Florida Gulf Coast University Management s Discussion and Analysis

Transcription

1 Florida Gulf Coast University Management s Discussion and Analysis Overview of the Financial Statements and Financial Analysis This section of Florida Gulf Coast University annual financial report presents a discussion and analysis of the financial performance of the university during the fiscal year ended June 30, 2003, with fiscal year data presented for comparative purposes. The emphasis of discussions about these statements will be on current year activities, resulting change and current known facts. This discussion should be read in conjunction with the financial statements and related notes. Responsibility for the completeness and fairness of this information rests with the University s management. This annual report consists of a series of financial statements, prepared in accordance with the Governmental Accounting Standards Board (GASB) Statement No. 35, Basic Financial Statements and Management Discussion and Analysis for Public Colleges and Universities and GASB Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. Florida Gulf Coast University reporting model under GASB Statement No. 35 is a special-purpose government entity engaged only in business-type activities. Statement of Net Assets The statement of net assets presents the assets (current and noncurrent), liabilities (current and noncurrent) and net assets (assets minus liabilities) as of the end of the fiscal year. It is 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 goods or services are received, regardless of when cash is exchanged. The purpose of the statement of net assets is to present to the reader of financial statements a fiscal snapshot of Florida Gulf Coast University at June 30, From the data presented, readers of the statement of net assets are able to determine the assets available to continue operations of the University. In addition, they are also able to determine how much the University owes employees, vendors, and other parties. Finally, the statement of net assets provides a picture of the net assets and availability of those funds for use by the University. Over time, this provides an indication of the overall financial condition of the University. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the University s equity in property, plant and equipment. The next asset category is restricted net assets, which is divided into three parts, loans, capital projects and other restricted assets. These restricted net assets are available for expenditure by the University but must be spent for the purpose as determined by external entities that have placed restriction on the use of the assets. Unrestricted assets are available to the University for any lawful purpose. 1

2 Statement of Net Assets 6/30/2002 6/30/2003 Assets Current Assets $ 50,775, $ 50,283, Noncurrent Assets 416, ,063, Capital Assets 139,333, ,456, Total Assets $ 190,525, $ 216,803, Liabilities Current Liabilities $ 5,128, $ 6,118, Noncurrent Liabilities 26,584, ,664, Total Liabilities $ 31,712, $ 40,783, Net Assets Investment in Capital Assets, Net of Related Debt $ 115,319, $ 129,696, Restricted: Loans 130, , Capital Projects 33,189, ,513, Other Restricted Net Assets 4,270, ,022, Unrestricted 5,903, ,635, Total Net Assets $ 158,813, $ 176,020, Total Liabilities and Net Assets $ 190,525, $ 216,803, The University s financial position, as a whole, improved during the fiscal year ended June 30, 2003 with an increase of net assets in the amount of $17,207, or 11 percent over last year. This is a strong indicator of the overall financial condition and health of the University. The total assets of the institution increased by $26,277, A review of the statement of net assets will reveal that the increase was primarily the result of an increase in capital assets. The total liabilities for the year increased by $9,070, The most significant cause for the increase in the liability category is primarily the result of an increase in capital leases payable for student housing. The increase to net assets of the University is determined by subtracting the increase of total assets from the increase in total liabilities. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the statement of net assets are based on the activity presented in the statement of revenues, expenses and changes in net assets. The purpose of the statement is to show the operating and nonoperating revenues received by the University, the operating and nonoperating expenses paid by the University and any other revenues, expenses, gains and losses received or spent by 2

