WEST VIRGINIA UNIVERSITY AT PARKERSBURG. Financial Statements for the Years Ended June 30, 2011 and 2010 and Independent Auditors Reports

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1 WEST VIRGINIA UNIVERSITY AT PARKERSBURG Financial Statements for the Years Ended June 30, 2011 and 2010 and Independent Auditors Reports

2 WEST VIRGINIA UNIVERSITY AT PARKERSBURG TABLE OF CONTENTS Page INDEPENDENT AUDITORS REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS (RSI) (UNAUDITED) 2-15 FINANCIAL STATEMENTS FOR YEARS ENDED JUNE 30, 2011 and 2010: Statements of Net Assets 16 WVU at Parkersburg Foundation, Inc. - Statements of Financial Position 17 Statements of Revenues, Expenses and Changes in Net Assets 18 WVU at Parkersburg Foundation, Inc. - Statements of Activities Statements of Cash Flows Notes to Financial Statements INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 57

3 Deloitte LLP 2500 One PPG Place Pittsburgh, PA Tel: Fax: Member of Deloitte Touche Tohmatsu Limited

4 WEST VIRGINIA UNIVERSITY AT PARKERSBURG Management's Discussion and Analysis (Unaudited) Year Ended June 30, 2011 Overview The Management's Discussion and Analysis is required supplementary information and has been prepared in accordance with the requirements of the Governmental Accounting Standards Board (GASB). This section of West Virginia University at Parkersburg s ( WVU at Parkersburg, WVUP, or College ) annual financial report provides an overview of WVUP s financial performance during the fiscal year ended June 30, 2011 as compared to the previous fiscal year. Comparative analysis is also presented for fiscal year 2010 compared to fiscal year 2009, which was WVUP s first year as a separately governed institution. The primary focus is on fiscal year WVUP s annual report consists of three basic financial statements: the statement of net assets, the statement of revenues, expenses and changes in net assets, and the statement of cash flows. These statements focus on the financial condition, the results of operations, and cash flows of WVU at Parkersburg. Each of these statements is discussed below. Financial Highlights At June 30, 2011, WVUP s total net assets increased from the previous year-end by $853,000, primarily due to increases in cash and cash equivalents and capital assets, net of depreciation, amounts due from the Council/Commission, as well as decreases in deferred revenue and debt service assessment payable to the Commission. These changes were partially offset by increases in notes payable, other post employment benefits ( OPEB ) liability, accrued liabilities, accrued payroll and compensated absences, as well as decreases in accounts receivable. Total revenues grew by 7.8%, mainly due to increases in Federal Pell grants, Federal, local and nongovernmental grants and contracts, and net tuition and fees. Total expenses increased 11.1% from prior year mainly because of increased scholarship expense, salaries and benefits, supplies and other services, and utilities. Net Assets The statements of net assets present the assets (current and noncurrent), liabilities (current and noncurrent), and net assets (assets minus liabilities) of WVUP as of the end of the fiscal years. Assets denote the resources available to continue the operations of WVUP. Liabilities indicate how much WVUP owes vendors, employees and lenders. Net assets measure the equity or the availability of funds of WVUP for future periods. 2

5 Net Assets are displayed in three major categories: Invested in capital assets, net of related debt. This category represents WVUP s total investment in capital assets, net of accumulated depreciation and outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets. This category includes net assets, the use of which is restricted, either due to externally imposed constraints or because of restrictions imposed by law. They are further divided into two additional components - nonexpendable and expendable. Nonexpendable restricted net assets include endowment and similar type funds for which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity and invested for the purpose of producing present and future income, which may either be expended or added to principal. WVUP did not have any nonexpendable restricted net assets during fiscal year 2010 or fiscal year Expendable restricted net assets include resources for which WVUP is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Unrestricted net assets. This category includes resources that are not subject to externally imposed stipulations. Such resources are derived primarily from tuition and fees (not restricted as to use), state appropriations, sales and services of educational activities, and auxiliary enterprises. Unrestricted net assets are used for transactions related to the educational and general operations of WVUP and may be designated for specific purposes by action of WVUP s management or the Board of Governors. Condensed Statements of Net Assets (in thousands) Condensed Statement of Net Assets As of June Assets Current Assets $ 11,691 $ 11,306 $ 10,084 Noncurrent Assets 16,715 14,944 14,504 Total Assets $ 28,406 $ 26,250 $ 24,588 Liabilities Current Liabilities $ 4,150 $ 4,222 $ 5,177 Noncurrent Liabilities 6,666 5,291 4,035 Total Liabilities $ 10,816 $ 9,513 $ 9,212 Net Assets Invested in Capital Assets, net of related debt $ 13,007 $ 11,303 $ 10,764 Restricted ,240 Unrestricted 4,119 5,108 3,372 Total Net Assets $ 17,590 $ 16,737 $ 15,376 3

