San Marcos University Corporation. Financial Report June 30, 2013

Transcription

1 San Marcos University Corporation Financial Report June 30, 2013

2 Contents Independent Auditor s Report 12 Financial Statements Statements of financial position 3 Statements of activities 4 Statements of cash flows 5 Notes to financial statements 614 Supplemental Schedules Schedule of net position 15 Schedule of revenues, expenses and changes in net position 16 Other information 1726

3 Independent Auditor s Report To the Board of Directors San Marcos, CA Report on the Financial Statements We have audited the accompanying financial statements of, which comprise statements of financial position as of June 30, 2013 and 2012, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP); this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in conformity with U.S. GAAP. 1

4 Report on Schedules to be Included in the California State University Systems Financial Report (Supplementary Information) Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. San Diego, CA September 30,

5 Statements of Financial Position June 30, 2013 and 2012 Assets Current Assets Cash and cash equivalents $ 3,791,472 $ 2,704,126 Accounts receivable, less allowance for doubtful accounts of $10,932 in 2013 and $24,705 in ,638 29,902 Relatedparty receivable (Note 5) 59,141 Certificates of deposit 489,723 1,226,245 Prepaid expenses 24,110 19,398 Total current assets 4,442,084 3,979,671 Property and Equipment, net (Notes 2, 4 and 5) 19,312,929 19,799,954 Notes Receivable (Note 5) 1,489,000 Total assets $ 25,244,013 $ 23,779,625 Liabilities and Net Assets Current Liabilities Accounts payable $ 108,501 $ 17,129 Current portion of longterm debt (Note 3) 670, ,000 Bond interest payable (Note 5) 187, ,792 Due to related parties (Note 5) 467, ,523 Accrued expenses 115,562 91,071 Deferred revenue 574, ,618 Total current liabilities 2,122,842 1,814,133 LongTerm Debt, net of current portion (Note 3) 22,367,754 23,067,135 Total liabilities 24,490,596 24,881,268 Commitments and Contingencies (Notes 4 and 5) Net Assets (Deficit), unrestricted 753,417 (1,101,643) Total liabilities and net assets $ 25,244,013 $ 23,779,625 See Notes to Financial Statements. 3

6 Statements of Activities Years Ended June 30, 2013 and Unrestricted revenue and support: Housing rental income $ 4,664,740 $ 4,122,140 Housing other fees 492, ,064 Student recreation fees 770,358 Student recreation other income 64,953 Event and conference services 790,831 Student Union fees (Note 5) 1,018,415 Clarke Field House (Note 5) 225,313 Inkind rental income (Note 4) 888, ,389 Total unrestricted revenue and support 8,915,826 4,999,593 Expenses: Program services student housing and child center management: Housing program (Note 5) 2,750,366 3,001,001 Bond and debt activities, bond interest expense (Note 5) 1,100,701 1,073,849 Student recreation 732,623 Event and conference services 1,123,926 Clarke Field House and Student Union 833,182 Inkind rental expense (Note 4) 888, ,389 General and administrative 627,855 Total expenses 8,057,054 4,549,239 Increase in net assets before transfers 858, ,354 Transfer of assets to UARSC (Note 5) (6,285,611) Transfer of assets to CSUSMF (Note 5) (2,000,000) Transfer of assets from CSUSM (Note 5) 996,288 Increase (decrease) in net assets after transfers 1,855,060 (7,835,257) Unrestricted net assets (deficit), beginning (1,101,643) 6,733,614 Unrestricted net assets (deficit), ending $ 753,417 $ (1,101,643) See Notes to Financial Statements. 4

7 Statements of Cash Flows Years Ended June 30, 2013 and Cash Flows From Operating Activities Increase in net assets $ 858,772 $ 450,354 Transfer of cash to CSUSMF (2,000,000) Transfer of cash to CSUSM 996,288 Adjustments to reconcile increase in net assets to net cash provided by (used in) operating activities: Depreciation 826, ,712 Amortization of bond premium (29,381) (29,382) Provision for doubtful accounts 21,372 46,614 (Increase) decrease in: Accounts receivable (69,108) (32,724) Relatedparty receivable (59,141) Prepaid expenses (4,712) 5,069 Increase (decrease) in: Accounts payable 91, Bond interest payable (3,667) (2,816) Relatedparty payable 83, ,200 Accrued expenses 24,491 12,833 Deferred revenue 33,434 (27,507) Net cash provided by (used in) operating activities 2,769,301 (447,112) Cash Flows From Investing Activities Purchases of property and equipment (339,477) (383,474) Purchases of certificates of deposit (1,470,000) Proceeds from maturity of certificates of deposit 736,522 2,203,351 Notes receivable (1,489,000) Net cash (used in) provided by investing activities (1,091,955) 349,877 Cash Flows From Financing Activities Payments of longterm debt (590,000) (520,000) Net cash used in financing activities (590,000) (520,000) Net increase (decrease) in cash and cash equivalents 1,087,346 (617,235) Cash and Cash Equivalents, beginning 2,704,126 3,321,361 Cash and Cash Equivalents, ending $ 3,791,472 $ 2,704,126 Supplemental Disclosures of Cash Flow Information Cash paid for interest $ 1,133,750 $ 1,070,099 Supplemental Disclosure of Noncash Activities Transfer of property and equipment to UARSC $ $ (6,285,611) See Notes to Financial Statements. 5

