Central Michigan University. Financial Report. As of and for the Years Ended June 30, 2010 and 2009

Transcription

1 Central Michigan University Financial Report As of and for the Years Ended June 30, 2010 and 2009

2 Central Michigan University Board of Trustees Stephanie Comai, Ann Arbor Chair Marilyn French Hubbard, Bloomfield Township Vice Chair Sam R. Kottamasu, Saginaw Vice Chair Gail F. Torreano, Northville Brian W. Fannon, Novi John D. Hurd, Munith Sarah R. Opperman, Midland Robert F. Wardrop II, Grand Rapids President and Vice Presidents Dr. George Ross, President E. Gary Shapiro, Executive Vice President/Provost David Burdette, Vice President for Finance and Administrative Services Kathleen M. Wilbur, Vice President for Government Relations and Public Affairs Ted Tolcher, Vice President for Development and Alumni Relations, Interim Financial Administrative Staff Barrie J. Wilkes, Associate Vice President / Financial Services & Reporting and Controller Susan M. Parsons, Assistant Controller Michael J. Roethlisberger, Director of Internal Audit

3 August, 2010 REPORT FROM THE VICE PRESIDENT FOR FINANCE AND ADMINISTRATIVE SERVICES I am pleased to share with you the financial report for Central Michigan University for the year ended June 30, For nearly 120 years Central Michigan University has remained focused on student success and improving the overall quality of life of citizens throughout the state, nation and world. CMU remains a partner with the state of Michigan in being a responsible steward of taxpayers dollars, while providing access to the best educational experience possible to advance the personal ambitions and professional goals of the state s citizenry. Central Michigan University is one of the nation s 100 largest public universities and the fourth largest in Michigan with nearly 200,000 alumni and an enrollment of more than 27,000 students. Our impressive breadth of more than 200 academic programs at the bachelor s, master s, specialist and doctoral levels include nationally recognized programs in entrepreneurship, journalism, music, audiology, teacher education, psychology and physician assistant. CMU has also established a College of Medicine, scheduled to open in Despite difficult economic times, Central Michigan University will escalate its dedication to maximizing the student learning experience. From our main campus in Mount Pleasant to one of our 60 off-campus centers throughout the U.S., Canada and Mexico or through our online courses, CMU will continue to expand and enhance its educational opportunities with primary focus on student success. Once again, Central Michigan University continues its sound financial condition, with much credit due to our more than 2,200 valued and hardworking faculty and staff. We are focused on careful stewardship of university resources. During the year, net assets increased by $54.2 million, due primarily to additional capital assets, better market performance in endowment funds and positive operational results. The demanding economic times not only have challenged our bottom line, but also have resulted in Central Michigan University implementing steps to ensure our students continue to have a first-rate environment for teaching and learning and to receive an outstanding education. We continue to examine many different avenues to reduce costs and increase energy efficiency, while concentrating our efforts on sustainability. We are strategic when making investments in capital facilities and programs. The ability to provide our students with a growing positive environment that encourages diversity, research and service is vital. As we prepare the university s budget for the coming year, we will remain flexible to the changing needs of our students, while being creative in the way we service those needs, even as we are aware of the economic times in which we live. Central Michigan University will continue to advance the university s long-established tradition of academic excellence, integrity, research and creative activity. Sincerely, David A. Burdette Vice President for Finance and Administrative Services Mount Pleasant, Michigan 48859

4 Financial Statements Central Michigan University June 30, 2010 Management s Discussion and Analysis Report of Independent Auditors Statements of Net Assets Statements of Revenues, Expenses and Changes in Net Assets Statements of Cash Flows-Direct Method Notes to Financial Statements

5 Management s Discussion and Analysis This section of the Central Michigan University annual financial report presents a discussion and analysis of the financial performance of the university for the fiscal year ended June 30, 2010, with selected comparative information for the years ended June 30, 2009, and This discussion has been prepared by management along with the financial statements and related footnote disclosures and should be read in conjunction with, and is qualified in its entirety by, the financial statements and footnotes. The discussion and analysis is designed to focus on current activities, resulting changes and currently known facts. The financial statements, footnotes and this discussion are the responsibility of management. Using the Annual Report The university s financial report includes three financial statements: the Statements of Net Assets, the Statements of Revenues, Expenses and Changes in Net Assets and the Statements of Cash Flows. These financial statements are prepared in accordance with the Governmental Accounting Standards Board Statement No. 35, Basic Financial Statements-and Management s Discussion and Analysis-for Public Colleges and Universities. STATEMENTS OF NET ASSETS include all assets and liabilities. The Statements of Net Assets are prepared under the accrual basis of accounting, whereby revenues and assets are recognized when the service is provided and expenses and liabilities are recognized when others provide the service, regardless of when cash is exchanged. Net assets, the difference between total assets and total liabilities, are one indicator of the current financial condition of the university. Assets and liabilities are generally measured using current values. Investments are stated at fair value and capital assets are stated at historical cost less an allowance for depreciation. A three year summarized comparison of the university s assets, liabilities and net assets (shown in millions) at June 30 is as follows: Current assets $ $ $ 96.3 Noncurrent assets Capital assets, net Other TOTAL ASSETS Current liabilities Noncurrent liabilities TOTAL LIABILITIES TOTAL NET ASSETS $ $ $