6 Total assets of WVU at Parkersburg increased by $2.2 million to a total of $28.4 million as of June 30, The increase was primarily due to an increase in cash and cash equivalents and net capital assets. Cash and cash equivalents increased by $354,000 compared to prior year primarily due to increased cash inflows from tuition and fee revenue and grants and contracts. Capital assets, net increased by $1.4 million as a result of construction-in-progress activities including the W.T. Grant Building renovation, the training center renovation funded by HEPC 2009 B Facilities Bonds, theater renovation and completion of the Caperton HVAC project. Land improvements include the addition of the Jackson County parking lot. Various building projects completed on campus include the fire alarm system, a new storage building (salt and motorcycle), a new roof placed on the main campus building and student lounge, the addition of the clock tower, the addition of the Caperton Center HVAC, the business office renovation, and IT renovation. The 2011 increase is more than the $866,000 net increase in prior year. Due from the Council/Commission increased by $100,000 compared to the previous year. In fiscal year 2011, WVUP received grants and State appropriations for various projects and programs including: funds from WVNET Services, a federal pass-through grant from the U.S. Department of Education for the Improvement of Postsecondary Education (FIPSE IPASS), and a state pass-through grant titled Green Up to be used for Solar Energy projects. These amounts were recorded as a receivable as of June 30, Net accounts receivable decreased by $31,000 due to decreases in grants outstanding at June 30, 2011 as compared to the previous year. As of the end of fiscal year 2010, the only grant receivable outstanding was a Governor s Community Participation Grant to be used for WVUP s day care center. Student accounts receivable also decreased due to new invoicing procedures that have resulted in invoices being paid in a more timely manner. Net accounts receivable had increased from fiscal year 2009 to fiscal year 2010 by $154,000 due to an increase in grants receivable at the end of fiscal year Total liabilities for the year increased by $1.3 million over the prior year. This increase is primarily attributable to increases in OPEB liability and notes payable. These increases were partially offset by decreases in deferred revenue and debt service assessment payable to the Commission. Other post employment benefits liability increased by another $1.3 million in 2011 due to the annual required contribution ( ARC ) rate allocated to WVUP by the West Virginia Retiree Health Benefit Trust Fund (the Trust ). The OPEB liability had increased from fiscal year 2009 to fiscal year 2010 by $1.5 million, and is expected to continue to grow in future years by comparable amounts, until the state addresses this issue. Accounts and service agreement payable decreased by $134,000 due to the decrease in the service agreement payable of $63,000. At fiscal year ended 2010, WVUP had not paid the fourth quarter amount due to WVU for services rendered during fiscal year 2010 based upon the terms of the service agreement entered into by WVU and WVUP. In fiscal year ended 2011, all balances had been paid and no balances were outstanding. There was also a decrease in accounts payable from fiscal year 2010 to Deferred revenue decreased by $233,000 over prior year. This is due to a decline in deferred revenue recorded for various grants such as SB1011 Paramedic, Energy Technology, HVAC CTC TPD, and SB 1011 Nursing. The Nursing Program Enhancement Hospital Partnerships grant and the Paramedic Science Certificate were received in fiscal year 2010 and were not received in fiscal year

7 Debt service assessment payable to the Commission decreased by $144,000 due to scheduled debt service (principal) payments in fiscal year This decrease is consistent with the decrease in such liability from fiscal year 2009 to fiscal year 2010 of $137,000. WVUP s current assets of $11.7 million were sufficient to cover current liabilities of $4.1 million, indicating that WVUP has sufficient available resources to meet its current obligations. The following is a comparative illustration of net assets. Invested in capital assets, net of related debt increased by $1.7 million primarily due to an increase in capital assets, net, and decreases in debt assessment payable to the Commission and leases payable which were partially offset by an increase in notes payable. There was also an increase in this category from fiscal year 2009 to fiscal year 2010 of $539,000. Restricted net assets increased by $138,000 due to an increase in both restricted for sponsored programs and restricted for scholarships and fellowships categories. This increase is due to more revenue for restricted Federal, local and nongovernmental grants and contracts in fiscal year 2011 compared to fiscal year The change in this net asset category from fiscal year 2009 to fiscal year 2010 was a decrease of $914,000. Unrestricted net assets decreased by $989,000 primarily due to an increase in the OPEB liability. This category decreased compared to an increase from fiscal year 2009 to fiscal year 2010, which was $1.7 million. 5

8 Revenues, Expenses and Changes in Net Assets The statements of revenues, expenses and changes in net assets present the operating revenues, operating expenses, nonoperating revenues and expenses and other revenues, expenses, gains or losses of WVUP for the fiscal years presented. State appropriations, while budgeted for operations, are considered and reported as non-operating revenues. This is because State appropriations are provided by the West Virginia Legislature (the Legislature ) to WVUP without the Legislature directly receiving commensurate goods and services for those revenues. Likewise, Federal Pell grants are reported as nonoperating, because of specific guidance in the AICPA industry audit guide. Student tuition and fees are reported net of scholarship discounts and allowances. Financial aid to students is reported using the NACUBO alternative method. Under this method, certain aid, such as loans and federal Stafford loans, is accounted for as a third party payment, while all other aid is reflected either as operating expenses or scholarship allowances, which reduce revenues. The utilization of capital assets is reflected in the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life. Condensed Statements of Revenues, Expenses and Changes in Net Assets (in thousands) Year Ended June Operating Revenues $ 9,922 $ 9,917 $ 8,534 Operating Expenses 31,296 28,155 23,429 Operating Loss (21,374) (18,238) (14,895) Net Nonoperating Revenues 21,898 19,587 16,292 Income before Other Revenues, Expenses, Gains, or Losses 524 1,349 1,397 Capital Grants and Gifts Capital payments on behalf of WVU Parkersburg Transfer of Net Assets from WVU ,429 Increase in Net Assets 853 1,361 15,376 Net Assets at Beginning of Year 16,737 15,376 - Net Assets at End of Year $ 17,590 $ 16,737 $ 15,376 6