8 Notes to Financial Statements Note 1. Nature of Operations and Summary of Significant Accounting Policies Nature of operations: (the Corporation), which is an auxiliary organization of California State University, San Marcos (CSUSM or the University), was established on May 15, 2001 as a nonprofit public California corporation for the purpose of developing, providing and maintaining affordable housing for the use and convenience of students, faculty and staff of CSUSM. The Corporation owns University Village Apartments (UVA), which provides housing and studentlife activities for approximately 624 students, but contracts with Education Realty Trust, Inc. (EDR), a thirdparty administrator for the UVA operations and management. Additionally, the Corporation manages the contractual relationship between The Quad developer, a privately owned housing option for CSUSM students, the University and the residential life team. On September 1, 2007, the Corporation received a donated building and equipment from an auxiliary, University Auxiliary and Research Services Corporation (UARSC) (formerly named California State University San Marcos Foundation (CSUSMF)). This property was being used to provide daycare services to faculty, staff and the community. On July 1, 2011, the Corporation transferred the building, equipment and operations back to UARSC (see Note 5). On July 1, 2012, the Corporation expanded its mission to provide facilities and services that enhance the student experience, build community, and support the University mission by assuming responsibility for the operation of the M. Gordon Clarke Field House/University Student Union (the Clarke Field House), including the campus recreation programs formerly housed under Associated Students, Inc. (ASI) and event and conference services (ECS) formerly housed under the University. As of July 2012, the Corporation relies on CSUSM business and financial services for accountingrelated support services and on UARSC for human resources and payroll services. A new University Student Union is currently under construction, with anticipated occupancy beginning in January The Corporation is governed by a Board of Directors composed of representatives from the University and auxiliary administration, faculty, student body and community. The Corporation s financial statements are included as a component unit of the University s annual generalpurpose financial statements. This is required by accounting principles generally accepted in the United States (U.S. GAAP) applicable to governmental entities. Affiliated organizations: The Corporation is related to other auxiliaries of the University, including UARSC, CSUSMF and ASI. These auxiliaries and the University periodically provide various services to one another. 6

9 Notes to Financial Statements Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued) A summary of significant accounting policies is as follows: Basis of accounting and reporting: The financial statements of the Corporation have been prepared in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958, Financial Statements of NotforProfit Organizations. At June 30, 2013 and 2012, all of the Corporation s net assets were classified as unrestricted. Unrestricted net assets represent funds that are fully available, at the discretion of management and the Associated Students Council, for the Corporation to utilize in any of its programs or services. In order to ensure observance of limitations and possible restrictions placed on the use of available resources, the accounts of the Corporation are maintained in accordance with the principles of fund accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified. Funds that have similar objectives and characteristics have been combined into fund groups. Amounts due to or from other funds are eliminated in total in the financial statements. Contributions, including unconditional promises to give (pledges), are recognized in the year the promise is made, as opposed to when assets are received. Contributions with donorimposed restrictions are reported as temporarily or permanently restricted contributions. Temporarily restricted net assets are reclassified as unrestricted net assets at such time as the Corporation has fulfilled the donorimposed restriction. Contributions where donorimposed restrictions both arose and expired in the same fiscal year are reported as unrestricted contributions. As of and for the years ended June 30, 2013 and 2012, all contributions received by the Corporation were classified as unrestricted and are included in unrestricted revenue and support. Noncash contributions are recorded at their fair value at the date of donation as established by either appraisal or the value anticipated in the subsequent resale of an item. Cash and cash equivalents: The Corporation maintains accounts at various financial institutions with funds insured by the Federal Deposit Insurance Corporation (FDIC). The Corporation s accounts at these institutions may, at times, exceed FDICinsured limits. The Corporation has not experienced any such losses in these accounts. The Corporation considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents. Accounts receivable: Accounts receivable primarily represent past due rental income. Rental income is considered past due after the rental due date. Management of the Corporation, along with the property manager, determines if an allowance of doubtful accounts is necessary by using historical collection experience applied to the aged receivable. Management has determined an allowance of $10,932 and $24,705 as of June 30, 2013 and 2012, respectively. Certificates of deposit: Shortterm investments consist of certificates of deposit carried at cost, which approximates fair value, and investment interest receivable. Property and equipment: Property and equipment acquisitions greater than $1,000 are recorded at cost. Donated property and equipment are recorded at fair value at the date of the gift. Depreciation is computed using the straightline method over the estimated useful life of the assets, ranging from five to 40 years. 7

