Asscociated Students of Sonoma State University. Financial Statements and Supplemental Information

Transcription

1 Asscociated Students of Sonoma State University Financial Statements and Supplemental Information Years Ended June 30, 2014 and 2013

2 Table of Contents Page Child Development Programs General Information 1 Independent Auditor s Report 2 3 Management's Discussion and Analysis 4 9 Basic Financial Statements: Statements of Net Position 10 Statements of Revenues, Expenses and Changes in Net Position 11 Statements of Cash Flows Notes to Basic Financial Statements Supplementary Information: Child Development Programs: Schedule of Expenditures of Federal and State Awards Schedule 1 29 Combining Statement of Activities Schedule 2 30 Schedule of Expenditures by State Categories Schedule 3 31 Reconciliation of CDE and GAAP Revenue and Expense Reporting Schedule 4 32 Combining Schedule of Equipment Expenditures Schedule 5 33 Combining Schedule of Renovation and Repair Expenditures Schedule 6 34 Schedule of Administrative Costs Schedule 7 35 Audited Attendance and Fiscal Report Schedule Summary of Claim Schedule 9 42 Schedule of Reported, Adjusted, and Allowed Meals Schedule and Earned Reimbursement Schedule of Reported, Adjusted, and Allowed Eligibility Schedule Schedule of Reported, Adjusted, and Allowed Meals Schedule Compliance: Schedule of Findings and Questioned Costs 47 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 48 49

3 Child Development Programs General Information For the Year Ended June 30, 2014 Organization Name: Children's School Type of Organization: Campus without match Contract Numbers Program Numbers Program Name CCTR Y General Child Care & Dev Program CSPP Y California State Preschool Program N/A A Child Care Food Program Address of Organization: 1801 East Cotati Avenue Rohnert Park, CA Telephone: (707) Executive Director: Program Director: Senior Director, Sponsored Programs: Erik Dickson Lia ThompsonClark Jeff Wilson Report Period: Year ended June 30, 2014 Scheduled daily hours: 7:30 am 5:30 pm Number of days operating: 213 days 1

4 INDEPENDENT AUDITORS REPORT To the Audit Committee Report on the Financial Statements We have audited the accompanying financial statements of (a nonprofit organization, referred to as Associated Students ), which comprise the statement of net position as of June 30, 2014, and the related statements of revenues, expenses, and changes in net position and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of June 30, 2014, and the changes in its net position and its cash flows for the year then ended in accordance with principles generally accepted in the United States of America. Prior Period Financial Statements The financial statements of as of June 30, 2013 were audited by other auditors whose report dated September 6, 2013 expressed an unmodified opinion on those statements.

5 INDEPENDENT AUDITORS REPORT, CONTINUED Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 49 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental information presented on pages 1 and 29 to 46 is presented for the purposes of additional analysis as required by the California Department of Education and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and with the Audit Guide for Child Development, Nutrition and Adult Basic Education Programs, issued by the California Department of Education. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 19, 2014, on our consideration of Associated Students internal control over financial reporting and on 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Associated Students internal control over financial reporting and compliance. San Diego, California September 19, 2014

6 Management's Discussion and Analysis Years Ended June 30, 2014 and 2013 This section of the 's (the Organization) annual financial report presents management's overview and financial analysis of the Organization for the fiscal year ended June 30, 2014 and We encourage the reader to consider the information presented here in conjunction with the financial statements as a whole. Introduction to the Basic Financial Statements This discussion and analysis is intended to serve as an introduction to the Organization's audited financial statements, which are comprised of the basic financial statements, the notes to the basic financial statements and supplemental schedules as listed in the table of contents. This annual report is 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. The BusinessType Activity (BTA) reporting model is used which best represents the activities of the University and its auxiliaries. The Organization is one of three notforprofit auxiliaries on the Sonoma State University (the University) campus. The required basic financial statements include the Statement of Net Position, the Statement of Revenues, Expenses and Changes in Net Position, and the Statement of Cash Flows. These statements are supported by notes to the basic financial statements, supplementary detail and this summary. All sections must be considered together to obtain a complete understanding of the financial picture of the Organization. Statement of Net Position: This statement includes all assets and liabilities using the accrual basis of accounting as of the statement date. The difference between the two classifications is represented as "Net Position". The net position section of the statement identifies major categories of restrictions and reflects the overall financial position of the Organization as a whole. Statement of Revenues, Expenses and Changes in Net Position: This statement presents the revenues earned and the expenses incurred during the year using the accrual basis of accounting. Under the accrual basis of accounting, all increases or decreases in net position are reported as soon as the underlying event occurs, regardless of the timing of the cash flow. Consequently, revenues and/or expenses reported during this fiscal year may result in changes to cash flow in a future period. Statement of Cash Flows: This statement reflects inflows and outflows of cash, summarized by operating, financing, and investing activities. The direct method was used to prepare this information, which means that gross rather than net amounts were presented. Notes to the Basic Financial Statements: This additional information is essential to a full understanding of the data reported in the basic financial statements. Supplemental Information: This is offered to support the required basic financial statements, to fulfill California Department of Education requirements, and to assist the reader in obtaining a clearer understanding of the operating units within the Organization. 4