9 Revenues: The following charts illustrate the composition of revenues by source for 2011 and Total revenues for fiscal year 2011 were $32.2 million, an increase of $2.5 million over prior year. The most significant sources of revenue for WVUP are State appropriations, Federal pell grants, grants and contracts, and 7

10 tuition and fees. Some highlights of the information presented on the statement of revenues, expenses, and changes in net assets are as follows: Federal Pell grants revenue increased by $2.2 million. This increase can be attributed to a significant increase in the number of students utilizing the Workforce and Trade Adjustment Assistance programs during fiscal year Other factors for the increase are an increase in the Pell award per student, an increase in enrollment, and an increase in the number of full time students. This increase is lower than the increase that occurred from fiscal year 2009 to fiscal year 2010, which was $4.5 million. Gross tuition and fees increased by $544,000 primarily due to an increase in the number of students enrolled. The previous economic downtown led to a significant increase in enrollment at WVUP, as displaced and underemployed members of the workforce have enrolled at WVUP to further their education. The College has experienced a 20% increase in enrollment since FY The option of increasing tuition was not available in the academic year and may not be in the foreseeable future. An 8.6% increase in tuition went into effect during fiscal year This rate increase applied to both in-state and out-of-state students, as well as both upper and lower division courses. This increase is significantly lower than the increase that occurred from fiscal year 2009 to fiscal year 2010 of $2.4 million, which was primarily due to the 8.6% increase in tuition rates and the increase in number of students enrolled. State grants and contracts revenue decreased by $653,000. This decrease is closely tied to the decrease and change in the various grants received. The significant changes include the Partnership Grant decrease of $755,000 from fiscal year 2010 to fiscal year 2011, and the receipt of the WV Advance Scholar Energy Grant in the amount of $125,000 in fiscal year 2011 that was not received in fiscal year In fiscal year 2010, approximately $1.9 million in state grants and contracts revenue was deferred compared in fiscal year 2011 of $1.7 million being deferred. State grants and contracts increased by $892,000 recorded from fiscal year 2009 to fiscal year State appropriations decreased by $118,000 during fiscal year General State appropriations declined as a result of a State planned reduction in the base budget allocations. The budgeted decreases were offset by State fiscal stabilization funds, which were Federal American Recovery and Reinvestment Act funds allocated by the State for this purpose. State appropriations decreased by $1.5 million from fiscal year 2009 to fiscal year 2010 due to a combination of factors including $875,000 of this decrease being attributable to a onetime, non-recurring special legislative appropriations allocated to WVUP in fiscal year 2009 to cover expenses related to WVUP s separation from WVU per House Bill 3215, as well as a legislative improvement package designed to provide lab and equipment upgrades across campus. As a result of the two sources of State funds including State appropriations and State fiscal stabilization funds, there was no total change in these revenues recognized for fiscal years ending 2011 and There were no capital grants and contracts in fiscal years 2011 and

11 There were no payments on behalf of the University for OPEB in fiscal years 2011 or Federal grants and contracts revenue increased by $283,000 over prior year. This increase is primarily due to the receipt of two new grants in fiscal year These grants include the NSF IGNITE and the CCAMPIS. Additionally, the Nursing Access DOL received approximately $88,000 more in fiscal year 2011 compared to fiscal year This category of revenue had decreased from fiscal year 2009 to fiscal year 2010 by $92,000. Nongovernmental grants and contracts revenue increased by $179,000. This increase is mainly due to an increase in private scholarship disbursements compared to prior year. During fiscal year ended 2011, WVUP received such grants as the 2011 American Masterpiece Grant, the 2011 Mid Atlantic Tours Grant, the Art Bronze Fund Grant, the Arts Bridge 2011 Grant, the Changing the Equation Grant, the CJ Student Conference Presentation Grant, the Grant Japanland, the Hospital Contribution Funds, the Journalism LINK Grant, the MLK Program Grant, the PACF & JCCF Grant Interactive Lessons, and the PennPAT Grant. This category of revenue had decreased from fiscal year 2009 to fiscal year 2010 by $82,000. Gifts were received in fiscal year 2011 in the amount of $66,000 and were not received in fiscal year During fiscal year 2011, WVUP received donated gifts which included the HVAC Program Refrigerant Analyzer Kit, a Digitizing Table to be used in drafting classrooms, 15 network switches and 5 network routers to be used in the CIT Program, Hats for theater production, a cylinder assortment to be used by the Multi Craft Program, and material and labor to be used to repair the 4 th floor HVAC unit. Investment income decreased by $4,000. The main components of this decrease were a declining balance in the Energy Performance Phase II account, and also a decrease in the rate of return received. This decrease is consistent with, but less than, the decrease in this revenue category from fiscal year 2009 to fiscal year 2010 of $54,000. 9

12 Expenses: The following is a graphic comparison of total expenses by category between 2011 and 2010 Total expenses for fiscal year 2011were $31.4 million, an increase of $3.0 million from prior year. This increase is lower than the increase in total expenses from fiscal year 2009 to fiscal year 2010 of $4.8 million. This increase is primarily due to an increase in several categories of expenses as detailed below. Scholarship and fellowship expenses increased by approximately $1.7 million over the prior year. This increase is mainly due to the significant increase in student financial assistance funds distributed under 10