3 the University. Operating revenues are generally fees and grants received from students and others to provide them with instruction and other goods and services. Operating expenses are those expenses paid to acquire or produce the goods and services provided to students. In contrast, nonoperating revenues and expenditures are for goods and services not provided by the University. An example of nonoperating revenues would be State appropriations. This new financial reporting model classifies State appropriations as nonoperating revenues because they are provided by the Legislature to the University without the Legislature directly receiving commensurate goods and services for those revenues. Public universities dependency on state revenue (appropriations) will normally result in an operating loss since these recurring revenues are classified as nonoperating. A more indicative measure of the University s financial activity during the year would be the income before capital outlay appropriations and contributions. Statement of Revenues, Expenses and Changes in Net Assets Fiscal Year Fiscal Year Operating Revenues $ 26,568, $ 36,866, Operating Expenses 55,470, ,831, Operating Loss $ (28,902,246.46) $ (28,965,052.13) Nonoperating Revenues (Net) $ 29,112, $ 29,903, Net Income Before Capital Outlay Appropriations and Contributions 210, , Capital Outlay Appropriations and Contributions 21,760, ,269, Net Increase in Net Assets $ 21,971, $ 17,207, Net Assets of Beginning of Year 136,841, ,813, Net Assets of End of Year $ 158,813, $ 176,020, The Statement of revenues, expenses and changes in net assets reflects an increase in net assets in the amount of $17,207, or 22 percent decrease when compared to the net increase for the fiscal year. This decrease is primarily due to a reduction of State contributions (appropriations) related to capital projects, which were in various stages of planning and completion and will fluctuate from year to year. Again, a more indicative measure of the University s financial activity during the year would be the income before capital outlay appropriations and contributions. Over time, this indicator would provide a more accurate picture of the stability of the current operations of the University. 3

4 Operating Revenues Fiscal Year Fiscal Year Student Fees, Net $ 10,157, $ 13,725, Federal Grants Contracts and Grants 4,386, ,701, State and Local Contracts and Grants 2,892, ,821, Non-Governmental Contracts and Grants 2,919, ,795, Auxiliary Enterprises 5,825, ,796, Other 386, ,025, Total Operating Revenues $ 26,568, $ 36,866, Total operating revenues for the fiscal year were $36,866, of which $15,782, was from student tuition and fees. The tuition discount, which represents institutional scholarships, was $2,057, and resulted in net student tuition and fees of $13,725, that represents a 35 percent increase over the last fiscal year due primarily to an increase in student enrollment. Federal grants and contracts reflect a 53 percent increase due to Title IV Federal financial aid disbursed to students, primarily an increase in PELL awards in the amount of appropriately $2.3 million. Sales and services from auxiliary enterprises reflect a 34 percent increase over last year due primarily to new student housing facilities. Operating Expenses Fiscal year Fiscal Year Personal Services $ 35,260, $ 39,689, Contractual Services 2,774, ,737, Utilities 1,557, ,082, Material and Supplies 1,930, ,476, Repairs and Maintenance 928, Scholarships and Fellowships 4,409, ,559, Depreciation and Deletions 5,454, ,353, Loan Cancellations and Receivable Writeoffs 93, , Other 3,989, ,85, Total Operating Expenses $ 55,470, $ 65,831,

5 Total operating expenses, including depreciation and deletion expenses of $5,353,850.55, for the fiscal year were $65,831, of which $39,689, or 60 percent was for employee compensation and benefits. Other than the increase in utilities expense of 34 percent there were no significant or unexpected changes in operating expenses. In conjunction with the Interinstitutional Committee on Finance and Accounting (ICOFA), the ICOFA consortium developed design logic used to provide these statements through the automated financial statement (AFS) system. The design concepts broke out repairs and maintenance operating expense for the fiscal year., This information was not reported in the annual financial report for the fiscal year. In addition, the category Other is not broken out by the AFS but includes expenses such as travel, telecommunication, postage, freight, copy, and equipment not capitalized. Statement of Cash Flow The Statement of cash flow presents detailed information about the cash activity of the University during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used in the operating activities of the University. The second section reflects cash flows from noncapital finance activities, which include state appropriation funding. The third section deals with cash flows from capital and related financing activities. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the statement of revenues, expenses and changes in net assets. Statement of Cash Flows Fiscal Year Fiscal Year Cash Received From Operations $ 26,327, $ 36,002, Cash Expended For Operations 49,867, ,697, Net Cash Used By Operations $ (23,540,663.81) $ (23,695,818.16) Net Cash Provided from NonCapital Financing Activities 29,241, ,849, Net Cash Provided (Used) by Capital and Related Financing Activities (3,453,738.77) 989, Net Cash Used by Investing Activities (1,142,991.12) (1,912,701.95) Net Increase in Cash $ 1,104, $ 5,231, Beginning Cash and Cash Equivalents 4,860, ,965,