7 Management's Discussion and Analysis Years Ended June 30, 2014 and 2013 Reporting Entity The financial statements of Sonoma State University will be separated between the University and its component units. The latter are separate I.R.C. 501(c)(3) notforprofit auxiliary organizations whose financial information will be presented in a discrete column and in the footnotes of the University's financial statements. Consequently, these auxiliaries must comply with the same governmental standards for financial reporting and must present their individual separate audited financial statements in the same format. Analytical Overview Statement of Net Position Variance Analysis Total assets of the Organization have increased by $300,398 in the year ended June 30, This classification is comprised of current assets (cash, accounts receivable, prepaid expenses, and investments), and noncurrent assets (capital assets). Current assets increased $300,992 primarily related to increased cash in checking and investment accounts due to increased cash held by the Organization for various student run clubs (Clubs) on campus. Total liabilities have increased during the year ended June 30, 2014 by $80,731. This classification is comprised of current liabilities (accounts payable, accrued salaries, benefits, compensated absences, and unearned revenue) and noncurrent liabilities (compensated absences, noncurrent portion). The increase in total liabilities was primarily driven by an increase in monies held by the Organization on behalf of the Clubs. The overall change to net position during the year ended June 30, 2014 is an increase of $219,667 which is a 15% increase from the prior year, resulting in a June 30, 2014 balance of $1,646,731. In the prior year, total assets of the Organization decreased by $406,988 which was primarily due to a $793,010 contribution to Sonoma State University used towards the construction costs of the Student Center. In the prior year, total liabilities increased by $44,667 which was primarily driven by an increase in monies held by the Organization on behalf of the Clubs. The overall change to net position in the prior year was a decrease of $451,655 which was a 24% decrease from the previous year, resulting in a June 30, 2013 balance of $1,427,064. 5

8 Management's Discussion and Analysis Years Ended June 30, 2014 and 2013 Analytical Overview (continued) Condensed Statements of Net Position as of June 30, Change $ % Assets: Current assets $ 2,445,142 $ 2,144,150 $ 300,992 14% Noncurrent assets 6,325 6,919 (594) 9% Total assets 2,451,467 2,151, ,398 14% Liabilities: Current liabilities 794, ,519 84,907 12% Noncurrent liabilities 10,310 14,486 (4,176) 29% Total liabilities 804, ,005 80,731 11% Net position: Net investment in capital assets 6,325 6,919 (594) 9% Unrestricted 1,640,406 1,420, ,261 16% Total net position $ 1,646,731 $ 1,427,064 $ 219,667 15% Condensed Statements of Net Position as of June 30, Change $ % Assets: Current assets $ 2,144,150 $ 2,550,495 $ (406,345) 16% Noncurrent assets 6,919 7,562 (643) 9% Total assets 2,151,069 2,558,057 (406,988) 16% Liabilities: Current liabilities 709, ,525 36,994 6% Noncurrent liabilities 14,486 6,813 7, % Total liabilities 724, ,338 44,667 7% Net position: Net investment in capital assets 6,919 7,562 (643) 9% Unrestricted 1,420,145 1,871,157 (451,012) 24% Total net position $ 1,427,064 $ 1,878,719 $ (451,655) 24% 6