13 the Federal Pell grant program and is due to the increase in the number of students. The increase from fiscal year 2009 to fiscal year 2010 was $2.7 million. Benefits expense increased by only $18,000 over the previous year. This is due to the increase in Compensated Absences expense recorded in 2011 over prior year. Compensated absences expense represents the active employees vacation accrual. During fiscal year 2011, employees accrued vacation hours increased by approximately 700 hours from the prior year. An increase of $13,000 alone was caused as a result of the West Virginia Supreme Court of Appeals ruling that a special election for the office of Governor must be held in order to place a new Governor in office by November 15, The primary election was held on May 14, 2011 with WVUP recognizing this date as a floater holiday. The floater holiday may be taken anytime between May 22, 2011 and June 30, The Compensated Absences increase was partially offset by the decrease in OPEB expense recorded during fiscal year 2011 from the prior year. The two factors causing this decrease are an increase in the retiree subsidy contributions and a decline in the eligible policy holders. WVUP experienced a substantial increase in this category from 2009 to 2010 of $1.1 million. Salaries and wages increased by approximately $539,000 from the prior year. This increase is largely due to the salary enhancement provided during fiscal year WVUP enacted temporary salary increases, with the exception of classified staff who received an increase to their base salary as well as a temporary increase. For classified staff, the average base increase was 3.9%. The temporary increase for classified, non-classified, and faculty employees averaged 2.1%. The salary enhancement amounted to $154,000 while the adjunct faculty 5% salary increase, plus increase in employees necessitated by increase in enrollment, was an additional $145,000. Full time faculty salaries increased due to the increase in employees necessitated by increase in enrollment approximately $156,000. This increase is consistent with, but greater than, the increase in this expense category from fiscal year 2009 to fiscal year 2010 of $450,000. Supplies and other services increased by $691,000 mainly due to increases in computer services and supplies, computer software and equipment less than $5,000 partially offset by a substantial decrease in bad debt expenses recorded. This increase is consistent with, but greater than the increase in this expense category from fiscal year 2009 to fiscal year 2010 of $259,000. Service agreement expense of $250,000 was recorded during both fiscal years 2011 and 2010 and is due to the service agreement entered into by WVU and WVUP which came into effect for fiscal year Per this agreement, WVUP will pay WVU a yearly sum of $250,000 for services performed on their behalf. Interest on capital related debt decreased by $84,000 as a result of interest payments made on the Energy Performance Phase II contract with Siemens Building Technologies, Inc. This decrease is due to the fact that principal is being repaid. There was an increase of $122,000 recorded from fiscal year 2009 to Cash Flows The statements of cash flows provide information about the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities (capital and noncapital) of WVU at Parkersburg during the year. This statement helps users assess WVUP s ability to generate net cash flows, its ability to meet obligations as they come due, and its need for external financing. The statement of cash flows is divided into five sections: Cash flows from operating activities. This section shows the net cash used by the operating activities of WVUP. 11

14 Cash flows from noncapital financing activities. This section reflects the cash received and paid for nonoperating, noninvesting, and noncapital financing purposes. Cash flows from capital financing activities. This section includes cash used for the acquisition and construction of capital and related items. Cash flows from investing activities. This section shows the purchases, proceeds, and interest received from investing activities. Reconciliation of operating loss to net cash used in operating activities. This section provides a schedule that reconciles the accrual-based operating income (loss) and net cash used in operating activities. Condensed Statements of Cash Flows (in thousands) Year Ended June Cash Provided (Used) By: Operating Activities $ (19,306) $ (16,723) $ (11,307) Noncapital Financing Activities 22,331 20,651 22,075 Capital Financing Activities (2,289) (1,831) (2,138) Investing Activities Increase in Cash and Cash Equivalents 754 2,119 8,713 Cash and Cash Equivalents, Beginning of Year 10,832 8,713 - Cash and Cash Equivalents, End of Year $ 11,586 $ 10,832 $ 8,713 Total cash and cash equivalents increased by $754,000 during fiscal year 2011 to $11.6 million. Net cash used in operating activities increased by $2.6 million primarily due to an increase in payments for scholarships and fellowships. This increase in outflows was partially offset by an increase in cash inflows from tuition and fees. This category had experienced an increase of $5.4 million from fiscal year 2009 to fiscal year Net cash provided by noncapital financing activities increased by approximately $1.7 million primarily due to an increase in Federal Pell grants. This category had experienced a decrease of $1.4 million from fiscal year 2009 to fiscal year Net cash used in capital financing activities increased by $458,000 primarily due to an increase in cash outflows for the purchase of capital assets. This category had experienced a decrease from fiscal year 2009 to fiscal year 2010 of $307,000. Net cash from investing activities decreased by $4,000 as a result of a decrease in investment income. This category had experienced a decrease of $61,000 from fiscal year 2009 to fiscal year