6 Ending Cash and Cash Equivalents $ 5,965, $ 11,196, The university s overall liquidity increased significantly during the fiscal year, with a net increase to cash and cash equivalents of $5,231, This increase is due to several events occurring on or before June 30, The University received approval from its Board of Trustees and from Florida Board of Education to commence independent operations from the State Comptroller effective July 1, The devolution process began June 1, 2003 by moving some investments from the State s Treasury Investment Pool to the University s Special Purpose Investment Accounts. Remaining cash at June 30, 2003 was paid out after all outstanding obligations were settled with the State Comptroller. The funds were wire transferred from the State Treasury to the University on June 30, 2003 and subsequently invested in July The University assumed duties performed by the State Comptroller on July 1, 2003 with the implementation of a new finance system, SCT Banner. In addition and in accordance with the University s devolution plan, the Bureau of State Payrolls retains control over the University s payroll processing and tax reporting through the end of the calendar year 2003 until the University commences independent operations and implementation of new human resource and payroll systems. The major source of funds included in operating activities are federal, state and local grants and contracts in the amount $13,879,239.30, student tuition & fees in the amount $13,350,872.29, and auxiliary enterprises in the amount of $7,796, Major uses of funds were payments made to employees in the amount of $39,014,696.97, to suppliers in the amount of $9,119, and payments to students for scholarship in the amount of $5,559, The largest inflow of cash in the noncapital financing group is State appropriation in the amount of $29,836,719 used for operations. The largest inflow of cash in the capital financing group is again the State appropriation in the amount of $12,778, used for capital projects. Capital Assets and Debt Additional new debt in the amount of $8,000,000 was recorded to recognize a capital lease between the University and the Florida Gulf Coast University Foundation, Inc. (Foundation) for new student residence halls on land leased from the University. The University leased back the land from the Foundation and will manage and operate the student residence halls. At June 30, 2003 the University had $129,250, invested in capital assets, net of related debt of $32,206, and accumulated deprecation of $22,325, Deprecation and deletion expense for the year totaled $5,353, The University s significant capital asset additions related primarily to new buildings totaling $28.6 million 6

7 including academic IV, the multipurpose building, and the teaching gym.and the student residence halls obtained through a capital lease in the amount of $7.6 million. The condition of university facilities is excellent. The university opened in August 1997 with the oldest building placed in service at that time. The Legislature has approved and appropriated funds to the University for the capital budget for the fiscal year in the amount of $5,525,055. Several important Public Education Capital Outlay appropriations by project for fiscal year include: (1) Roads/Parking/Infrastructure in the amount of $3,469,380, (2) Library Expansion in the amount of $1,500,000, (3) Classrooms/Academic 5 in the amount of $500,000 and (4) maintenance, repairs and renovation in the amount of $55,675. Factors Impacting Future Periods The University is not aware of any currently known facts, decisions, or conditions expected to have a significant effect on the financial position of operations during this year. The University s financial outlook for the future continues to be positive. The level of State support is one of the key factors influencing the university s financial condition. Short-term economic conditions of the State of Florida may be affected by the reduced class size amendment approved by Florida voters last fall. However, financial and political support from state government is expected to remain fairly stable with moderate growth over the long-term. Another significant factor in the University s economic position relates to its ability to recruit and retain high quality students. Fall 2003 total enrollment head count was 5,888 as compared to fall 2002 of 5,258 representing an increase of 12 percent. Firsttime in-college freshman admission of 871 students represents a 49 percent increase over last year. Efforts to improve retention such as an aggressive marketing plan to recruit qualified students and enhanced intervention to assist academic success will help assure this positive trend. 7