9 Management's Discussion and Analysis Years Ended June 30, 2014 and 2013 Analytical Overview (continued) Condensed Statements of Revenues, Expenses and Changes in Net Position for the Fiscal Years Ended June 30, Change $ % Revenues and expenses: Operating revenues $ 2,155,922 $ 2,103,314 $ 52,608 3% Operating expenses 1,944,401 1,780, ,225 9% Net operating income 211, ,138 (111,617) 35% Nonoperating revenues (expenses): Gifts, noncapital (793,010) 793, % Investment earnings, net 8,146 18,217 (10,071) 55% Net nonoperating revenues (expenses) 8,146 (774,793) 782, % Change in net position 219,667 (451,655) 671, % Net position, beginning of year 1,427,064 1,878,719 (451,655) 24% Net position, end of year $ 1,646,731 $ 1,427,064 $ 219,667 15% Condensed Statements of Revenues, Expenses and Changes in Net Position for the Fiscal Years Ended June 30, Change $ % Revenues and expenses: Operating revenues $ 2,103,314 $ 2,011,496 $ 91,818 5% Operating expenses 1,780,176 1,747,951 32,225 2% Net operating income 323, ,545 59,593 23% Nonoperating revenues (expenses): Gifts, noncapital (793,010) (793,010) 100% Investment earnings, net 18,217 12,558 5,659 45% Net nonoperating revenues (expenses) (774,793) 12,558 (787,351) 6270% Change in net position (451,655) 276,103 (727,758) 264% Net position, beginning of year 1,878,719 1,602, ,103 17% Net position, end of year $ 1,427,064 $ 1,878,719 $ (451,655) 24% 7

10 Management's Discussion and Analysis Years Ended June 30, 2014 and 2013 Analytical Overview (continued) Revenue and Expense Variance Analysis Operating revenue increased in the current year by $52,608. This was primarily due to an increase in student fees. The Organization's programs include the Children's School, the Associated Student Productions (ASP), the ShortTerm Loan, Join Us Making Progress (JUMP), the AS Senate, and the General Fund, which accounts for all other activities. Operating expenses increased in the current year by $164,225. The General Fund's operating expenses increased by 18%, Associated Student Productions (ASP) increased by 15%, and the Senate increased by 10%. The expenses for the following funds decreased in the current year: Children s School by 3%, JUMP by 9%, and the Plant Fund by 8%. The Organization s overall increase is due to increased program and institutional costs related to salaries and benefits. Other nonoperating expenses, net of nonoperating revenues increased in the current year by $782,939. This increase is primarily due to a $793,010 contribution in the prior year to Sonoma State University which was used towards the preconstruction costs of the Student Center with no corresponding payment in the year ended June 30, In the prior year, operating revenue increased by $91,818. This was primarily due to an increase in student fees and Children s School parent revenue. The prior year s operating expenses increased by $32,225. The Organization s overall increase in operating expenses was due to increased program and institutional costs related to salaries and benefits. The decline in other nonoperating revenues, net of nonoperating expenses of $787,351 was primarily due to the prior year s contribution to Sonoma State University mentioned previously. Restricted Resources The Children's School receives restricted resources in the form of grants from outside agencies. These grant activities have no net effect at yearend on net position balances, as the revenues are equal to the expenses. All other funds are unrestricted, but are internally designated by the Board's Reserve Policy (See Note 10 to the basic financial statements). Organizational Highlights The Organization was successful during the year in fulfilling its mission by offering numerous services and programs to enhance the lives and educational experience of the students of Sonoma State University. JUMP had a very successful year serving more students and more members of the community than ever before. JUMP continued serving multiple communities of need including tutoring schoolage kids in multiple Sonoma County schools, conducting five alternative spring break trips around the country and having over 700 students at the annual campus wide service project Sonoma Serves. They worked on projects that provided for those in need in the community and worked on projects that promoted sustainability practices and living. 8

11 Management's Discussion and Analysis Years Ended June 30, 2014 and 2013 Organizational Highlights (continued) ASP continued to lead the campus in providing cocurricular events and programs for the entire University student body. The program sponsored and planned over 80 events. ASP sponsored several programs to promote campus wide community and spirit. ASP also continued their connections to the academic classroom by planning events that worked in concert with the faculty and classroom topics. The AS Senate spent the year fulfilling the mission of the Organization by advocating for the students of the University, on issues including the academic classroom and schedule, student fees and the University s support for sustainability efforts. The Children s School continued its recognized excellence as leaders in early childhood education in Sonoma County. Serving as both a fully functioning early childhood education center for the children of students, staff and faculty of Sonoma State, it also serves as a learning laboratory for multiple courses, majors and minors at the University. The Organization experienced significant staff turnover with the resignation of three professional staff positions. The Organization has successfully searched and hired replacements for each of the vacated positions. The Organization has also seen a growth in student staff and leadership. With the move to the Student Center, the Organization has brought on significantly more student staff in several of its programs. Budgetary Highlights The Organization has continued to support University programs and functions that are a service to students and share the Organization s mission to provide an active and engaging student life at Sonoma State University. These include the Tutorial Center and the Center for Student Leadership & Service. The Organization has moved into the new Student Center on campus, as it opened in November of With the move, the Organization has begun to pay for the space it is using within the new building. Factors Impacting Future Periods The Organization s budget is heavily impacted by the number of students enrolled at the University. As the statewide budget crisis begins to abate, the California State University and its auxiliaries will look at ways to adjust and prepare for the future. The Organization is remaining cautious and is always preparing for any unpredictable enrollment patterns in the next few years. The Organization s student fee is increased according to the growth in the Consumer Price Index of the Bay Area (CPI). 9