15 The following graphs illustrate the sources and uses of cash SOURCES OF CASH Other $1,616 $1,629 $1,861 Transfer of Cash From WVU $0 $0 $6,825 State Appropriations Grants & Contracts $9,735 $10,610 $9,735 $10,120 $11,452 $14,329 Tuition & Fees $4,913 $5,847 $5,948-2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 In Thousands USES OF CASH Other $1,216 $874 $1,290 Purchase of Capital Assets Supplies $1,888 $1,450 $1,890 $3,848 $4,212 $4,833 Scholarships $4,726 $7,269 $9,167 Benefits Salaries & Wages $2,508 $2,650 $2,737 $10,310 $10,781 $11,202-2,000 4,000 6,000 8,000 10,000 12,000 In Thousands 13

16 Capital Asset and Long Term Debt Activity WVU at Parkersburg completed several construction projects in fiscal year 2011 and 2010, financed by leases, gifts and other WVUP funds The most significant capital activity was the roof replacement on the downtown center. Additionally, the Caperton Center HVAC project was completed and a new storage building for the storage of salt and motorcycles was constructed. Other projects completed include fire alarm system upgrades, the addition of a clock tower and the renovation of the Jackson County Parking Lot as well as the renovation of the Business Office and IT Renovation projects. Theater Renovations occurred during fiscal year 2011 and are expected to be completed in August The W.T. Grant Building renovations occurred during fiscal year ended 2011 and are expected to be completed in December Additionally, renovations began on the WVUP Training Center and are extending into fiscal year The most significant capital activity occurred under the Energy Performance Contract. This activity is part of a lease purchase agreement entered into by WVU in the amount of $12.5 million with SunTrust Leasing Corporation to finance phase II of an energy performance contract with Siemens Building Technologies, Inc. WVU at Parkersburg s portion of this agreement totals approximately $3.3 million. The performance energy contract is designed to reduce energy consumption, reduce deferred maintenance, implement life safety improvements, and advance operational enhancements throughout the campus of WVUP. The funds for the entire project were held in an escrow account with BB&T. BB&T paid $426,000 during fiscal year 2010 to Siemens for progress payments attributable to WVUP related to this contract. Payments during fiscal year 2010 were the final progress payments for this project. WVU at Parkersburg also completed fire alarm system upgrades, as well as elevator upgrades on campus during fiscal year WVU at Parkersburg has planned capital expenditures of close to $1.1 million over fiscal year The largest project is the W.T. Grant Building Renovations with additional expenditures estimated at $685,000 to occur in fiscal year Additionally, the WVUP Training Center is projected to incur additional expenditures approximating $341,000 and the Theater Renovation is projected to incur an estimated amount of $59,000 in renovations during fiscal year The Commission assesses each public institution of higher education for funds to meet the payment of debt service on various revenue bonds that were issued for the financing of academic and other facilities of the State s universities and colleges, including certain facilities at WVUP. The bonds remain as a capital obligation of the Commission; however $151,000 and $295,000 is reported as debt service assessment payable to the Commission by WVU at Parkersburg as of June 30, 2011 and 2010, respectively. 14

17 Economic Outlook WVU Parkersburg is located in Wood County in West Virginia. The West Virginia Economic Outlook 2011, a report published by the WVU Bureau of Business and Economic Research, indicates that Wood County s economic performance is very close to the State average in terms of the rate of change in employment. Wood County s employment can be expected to move in tandem with the State average rate as the State and the nation move out of the recession. However, the report expects employment gains to be slow and the State may not regain 2008 employment levels until Since WVUP receives nearly a third of its annual operating resources in the form of State appropriations, the College s financial resources are closely tied to the fiscal performance of the State of West Virginia. Although the State s economic outlook is not robust, the State s fiscal situation in the short term is expected to improve considerably. According to the Six Year Financial Plan published in the State of West Virginia Executive Budget Fiscal Year 2012, General revenues for FY 2012 are predicted to grow a healthy 7.3% above the FY 2011 official revenue estimate. As such, cuts in State support for the College are unlikely in the short term. However, WVUP s revenues from State appropriations may not see significant increases beyond pre-recession levels in the coming fiscal years. To help manage the static in State appropriations, WVUP continues to implement numerous cost control measures in order to reduce the growth in operating expenditures in the coming fiscal years. A significant source of revenue increases in the past has been student tuition and fees. The option of increasing tuition is not available in the academic year and may not be in the foreseeable future, despite the fact that WVUP has one of the lowest tuition rates in West Virginia. Tuition revenue is also a significant share (18%) of WVUP s operating resources, and it is materially impacted by fluctuations in enrollment, which occur in response to major changes in overall economic conditions. The recent economic downturn led to a significant increase in enrollment at WVUP, as displaced and underemployed members of the workforce have enrolled at WVUP to further their education. This increase generated additional tuition and fees revenues for WVUP. The College has experienced a 20 percent increase in enrollment over the past two years. However, this surge in enrollment is expected to level off and be completely reversed in future academic years as the economy improves and displaced workers return to work. For fiscal year 2012 and beyond, enrollment is expected to drop to the level of fiscal year Another revenue enhancement strategy WVUP continues to pursue is utilization of grants, donations and gifts. Improving the level of federal, State and private grant activity at WVUP has been a strategic priority for the past several years and the increased focus has been successful as grant revenues rose significantly during the 2010 and 2011 fiscal years. These strategic efforts are continuing and WVUP expects this trend in grant related revenue to continue in fiscal year 2012 and beyond. 15