8 ASSETS Current Assets: FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA STATEMENT ON NET ASSETS JUNE 30, 2003 University Component Unit Cash and Cash Equivalents $ 7,190, $ 12,803, Investments with State Treasury 9,764, Investments with State Treasurey - Securities Lending and Reverse Repurchase Agreements 2,310, Invstment in Direct Financing Lease 300, Accounts and Pledges Receivables, Net 671, ,526, Interest and Dividends Receivable 31, , Contracts and Grants Receivable 877, Due from Component Unit/Primary Government 29,427, , Loans and Notes Receivable 8, Total Current Assets 50,283, ,174, Cash in Bank - Restricted 4,005, Investments with State Treasury - Restricted 1,049, Investments - Restricted 24,394, Investment in Direct Financing Lease 29,500, Accounts and Pledges Receivable, Net 2,253, Deferred Charges 8, Buildings, Equipment, and Other Depreciable Capital Assets,Net 132,771, , Land and Other Nondepreciable Assets 28,685, ,274, Total Noncurrent Assets 166,520, ,036, TOTAL ASSETS $ 216,803, $ 82,210, LIABILITIES Current Liabilities: Obligations Under Securities Lending Agreements 502, Obligations Under Reverse Repurchase Agreements 1,808, Accounts Payable 700, $ 400, Construction Contracts Payalbe 1,074, Accrued Salaries and Wages 1,101, Deposits Payable 323, Due to Component Unit/Primary Government 437, Deferred Revenue 3,206, Other Current Liabilities 1,919, Long-Term Liabilities - Current Portion: Current Compensated Absences Payable 231, Bonds Payable 76, Certificates of Participation Payable 300, Capital Leases Payable 300, Total Current Liabilities 6,118, ,264, Noncurrent Liabilities: Advances from Other Funds 20, Compensated Absences Liability 2,815, Deferred Revenue 45, Bonds Payable 2,329, Certificates of Participation Payable 38,500, Capital Leases Payable 29,500, Other Long -Term Liabilities 789, Total Noncurrent Liabilities 34,664, ,334, TOTAL LIABILITIES 40,783, $ 45,599, NET ASSETS Investment in Capital Assets, Net of Related Debt $ 129,696, $ 3,454, Restricted: Nonexpendable: Endowment 16,741, Expendable: Loans 153, Capital Projects 32,513, Other Restricted Assets 5,022, ,416, Unrestricted 8,635, , Total Net Assets 176,020, ,611, TOTAL LIABILITIES AND NET ASSETS $ 216,803, $ 82,210, The accompanying notes to the financial statements are an integral part of this statement. 8

9 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 University REVENUES Operating Revenues: Student Tuition and Fees 13,725, Component Unit $ $ Federal Grants and Contracts 6,701, State and Local Grants and Contracts 3,821, Nongovernmental Grants and Contracts 3,795, Sales and Services of Auxiliary Enterprises 7,796, Other Operating Revenue 1,025, Gifts and Donations 9,632, Rental Income and Other 1,326, Total Operating Revenue 36,866, ,958, EXPENSES Operating Expenses: Personal Services 39,689, Contractual Services 3,737, Utilities 2,082, Repairs and Maintenance 928, Materials and Supplies 2,476, Scholarships and Fellowships 5,559, , Depreciation and Deletion Expense 5,353, , Loan Cancellation and Receivable Writeoffs 149, Other Operating Expense 5,854, , General and Administrative 816, University Support 3,525, Program Services 2,802, Total Operating Expenses 65,831, ,187, Operating Income (Loss) (28,965,052.13) 2,771, NONOPERATING REVENUES (EXPENSES) State Appropriations -Operating 29,836, Investment Appreciation and Income 901, ,105, Interest on Asset-Related Debt (811,645.25) Other Non-0perating Expense (22,868.30) Total Non-Operating Revenues (Expenses) 29,903, ,105, Net Income Before Other Revenue and Transfers 938, ,876, State Appropriations - Fixed Capital Outlay 12,778, Capital Grants, Contracts, and Donations 3,490, ,774, Additions to Permanent Endowments 419, Total Other Revenue and Transfers 16,269, ,194, Increase in Net Assets 17,207, ,070, Net Assets, July 1, ,813, ,541, Net Assets, June 30, 2003 $ 176,020, $ 36,611, The accompanying notes to the financial statements are an integral part of this statement. 9