12 Statements of Net Position June 30, Assets Current assets Cash and cash equivalents $ 442,334 $ 275,254 Shortterm investments 1,965,476 1,830,129 Accounts receivable 32,320 31,865 Prepaid expenses and other assets 5,012 6,902 Total current assets 2,445,142 2,144,150 Noncurrent assets Capital assets, net 6,325 6,919 Total assets 2,451,467 2,151,069 Liabilities Current liabilities Accounts payable 19,159 18,769 Accrued salaries and benefits payable 11,082 7,841 Accrued compensated absences, current portion 16,202 10,096 Unearned revenue 525, ,883 Other liabilities 222, ,930 Total current liabilities 794, ,519 Noncurrent liabilities Accrued compensated absences, net of current portion 10,310 14,486 Total liabilities 804, ,005 Net position Net investment in capital assets 6,325 6,919 Unrestricted 1,640,406 1,420,145 Total net position $ 1,646,731 $ 1,427,064 See accompanying Notes to the Basic Financial Statements 10

13 Statements of Revenues, Expenses and Changes in Net Position Year Ended June 30, Operating revenues Student tuition and fees $ 1,682,243 $ 1,592,263 Grants and contracts, noncapital Federal 95,451 91,114 State 118, ,411 Sales and services of auxiliary enterprises 222, ,845 Other operating revenues 37,276 41,681 Total operating revenues 2,155,922 2,103,314 Operating expenses Student services 1,943,807 1,779,533 Depreciation Total operating expenses 1,944,401 1,780,176 Operating income 211, ,138 Nonoperating revenues (expenses) Gifts, noncapital (793,010) Investment income, net 8,146 18,217 Net nonoperating revenues (expenses) 8,146 (774,793) Increase (decrease) in net position 219,667 (451,655) Net position Net position at beginning of year 1,427,064 1,878,719 Net position at end of year $ 1,646,731 $ 1,427,064 See accompanying Notes to the Basic Financial Statements 11

14 Statements of Cash Flows For the Year Ended June 30, Increase (decrease) in cash and cash equivalents Cash flows from operating activities Student tuition and fees $ 1,685,741 $ 1,670,754 Federal grants and contracts 106,092 76,706 State grants and contracts 109, ,913 Sales and services of auxiliary enterprises 222, ,845 Other receipts 33,152 41,978 Payments to suppliers (1,078,757) (1,043,457) Payments for wages (735,167) (704,399) Payments to students (48,550) (61,985) Net cash provided by operating activities 294, ,355 Cash flows from noncapital financing activities Gifts, noncapital (793,010) Net cash used for noncapital financing activities (793,010) Cash flows from investing activities Investment income received Purchase of investments (443,423) (675,934) Proceeds from sale of investments 316, ,303 Net cash provided by (used in) investing activities (127,201) 218,571 Net increase (decrease) in cash 167,080 (218,084) Cash and cash equivalents at beginning of year 275, ,338 Cash and cash equivalents at end of year $ 442,334 $ 275,254 See accompanying Notes to the Basic Financial Statements 12

15 For the Year Ended June 30, Increase (decrease) in cash and cash equivalents Reconciliation of operating income to net cash provided by operating activities Operating income $ 211,521 $ 323,138 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation Change in assets and liabilities Accounts receivable (455) (15,962) Prepaid expenses and other current assets 1,890 3,869 Accounts payable 390 (2,377) Accrued salaries and benefits payable 3, Accrued compensated absences 1,930 10,805 Unearned revenue 3,926 78,237 Other current liabilities 71,244 (42,589) Net cash provided by operating activities $ 294,281 $ 356,355 Noncash investing, capital, and financing activities Statements of Cash Flows (continued) Dividends reinvested $ 8,017 $ 18,015 See accompanying Notes to the Basic Financial Statements 13