10 Notes to Financial Statements Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued) Amounts paid for additions, improvements and replacements of property and equipment are capitalized, while maintenance and repairs that do not improve or extend the service lives of the respective assets are expensed as incurred. Capitalized interest: Interest costs are capitalized when incurred on debt whose proceeds are used to finance the construction of assets. Interest earned on proceeds of taxexempt borrowing arrangements restricted to the acquisition of qualifying assets is offset against interest costs in determining the amount to be capitalized. There was no capitalized interest for the years ended June 30, 2013 or 2012, as there were no capital projects requiring debt financing. Longlived assets: The Corporation evaluates the carrying value of longlived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and may differ from actual cash flows. Longlived assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected future undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made. Management has determined that no impairment of longlived assets currently exists. Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. These estimates include assessing the lives and methods for recording depreciation and amortization of property and equipment and determining the allowance for doubtful accounts for accounts receivable. Actual results could differ from those estimates used by management. Deferred revenue: Deferred revenue represents rental income received prior to when income is earned. Bond premium: Bond premium is amortized using the straightline method, which approximates the effective interest method, over the term of the bonds. The amortization is recorded as a reduction of interest expense. Revenue recognition: Housing rental: Rental income attributed to leases is recorded when earned over time on a straightline basis. Rental payments are due at the beginning of each month. Other propertyrelated income includes management and service fees, and is recognized as revenue when the related fees are earned and are realized or realizable. Student recreation: Each matriculated student of the University is required to pay a $35 per semester student recreation fee for the fall, spring and summer semesters. Funds are used to expand and implement programs and services offered such as funding for student development and new and substantial programming events, as well as provide funding to improve the Student Lounge furniture and recreation activities. These payments are collected by the University Business Office and remitted to the Corporation each semester, at which time they are recorded as revenue. Other student recreation fee income is attributable to various optional oncampus organizations and intramural sports operated by the student recreation staff. Other student recreation fee income is recognized as revenue when the related fees are earned and are realized or realizable. 8

11 Notes to Financial Statements Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued) Events and conference services: The ECS revenue is attributed to event planning and facilitation for both internal and external customers of the University. The group facilitates events at various locations on the University campus. Income attributed to the service is recorded when the event is completed and is realized or realizable. Student Union: Student Union revenue is attributed to consideration received for managing and operating the Student Union functions in accordance with the University s bond indenture and the policies of the California State University Program and the University. Revenue is earned annually based on a mutually agreed upon monetary agreement between the University and the Corporation. Clarke Field House: The Clarke Field House income is primarily attributed to leases with University departments, which are recorded when earned over time on a straightline basis. Rental payments are due annually. Other Clarke Field House income is attributable to events held at the Clarke Field House by oncampus organizations and University departments. Other income is recognized as revenue when the related fees are earned and are realized or realizable. Income taxes: The Corporation is a qualified nonprofit public organization that is generally exempt from federal and state income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. This exemption is for all income taxes except for those assessed on unrelated business taxable income (UBI), if any. In order to maintain that status, the Corporation is precluded from making certain expenditures, principally in support of political parties. Management believes that no such expenditures have been made. The Corporation is not a private foundation. The Corporation adopted accounting guidance relating to accounting for uncertainty in income taxes, which is primarily codified in FASB ASC 740. The Corporation files a Form 990 (Return of Organization Exempt from Income Tax) annually. When these returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the tax position taken or the amount of the position that would ultimately be sustained. Examples of tax positions common to the Corporation include such matters as the taxexempt status of the entity and various positions relative to potential sources of UBI. UBI is reported on Form 990T, as appropriate. The benefit of the tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions are not offset or aggregated with other positions. Tax positions that meet the morelikelythannot recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely to be realized on settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying statements of financial position, along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Upon the adoption and as of June 30, 2013 and 2012, the Corporation has addressed uncertainty in its income tax position under the guidance, and there are no unrecognized/derecognized tax benefits requiring an accrual. 9