18 WEST VIRGINIA UNIVERSITY AT PARKERSBURG STATEMENTS OF NET ASSETS AS OF JUNE 30, 2011 AND 2010 (Dollars in Thousands) ASSETS Current Assets: Cash and cash equivalents $ 11,186 $ 10,832 Accounts receivable Due from the Council/Commission Inventories Prepaid expenses Total current assets 11,691 11,306 Noncurrent Assets: Cash and cash equivalents Capital assets, net 16,315 14,944 Total noncurrent assets 16,715 14,944 TOTAL ASSETS $ 28,406 $ 26,250 LIABILITIES Current Liabilities: Accounts payable $ 590 $ 660 Service agreement payable to West Virginia University - 63 Accrued liabilities Accrued payroll Deferred revenue 2,275 2,508 Compensated absences Debt service assessment payable to the Commission, current portion Leases payable, current portion Notes payable, current portion 80 - Total current liabilities 4,150 4,222 Noncurrent Liabilities: Other post employment benefits liability 3,283 1,940 Debt service assessment payable to the Commission Leases payable 3,063 3,200 Notes payable Total noncurrent liabilities 6,666 5,291 TOTAL LIABILITIES $ 10,816 $ 9,513 NET ASSETS Invested in capital assets, net of related debt $ 13,007 $ 11,303 Restricted for: Expendable: Scholarships and fellowships Sponsored programs Total expendable Unrestricted 4,119 5,108 TOTAL NET ASSETS $ 17,590 $ 16,737 See notes to financial statements. 16

19 WEST VIRGINIA UNIVERSITY AT PARKERSBURG WVU AT PARKERSBURG FOUNDATION, INC. COMPONENT UNIT - STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 2011 AND ASSETS Cash and Cash Equivalents $ 208,618 $ 262,035 Pooled Investment Fund 7,272,404 6,212,671 Accrued Interest and Dividends Receivable 12,471 12,082 Other Assets 13,525 12,568 TOTAL ASSETS $ 7,507,018 $ 6,499,356 LIABILITIES Accounts Payable $ 4,762 $ 2,116 TOTAL LIABILITIES 4,762 2,116 NET ASSETS Unrestricted 212, ,556 Temporarily Restricted 5,389,778 4,653,943 Permanently Restricted 1,899,954 1,650,741 TOTAL NET ASSETS 7,502,256 6,497,240 TOTAL LIABILITIES AND NET ASSETS $ 7,507,018 $ 6,499,356 The accompanying notes are an integral part of this financial statement. 17

20 WEST VIRGINIA UNIVERSITY AT PARKERSBURG STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS YEARS ENDED JUNE 30, 2011 AND 2010 (Dollars in Thousands) OPERATING REVENUES Student tuition and fees, net of scholarship allowances of $3,827 and $3,552 $ 5,925 $ 5,656 Federal grants and contracts State grants and contracts 1,635 2,288 Local grants and contracts 63 3 Nongovernmental grants and contracts Sales and services of educational departments Auxiliary enterprises, net of scholarship allowances of $28 and $ Other operating revenues (including revenue from outsourced enterprise of $25 and $25) 1,466 1,602 Total operating revenues 9,922 9,917 OPERATING EXPENSES Salaries and wages 11,361 10,822 Benefits 4,126 4,108 Scholarships and fellowships 9,164 7,509 Utilities Supplies and other services 4,915 4,224 Depreciation Assessments by the Commission for operations Service agreement expense Total operating expenses 31,296 28,155 OPERATING LOSS (21,374) (18,238) NONOPERATING REVENUES (EXPENSES) State appropriations 8,942 9,060 State fiscal stabilization funds Gifts 66 - Federal Pell grants 12,179 10,019 Investment income Interest on capital asset-related debt (119) (203) Credit from the Commission for debt service Other nonoperating revenues - net 2 4 Net nonoperating revenues 21,898 19,587 INCOME BEFORE OTHER REVENUES, EXPENSES, GAINS, OR LOSSES 524 1,349 Capital payments on behalf of WVU Parkersburg INCREASE IN NET ASSETS 853 1,361 NET ASSETS--BEGINNING OF YEAR 16,737 15,376 NET ASSETS--END OF YEAR $ 17,590 $ 16,737 See notes to financial statements. Page 18

21 WEST VIRGINIA UNIVERSITY AT PARKERSBURG WVU AT PARKERSBURG FOUNDATION, INC. COMPONENT UNIT - STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2011 TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL REVENUES, GAINS, AND OTHER SUPPORT Contributions $ $ 178,391 $ $ 178,391 Interest and Dividend Income 4, ,238 45, ,349 Realized Gains (Losses) on Investments 6, ,420 62, ,049 Unrealized Gains (Losses) on Investments 19, , , ,069 Net Assets Released from Restrictions 327,310 (294,191) (33,119) -0- TOTAL REVENUES, GAINS, AND AND OTHER SUPPORT 357, , ,213 1,342,858 EXPENSES Program Services Grants and Scholarships 108, ,897 Faculty/Staff Development 38,420 38,420 Other Program Cost and Equipment Purchases 70,025 70,025 Total Program Services 217, ,342 Support Services Management and General 120, ,500 Total Support Services 120, ,500 TOTAL EXPENSES 337, ,842 CHANGE IN NET ASSETS 19, , ,213 1,005,016 NET ASSETS AT BEGINNING OF YEAR 192,556 4,653,943 1,650,741 6,497,240 NET ASSETS AT END OF YEAR $ 212,524 $ 5,389,778 $ 1,899,954 $ 7,502,256 The accompanying notes are an integral part of this financial statement. 19