16 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 1 ORGANIZATION (the Organization or AS) is a notforprofit, auxiliary corporation operating on the campus of Sonoma State University (the University or SSU). As such, the Organization is a component unit of the University, which is part of the California State University System. The Organization administers programs that provide for the general welfare of the student body and the University. Such programs are funded principally by student fees. The Organization's programs include the Children's School, the Associated Student Productions (ASP), the ShortTerm Loan, Join Us Making Progress (JUMP), the Senate, and the General Fund, which accounts for all other activities. The Children's School provides early childhood education services to the families of students, staff and faculty of the University. The ASP provides support and coordinates the University students' concerts, lectures, comedy shows, performing arts showcases, club events and other events throughout the school year. The ShortTerm Loan program provides students $150 interestfree loans for up to 30 days. JUMP provides service learning opportunities for students who want to volunteer in the community. The Senate is the governing body and management authority of the Organization. The Senate is responsible for the oversight of Associated Students' programs, services, and fiscal operations. Members of the Senate include one Senator from each school and one Senator from each of six different special interest areas, including Community Affairs, Diversity, Involvement, Student Services, Sustainability and Undeclared Students. The Associated Students' executive officers are voting members of the Senate. A Sonoma State University staff member appointed by the University President and a faculty member representing the Academic Senate serve as liaisons to the Senate. The Senate is advised by the AS Executive Director and the AS Student Government Coordinator. Financial Reporting Entity The basic financial statements present only the statements of net position, statements of revenues, expenses and changes in net position, and statements of cash flows of the Organization. The Organization is one of three recognized University auxiliary organizations. Auxiliary organizations are legally separate entities that provide services primarily to the University's students and faculty. 14

17 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying basic financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. The basic financial statements required by Governmental Accounting Standards Board (GASB) Statements Nos. 34, as amended, and 35 include a statement of net position, a statement of revenues, expenses and changes in net position, and a statement of cash flows. The Organization records revenue in part from fees and other charges for services to external users, and accordingly has chosen to present its financial statements using the reporting model for specialpurpose governments engaged only in businesstype activities. This model allows all financial information for the Organization to be reported in a single column in each of the basic financial statements. In accordance with the businesstype activities reporting model, the Organization prepares its statements of cash flows using the direct method. Classification of Current and Noncurrent Assets and Liabilities The Organization considers assets that can reasonably be expected, as part of its normal business operations, to be converted to cash and be available for liquidation of current liabilities within 12 months of the statements of net position date to be current. Liabilities that reasonably can be expected, as part of normal business operations, to be liquidated within 12 months of the statement of net position date are considered to be current. All other assets and liabilities are considered to be noncurrent. Cash and Cash Equivalents The Organization considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. The Organization considers all amounts included in the internal investment pool to be investments. 15

18 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Investments Investments are reflected at fair value using quoted market prices. Realized and unrealized gains and losses are included in the accompanying statements of revenues, expenses and changes in net position as investment income. The Organization's investment policy authorizes funds to be invested in obligations of federal and state governments and other investment instruments that will enhance total return while avoiding undue risks. Capital Assets Capital assets are stated at cost or estimated historical cost if purchased, or if donated, at estimated fair value at date of donation. Capital assets, including infrastructure, with a value of $5,000 or more and with a useful life of one year or more are capitalized. Capital assets are depreciated on a straightline basis over their estimated useful lives, which range from five to thirty years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are expensed as incurred. Depreciation expense is shown separately in the statements of revenues, expenses and changes in net position rather than being allocated among other categories of operating expenses. Assets purchased with California Department of Education (CDE) contract funds are subject to restrictions for which depreciation may not be claimed against CDE funds and are therefore expensed in the year of acquisition. CDE has a reversionary interest in assets purchased with CDE program funds. Disposition of restricted assets and any funds derived therefrom are subject to grant regulations. Unearned Revenue Unearned revenue consists primarily of student fees collected in advance but not yet earned as of the end of the fiscal year. Accrued Compensated Absences Employees accrue annual leave at rates based on length of service and job classification. Employee vacation benefits earned, but not used, are recognized as liabilities of the Organization. The Organization estimates the current portion for compensated absences based on the fiscal year vacation used. The calculation is based on pay rates at June 30. Sick leave benefits are earned and accumulated for each employee. However, because accumulated sick leave benefits cannot be converted into compensated absences and cannot be redeemed upon termination, they are not considered liabilities of the Organization. 16