10 FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 University CASH FLOWS FROM OPERATING ACTIVITIES Student Tuition and Fees $ 13,350, Grants and Contracts 13,879, Sales and Services of Auxiliary Enterprises 7,796, Other Operating Receipts 973, Net Loans Collected from Students 2, Payments to Employees (39,014,696.97) Payments to Suppliers for Goods and Services (9,119,247.30) Payments to Students for Scholarships and Fellowships (5,559,755.38) Other Operating Disbursements (6,004,123.49) Net Cash Used by Operations (23,695,818.16) CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations - Operating 29,836, Other Noncapital Financing Net Receipts 13, Net Cash Provided by Noncapital Financing Activities 29,849, CASH FLOWS FROM CAPITAL AND RELATED FINANCIAL ACTIVITIES State Appropriations - Fixed Capital Outlay 12,778, Capital Subsidies and Contributions 10,575, Purchase or Construction of Capital Assets (21,272,044.90) Principal Paid on Capital Debt (272,857.31) Interest Paid on Asset Related Debt and Leases (810,071.95) Other Disbursements for Capital Projects (9,118.50) Net Cash Used from Capital and Related Financing Activities 989, CASH FLOW FROM INVESTNG ACTIVITIES Net Purchases of Investments (2,520,708.15) Investment Income 608, Net Cash Used by Investing Activities (1,912,701.95) Net Increase in Cash 5,231, Cash and Cash Equivalents, July 1, ,965, Cash and Cash Equivalents, June 30, 2003 $ 11,196, RECONCILIATION OF OPERATING CASH FLOW TO OPERATING LOSS Operating Loss $ (28,965,052.13) Adjustments to Reconcile Operating Loss to Net Cash Used by Operations Depreciation and Deletions Expense 5,353, Changes in Assets and Liabilities: Accounts Receivable (428,034.80) Contracts and Grants Receivable (439,011.13) Loans and Notes Receivable 2, Accounts Payable 104, Accried Salaries and Wages 235, Deposits Payable Compensated Absences Liability 439, Net Cash Used by Operations $ (23,695,818.16) The accompanying notes to the financial statements are an integral part of this statement. 10