12 Notes to Financial Statements Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued) Forms 990 and 990T filed by the Corporation are subject to examination by the Internal Revenue Service up to three years from the extended due date of each return. Management believes Forms 990 and 990T have been filed appropriately. Forms 990 and 990T filed by the Corporation are no longer subject to examination for the fiscal years ended June 30, 2009 and prior. Reclassification of certain expenses: Certain expenses on the statement of activities for the year ended June 30, 2012 have been reclassified, with no effect on net assets or the change in net assets, to be consistent with the classifications adopted for the year ended June 30, In the year ended June 30, 2012, the Corporation s activities consisted only of income and expense related to operating the student housing facility. During the year ended June 30, 2013, the Corporation began operating several new functions, including the Student Union, the Clarke Field House, student recreation and ECS. As a result, the Corporation has presented the expenses specific to each function on that function s line in the statement of activities. This resulted in the reclassification of prior housing expenses into one line item. In addition, in the year ended June 30, 2013, the Corporation began incurring costs not specific to any one of the functions, but related to operating all of the functions; these expenses are presented in general and administrative expense. Reclassification of certain liabilities: Certain liabilities on the statement of financial position for the year ended June 30, 2012 have been reclassified, with no effect on net assets or the change in net assets, to be consistent with the classifications adopted for the year ended June 30, The liabilities were reclassified to separately identify relatedparty payables. As a result, the reclassification was also reflected in the statement of cash flows. Subsequent events: The Corporation has evaluated subsequent events through September 30, 2013, the date the financial statements were available to be issued, and has determined that there was one subsequent event to recognize in these financial statements. In August 2013, the Board of Trustees of the California State University issued $11,400,000 of Systemwide Revenue Bonds, Series 2013A and net premium of $1,659,048. The Series 2013A bond proceeds were used to refund $11,875,000 of the Systemwide Revenue Series 2005A bonds (see Note 3). The Series 2013A bonds bear annual interest of 5.0 percent (paid semiannually). Subject to the refunding, the Series 2005A bonds have a $10,580,000 portion that was not refunded and will be paid based upon the original obligations. Management is still in the process of determining the impact on the Corporation s financial position, results of operations and cash flows. Recent accounting guidance: In October 2012, the FASB issued Accounting Standards Update (ASU) , Statement of Cash Flows (Topic 230) NotforProfit Entities (NFP): Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows. This Update requires, with certain exceptions, a notforprofit (NFP) to classify in the statement of cash flows cash received from donated financial assets as an operating activity if those donated financial assets were directed without any NFPimposed limitations for sale and were converted nearly immediately into cash. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after June 15, Retrospective application to all prior periods presented upon the date of adoption is permitted. Early adoption from the beginning of the fiscal year of adoption is permitted. For fiscal years beginning before October 22, 2012, early adoption is permitted only if an NFP s financial statements for those fiscal years and interim periods within those years have not yet been made available for issuance. Certain transition disclosures are required. The adoption of this standard is not expected to have a material impact on the Corporation s financial position, results of operations or cash flows. 10

13 Notes to Financial Statements Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued) In April 2013, the FASB issued ASU , NotforProfit Entities (Topic 958) Services Received From Personnel of an Affiliate. These amendments are effective on a prospective basis for fiscal years beginning after June 15, 2014, and interim and annual periods thereafter. A recipient NFP entity may apply the amendments using a modified retrospective approach, under which all prior periods presented upon the date of adoption should be adjusted, but no adjustment should be made to the beginning balance of net assets of the earliest period presented. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Corporation s financial position, results of operations or cash flows. Note 2. Property and Equipment Property and equipment at June 30 consists of the following: Building and improvements $ 24,528,007 $ 24,175,058 Furniture and equipment 1,757,265 1,698,968 Land improvements 800, ,603 Construction in progress 26, ,497 27,112,603 26,773,126 Less accumulated depreciation (7,799,674) (6,973,172) $ 19,312,929 $ 19,799,954 Note 3. LongTerm Debt In March 2002, the Corporation issued $27,990,000 of Student Housing Revenue Series 2002 bonds. The proceeds were used to finance the construction of the facility. In March 2005, the Board of Trustees of the California State University (the Board) issued $25,230,000 of Systemwide Revenue Series 2005A bonds, whose proceeds were used to pay in full the Series 2002 bonds and to purchase the facility from the Corporation. In March 2005, a ground and facility lease was signed between the Board and the Corporation for a term of 28 years beginning on May 1, 2005, with an option to extend an additional 10 years. The Corporation is responsible for paying a base rental equal to the Series 2005A bond obligation and additional rental payments to cover all administrative costs and other expenses in connection with the refinancing or leasing of the Facility. The Series 2005A bonds bear escalating annual interest from 2.5 percent to 5.0 percent (paid semiannually). Rental payments are secured by a pledge of all Corporation revenues. The lease obligation due to the Board is treated as a financing arrangement. U.S. GAAP precludes recognition of a real estate sale where there is continuing involvement with the property on the part of the seller. If the sellerlessee has any continuing involvement other than the leaseback, saleleaseback accounting is prohibited. U.S. GAAP requires that if the seller is required to support operations or continue to operate the property at its own risk for an extended period of time, the transactions should be accounted for as a financing, leasing or profitsharing arrangement. The financing method is used when the situations are generally significant enough that, in substance, the arrangement is a loan by the buyerlessor to the sellerlessee. Longterm debt payable to the Board at June 30, 2013 includes $22,455,000 of bond principal obligation and $582,754 for net premium. 11