19 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Position The Organization's net position is classified into the following categories: Net investment in capital assets: Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. Unrestricted: All other categories of net position whose use is not restricted. In addition, unrestricted net position may be designated for use by the Senate. These requirements limit the area of operations for which expenditures of net position may be made, and require that unrestricted net position be designated to support future operations in these areas. Classification of Revenues and Expenses The Organization considers operating revenues and expenses in the statements of revenues, expenses and changes in net position to be those revenues and expenses that result from exchange transactions or from other activities that are connected directly to the Organization's primary functions. Exchange transactions include charges for services rendered and the acquisition of goods and services. Certain other transactions are reported as nonoperating revenues and expenses or capital contributions in accordance with GASB Statement No. 35. These nonoperating activities include the Organization's net investment income and gifts. Income Taxes The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and from California franchise and income tax under section 23701(d) of the Revenue and Taxation code. The Organization follows accounting standards generally accepted in the United States of America related to the recognition of uncertain tax positions. The Organization recognizes accrued interest and penalties associated with uncertain tax positions as part of the statements of revenues, expenses, and changes in net position, when applicable. Management has determined that the Organization has no uncertain tax positions at June 30, 2014 and 2013 and therefore no amounts have been accrued. The Organization files income tax returns in the United States and various state and local jurisdictions. The Organization s federal income tax returns for the years prior to 2010 are closed. State and local jurisdictions have statutes of limitation that generally range from three to five years. 17

20 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions based on management's knowledge and experience. Those estimates affect the reported amounts of assets and liabilities, and the reported amount of revenue, support and expenses. The use of management's estimates primarily relate to the depreciable lives of equipment and leasehold improvements. Actual results could differ from those estimates. Risk Management The Organization is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Organization carries commercial insurance. Reclassifications Certain amounts presented in the prior year have been reclassified in order to be consistent with the current year s presentation. Subsequent Events The Organization has evaluated subsequent events through September 19, 2014, which is the date the financial statements were available to be issued. NOTE 3 CASH, CASH EQUIVALENTS AND INVESTMENTS Cash and Cash Equivalents Cash and cash equivalents at June 30, Book balance $ 442,334 $ 275,254 Bank balance 464, ,125 Difference between book and bank balance $ (22,211) $ (27,871) Significant reconciling items consist of: Deposits in transit $ $ 700 Outstanding checks (22,411) (28,771) Cash and change fund $ (22,211) $ (27,871) 18

21 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 3 CASH, CASH EQUIVALENTS AND INVESTMENTS (continued) The Organization maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) to a limit of $250,000 per institution. Composition of Investments The Organization participates in an internal investment pool managed by US Bank, an asset management and investment advisory firm that serves the California State University system (CSU). Securities within the investment pool are not insured. In addition, the securities are not held in the Organization's name, but in the name of the CSU. The Organization's share of the pool is determined based on its proportionate interest in the University's investment pool account. Such shortterm investments are reported at cost which approximates fair value and was $1,965,476 and $1,830,129 as of June 30, 2014 and 2013, respectively. Investments held in the investment pool are reported as shortterm investments included in current assets on the statements of net position. Composition of investments at June 30, 2014 Shortterm Longterm Total CSU consolidated SWIFT pool $ 1,965,476 $ $ 1,965,476 Composition of investments at June 30, 2013 $ 1,965,476 $ $ 1,965,476 Shortterm Longterm Total CSU consolidated SWIFT pool $ 1,830,129 $ $ 1,830,129 $ 1,830,129 $ $ 1,830,129 Investment income, as reflected in the statements of revenues, expenses and changes in net position: Interest and dividends $ 129 $ 202 Investment income reinvested on shortterm investments 8,017 18,015 Total investment income, net $ 8,146 $ 18,217 Investments held under contractual agreements As noted above, the Organization's investment in US Bank is held by the CSU on behalf of the University. 19

22 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 3 CASH, CASH EQUIVALENTS AND INVESTMENTS (continued) Deposit and Investment Risk Custodial Credit Risk Custodial credit risk is the risk that in the event of the failure of a counterparty, the Organization would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Financial instruments that potentially subject the Organization to custodial risk consist primarily of bank demand deposits and investments in excess of amounts insured by the FDIC or the Securities Investor Protection Corporation (SIPC). The Organization had cash on deposit with two financial institutions, both of which did not exceed the federally insured limit at June 30, 2014 and June 30, Investments in the California State University's Investment Pool are not held in the name of the Organization and are not secured. These investments are at risk in the event of a failure of a counterparty. These investments are held in the name of the California State University. The Organization does not have a policy addressing custodial credit risk related to deposits and investments. Concentration of Credit Risk Concentrations of credit risk include uninsured investments. The value of these investments at June 30, 2014 and 2013 were $1,965,476 and $1,830,129, respectively. Investments in three entities that represented 9%, 8%, and 5% respectively of the total investment fair value are included in investments at June 30, Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The Organization's investments are held as agency trust funds by the University. The California State University manages its exposure to interest rate risk by purchasing a combination of shortterm investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or nearing maturity evenly over time as necessary to provide the cash flows and liquidity needed for operations. The weighted average maturity for these investments range from 0.0 to 8.0 years. The California State University monitors the interest rate risk inherent in its portfolio. Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The Organization participates in an internal investment pool managed by US Bank, an asset management and investment advisory firm that serves the California State University. Investment ratings range between AAA and A, and there are some which are not rated. 20