22 WEST VIRGINIA UNIVERSITY AT PARKERSBURG STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2010 TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL REVENUES, GAINS, AND OTHER SUPPORT Contributions $ 5,245 $ 249,202 $ $ 254,447 Interest and Dividend Income 5, ,548 46, ,082 Realized Gains (Losses) on Investments 17, ,408 85, ,448 Unrealized Gains (Losses) on Investments 4, ,635 44, ,202 Net Assets Released from Restrictions 314,636 (258,198) (56,438) -0- TOTAL REVENUES, GAINS, AND AND OTHER SUPPORT 347, , , ,179 EXPENSES Program Services Grants and Scholarships 85,595 85,595 Faculty/Staff Development 44,082 44,082 Other Program Cost and Equipment -0- Purchases 101, ,443 Total Program Services 231, ,120 Support Services Management and General 124, ,444 Total Support Services 124, ,444 TOTAL EXPENSES 355, ,564 CHANGE IN NET ASSETS (7,942) 462, , ,615 NET ASSETS AT BEGINNING OF YEAR 200,498 4,191,348 1,530,779 5,922,625 NET ASSETS AT END OF YEAR $ 192,556 $ 4,653,943 $ 1,650,741 $ 6,497,240 The accompanying notes are an integral part of this financial statement. 20

23 WEST VIRGINIA UNIVERSITY AT PARKERSBURG STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2011 AND 2010 (Dollars in Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees $ 5,948 $ 5,847 Grants and contracts 2,150 1,433 Payments to suppliers (4,833) (4,212) Payments to employees (11,202) (10,781) Payments for benefits (2,737) (2,650) Payments to utilities (578) (500) Payments for scholarships and fellowships (9,167) (7,269) Auxiliary enterprise receipts Sales and service of educational departments Payments of operating expenses to West Virginia University (313) (188) Other receipts 1,352 1,525 Net cash used in operating activities (19,306) (16,723) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State appropriations 8,942 9,935 State fiscal stabilization funds Federal Pell grants 12,179 10,019 Credit from the Commission for debt service Other nonoperating receipts Cash provided by noncapital financing activities 22,331 20,651 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Payments on Commission debt assessment payable (144) (137) Purchases of capital assets (1,890) (1,450) Principal paid on capital debt and leases (125) (25) Interest paid on capital debt and leases (130) (219) Cash used in capital financing activities (2,289) (1,831) CASH FLOWS FROM INVESTING ACTIVITIES Investment income Cash provided by investing activities INCREASE IN CASH AND CASH EQUIVALENTS 754 2,119 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 10,832 8,713 CASH AND CASH EQUIVALENTS - END OF YEAR $ 11,586 $ 10,832 (continued) Page 21

24 WEST VIRGINIA UNIVERSITY AT PARKERSBURG STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED JUNE 30, 2011 AND 2010 (Dollars in Thousands) Reconciliation of net operating loss to net cash used in operating activities: Operating loss $ (21,374) $ (18,238) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation expense Donations 66 - Changes in assets and liabilities: Accounts receivable, net Due from the Commission (100) 286 Prepaid expenses (8) 4 Inventories 46 4 Accounts payable (71) 24 Accrued liabilities 1,502 1,560 Deferred revenue (233) (1,120) Compensated absences 37 (64) Net cash used in operating activities $ (19,306) $ (16,723) Noncash Transactions: Capitalization of interest $ 11 $ 16 Donations $ 66 $ - Loss on dispositions $ 1 $ 9 Other post employment benefits liability $ 1,343 $ 1,518 Capital payments on behalf of WVU Parkersburg $ 329 $ 12 Reconciliation of cash and cash equivalents to the statements of net assets: Cash and cash equivalents classified as current assets $ 11,186 $ 10,832 Cash and cash equivalents classified as noncurrent assets $ 11,586 $ 10,832 See notes to financial statements. Page 22

25 WEST VIRGINIA UNIVERSITY AT PARKERSBURG NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2011 AND ORGANIZATION West Virginia University at Parkersburg ( Parkersburg ) is governed by the West Virginia University at Parkersburg Board of Governors (the Board ). The Board was established by House Bill 3215 ( H.B ). During fiscal year 2008, H.B was passed which clarified and redefined relationships between and among certain higher education boards and institutions. This legislation defines the statewide network of independently accredited community and technical colleges. Effective July 1, 2008, the administratively linked community and technical colleges of West Virginia University (the University ) established their own Boards of Governors. Powers and duties of the Board include, but are not limited to, the power to determine, control, supervise and manage the financial, business and educational policies and affairs of the institution under its jurisdiction, the duty to develop a master plan for the institution, the power to prescribe the specific functions and institution s budget request, the duty to review at least every five years all academic programs offered at the institution, and the power to fix tuition and other fees for the different classes or categories of students enrolled at its institution. The West Virginia Council for Community and Technical College Education (the Council ) (two year education) and the West Virginia Higher Education Policy Commission (the Commission ) (four year and post graduate education) collectively comprise the West Virginia Higher Education Fund. Both the Council and the Commission were legislatively created under Senate Bill No. 448 and Senate Bill No. 653, respectively. The Council is responsible for developing, overseeing and advancing the State s public policy agenda as it relates to community and technical college education. The Council is comprised of 12 persons appointed by the Governor with the advice and consent of the Senate. The University provides Parkersburg with administrative and academic support services under a service agreement. The University and the separately established community and technical colleges shall oversee a plan that ensures the financial stability of auxiliary enterprises, including but not limited to, student housing, student centers, dining services, parking and athletics through fiscal year As a requirement of Governmental Accounting Standards Board (GASB) standards, Parkersburg has included information from WVU at Parkersburg Foundation, Inc. (the Foundation ). 23