14 Notes to Financial Statements Note 3. LongTerm Debt (Continued) Longterm debt payable to the Board at June 30, 2012 includes $23,045,000 of bond principal obligation and $612,135 for net premium. Future principal payments on longterm debt are due as follows: Years Ending June 30, Amount 2014 $ 670, , , , ,000 Thereafter 18,740,000 22,455,000 Remaining bond premium 582,754 $ 23,037,754 Note 4. Commitments Ground and facility lease agreements: University Village Apartments: The Corporation entered into a ground and facility lease agreement for student housing with the Board on March 1, The lease term is for 28 years, with an option to extend an additional five years. In consideration of the execution of the lease agreement, the Corporation would continue to operate the student housing facility on the site as part of refinancing the student housing improvements. M. Gordon Clarke Field House, Multipurpose Soccer Field, Mangrum Track & Field and McMahan House: On July 1, 2012, the Corporation entered into two additional facility leases for various building offices and fields, including space in the M. Gordon Clarke Field House/University Student Union, McMahan House, the Soccer multipurpose field and the Mangrum Track & Field. Each lease has a fouryear term, with the option to carry on the leases on a monthtomonth basis. In consideration of the execution of the lease agreement, the Corporation agrees to act as the property manager for the facilities and to provide educational, cultural and recreational programs, advice and guidance to student organizations and student leaders, and support to the overall development of student life at CSUSM through the programs and services offered through the Corporation. Management estimated that the value of the lease agreements was $888,401 and $474,389 for the years ended June 30, 2013 and 2012, respectively. These amounts are reflected in the statements of activities for the years ended June 30, 2013 and 2012 as inkind rental income and inkind rental expense. Child care center: In June 2005, UARSC entered into a ground lease agreement with the Board for the property. The lease term is for 23 years. When the property was transferred from UARSC to the Corporation in September 2007, the Corporation took over the ground lease. On July 1, 2011, the property was transferred back to UARSC along with the ground lease (see Note 5). 12

15 Notes to Financial Statements Note 4. Commitments (Continued) On July 1, 2011, when the Corporation transferred the operations of the child care center to UARSC (see Note 5), UARSC assumed the agreement. As a result of UARSC s assumption of this agreement, the Corporation did not record revenues or expenses during the year ended June 30, 2012 related to the agreement. Management agreement: In March 2002, the Corporation entered into a management agreement with Allen & O Hara Education Services, LLC (the Manager) to manage the operations of the facility. The management agreement has an initial term of 10 years, which commenced on July 1, The agreement requires an annual fee, payable monthly to the Manager, consisting of a fixed fee and a variable fee, provided that the total fee will not exceed 5 percent of gross revenues. On November 4, 2011, the management agreement was amended to extend the term to June 30, Subsequent to the initial agreement, Allen & O Hara Education Services, LLC changed its name to EDR. Based on the terms of the agreement, $209,311 and $205,901 were paid to the Manager for the years ended June 30, 2013 and 2012, respectively. These amounts are reflected in the statements of activities for the years ended June 30, 2013 and 2012 within housing program expenses. Note 5. Transactions With Affiliates Reimbursed costs: During the year ended June 30, 2012, the Corporation reimbursed the University for certain services and costs related to the Corporation s only active function in the year then ended: housing management. Those services and costs included police, information technology and other expenses. The total amount paid to the University for these services and costs was $489,277 for the year ended June 30, The amount due to the University as of June 30, 2012 was $110,563. During the year ended June 30, 2013, the Corporation added several new functions, including the operation of the M. Gordon Clarke Field House/University Student Union, the campus recreation programs and ECS. The added functions resulted in increased amounts to be reimbursed by the University for services and costs, including police, information technology, utilities, business financial service and other expenses. The total amount paid to the University for these services and costs was $1,182,704 for the year ended June 30, Beginning the year ended June 30, 2013, the Corporation also reimbursed the University for personnel and personnelrelated costs used to operate these new functions. The total amount paid to the University for these personnel and costs was $1,557,601 for the year ended June 30, The amount due to the University as of June 30, 2013 was $335,084. The University remits bond interest payments for the Corporation s bond. The Corporation then reimburses the University for the payments. Amounts due to the University for the bond interest as of June 30, 2013 and 2012 were $187,125 and $190,792, respectively. Bond interest expense for the years ended June 30, 2013 and 2012 was $1,100,701 and $1,073,849, respectively. Operating agreement: In July 2004, the Corporation entered into an agreement with UARSC for certain personnel and other operating services. The total amount incurred for these services and costs was $347,645 and $273,960 for the years ended June 30, 2013 and 2012, respectively. As of June 30, 2013 and 2012, there were amounts due to UARSC for these services of $132,518 and $273,960, respectively. 13

