution. The NCAA Membership Financial Reporting System populates the sports from the NCAA Membership Database as they are reported by the institution. If there is a discrepancy in the sports sponsored between the NCAA Membership Financial Reporting System and the squad lists, inquire about the discrepancy and report the justification in the AUP report. Obtain the institution s Sports Sponsorship and Demographics Forms Report for the reporting year. Validate that the countable sports reported by the institution meet the minimum requirements set forth in Bylaw for the number of contests and the number of participants in each contest that is counted toward meeting the minimum contest requirement. Once countable sports have been confirmed, ensure that the institution has properly reported these sports as countable for revenue distribution purposes within the NCAA Membership Financial Reporting System. Note: Any discrepancies MUST be resolved within the NCAA Membership Financial Reporting System prior to the report being submitted to the NCAA. Agreed-Upon Procedures Related to Affiliated and Outside Organizations Procedure 1. The Association shall identify all intercollegiate athletics-related affiliated and outside organizations and obtain those organizations statements for the reporting period. Once the Association has made these statements available, the independent accountant shall agree the amounts reported in the statement to the organization s general ledger or, alternatively, confirm revenues and expenses directly with a responsible official of the organization. In addition, the Association shall prepare a summary of revenues and expenses for or on behalf of intercollegiate athletics programs affiliated and outside organizations to be included with the agreed-upon procedures report

14 Finding The Association identified the University of Central Florida Foundation, Inc. (the Foundation) and the UCF Stadium Corporation (the Corporation) as the only outside organizations making expenditures for, or on behalf of the Association or its employees. The Foundation serves as the official legal conduit for the acceptance, investment, and distribution of private gifts in support of the activities of the Association. Included in the Association s Foundation accounts are the accounts of the Corporation. The Corporation serves as a direct support organization of the University whose purpose is to construct, operate and maintain the football stadium for and on behalf of the Association. During the year ended June 30, 2016, the Foundation transferred funds to the Corporation representing contributions made for the purchase of season tickets, luxury suites, and club seats in the stadium. Expenditures for, or on behalf of the Association or its employees are made directly from the Foundation and the Corporation. We obtained the statement of changes in net position of the Corporation and the Foundation accounts held for the Association for the year ended June 30, 2016, which represents revenues and expenditures on behalf of the Association. This information was obtained by direct confirmation with the Foundation and the Corporation. The following is a summary of the changes in net position for the Foundation accounts held for the Association: Procedure Net position, beginning of year $ 822,564 Increases in net position 509,662 Decreases in net position (77,027) Change in net position 432,635 Net position, end of year $ 1,255,199 The following is a summary of the changes in net position for the Corporation: Net position, beginning of year $ 9,643,234 Increases in net position 10,446,815 Decreases in net position (67,983,969) Change in net position (57,537,154) Net position, end of year $ (47,893,920) 2. The independent accountant shall obtain and review the audited financial statements of the organization and any additional reports regarding internal control matters if the organization is audited independent of the agreed-upon procedures required by NCAA legislation. The Association s independent accountant shall also inquire of institutional and outside organization management as to corrective action taken in response to comments concerning internal control structure (if any)

15 Finding We obtained and read the audited financial statements of the Foundation and the Corporation for the year ended June 30, 2016, and the related report on compliance and on internal control. The results of this procedure disclosed that the independent auditors expressed an unqualified opinion on the financial statements of the Foundation and the Corporation. The independent auditors noted no matters involving internal control over financial reporting and its operation that were considered material weaknesses. We were not engaged to, and did not, conduct an examination, the objective of which would be the expression of an opinion on the compliance of the accompanying statement of revenues and expenses (Exhibit I) of the University, supplement to statement of revenues and expenses variation analysis of the total revenue and expenses, and the accompanying notes to the statement of revenues and expenses (Exhibit II). Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the management of UCF Athletics Association, Inc., the University of Central Florida Board of Trustees, the State of Florida Board of Education, and the National Collegiate Athletic Association, and is not intended to be and should not be used by anyone other than these specified parties. Gainesville, Florida January 17,