23 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 4 PREPAID EXPENSES AND OTHER ASSETS Prepaid expense balances are calculated and adjusted at yearend to properly charge programs in the period benefited. Prepaid expenses as of June 30 were comprised of the following: Awards $ 2,900 $ Prepaid insurance (Sports Club, Workers Compensation Insurance) 1,750 3,390 Other 362 3,512 Total $ 5,012 $ 6,902 NOTE 5 CAPITAL ASSETS Capital assets activity for the year ended June 30, 2014 consisted of the following: Balance Balance June 30, June 30, 2013 Additions Reductions 2014 Depreciable capital assets Leasehold improvements $ 48,567 $ $ 10,000 $ 38,567 Personal property: Equipment 19,195 13,665 5,530 Total depreciable capital assets 67,762 23,665 44,097 Total cost 67,762 23,665 44,097 Less accumulated depreciation: Leasehold improvements (41,648) (594) (10,000) (32,242) Personal property: Equipment (19,195) (13,665) (5,530) Total accumulated depreciation (60,843) (594) (23,665) (37,772) Net capital assets $ 6,919 $ (594) $ $ 6,325 Depreciation expense related to capital assets $ 594 Depreciation expense was $594 for the year ended June 30, 2014, and is included in operating expenses in the statements of revenues, expenses and changes in net position. As of June 30, 2014 cumulative capital assets purchased with CDE funds and expensed totaled $165,213 of which $911 was purchased and expensed, and nothing was retired during fiscal year ended June 30,

24 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 5 CAPITAL ASSETS (continued) Capital assets activity for the year ended June 30, 2013 consisted of the following: Balance Balance June 30, June 30, 2012 Additions Reductions 2013 Depreciable capital assets Leasehold improvements $ 48,567 $ $ $ 48,567 Personal property: Equipment 19,195 19,195 Total depreciable capital assets 67,762 67,762 Total cost 67,762 67,762 Less accumulated depreciation: Leasehold improvements (41,005) (643) (41,648) Personal property: Equipment (19,195) (19,195) Total accumulated depreciation (60,200) (643) (60,843) Net capital assets $ 7,562 $ (643) $ $ 6,919 Depreciation expense related to capital assets $ 643 Depreciation expense was $643 for the year ended June 30, 2013 and is included in operating expenses in the statements of revenues, expenses and changes in net position. NOTE 6 LEASE OBLIGATIONS The Organization is obligated under an operating lease for the use of two copiers into fiscal year ending June 30, Actual rental expense under operating leases for the years ended June 30, 2014 and 2013 totaled $4,348 and $4,009, respectively. Future minimum lease payments remaining for operating leases are: Year ending June 30, 2015 $ 4, , ,340 Total minimum lease payments $ 9,372 22

25 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 7 UNEARNED REVENUE The composition of unearned revenue at June 30 is: Children's School parent fees $ 478 $ 50 Student fees 525, ,833 Total $ 525,809 $ 521,883 NOTE 8 OTHER CURRENT LIABILITIES The composition of other current liabilities at June 30 is: Student clubs cash held by the Organization $ 221,599 $ 148,206 Due to CDE 2,638 Other Total $ 222,174 $ 150,930 23

26 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 9 LONGTERM LIABILITIES ACTIVITY Longterm liabilities activity for the year ended June 30, 2014 was as follows: Balance June 30, 2013 Additions Reductions Balance June 30, 2014 Longterm portion Current portion Accrued compensated absences $ 24,582 $ 17,370 $ (15,440) $ 26,512 $ 10,310 $ 16,202 Capitalized lease obligations Longterm debt obligations Other Total longterm liabilities $ 24,582 $ 17,370 $ (15,440) $ 26,512 $ 10,310 $ 16,202 Longterm liabilities activity for the year ended June 30, 2013 was as follows: Balance June 30, 2012 Additions Reductions Balance June 30, 2013 Longterm portion Current portion Accrued compensated absences $ 13,777 $ 16,435 $ (5,630) $ 24,582 $ 14,486 $ 10,096 Capitalized lease obligations Longterm debt obligations Other Total longterm liabilities $ 13,777 $ 16,435 $ (5,630) $ 24,582 $ 14,486 $ 10,096 24