16 Notes to Financial Statements Note 5. Transactions With Affiliates (Continued) Restructure: On July 1, 2011, the Board of Directors approved the transfer of the activities of the M. Gordon Clarke Field House/University Student Union from the campus to the Corporation as an authorized auxiliary function. The plan was initiated to help prepare for the management of a new University Student Union building scheduled for completion in fiscal year Oversight of the Corporation was delegated to the Vice President of Student Affairs. The restructure also included the transfer of the assets and functions of the campus child care center, Center for Children and Families, from the Corporation to UARSC. The child care center assets consisted of a building and related equipment with a net book value of $6,285,611 at July 1, On July 1, 2012, the Corporation took over the activities of campus student recreation from ASI and ECS from the University. The assets of the two functions were transferred to the Corporation. The assets transferred during the year ended June 30, 2013 consisted of cash of $996,288. Transfer of funds: During the year ended June 30, 2012, the Corporation transferred cash in the amount of $2,000,000 to UARSC on behalf of CSUSMF. The Board approved the nonreciprocal transfer of $2,000,000 from the Corporation to UARSC as a contribution to the University for use toward the advancement of the educational mission of the University. The cash reserves had accumulated over the past number of years from the positive cash flows generated by the high demand for student housing. Loan receivable: On June 26, 2013, the Corporation loaned the University $1,489,000. The loan carries a 3 percent interest rate per annum beginning July 1, Payments of $238,994 will be made annually beginning July 1, 2015, with the last payment being made on July 1, The parties will review the terms of the loan on an annual basis and may modify them based upon current financial conditions and the availability of funding. Lease agreements: During the year ended June 30, 2013, the Corporation assumed the operations of the Clarke Field House from the University. A portion of the Clarke Field House s total revenue from operations is due to the Clarke Field House leasing out space to two University departments, Athletics and Kinesiology. The leases to both departments expire on June 30, Total lease revenue attributed to the leases in the year ended June 30, 2013 is $185,156, which is included within the total Clarke Field House revenue of $225,313 shown on the statement of activities. Student Union operating agreement: In July 2012, the Corporation entered into an agreement with the University to operate the Student Union for the University. The total amount of revenue recognized in the year ended June 30, 2013 relating to the operating agreement was $1,018,415. Relatedparty receivable: On July 1, 2012, the Corporation began operating the student recreation services for the University. The University collects cash for student recreation fees on the Corporation s behalf. As of June 30, 2013, the Corporation had a receivable of $59,141 due from the University for unremitted student recreation fees. 14

17 Supplemental Schedules

18 1 Schedule of Net Position June 30, 2013 (for inclusion in the California State University) Assets: Current assets: Cash and cash equivalents $ 3,791,472 Shortterm investments 489,723 Accounts receivable, net 77,638 Leases receivable, current portion Notes receivable, current portion Pledges receivable, net Prepaid expenses and other assets 83,251 Total current assets 4,442,084 Noncurrent assets: Restricted cash and cash equivalents Accounts receivable, net Leases receivable, net of current portion Notes receivable, net of current portion 1,489,000 Student loans receivable, net Pledges receivable, net Endowment investments Other longterm investments Capital assets, net 19,312,929 Other assets Total noncurrent assets 20,801,929 Total assets 25,244,013 Deferred outflows of resources: Unamortized loss on refunding(s) Total deferred outflows of resources Liabilities: Current liabilities: Accounts payable 576,103 Accrued salaries and benefits payable Accrued compensated absences, current portion Unearned revenue 574,052 Capitalized lease obligations, current portion Longterm debt obligations, current portion 670,000 Selfinsurance claims liability, current portion Depository accounts Other liabilities 302,687 Total current liabilities 2,122,842 Noncurrent liabilities: Accrued compensated absences, net of current portion Unearned revenue Grants refundable Capitalized lease obligations, net of current portion Longterm debt obligations, net of current portion 22,367,754 Selfinsurance claims liabilities, net of current portion Depository accounts Other postemployment benefits obligation Other liabilities Total noncurrent liabilities 22,367,754 Total liabilities 24,490,596 Deferred inflows of resources: Deferred inflows from SCAs, grants and others Total deferred inflows of resources Net Position: Net investment in capital assets (3,724,825) Restricted for: Nonexpendable endowments Expendable: Scholarships and fellowships Research Loans Capital projects Debt service Other Unrestricted 4,478,242 Total net position $ 753,417 15