11 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FLORIDA GULF COAST UNIVERSITY A COMPONENT UNIT OF THE STATE OF FLORIDA NOTES TO THE FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2003 REPORTING ENTITY. Although the University is considered a separate entity for financial reporting purposes, it is a part of the State University System and accordingly is regulated, and coordinated by the Florida Board of Education. The governing body of Florida Gulf Coast University is its Board of Trustees. The Board constitutes a body corporate and is composed of twelve (12) members appointed by the Governor and one student member. The Board of Trustees is under the general direction and control of the Commissioner of Education, the Chancellor of State Universities, and is governed by law and rules of the Florida Board of Education. By statute, the University Board of Trustees appoints the President and Florida Board of Education ratifies the appointment. The University Board of Trustees adopts University rules and procedures and plans for the future needs of the university. The University President is responsible for the management of the university and has the ultimate responsibility for administering the policies prescribed by the Board of Trustees. COMPONENT UNITS. Based on the application of the criteria for determining component units, the Florida Gulf Coast University Foundation, Inc. (Foundation) is included within the university reporting entity as a discretely presented component unit and the financial statements for the fiscal year ended June 30, 2003 for this organization are included in the financial statements of the university. Florida Gulf Coast University Foundation, Inc., was incorporated on April 29, 1993, as a Florida not-for-profit Foundation under the provisions of Chapter 617, is a direct support organization of the University. The Foundation was established for the purpose to encourage, solicit, collect, receive and administer gifts and bequests of property and funds for scientific, educational and charitable purposes, all for the advancement of Florida Gulf Coast University and its objectives. An annual post audit of the Foundation s financial statements is conducted by an independent certified public accountant. The annual report is submitted to the Auditor General and the Board of Trustees for review. BASIS OF PRESENTATION. The University s fiscal and accounting operations are effectively structured around the Governmental Accounting Standard Board s (GASB) statements. The University also adheres to the recommendations of the National Association of College and University Business Officers (NACUBO). NACUBO s recommendations are prepared in accordance with generally accepted accounting principles promulgated by the Financial Accounting Standards Board (FASB) and the GASB. In November 1999, the GASB issues GASB Statement No.35 Basic Financial Statements and Management Discussion and Analysis for Public Colleges and Universities and amendment of GASB Statement No.34 Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. GASB Statements Nos.34 and 35 provide the most significant change in financial reporting for all governmental institutions. Florida Gulf Coast University reporting model under GASB Statement No.35 is a special-purpose government entity engaged only in business-type activities. GASB Statements Nos.34 and 35 provide that a special-purpose government entity engaged only in business-type activities is to present entity-wide reporting including the following: Management s discussion and analysis Basic Financial Statements: 1) Statement of Net Assets 2) Statement of Revenues, Expenses, and Changes in Net Assets 3) Statement of Cash Flows 4) Notes to financial statements BASIS OF ACCOUNTING. Basis of accounting refers to when the effect of transactions or events should be recognized for financial reporting purposes. It relates to the timing of the measurements made, regardless of the measurement focus applied. The statement of net assets and the statement of revenues, expenses, and changes in net assets are presented using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. The University s principal operating activities consist of instruction, research and public service. Operating revenues and expenses generally include all fiscal transactions directly related to these activities plus administration, operation and maintenance of plant assets, and depreciation on capital assets. Included in non-operating revenues are state appropriations, investment income and revenues for capital construction projects. Interest on asset-related debts is considered a nonoperating expense. Interdepartmental transactions of Auxiliary Service Departments have been accounted for as reductions of expenditures and not revenues of the Auxiliary Service Department. 11

12 Property, plant, and equipment are capitalized and recorded at cost at the date of acquisition or at appraised value at the date received in the case of gifts or purchases from the State Division of Surplus Property. Additions, improvements and other outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. The University has a capitalized threshold of $1,000 for all movable equipment items and a $100,000 threshold for building renovations and improvements. Depreciation is computed on the straight-line basis over the estimated useful life of the related assets. The following estimated useful lives were used to determine depreciation expense: Buildings years Infrastructure and Other Improvements 15 to 50 years Property Under Capital Lease 50 years Furniture and Equipment 1) Equipment 10 to 25 years 2) Computer equipment 3 to 6 years 3) Moveable equipment 5 to 20 years Library Resources 10 years Works of Art 20 years The statement of net assets is presented in a classified format to distinguish between current and long-term assets and liabilities. When both restricted and unrestricted resources are available to fund certain programs, grants, etc., it is the University s policy to first apply the restricted resources to such programs followed by the use of the unrestricted resources. The statement of revenues, expenses, and changes in net assets is presented by major sources. The University applied The Alternate Method as prescribed in NACUBO Advisory Report to determine the net tuition scholarship allowances reported in the statement of revenues, expenses, and changes in net assets. The statement of cash flows is presented using the direct method and is in compliance with GASB Statement No.9 Reporting Cash Flow for Proprietary and Non-expendable Trust Funds. The University follows FASB Statements and interpretations issued on or before November 30, 1989, unless those pronouncements conflict with GASB pronouncements. 2. CASH AND CASH EQUIVALENTS The amount reported as cash and cash equivalents consist of cash on hand, cash in demand accounts, the unexpended general revenue appropriation releases, and cash held in the State Treasury. Cash in demand accounts is held in banks qualified in accordance with the provisions of Chapter 280, Florida Statutes, as a public depository. Deposits are fully insured by a mutual collateral pool. 3. INVESTMENTS The University participates in investments through the State Treasury in accordance with the provisions of Section , Florida Statutes. These investment pools operate under investment guidelines established in Section , Florida Statutes. The investments in these pools are reported at fair market value. Generally accepted accounting principles require that the credit risk of investments be classified into the following three categories: Risk Category 1 Insured or registered, or securities held by the entity or its agent in the entity s name. Risk Category 2 Uninsured and unregistered, with securities held by the counterparty s trust department or agent in the entity s name. Risk Category 3 Uninsured and unregistered, with securities held by the couterparty, or by its trust department or agent but not in the entity s name. University investments in investment pools managed by other governments cannot be categorized because the University s investments are not evidences by specific, identifiable investment securities. All University investments at June 30 were in investment pools managed by the State Treasury with a fair market value of $13,125, These investments include $2,310, related to securities lending and reverse repurchase agreements entered into by the State Treasury on behalf of the University. These investments are offset on the Statement of Net Assets by related current obligations. 4. ACCOUNTS RECEIVABLE Accounts Receivables, Net reported in the statement of net assets represent amounts (net of estimated uncollectibles) for student fees and various student services provided by the university. An estimate of uncollectible accounts receivable of $291, was calculated by aging the accounts and considering any account over 180 days old as uncollectible at June 30,