27 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 10 UNRESTRICTED DESIGNATED NET POSITION The Senate has designated portions of the General Fund component of the net position according to the Organization's policy on reserve accounts. The designations at June 30 are: Corporate Reserve $ 428,203 $ 330,795 Transitional Housing Program Reserve 78,198 81,181 Capital Expenditure Reserve 403, ,454 Operating Reserve 325, ,154 Unallocated Reserve 140, ,358 Total unrestricted designated net position 1,375,565 1,196,942 Total net investment in capital assets 6,325 6,919 Total unrestricted undesignated net position 264, ,203 Total net position 1,646,731 1,427,064 NOTE 11 DEFINED CONTRIBUTION RETIREMENT PLAN The Organization has a defined contribution tax sheltered annuity plan under Section 403(b) of the Internal Revenue Code for its staff employees. Once hired, all regular employees are eligible for participation starting the first day of employment. The Organization contributes 7% of the employee's annual compensation. Total contributions to the plan were $15,897 and $16,857 for the years ended June 30, 2014 and 2013, respectively. NOTE 12 COMMITMENTS AND CONTINGENCIES Federal grant programs are subject to review by the grantor agencies, which could result in requests for reimbursement to grantor agencies for disallowed expenditures. Management believes that it has adhered to the terms of its grants and that any disallowed expenditures resulting from such review would not have a material effect on the financial position of the Organization. 25

28 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 13 CLASSIFICATION OF OPERATING EXPENSES The Organization has elected to report operating expenses by functional classification in the statements of revenues, expenses and changes in net position, and to provide the natural classification of those expenses as an additional disclosure. For the years ended June 30, 2014 and 2013, operating expenses by natural classification consisted of the following: Supplies and other 2014 Salaries Benefits services Depreciation Total Functional classification: Student services $ 740,338 $ 251,442 $ 952,027 $ $ 1,943,807 Depreciation Total $ 740,338 $ 251,442 $ 952,027 $ 594 $ 1,944,401 Supplies and other 2013 Salaries Benefits services Depreciation Total Functional classification: Student services $ 715,795 $ 249,219 $ 814,519 $ $ 1,779,533 Depreciation Total $ 715,795 $ 249,219 $ 814,519 $ 643 $ 1,780,176 NOTE 14 TRANSACTIONS WITH RELATED ENTITIES The Organization has an operating agreement with the California State University Trustees (the Trustees) for the provision of certain auxiliary activities including student body organization and student programs. The agreement provides for reimbursement of allowable direct costs plus an allocable portion of indirect costs associated with facilities, goods, and services provided by the University on behalf of the Trustees in accordance with CSU Executive Order 1000Delegation of Fiscal Authority and Responsibility and the University's annual cost allocation plan. These amounts are included in student services expenses in the statements of revenues, expenses and changes in net position. 26

29 Notes to Basic Financial Statements Years Ended June 30, 2014 and 2013 NOTE 14 TRANSACTIONS WITH RELATED ENTITIES (continued) Related party activities during the years ended June 30, 2014 and 2013 are reflected below Payments to the University: CSU Executive Order 1000 and other contracted services $ 132,817 $ 126,555 Other contracted services 55,826 54,411 Contributions and support for student programs 59,789 70,000 Resticted transfer to the University (included in gifts, noncapital) 793,010 Reimbursement for Children's School personnel costs 422, ,314 Reimbursement for other personnel costs 71,486 88,406 Space rentals 132,625 60,990 Children's School grant costs 19,998 Total payments to the University $ 874,578 $ 1,623,684 Payments to recognized auxiliary organizations for services and programs: Sonoma State Enterprises, Inc. $ 15,253 $ 4,732 Total payments to other Auxiliaries $ 15,253 $ 4,732 Amounts received from the University AS Student Body Fees reimbursed $ 1,684,599 $ 1,589,123 Executive Director salary reimbursement 31,801 31,153 ASI program support 122, ,482 Short term loans recovered Total received from the University $ 1,839,068 $ 1,726,058 Amounts received from recognized auxiliary organizations $ 23,422 $ 17,804 Amounts payable to the University (included in Accounts Payable ) $ 14,384 $ 11,449 Amounts payable to other Auxiliaries (included in Accounts Payable ) $ 210 $ 1,765 Amounts receivable from other Auxiliaries (included in Accounts Receivable ) $ 282 $ 469 The University receives various funds that are managed and recorded on its general ledger but support the Children's School. These funds are from a federal grant, Instructional Related Activity Fees (IRA) and nonreimbursed payroll. These funds totaled approximately $173,467 and $204,480 in fiscal years ended June 30, 2014 and 2013, respectively. 27