19 1 Schedule of Revenues, Expenses and Changes in Net Position Year Ended June 30, 2013 (for inclusion in the California State University) Revenues: Operating revenues: Student tuition and fees (net of scholarship allowances of $8,000) $ 2,079,039 Grants and contracts, noncapital: Federal State Local Nongovernmental Sales and services of educational activities Sales and services of auxiliary enterprises (net of scholarship allowances of $ ) 6,835,625 Other operating revenues Total operating revenues 8,914,664 Expenses: Operating expenses: Instruction Research Public service Academic support Student services 1,565,805 Institutional support 627,855 Operation and maintenance of plant Student grants and scholarships Auxiliary enterprise expenses 3,936,191 Depreciation and amortization 826,502 Total operating expenses 6,956,353 Operating income 1,958,311 Nonoperating revenues (expenses): State appropriations, noncapital Federal financial aid grants, noncapital State financial aid grants, noncapital Local financial aid grants, noncapital Nongovernmental and other financial aid grants, noncapital Other federal nonoperating grants, noncapital Gifts, noncapital Investment income, net 1,162 Endowment income (loss), net Interest expenses (1,100,701) Other nonoperating revenues 996,288 Net nonoperating expenses (103,251) Income before other additions 1,855,060 State appropriations, capital Grants and gifts, capital Additions (reductions) to permanent endowments Increase in net position 1,855,060 Net position: Net position at beginning of year, as previously reported (1,101,643) Restatements Net position at beginning of year, as restated (1,101,643) Net position at end of year $ 753,417 16

20 1 Other Information June 30, 2013 (for inclusion in the California State University) 1 Restricted cash and cash equivalents at June 30, 2013: Portion of restricted cash and cash equivalents related to endowments $ All other restricted cash and cash equivalents Total restricted cash and cash equivalents $ 2.1 Composition of investments at June 30, 2013: Current Unrestricted Current Restricted Total Current Noncurrent Unrestricted Noncurrent Restricted Total Noncurrent Total State of California Surplus Money Investment Fund (SMIF) $ State of California Local Agency Investment Fund (LAIF) Wachovia Short Term Fund Wachovia Medium Term Fund Wachovia Equity Fund CSU Consolidated Investment Pool (includes SWIFT and 0948 SMIF) Common Fund Short Term Fund Common Fund Others Debt securities Equity securities Fixed income securities (Treasury notes, GNMAs) Land and other real estate Certificates of deposit 489, , ,723 Notes receivable Mutual funds Money market funds Collateralized mortgage obligations: Inverse floaters Interestonly strips Agency passthrough Partnership interests (includes private passthrough) Alternative investments Hedge funds Other major investments: Total investments 489, , ,723 Less endowment investments (enter as negative number) Total investments $ 489, , ,723 17

21 1 San Marcus University Corporation Other Information June 30, 2013 (for inclusion in the California State University) 2.2 Investments held by the University under contractual agreements at June 30, 2013: Portion of investments in Note 2.1 held by the University under contractual agreements at June 30, 2013 $ 2.3 Restricted current investments at June 30, 2013 related to: Amount Add description $ Total restricted current investments at June 30, 2013 $ 2.4 Restricted noncurrent investments at June 30, 2013 related to: Amount Endowment investment $ Total restricted noncurrent investments at June 30, 2013 $ 18