6 CURRENT ASSETS consist of cash and cash equivalents, receivables net of the allowance for doubtful accounts, inventories and prepaid expenses. Current assets totaled $149.5 million at June 30, 2010, $105.5 million at June 30, 2009, and $96.3 million at June 30, Fiscal year 2010 compared to 2009 Cash and cash equivalents increased $43.4 million primarily due to the conversion of longer-dated securities into cash. Accounts receivable from the State Building Authority decreased $1.8 million related to the Education Building. Appropriations receivable from the State of Michigan decreased $0.5 million. Pledge receivables increased $1.5 million, primarily due to an increase in pledges to university capital projects. Charter schools appropriations receivable increased $1.0 million, primarily due to an enrollment increase of approximately 3.86% combined with a decrease of $154 in the per pupil foundation grant. Fiscal year 2009 compared to 2008 Cash and cash equivalents increased $4.4 million as the pooled cash investment managers moved funds out of equities, corporate bonds and notes into short-term US sponsored government securities and bond mutual funds. Accounts receivable from the State Building Authority decreased $0.7 million related to the Education Building. Appropriations receivable from the State of Michigan increased $0.1 million. Operating and pledge receivables increased $2.5 million, primarily due to a $1.7 million increase in pledges to university capital projects. Charter schools appropriations receivable increased $1.3 million, primarily due to an enrollment increase of approximately 1.93% combined with an increase of $105 in the per pupil foundation grant. NONCURRENT ASSETS include restricted cash and cash equivalents, endowment investments at fair value, loans receivable net of the allowance for doubtful accounts, long-term investments, deferred outflows and capital assets. Noncurrent assets totaled $655.5 million at June 30, 2010, $646.3 million at June 30, 2009, and $620.9 million at June 30, Refer to Footnote F to the Financial Statements for the detail regarding the change in deferred outflows. Fiscal year 2010 compared to 2009 Endowment investments increased $7.4 million due to a favorable change in market conditions. There was a $9.7 million increase in market value within the investments portfolio, offset by investment income loss of $1.7 million due to a realized loss of income generated by a change in investment managers. Earnings distributed from endowments for spending was $2.6 million which were offset by gifts received for endowments of $1.7 million. Other long-term investments decreased $7.1 million primarily as a result of the conversion of longer-dated securities into cash offset by a favorable change in market conditions. Capital assets increased $8.9 million, due to a net increase of $31.1 million in capitalized construction project costs, land improvements, equipment and library materials less $22.2 million in depreciation. 2

7 Fiscal year 2009 compared to 2008 Restricted cash and cash equivalents decreased as a result of the completion of bond funded capital projects. Endowment investments decreased $18.3 million due to unfavorable market conditions. There was a $19.5 million decrease in market value within the investments portfolio, offset by investment income of $1.6 million. Earnings distributed from endowments for spending was $3.0 million which were offset by gifts received for endowments of $1.6 million. Other long-term investments increased $11.8 million primarily as a result of the investment of available funds. Capital assets increased $25.3 million, due to a net increase of $46.3 million in capitalized construction project costs, land improvements, equipment and library materials less $21.0 million in depreciation. CURRENT LIABILITIES consist of accounts payable, deferred revenue, deposits and the current portion of the long-term obligations payable within the next twelve months. Current liabilities totaled $81.0 million at June 30, 2010, $76.0 million at June 30, 2009, and $76.0 million at June 30, Fiscal year 2010 compared to 2009 The current liabilities increased $5.0 million, primarily due to potential retirement and vacation payments of $0.5 million, an increase of $1.0 million to Charter Schools, construction project liability increases of $2.1 million, and an increase of $0.6 million in deferred revenue. Fiscal year 2009 compared to 2008 The current liabilities remained consistent. NONCURRENT LIABILITIES consist of long-term debt, hedging instruments and other obligations for which the principal is due more than one year from the balance sheet date. Included is the Retirement Service Award program, the federal portion of the Perkins Loan program for students, accrued compensated absences, hedging instruments and bonded debt. Noncurrent liabilities totaled $178.7 million at June 30, 2010, $184.7 million at June 30, 2009, and $183.7 million at June 30, Refer to Footnote F to the Financial Statements for the detail regarding the change in longterm debt, hedging instruments and other obligations. Refer to Footnote G to the Financial Statements for the details regarding the Retirement Service Award program. Fiscal year 2010 compared to 2009 Noncurrent liabilities decreased $6.0 million, primarily due to an increase of $1.0 million in the liability relating to hedging instruments offset by a reduction in the bond principal of $5.8 million and a $0.9 million reduction in retirement and vacation accrual liabilities. Fiscal year 2009 compared to 2008 Noncurrent liabilities increased $1.0 million, primarily due to the initial recording of $7.5 million for the liability relating to hedging instruments, offset by bond principal payments of $6.6 million. 3