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Parkersburg have been prepared in accordance with generally accepted accounting principles as prescribed by GASB. The financial statement presentation required by GASB provides a comprehensive, entity-wide perspective of Parkersburg s assets, liabilities, net assets, revenues, expenses, changes in net assets, and cash flows. Parkersburg follows all GASB pronouncements as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins issued on or before November 30, 1989 and amendments thereof, and has elected not to apply the FASB Statements and Interpretations issued after November 30, 1989, to its financial statements. a. Reporting Entity Parkersburg is an operating unit of the West Virginia Higher Education Fund and represents separate funds of the State that are not included in the State s general fund. Parkersburg is a separate entity which, along with all State institutions of higher education, the Council and the Commission (which includes West Virginia Network for Educational Telecomputing ( WVNET)) form the Higher Education Fund of the State. The Higher Education Fund is considered a component unit of the State and its financial statements are discretely presented in the State s comprehensive annual financial report. The foundation is not part of the Parkersburg reporting entity and is not consolidated in the accompanying financial statements since Parkersburg has no ability to designate management, cannot significantly influence operations of this entity, and is not accountable for fiscal matters of the foundation under GASB. The accompanying financial statements present all funds under the authority of Parkersburg. The basic criterion for inclusion in the accompanying financial statements is the exercise of oversight responsibility derived from Parkersburg s ability to significantly influence operations and accountability for fiscal matters of related entities. The audited financial statements of the Foundation are presented here as a discrete component unit with the Parkersburg financial statements for the fiscal years ended June 30, 2011 and The Foundation is a separate, private, nonprofit organization that reports under FASB standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the audited financial information as it is presented herein (See Note 16). b. Basis of Accounting For financial reporting purposes, Parkersburg is considered a special-purpose government engaged only in business-type activities. Accordingly, Parkersburg s financial statements have been prepared on the accrual basis of accounting with a flow of economic resources measurement focus. Revenues are reported when earned and expenditures are reported when materials or services are received. c. Cash and Cash Equivalents For purposes of the statement of net assets, Parkersburg considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 24

27 Cash on deposit with the West Virginia Treasurer s Office (the Treasurer ) is invested in the WV Money Market Pool, the WV Government Money Market Pool and the WV Short Term Bond Pool with the West Virginia Board of Treasury Investments (BTI). These investments are available for immediate withdrawal and, accordingly, are presented as cash and cash equivalents in the accompanying financial statements. Cash and cash equivalents also include cash in bank accounts and cash on hand. d. Allowance for Doubtful Accounts It is Parkersburg s policy to provide for future losses on uncollectible accounts receivable based on an evaluation of the underlying account, the historical collectibility experienced by Parkersburg on such balances, and such other factors which, in Parkersburg s judgment, require consideration in estimating doubtful accounts. e. Inventories Inventories are stated at the lower-of-cost or market, cost being determined on the first-in, first-out method. f. Noncurrent Cash and Cash Equivalents Cash that is (1) externally restricted to make debt service payments or (2) to purchase capital or other noncurrent assets is classified as a noncurrent asset in the statement of net assets. g. Capital Assets Capital assets include property, plant, and equipment, books and materials that are part of a catalogued library, and infrastructure assets. Capital assets are stated at cost at the date of acquisition or construction, or fair market value at the date of donation in the case of gifts. The capital assets transferred in were recorded at net book value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 15 to 50 years for buildings, infrastructure, and land improvements, 3 to 15 years for furniture, equipment, and library books. Parkersburg s capitalization threshold for equipment is $5,000. h. Deferred Revenue Revenue for programs or activities to be conducted primarily in the next fiscal year are classified as deferred revenue, including items such as tuition, orientation fees, financial aid deposits, and advance payments on sponsored awards. i. Compensated Absences and Other Post Employment Benefits Parkersburg accounts for compensated absences in accordance with the provisions of GASB. GASB provides standards for the measurement, recognition, and display of other post employment benefit (OPEB) expenditures, assets, and liabilities, including applicable note disclosures and required supplementary information. During fiscal year 2006, House Bill No was established to create a trust fund for post employment benefits for the State of West Virginia (the State ). Parkersburg is required to participate in this multiple employer cost-sharing plan, the West Virginia Retiree Health Benefit Trust Fund, sponsored by the State of West Virginia. Details regarding this plan can be obtained by contacting the State Public Employees Insurance Agency (PEIA), State Capitol Complex, Building 5, Room 1001, 1900 Kanawha Boulevard, East, Charleston WV or These GASB standards require entities to accrue for employees rights to receive compensation for vacation leave, or payments in lieu of accrued vacation or sick leave, as such benefits are earned and payment becomes probable. 25