16 UCF ATHLETICS ASSOCIATION, INC. STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED - SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS' REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) Exhibit I Revenues 1 Ticket sales $ 3,934,495 2 Direct state or other government support 833,482 3 Student fees 22,447,191 4 Direct institutional support 3,557,693 5 Less - transfers to institution - 6 Indirect institutional support - 6A Indirect institutional support - athletic facilities debt service, lease and rental fees - 7 Guarantees 609,300 8 Contributions 6,918,969 9 In-kind - 10 Compensation and benefits provided by a third party - 11 Media rights - 12 NCAA distributions 911, Conference distributions 3,438, Program, novelty, parking, and concession sales 430, Royalties, licensing, advertisement, and sponsorships 4,282, Sports camp revenues - 17 Athletics restricted endowment and investments income 112, Other operating revenue 11,902, Bowl revenues - Total operating revenues 59,379,453 Expenses 20 Athletic student aid 8,870, Guarantees 911, Coaching salaries, benefits and bonuses paid by the university and related entities 9,321, Coaching salaries, benefits, and bonuses paid by a third-party - 24 Support staff and administrative compensation, benefits and bonuses paid by the university and related entities 8,272, Support staff and administrative compensation, benefits and bonuses paid by a third-party - 26 Severance payments 1,909, Recruiting 692, Team travel 3,170, Sports equipment, uniforms and supplies 1,054, Game expenses 1,715, Fund raising, marketing and promotion 784, Sports camp expenses - 33 Spirit groups 181, Athletic facilities debt service, leases and rental fees 12,844, Direct overhead and administrative expenses 3,764, Indirect institutional support - 37 Medical expenses and insurance 529, Memberships and dues 184, Student athlete meals (non travel) 438, Other operating expenses 4,733, Bowl expenses - Total operating expenses 59,379,453 Excess of expenses over revenues $ - 50 Excess transfers to institution $ - 51 Conference realignment expenses $ - 52 Total athletics related debt $ 63,227, Total institutional debt $ 186,683, Value of athletics dedicated endowments $ 840, Value of institutional endowments $ 144,921, Total athletics related capital expenditures $ 7,217,

17 EXHIBIT II UCF ATHLETICS ASSOCIATION, INC. NOTES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) (1) Basis of Accounting: The accompanying statement of revenues and expenses includes the activity of the UCF Athletics Association, Inc. (the Association) and UCF Stadium Corporation (the Corporation) and has been prepared using the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recognized when they are incurred. (2) Capital Assets: Capital assets, which include furniture and equipment, facilities improvements and construction in progress, are reported in the accompanying financial statements. Capital assets with initial, individual costs that equal or exceed $1,000 and estimated useful lives of over one year are recorded as capital assets. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. Capital assets are depreciated using the straight-line method over the estimated useful lives ranging from 3 years to 39.5 years. During the year ended June 30, 2016, the extinguishment of the certificates of participation held by the Corporation terminated the ground lease between the Corporation and the University. All the related building and building improvements assets on the leased land transferred to the University. Capital asset activity for the year ended June 30, 2016, for the Association was as follows: Beginning Balance Additions Decreases Transfers Ending Balance Capital assets being depreciated: Furniture and equipment $ 4,207,704 $ 340,981 $ - $ - $ 4,548,685 Facilities improvements 18,546,473 77, ,937 18,753,055 Total capital assets being depreciated 22,754, , ,937 23,301,740 Accumulated depreciation (8,152,293) (817,069) - - (8,969,362) Total capital assets being depreciated, net 14,601,884 (398,443) - 128,937 14,332,378 Capital assets not being depreciated: Land 700, ,272 Construction in progress 256,587 1,572 - (128,937) 129,222 Total capital assets not being depreciated 956,859 1,572 - (128,937) 829,494 Capital assets, net $ 15,558,743 $ (396,871) $ - $ - $ 15,161,