8 NET ASSETS represent the difference between university assets and liabilities. Total net assets are $545.3 million at June 30, 2010, $491.1 million at June 30, 2009, and $457.5 million at June 30, The university s net assets (shown in millions) at June 30 are summarized as follows: Analysis of Net Assets Restricted Nonexpendable $ 31.2 $ 29.2 $ 27.3 Expendable Unrestricted Invested in capital assets, net of related debt TOTAL NET ASSETS $ $ $ Restricted nonexpendable net assets consist of endowment funds with specific restrictions on the expenditure of principal. Restricted expendable net assets consist of income from endowment funds, gifts and pledges with restrictions, grants from third party agencies with expenditure restrictions, and certain loan funds. The following is a breakdown of the restricted net assets (shown in millions): Nonexpendable endowment funds $ 31.2 $ 29.2 $ 27.3 Expendable scholarship and research funds Expendable loan funds Expendable gifts, including pledges TOTAL RESTRICTED NET ASSETS $ 61.2 $ 53.6 $ 60.6 Unrestricted net assets represent those balances from operational activities that have not been restricted by parties external to the university, such as donors or grant agencies. This includes funds that have been designated by the governing board for specific purposes as well as amounts that have been contractually committed for goods and services, which have not yet been received. Approximately $94.4 million of the unrestricted net assets at June 30, 2010, and $92.7 million at June 30, 2009, relate to capital projects, which are in various stages of planning and completion. Another $26.8 million at June 30, 2010 and $26.3 million at June 30, 2009, relate to debt stabilization and insurance reserves. Also included are contractual commitments and normal working capital balances maintained for departmental and auxiliary enterprise activities. 4

9 The following is a breakdown of the unrestricted net assets (shown in millions): Maintenance, debt stabilization and insurance reserves $ 45.0 $ 52.6 $ 46.7 Construction projects in process and reserves Campus improvement and technology reserves Contractual commitments Departmental special project reserves Departmental working capital Quasi endowment funds Academic support and research TOTAL UNRESTRICTED NET ASSETS $ $ $

10 Fiscal year 2010 compared to 2009 The increase in construction projects in process and reserves relates primarily to new capital improvement and construction projects. Maintenance, debt stabilization and insurance reserves decreased primarily as a result of funding expansion projects. Quasi endowments increased, primarily due to a favorable fluctuation in the market value of investments and investment income offset by realized losses. Fiscal year 2009 compared to 2008 The increase in construction projects in process and reserves relates primarily to new capital improvement and construction projects. Maintenance, debt stabilization and insurance reserves increased for capital emergencies and future expansion. Quasi endowments decreased, primarily due to an unfavorable fluctuation in the market value of investments offset by investment income. 6

11 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS present the revenues earned and the expenses incurred during the year. Activities are reported as either operating or nonoperating. The financial reporting model classifies state appropriations and gifts as nonoperating revenues. The utilization of long-lived assets, referred to as capital assets, is reflected in the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life. A summarized comparison of the university s revenues, expenses and changes in net assets (shown in millions) for the years ended June 30 is as follows: OPERATING REVENUES Tuition, net $ $ $ Grants and contracts Auxiliary enterprises, net Other operating revenues TOTAL OPERATING REVENUES OPERATING EXPENSES OPERATING LOSS (79.1) (77.0) (88.3) NONOPERATING REVENUES (EXPENSES) State appropriations* Other nonoperating revenues Interest on debt (7.4) (8.1) (8.6) NET NONOPERATING REVENUES INCOME (LOSS) BEFORE OTHER REVENUES 43.9 (0.4) 11.3 OTHER REVENUES Capital appropriations Capital grants and gifts Additions to permanent endowments TOTAL OTHER REVENUES INCREASE IN NET ASSETS NET ASSETS NET ASSETS AT BEGINNING OF YEAR NET ASSETS AT END OF YEAR $ $ $ *Fiscal year 2008 amount includes the delayed payment of $7.5 million from fiscal year

12 OPERATING REVENUES for the fiscal years ended June 30, 2010, 2009, and 2008 totaled $293.6 million, $276.9 million, and $259.5 million, respectively. Gross tuition for fiscal years ended June 30, 2010, 2009, and 2008 were $221.8 million, $203.3 million, and $186.8 million, respectively. Scholarship allowances for fiscal years ended June 30, 2010, 2009, and 2008 were $30.1 million, $23.1 million, and $18.0 million, respectively. Fiscal year 2010 compared to 2009 Tuition, before scholarship allowance, increased by $18.5 million. This increase relates to the new tuition rates which applied only to students who entered the university in the fall of 2008 or after and an increase in student credit hours. Eligible returning undergraduate students remained on the CMU Promise. Auxiliary enterprise operating revenues, before room and board discount, increased $4.0 million. Auxiliary enterprises include residence halls, apartments, food services, intercollegiate athletics, university bookstore, university press, parking services, energy facility and telecommunications. They are intended to be self-supporting. Residence Life revenue increased by $1.3 million. University Center revenue increased $0.8 million. Athletic programs revenue increased $1.1 million. 8