22 1 San Marcus University Corporation Other Information June 30, 2013 (for inclusion in the California State University) 3.1 Composition of capital assets at June 30, 2013: Balance Transfers of Balance Prior Period June 30, 2012 Completed Balance June 30, 2012 Adjustments Reclassifications (restated) Additions Reductions CWIP June 30, 2013 Nondepreciable/nonamortizable capital assets: Land and land improvements $ Works of art and historical treasures Construction work in progress (CWIP) 325, , ,477 (638,531) 26,443 Intangible assets: Rights and easements Patents, copyrights and trademarks Internally generated intangible assets in progress Licenses and permits Other intangible assets Total intangible assets Total nondepreciable/nonamortizable capital assets 325, , ,477 (638,531) 26,443 Depreciable/amortizable capital assets: Buildings and building improvements 24,175,058 24,175, ,949 24,528,007 Improvements, other than buildings 573, , , ,888 Infrastructure Leasehold improvements Personal property: Equipment 1,698,968 1,698,968 58,297 1,757,265 Library books and materials Intangible assets: Software and websites Rights and easements Patents, copyright and trademarks Licenses and permits Other intangible assets Total intangible assets Total depreciable/amortizable capital assets 26,447,629 26,447, ,531 27,086,160 Total capital assets 26,773,126 26,773, ,477 27,112,603 Less accumulated depreciation/amortization: Buildings and building improvements (5,124,037) (252,885) (5,376,922) (677,544) (6,054,466) Improvements, other than buildings (431,892) 283,682 (148,210) (39,267) (187,477) Infrastructure Leasehold improvements Personal property: Equipment (1,417,243) (30,797) (1,448,040) (109,691) (1,557,731) Library books and materials Intangible assets: Software and websites Rights and easements Patents, copyright and trademarks Licenses and permits Other intangible assets Total intangible assets Total accumulated depreciation/amortization (6,973,172) (6,973,172) (826,502) (7,799,674) Total capital assets, net $ 19,799,954 19,799,954 (487,025) 19,312, Detail of depreciation and amortization expense for the year ended June 30, 2013: Depreciation and amortization expense related to capital assets $ 826,502 Amortization expense related to other assets Total depreciation and amortization $ 826,502 19

23 1 Other Information June 30, 2013 (for inclusion in the California State University) 4 Longterm liabilities activity schedule: Balance Balance Prior Period June 30, 2012 Balance Current LongTerm June 30, 2012 Adjustments Reclassifications (restated) Additions Reductions June 30, 2013 Portion Portion Accrued compensated absences $ Capitalized lease obligations: Gross balance Unamortized premium / (discount) on capitalized lease obligations Total capitalized lease obligations Longterm debt obligations: Revenue Bonds 23,045,000 23,045,000 (590,000) 22,455, ,000 21,785,000 Other bonds (nonrevenue Bonds) Commercial Paper Note Payable related to SRB Other: Total longterm debt obligations 23,045,000 23,045,000 (590,000) 22,455, ,000 21,785,000 Unamortized bond premium / (discount) 612, ,135 (29,381) 582, ,754 Unamortized loss on refunding Total longterm debt obligations, net 23,657,135 23,657,135 (619,381) 23,037, ,000 22,367,754 Total longterm liabilities $ 23,657,135 23,657,135 (619,381) 23,037, ,000 22,367,754 20

24 1 Other Information June 30, 2013 (for inclusion in the California State University) 5 Future minimum lease payments capital lease obligations: Principal and Principal Interest Interest Year ending June 30: 2014 $ Total minimum lease payments Less amounts representing interest Present value of future minimum lease payments Less: current portion Capitalized lease obligation, net of current portion $ 21

25 1 Other Information June 30, 2013 (for inclusion in the California State University) 6 Longterm debt obligation schedule All Other LongTerm Revenue Bonds Debt Obligations Total Principal and Principal and Principal and Principal Interest Interest Principal Interest Interest Principal Interest Interest Year ending June 30: 2014 $ 670,000 1,106,000 1,776, ,000 1,106,000 1,776, ,000 1,071,625 1,776, ,000 1,071,625 1,776, ,000 1,035,375 1,780, ,000 1,035,375 1,780, , ,250 1,777, , ,250 1,777, , ,375 1,772, , ,375 1,772, ,765,000 4,113,125 8,878,125 4,765,000 4,113,125 8,878, ,115,000 2,759,625 8,874,625 6,115,000 2,759,625 8,874, ,860,000 1,021,250 8,881,250 7,860,000 1,021,250 8,881, Total $ 22,455,000 13,061,625 35,516,625 22,455,000 13,061,625 35,516,625 22

26 1 Other Information June 30, 2013 (for inclusion in the California State University) 7 Calculation of net position Auxiliary Organizations Total GASB FASB Auxiliaries 7.1 Calculation of net position Net investment in capital assets Capital assets, net of accumulated depreciation $ 19,312,929 19,312,929 Capitalized lease obligations, current portion Capitalized lease obligations, net of current portion Longterm debt obligations, current portion (670,000) (670,000) Longterm debt obligations, net of current portion (22,367,754) (22,367,754) Portion of outstanding debt that is unspent at yearend Other adjustments: (please list) Net position net investment in capital asset $ (3,724,825) (3,724,825) 7.2 Calculation of net position Restricted for nonexpendable endowments Portion of restricted cash and cash equivalents related to endowments $ Endowment investments Other adjustments: (please list) Net position Restricted for nonexpendable endowments per SNP $ 23