18 EXHIBIT II UCF ATHLETICS ASSOCIATION, INC. NOTES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) (2) Capital Assets: (Continued) Capital asset activity for the year ended June 30, 2016, for the Corporation was as follows: Beginning Balance Additions Decreases Ending Balance Non-depreciable capital assets: Construction in progress $ 2,457,569 $ - $ (2,457,569) $ - Capital assets being depreciated: Buildings and improvements 57,802,162 7,733,682 (65,535,844) - Equipment 2,327,104 81,522 (2,145,704) 262,922 Art and historical treasures 6, ,500 Total depreciable assets 60,135,766 7,815,204 (67,681,548) 269,422 Accumulated depreciation (13,545,874) (678,945) 13,965,389 (259,430) Total depreciable capital assets, net 46,589,892 7,136,259 (53,716,159) 9,992 Capital assets, net $ 49,047,461 $ 7,136,259 $ (56,173,728) $ 9,992 Capital asset activity related to Athletics for the year ended June 30, 2016, for the University was as follows: Beginning Balance Additions Decreases Ending Balance Buildings and improvements $ - $ 45,661,286 $ - $ 45,661,286 Equipment - 245, ,306 Total depreciable assets - 45,906,593-45,906,593 Accumulated depreciation - (794,547) - (794,547) Capital assets, net $ - $ 45,112,046 $ - $ 45,112,046 (3) Contributions: The Foundation serves as the official legal conduit for the acceptance, investment, and distribution of private gifts in support of the activities and programs. Contributions of $3,074,683 were recognized from the Foundation for the year ended June 30, 2016, and have been included in the accompanying statement of revenues and expenses. Contributions received from the Foundation were the only contributions exceeding 10% of total contributions, as reported in the statement of revenues and expenses, for the year ended June 30,

19 EXHIBIT II UCF ATHLETICS ASSOCIATION, INC. NOTES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) (4) Long-Term Obligations: Beginning Balance Additions Decreases Ending Balance Long-term obligations: UCF Athletic Association Lake Pickett and UCF Loan $ 10,025,989 $ 101,576 $ (3,063,980) $ 7,063,585 Fifth Third Line of Credit 6,434,999 - (250,000) 6,184,999 Compensated absences 519, ,795 (246,245) 416,689 Total UCF Athletic Association 16,980, ,371 (3,560,225) 13,665,273 UCF Stadium Corporation Certificates of Participation 43,846,253 - (43,846,253) - Wells Fargo Loan 11,430,000 - (11,430,000) - Revenue Bonds - 50,387,576 (825,193) 49,562,383 Total UCF Stadium Corporation 55,276,253 50,387,756 (56,101,446) 49,562,383 Total All Facilities $ 72,256,380 $ 50,632,947 $ (59,661,671) $ 63,227,656 The following information provides additional details regarding the long-term obligations of the Association: The Association currently has a note payable to the University. Interest on the note payable accrues at a floating rate per annum equal to the SPIA rate of return as of the prior fiscal year, which was 1.53% for the year ended June 30, The loan matures in On December 15, 2008, the Association assumed a note payable from the Foundation with a remaining principal balance at the time of $1,011,603 for the purchase of land for the women s rowing training facility (Lake Pickett). The loan is secured by pledged revenues and certain deposits. The note payable bears a fixed interest rate of 5.09%. Semiannual payments of interest and annual payments of principal are due through October 1, The Association obtained a line of credit in the fall of 2004 with a local bank to fund certain capital projects. At June 30, 2016, the amount outstanding on the note was $6,184,999. In June 2016, the Association renewed the agreement until July 2017, which carries interest at 67% of LIBOR plus 1.34% (1.68% at June 30, 2016) and is secured by an amount not to exceed 5% of the prior year s collection of student athletic fees and conference payments from the American conference. During 2015, the line of credit was modified to disallow additional borrowings and repay the outstanding balance as a line of credit promissory note by June of 2033 under a specified repayment schedule. The repayment schedule below assumes the agreement is renewed annually. If the agreement is not renewed annually, however, the entire balance will be due in full at that time