13 Fiscal year 2009 compared to 2008 Tuition, before scholarship allowance, increased by $16.5 million. This increase relates primarily to the new tuition rates which applied only to students who entered the university in the fall of 2008 or after. Eligible returning undergraduate students remained on the CMU Promise. Auxiliary enterprise operating revenues, before room and board discount, increased $4.0 million. Auxiliary enterprises include residence halls, apartments, food services, intercollegiate athletics, university bookstore, university press, parking services, energy facility and telecommunications. They are intended to be self-supporting. Residence Life revenue increased by $4.4 million. University Center revenue increased $0.6 million. Energy Facility revenue increased $0.6 million. Telecommunications revenue decreased $1.0 million. Analysis of Grants and Contracts Grants and Contracts include all restricted revenues made available by government agencies as well as private agencies. Grant revenues are recorded only to the extent the funds have been expended for exchange transactions. Non-exchange revenues are recorded when received or when eligibility criteria has been met. Fiscal year 2010 compared to 2009 There was an increase in federal sources of $2.1 million; the National Science Foundation increased $2.0 million, which includes $1.5 million of American Recovery and Reinvestment Act funds. There was an increase in the state sources of $1.6 million; this increase is attributed primarily to State Fiscal Stabilization Funds from the Department of Education. Awards from other non-governmental sources increased by $0.1 million. Fiscal year 2009 compared to 2008 There was an increase in federal sources of $4.2 million. There was an increase in the state sources of $1.9 million. Awards from other nongovernmental sources decreased by $0.5 million. 9

14 OPERATING EXPENSES include compensation and benefits, scholarships and fellowships, utilities, supplies and depreciation. Interest expense is classified as a nonoperating expense. A comparative summary of the university s expenses (shown in millions) for the years ended June 30 is as follows: Operating Compensation and benefits $ $ $ Supplies and other Depreciation Scholarships and fellowships Total Operating Expenses Nonoperating Interest Total Expenses $ $ $ Fiscal year 2010 compared to 2009 Compensation and benefit expenses increased $7.4 million. Of this increase, compensation increased 3.4% as a result of annual increases. The related employee benefits increased 3.3%. Supplies and other, including cost of goods sold, increased $7.7 million primarily as a result of an increase in university bad debt, a write down of university assets and an increase in bookstore cost of goods sold. Fiscal year 2009 compared to 2008 Compensation and benefit expenses increased $4.8 million. Of this increase, compensation increased 3.6% as a result of annual increases. The related employee benefits decreased 1.5%. Supplies and other, including cost of goods sold, decreased $1.0 million primarily as a result of a decrease in university credit card fees, uncollectible receivables and the completion of the network upgrade. 10

15 A comparative summary of the university s expenses by functional classification (shown in millions) for the years ended June 30 is as follows: Expenses by Functional Classification Instruction $ % $ % $ % Research Public service Academic support Student services Institutional support Scholarships and fellowships (auxiliary scholarships shown below) Operation and maintenance of plant Auxiliary enterprises (includes auxiliary scholarships) Student loan provision, cancellations Depreciation Other Interest expense Total Expenses by Function $ % $ % $ % 11

16 NONOPERATING REVENUES (EXPENSES) consist of state appropriations, gifts and pledges net of allowance, investment income including realized gains and losses, and other nonoperating revenues less interest on debt-financed capital assets. Fiscal year 2010 compared to 2009 Nonoperating revenue increased $46.4 million. Investment income consists primarily of earned income of $6.4 million offset by realized losses of $5.2 million. Unrealized gains and losses increased $43.5 million, changing from a $26.5 million loss to a $17.0 million gain. Gifts and pledges increased $0.4 million, and state appropriations decreased $2.7 million. Interest on debt-financed capital assets decreased $0.7 million. Other nonoperating revenue increased by $10.1 million, primarily due to an increase in Pell award revenue of $10.7 million. Fiscal year 2009 compared to 2008 Nonoperating revenue decreased $23.0 million. Investment income decreased $10.7 million. Unrealized gains and losses decreased $7.0 million, changing from a $19.5 million loss to a $26.5 million loss. Gifts and pledges decreased $2.4 million, and state appropriations decreased $6.6 million, partially due to the receipt of the August 2007 payment in fiscal year Interest on debt-financed capital assets decreased $0.5 million. Other nonoperating revenue increased by $3.3 million, primarily due to an increase in Pell award revenue of $2.5 million. OTHER REVENUES consist of capital appropriations received from the State Building Authority of Michigan, capital grants and gifts, including pledges and additions to permanent endowments. A gift received by the university, where a donor has specified that only the investment earnings from that gift can be expended for the purpose designated by the donor, is classified as a permanent endowment. The principal cannot be expended. Endowment gifts do not include pledges. Fiscal year 2010 compared to 2009 Other revenue decreased by $23.7 million. Capital appropriations decreased by $21.0 million. Capital grants, gifts, and pledges decreased by $2.7 million. Fiscal year 2009 compared to 2008 Other revenue increased by $27.4 million. Capital appropriations increased by $22.5 million. Capital grants, gifts, and pledges increased by $5.0 million. Additions to permanent endowments decreased by $0.1 million. 12

17 STATEMENTS OF CASH FLOWS present the information related to cash inflows and outflows summarized by operating, capital and noncapital financing and investing activities. Its primary purpose is to provide relevant information about the cash receipts and cash payments of the university during the year. A comparative summary of the statements of cash flows (shown in millions) for the years ended June 30 is as follows: Cash received from operations $ $ $ Cash expended for operations (346.5) (335.6) (324.9) NET CASH USED BY OPERATING ACTIVITIES (51.6) (59.1) (64.4) Net cash provided by noncapital financing activities Net cash used by capital financing activities (37.4) (29.8) (46.3) Net cash provided (used) by investing activities 18.1 (12.9) (9.8) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17.3) Cash and cash equivalents, beginning of the year CASH AND CASH EQUIVALENTS, END OF THE YEAR $ 65.0 $ 21.6 $ 17.2 Fiscal year 2010 compared to 2009 Cash received from operations is up $18.4 million. The change reflects an increase of $11.0 million from tuition, an increase of $1.4 million from grants and contracts and an increase of $6.3 million from auxiliary and other educational activities. Cash expended for operations is up $10.9 million. Compensation and benefits increased $7.1 million. Noncapital operating expenses increased $2.7 million. Scholarships and fellowships increased $2.5 million. Other payments decreased by $1.4 million. Net cash provided by noncapital financing activities increased $8.1 million, primarily due to a $2.0 million decrease in state appropriations and an increase of $10.7 million of Pell grant revenue. Net cash used by capital financing activities increased $7.6 million, due to new construction projects. Net cash provided by investing activities increased by $31.0 million, primarily due to more favorable market conditions. Fiscal year 2009 compared to 2008 Cash received from operations is up $16.0 million. The change reflects an increase of $6.0 million from tuition, an increase in loan collections of $1.0 million, an increase of $1.0 million from grants and contracts and an increase of $8.0 million from auxiliary and other educational activities. Cash expended for operations is up $10.7 million. Compensation and benefits increased $5.3 million. Noncapital operating expenses increased $2.9 million. Scholarships and fellowships increased $2.5 million. Net cash used by capital financing activities decreased $16.5 million, due to the completion of construction projects funded from debt issuance proceeds. Net cash used by investing activities decreased by $3.1 million, primarily due to unfavorable market conditions offset by investment income. 13

18 Enrollment The following table indicates the historical enrollment of undergraduate and graduate students for the through academic years. Fall Headcount Enrollment Year Ending On-Campus Off- Campus Combined June 30 Undergraduate Graduate Total Undergraduate Graduate Total Total ,542 1,902 20,444 2,038 4,875 6,913 27, ,454 1,792 20,246 2,086 5,022 7,108 27, ,163 1,704 19,867 1,928 4,993 6,921 26, ,331 1,694 20,025 1,842 5,233 7,075 27, ,100 1,817 19,917 1,912 5,623 7,535 27,452 14

19 The following table indicates the full-time equivalent students and the total number of credit hours taken by the students attending the university for the through academic years. Annual Full-Time Equivalent Students On-Campus Off-Campus Combined Annual Annual Annual Annual Year Ending Full-Time Credit Full-Time Credit Full-Time Credit June 30 Equivalent Hours Taken Equivalent Hours Taken Equivalent Hours Taken , ,542 4, ,026 23, , , ,936 4, ,735 23, , , ,727 4, ,542 23, , , ,307 4, ,129 23, , , ,483 4, ,067 23, ,550 15

20 Student Admissions The table below shows the total number of undergraduate applications received, the number accepted, and the number who enrolled for the fiscal years ending June 30, 2007 through Undergraduate Student Admissions On-Campus Off-Campus Combined Year Ending Percent Percent June 30 Applicants Accepted Enrolled Applicants Accepted Enrolled Applicants Accepted Accepted Enrolled Enrolled ,742 14,154 4,933 1,916 1, , % 15, % 5, ,896 12,955 4,926 1,616 1, , % 14, % 5, ,594 12,767 4,867 1,562 1, , % 13, % 5, ,376 12,591 4,969 1,295 1, , % 13, % 5,618 16

21 Student Tuition Cost per Credit Hour In the fall of 2005, Central Michigan University introduced a guaranteed undergraduate tuition plan called the CMU Promise. This plan provided fixed annual tuition rates for all in-state and out-of-state undergraduate students, based on date of enrollment and class status, as described below. All formerly mandated fees were rolled into these tuition rates, although certain fees or charges related to specific academic programs and to voluntary purchases of privileges and services were charged. For new students, the CMU Promise offered one unchanging tuition rate based on their date of enrollment for four years, with an additional one-year grace period, if needed, to complete a bachelor s degree. For returning students, a schedule of unchanging prorated tuition rates was used. The schedule was based on the student s number of credit hours completed. In addition, the CMU Promise was not applicable to graduate level courses. All mandatory fees were rolled into the graduate level tuition rates. Beginning with the fall 2008 semester, the CMU Promise was no longer available to new students, transferring students or students coming off the CMU Promise. A new rate of $346 per credit hour was approved at the July 15, 2010 Board of Trustees meeting for incoming students in the fall of The new per credit hour rate will include all mandatory fees. The tuition rates for on-campus students for fall 2009 are set forth below and are in effect for, and only for, the number of years stated below: Michigan Resident Credits Completed 17 Undergraduate Tuition Years Promised Years Remaining Rate Per Credit Hour Cohort T09 New students in 2009/10 academic year N/A N/A $ 339 Cohort T08 New students in 2008/09 academic year N/A N/A 339 Cohort T07 New students in 2007/08 academic year 4* 2* 304 Cohort T06 New students in 2006/07 academic year 4* 1* 251 Cohort T05 New students in 2005/06 academic year or Freshmen with up to 25 credits 4* 0* 213 Out-of State Resident Cohort T09 New students in 2009/10 academic year N/A N/A $ 789 Cohort T08 New students in 2008/09 academic year N/A N/A 789 Cohort T07 New students in 2007/08 academic year 4* 2* 707 Cohort T06 New students in 2006/07 academic year 4* 1* 584 Cohort T05 New students in 2005/06 academic year or Freshmen with up to 25 credits 4* 0* 495 Credit-by-Examination $ 40 *One additional year at the same tuition rate is available, if needed, to complete a bachelor's degree.