20 EXHIBIT II UCF ATHLETICS ASSOCIATION, INC. NOTES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) (4) Long-Term Obligations: (Continued) The following is a schedule of future principal payments for the loans outstanding as of June 30, 2016: Year Ending June 30, Principal Interest Total 2017 $ 697,656 $ 191,722 $ 889, , , , , , , , ,373 1,124, ,232, ,351 1,379, ,926, ,378 6,548, ,090, ,133 2,255, ,999 21, ,312 Total $ 13,248,584 $ 1,662,262 $ 14,910,846 In June 2015, the Association renewed an operating line of credit agreement with a local bank for $2,000,000. The line carries an interest rate of LIBOR plus 2.00% (2.18% at June 30, 2016). The line is secured by all contract royalties under the multimedia agreement as well as all NCAA grant-in-aid and sports sponsorship distributions. At June 30, 2016, there was no amount outstanding on the operating line of credit. The following information provides additional details regarding the long-term obligations of the Corporation: In August 2006, the Corporation issued Series 2006A tax-exempt Certificates of Participation for $45,685,000 and Series 2006B taxable Certificates of Participation for $18,850,000, (the 2006 debt issue). The debt was issued to finance a portion of the costs of designing, acquiring, constructing and equipping an approximately 45,000 seat football stadium on the campus of the University, containing luxury suites and club seats. The certificates include both term and serial certificates and are secured by a pledge from the Association of gross ticket revenues, Association rent, conference distributions, and sponsorship revenue. Principal and interest payments related to the tax-exempt portion of the 2006 debt issue are made in accordance with the schedule set forth at the time of issuance and bear fixed interest rates that range from 4 percent to 6 percent, and maturity dates that range from March 2031 to March The Series 2006B Certificates were issued as variable rate certificates with interest being calculated at an Auction Period Rate. In April 2008, due to prevailing market conditions at the time with respect to the Auction Period Rate and its effect on the taxable debt costs, the Corporation determined that it was in its best interest to provide for the conversion of the method of calculating interest on the Series 2006B certificates from the Auction Period Rate to a Short Term Rate. As a result, the Corporation entered into a loan agreement with Wells Fargo bank (formerly known as Wachovia Bank) to borrow $16,700,000. The proceeds of the loan were used to purchase all outstanding Series 2006B taxable certificates of participation. Those certificates of participation are held in trust and have been registered in the name of the bank as pledgee. The note was payable from and secured by a lien upon and pledge of all payments received with respect to the Corporation s Series 2006B certificates

21 EXHIBIT II UCF ATHLETICS ASSOCIATION, INC. NOTES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) (4) Long-Term Obligations: (Continued) In December 2014, the Corporation issued a single Series 2014 tax-exempt Certificate of Participation for $4,010,000. This debt was issued to finance a portion of the costs of designing, acquiring, constructing and equipping an approximately 22,500 square-foot Student Leadership Center facility, which will provide ample space for increased student services as well as room to house athletic compliance offices and career services programing. The certificate was secured by a pledge from the Association of gross ticket revenues, Association rent, conference distributions, and sponsorship revenue. Principal and interest payments related to the tax-exempt certificate are made in accordance with the schedule set forth at the time of issuance and bears a fixed interest rate of 2.49 percent, and matures in March In December 2015, the Corporation issued Series 2015A tax-exempt refunding revenue bonds for $33,995,000 with a net premium of $2,332,576, Series 2015B taxable refunding revenue bonds for $10,250,000, and a Series 2015C non-taxable refunding revenue bond for $3,810,000 to a bank (the 2015 debt issue). These bonds were issued to refund and replace the Corporation s Series 2006A, 2006B, and 2014 Certificates of Participation. Proceeds of $46,577,576 from the refunding bonds plus an additional $4,879,667 from the Corporations debt service accounts were used to purchase $40,376,088 of U.S. Treasury State and Local Government Series Securities and to make a cash deposit with the Corporation s trust to prepay the balance on the 2006B taxable certificates. These securities were placed in an irrevocable trust with an escrow agent to provide for all future debt service payments on the Series 2006 A&B certificates, which defeased the certificates. The trust assets and the liability for the defeased certificates are not included in the statement of net position. The trust extinguished the defeased certificates on March 1, As a result of the refunding, the Corporation reduced its capital improvement debt service requirement by $7,520,700 over the next 20 years and obtained an economic gain of $617,527. Approximately $224,000 related to the cost of issuance is included in interest expense for the year ended June 30, The extinguishment of the defeased certificates terminated the ground lease between the Corporation and the University. All the related building and building improvements assets on the leased land transferred to the University. The refunding bonds include both term and serial bonds and are secured by a pledge from the Association of gross ticket revenues, Association rent, away game guarantees, conference distributions, and sponsorship revenue. Principal and interest payments were made in accordance with the schedule set forth at the time of issuance and bear fixed interest rates that range from 1.60 percent to 5.15 percent, and maturity dates that range from March 2029 to March