22 Prior to the fall 2005 semester enrollment, student tuition was based on the number of credit hours taken. The student tuition rate for on-campus students, for the academic years indicated, are set forth below: Student Cost Per Credit Hour Student Classification Undergraduate, resident $ $ $ * $ * $ * Undergraduate, nonresident * * * Graduate, resident ** Graduate, nonresident ** Doctoral, resident ** Doctoral, nonresident ** *See preceding table of undergraduate tuition rates provided by the CMU Promise, which became effective for the fall 2005 semester enrollment. **In December 2005, the Board approved new graduate tuition rates. The new rates were effective for the spring 2006 semester as follows: The graduate resident rate is $325 per credit hour, the graduate nonresident rate is $603 per credit hour, the doctoral resident rate is $370 per credit hour, and the doctoral nonresident rate is $669 per credit hour. A full-time undergraduate student intending to graduate in four years takes an average of 15 credit hours per semester and a full-time graduate student in a one-year graduate program takes an average of 12 credit hours per semester. The following table sets forth the annual student tuition for such full-time on-campus students for the academic years indicated. Annual Full-Time Tuition Student Classification Undergraduate, resident $ 9,248* $ 7,818* $ 6,985* $ 6,638* $ 6,130* Undergraduate, nonresident 21,518* 18,180* 16,230* 15,428* 14,291* Graduate, resident 10,416 9,912 9,312 8,784 6,792 Graduate, nonresident 18,384 18,384 17,256 16,272 12,576 *Average tuition under the CMU Promise is based on 30 hours per year. Note that all mandatory fees have been included in the CMU Promise tuition rates beginning with fiscal year Annual full-time tuition for fiscal year was weighted by semester credit hours. 18

23 Registration or enrollment fees formerly totaled $160 annually. Students carrying seven credit hours or more paid a $100 per year student activity center fee and a $50 campus-programming fee. In , the university began assessing a technology fee as follows: Students carrying six credit hours or less paid $110 annually, and students carrying seven credit hours or more paid $220. In , a campus improvement fee was implemented, which was $75 annually. In , a library fee was instituted, which was $150 annually. In , a student publication fee was implemented, which was $10 annually. As described above, starting in fall 2005, all mandatory fees were rolled into tuition under the CMU Promise. Room and Board and Estimated Total Cost In addition to the CMU Promise that guarantees tuition rates, Central Michigan University also offered a guarantee on room and board rates. This agreement guaranteed room and board rates would not increase for a two-year period. The annual cost of room and board and the estimated total cost for two semesters for a resident undergraduate student for the academic years indicated are set forth below: Annual Room and Board and Estimated Total Costs New Students Annual Room and Board and Estimated Total Costs Returning Students Average Estimated Estimated Tuition, Tuition, Year Ending Room Books and Estimated Room Books and Estimated June 30 and Board Miscellaneous Total Costs and Board Miscellaneous Total Costs 2010 $ 7,667 $ 12,220* $ 19,887 $ 7,667 $ 10,990* $ 18, ,668 12,385* 20,053 7,668 10,008* 17, ,236 11,785* 19,021 7,236 9,303* 16, ,824 10,576* 17,400 6,824 8,980* 15, ,376 8,645* 15,021 6,376 8,550* 14,926 *Based on student tuition at 30 credit hours per year. The student tuition for the University s Off Campus Credit Courses and Degree Programs for the academic years are set forth below: Extended Learning Student Tuition Per Credit Hour Student Classification Educational Degree Program-Undergraduate $ 338 $ 325 $ 309 $ 286 $ 265 Educational Degree Program-Graduate Educational Certification Courses-Undergraduate Educational Certification Courses-Graduate