22 EXHIBIT II UCF ATHLETICS ASSOCIATION, INC. NOTES TO STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS REPORT ON THE APPLICATION OF AGREED-UPON PROCEDURES) (4) Long-Term Obligations: (Continued) The following is a schedule of future principal payments for the Series 2015A, Series 2015B and 2015C revenue bonds as of June 30, June 30, 2016: Fiscal Year Ending June 30, Principal Bonds Payable Interest Total Principal and Interest 2017 $ 1,674,000 $ 1,959,040 $ 3,633, ,715,000 1,913,712 3,628, ,786,000 1,843,637 3,629, ,863,000 1,768,989 3,631, ,940,000 1,689,706 3,629, ,061,000 7,093,243 18,154, ,658,000 4,565,760 17,223, ,600,000 1,874,145 16,474,145 Subtotals 47,297,000 22,708,232 70,005,232 Plus: Unamortized bond premium 2,265,383-2,265,383 Total $ 49,562,383 $ 22,708,232 $ 72,270,615 The University entered into a support agreement such that it will fund certain deficiencies that may arise in the event the Corporation is unable to make the minimum payments on the bonds. In addition, if the Corporation has deficiencies for debt service coverage requirements or reserve account shortfalls, the University agrees to transfer funds to cover any such deficiencies. The University is obligated only to the extent that it has legally available revenues to cover the unpaid amounts. (5) Surplus/Deficit Allocations: The Association and the Corporation are allowed to carry forward all available funds at the end of each fiscal year to the next fiscal year. Deficits are funded by the respective operations of both the Association and the Corporation, to the extent there are sufficient net assets available

23 UCF ATHLETICS ASSOCIATION, INC. SUPPLEMENT TO STATEMENT OF REVENUES AND EXPENSES VARIATION ANALYSIS OF THE TOTAL REVENUES AND EXPENSES TO PRIOR PERIOD AMOUNTS AND BUDGET ESTIMATES FOR THE YEAR ENDED JUNE 30, 2016 (UNAUDITED - SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES) Revenues $ Variance % Variance Variation Explanation 8 Contributions $ 6,918,969 $ 9,733,191 $ (2,814,222) % 18 Other operating revenue $ 11,902,296 $ 662,104 $ 11,240, % Net decrease is due to one-time contributions for the UCF football stadium expansion and the student leadership center in 2015 that did apply to Net increase is due to an amount released from debt service restrictions under UCF Stadium Corporation and an amount transferred from Athletics reserves. Expenses 20 Athletic student aid $ 8,870,903 $ 7,049,996 $ 1,820, % 34 Athletic facilities debt service, leases and rental fees $ 12,844,138 $ 5,083,174 $ 7,760, % Net increase is due to the changes to scholarships as UCF is moving towards a full cost of attendance model. Net increase is due to the debt refinancing associated with the UCF football stadium that enabled the University to use amounts previously restricted to pay down debt. Note 1: The budget estimates for the UCF Athletics Association, Inc. are not prepared in a format consistent with the revenue and expense categories specified by the NCAA. Thus, the variance analysis of total revenues and expenses to the budget estimates for the year ended June 30, 2016, could not be performed