24 Bonds Payable At June 30, 2010, the university had outstanding general revenue bonds totaling $157.9 million. This represents 60.8% of the university s total liabilities. State Building Authority The university has lease agreements with the State Building Authority (SBA) and the State of Michigan for the Park Library, Music Building, Dow Science II Building and the Herbert H. & Grace A. Dow Health Professions Building. See Note D to the financial statements. Operating and Capital Budget The university s Board of Trustees approved the operating budget for fiscal year 2011 and capital budgets for fiscal years totaling $417.9 million and $132.4 million respectively. The general fund expense budget increased from $308.0 million to $326.2 million. The $326.2 million balanced budget includes increased costs for employee salaries, health care insurance, and other necessary costs. The approved capital budget for fiscal year is $43.8 million. The sources of funds available for capital needs are parking service revenues, auxiliary service revenues, general operating revenue, certain capital construction reserves, and the remaining State of Michigan Building Authority revenue of $5.5 million. During fiscal year 2010, the university expended approximately $30.5 million on plant related projects. Of this amount, $4.2 million was funded by the State of Michigan State Building Authority and $26.3 million was funded by the university. The campus has many deferred maintenance needs as documented in a detailed audit of each building. The audit was completed in 1997 and updated in Starting with fiscal year , approximately $4.5 million dollars per year was dedicated toward addressing these needs. Beginning with fiscal year , the amount being allocated toward deferred maintenance was increased to $5.5 million. Funding is from a variety of sources, including the capital budget, the general fund, and residence and auxiliary services. Factors Impacting Future Periods The level of state support, compensation and benefit increases, and student tuition increases impact the university s ability to expand programs, undertake new initiatives, and meet its core mission and ongoing operational needs. The university s state appropriation is $6.3 million below its appropriation of seven years ago. State appropriation contributes approximately 25.4% of general operations revenue not including grant, contract and auxiliary revenues. The university has a required supplemental contribution to MPSERS for retiree health care benefits that additionally reduces the appropriation available for operations. 20

25 The CMU Promise Due to financial considerations, the Board of Trustees voted not to extend the CMU Promise to future incoming students. Beginning in fall 2008, new incoming students, including transferring students, and those coming off the CMU Promise had to pay the new fall tuition rates with no guarantees related to future tuition rates. The CMU Promise remained in effect for all students enrolled through the summer 2008 semester. The per-credit hour rates for students registered through the summer 2008 session are guaranteed not to increase for four years, with a one-year grace period. All formerly mandated fees were rolled into these tuition rates. Scheduled Payment Plan for Students and Parents CMU is now offering a scheduled payment plan for students and parents to pay for outstanding receivable balances. CMU has contracted with a third-party processor to implement this new scheduled payment plan. If a student does not sign up for the regular semester payment plan, the university is able to offer this scheduled payment plan as another option for payment. The scheduled payment plan allows CMU to draw funds from a checking account, savings account, or from a credit card as authorized by the student or parent. Deferred Maintenance The university completes an annual review of the priority needs and requirements for deferred maintenance, technology, renovations and new construction projects. This comprehensive review allows for systematic prioritization on an institutional basis. Priorities are established, based on anticipated future funding, with maintenance related projects having priority over new initiatives. Capital Projects The sources of funds available for the capital needs are state capital outlay, bonds, gifts, the parking services operating budget, the residences and auxiliary services operating budget, the general fund operating budget and other miscellaneous funding sources. The internal sources are pooled and distributed through a formal approval process. Restricted dollars are maintained separate from the internal sources. Anticipated restricted revenue sources for the capital projects are State Building Authority funds, grants and gifts. The following projects are in various stages of construction or review: Education and Human Services Building The Education and Human Services Building is in the final close out phase. Occupants moved into the building in April 2009 and offered the first classes in summer Sources of funds include 2006 bond proceeds, along with internal general funds, gifts and state capital outlay funds, for an anticipated total project cost of $50.0 million. Consistent with the Department of Management and Budget s Major Project Design Manual, final project close out is scheduled for no later than March

26 College of Medicine Central Michigan University has a bold vision and a sound plan to establish a new College of Medicine that will be a powerful new investment in the lives and businesses of citizens and communities that CMU serves. The university will join an elite group of 131 universities nationwide that have accredited medical schools. The College of Medicine will build on CMU s strengths in life sciences and health professions to train hundreds of students in earning their Doctor of Medicine (M.D.). These students will focus on serving Michigan communities. By establishing a world class medical school, CMU aims to address the growing national shortage of physicians, insufficient U.S. medical education opportunities for qualified students, an aging statewide population, medically underserved regions in mid- and northern Michigan and the Upper Peninsula, and economic opportunities for mid-michigan in the life sciences sector. The College of Medicine will drive new research into the local health issues and challenges that most concern our region, such as stroke, diabetes, cancer, heart disease, and chronic obstructive pulmonary disease that specifically impact residents of the region. 22

27 College of Medicine continued 23

28 College of Medicine continued Significant strides have been made in launching the College of Medicine. CMU has been granted applicant school status by the Liaison Committee on Medical Education, the accrediting body for M.D. degree programs in North America. Multiple hospitals across the state are working in partnership with the university and will serve as sites for the clinical education of its students. Central Michigan University's College of Medicine will be located in a $24.0 million, 60,000-square-foot addition to the Health Professions Building, scheduled to be completed early in Housing clinical exam rooms, group study rooms, simulation rooms and anatomy labs, the addition will be designed for silver-level Leadership in Energy and Environmental Design (LEED) certification from the U.S. Green Building Council. The CMU College of Medicine plans to welcome its inaugural class of 100 students in Students will earn a M.D. degree after successful completion of the four-year curriculum. 24

29 Events Center On July 16, 2009, the Board of Trustees gave approval to proceed with the construction phase of Rose Arena to create the multipurpose Events Center. The new CMU Events Center is a dramatic redesign and expansion of the existing facility and includes: A 10,000 square-foot lobby and reception area A redesigned arena with a 5,300 visitor capacity with telescoping seating to accommodate multiple arena configurations for athletics, concerts, commencements, speakers, and community expos A significant expansion including modern restrooms, marketing areas, and concessions space A dedicated practice gymnasium including two courts, one for court sports and one for a wrestling training center A comprehensive overhaul of the exterior appearance of the building, including a completely redesigned angular exterior and bright glazedglass entrance A student fitness center Academic teaching space The project is privately funded and is estimated to cost $21.0 million. It is designed to position Central Michigan University and the greater Mount Pleasant community as central and northern Michigan s preeminent athletics, cultural and entertainment center. The project will be completed in three phases: Phase 1 includes the arena, lobby, concessions and restrooms and will be completed in October 2010; Phase 2 includes the wrestling practice facility and practice gym that will be completed in December 2010; and Phase 3 includes the Student Athletic Complex fitness room expansion that will be completed in February

30 Events Center continued 26

31 Ronan Hall The Ronan Hall project includes the complete renovation of the second and third floors and will provide open office, conference and classroom space to house departments that provide support services to the students of CMU. Multiple offices currently housed in the Bovee University Center will be relocated to Ronan Hall to make way for the University Center renovation. The project is targeting certification under LEED. Construction began in June 2010 and is slated to be completed in December The estimated project cost is $3.6 million. Bovee University Center The Bovee University Center renovation is designed to increase student use of the facility by increasing the amount, variety and quality of dedicated student space. The project scope was based on the results of surveys and interviews of students, faculty, and staff. The project is targeting certification under LEED. Construction is scheduled to begin in September 2010 and to be completed in December The estimated project cost is $5.0 million. 27

32 CMU Strategic Plan In 2005, the university launched CMU 2010: The Vision Plan, a five-year strategic plan designed to position CMU as a nationally prominent university. The plan included five key strategic priorities centered around student success. In 2009, under the direction of then provost Dr. Julia Wallace, the university launched a new planning effort, instituted to evaluate the successes and opportunities for improvement learned in implementing CMU 2010 and updating the university s planning efforts for the next five years. With the resignation of President Rao in February 2009, the university-wide strategic planning process was temporarily suspended, pending the naming of a new president. In March 2010, Dr. George E. Ross became the 14th president of Central Michigan University. President Ross initiated a comprehensive transition process that included the appointment and charging of a revised strategic planning committee. The committee is inclusive, representing the major constituencies of the university. The committee s work will include external and internal assessments of Central Michigan University and the environment. The university s new, updated strategic plan will be completed by spring University Committees Various committees and individuals continually assess the university s performance toward identified goals, use of energy resources and ways to achieve greater efficiencies and reduce expenditures in an effort to assist in meeting the future financial challenges. Campus Sustainability Advisory Committee CMU is concerned about our community, our state and our planet and has formalized a commitment to becoming a more sustainable institution by establishing the Campus Sustainability Advisory Committee. As consumption increases and life-sustaining resources decline, there is a growing crisis for the earth to sustain the demand for its resources. In higher education, sustainability incorporates curricula, research, operations, mission and planning, purchasing, community outreach and partnerships, professional development, and student life. This committee gathers ideas and recommends actions that save money, reduce waste, and lessen the university s footprint on our environment. By focusing on sustainability, CMU is contributing to a better world and providing students with a model to employ in their future endeavors. 28

33 Campus Sustainability Advisory Committee continued Going green has helped CMU save millions of dollars. The use of woodchips as a renewable fuel source saves $2.0 million annually in costs. Fixtures have been modified to use less water. Cleaning products used on campus are environmentally compatible. Meanwhile, on-campus recycling has doubled to 38 tons of materials per month. In addition, all new buildings and major renovations will follow the U.S. Green Building Council guidelines and earn LEED certification. The Great Lakes Association of College and University Housing Officers have awarded the Outstanding Commitment of Sustainability to Central Michigan University s Office of Residence Life for its active role in the Campus Sustainability Advisory Committee. This award is given to an institution that has implemented an innovative approach to enhancing sustainability awareness, understanding and education on its campus. CMU students were involved through opportunities such as recycling, energy contests in residence halls and presenting panel discussions on campus sustainability. Corp! magazine has recognized Central Michigan University for one of its 2010 Michigan s Going Green Awards. This award is given to companies or individuals who have demonstrated exemplary efforts in eco-friendly initiatives including air quality, green building and business practices, and environmental stewardship. 29

34 Report of Independent Auditors Board of Trustees Central Michigan University Mt. Pleasant, Michigan We have audited the accompanying financial statements of Central Michigan University, a component unit of the State of Michigan, as of and for the years ended June 30, 2010 and These financial statements are the responsibility of the University s management. 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Central Michigan University as of June 30, 2010 and 2009, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note A, the University adopted the provisions of the Governmental Accounting Standards Board Statement No. 53, Accounting and Reporting for Derivatives, as of July 1, This statement required the University to evaluate each hedging instrument and record the hedge s fair value in each financial statement presented and to make certain additional disclosures. Adoption of this statement had no impact on the University s net assets. In accordance with Government Auditing Standards, we have also issued our report dated August 31, 2010 on our consideration of Central Michigan University s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit Gratiot Saginaw, Michigan ph fx