13 5. CAPITAL ASSETS The university s major classes of capital assets are listed below: Description Beginning Balance Additions Deletions Ending Balance Capital Assets, Non-Depreciable: Land $ 25,150, $ 685, $ 25,836, Construction in Progress 17,922, ,197, ,725, Works of Art and Historical Treasures 109, , , Total Capital Assets, Non-Depreciable $ 43,183, $ 699, $15,197, $ 28,685, Capital Assets, Being Depreciated Buildings $ 55,167, $ 28,618, $ 83,786, Infrastructure and Other Improvements 11,425, ,404, ,830, Furniture and Equipment 17,291, ,720, , ,136, Library Resources 7,491, , ,001, Property Under Capital Lease 22,000, ,562, ,562, Works of Art - 3, , Other Fixed Assets 652, , , , Total Capital Assets Being Depreciated $ 114,028, $ 41,974, $ 906, $ 155,096, Less: Accumulated Depreciation for Buildings $ 3,919, $ 1,216, $ 5,136, Infrastructure and Other Improvements 1,134, , ,568, Furniture and Equipment 9,399, ,277, , ,910, Library Resources 2,639, , ,419, Property under Capital Lease 427, , , Works of Art Other Fixed Assets 358, , , , Total Accumulate Depreciation $ 17,878, $ 5,241, $ 794, $ 22,325, Total Capital Assets, Being Depreciated, Net $ 96,150, ,733, , $ 132,771, Total Capital Assets, Net $ 139,333, $ 37,433, $ 1,700, $ 161,456, LONG TERM LIABILITIES A summary of the University s indebtedness resulting from on-going operation is as follows: Description Beginning Balance Additions Reductions Ending Balance Current Portion Long-Term Obligations: Bonds Payable $ 2,477, $ 71, $ 2,406, $ 76, Capital Lease 22,000, ,000, , ,800, , Other Liabilities: Compensated Absences 2,607, , ,046, , Total Long-Term Liabilities $ 27,084, $ 8,439, $ 271, $ 35,253, $ 608, A summary of pertinent information related to the University s indebtedness resulting from the issuance of certificates and bonds is as follows: Bonds Payable. Bonds Payable represents revenue certificates issued to construct a Child Care Center, North Lake Recreation Center and Athletic Playfields. Revenue certificates, which include both term and serial bonds, are secured by a pledge of various student fee assessments. The building fee and capital improvement fee collected as a part of tuition and remitted to the Florida Board of Education are used to retire the revenue certificates for the academic and student facilities. Bonds payable at June 30, 2003, are shown below: 13

14 Bond Amount Unamortized Total Amount Outstanding Interest Maturity Rates Series of issue Bond Discount Retired Principal Interest (Percent) Date 1997 $ 431, $ 5, $ 68, $ 357, $ 255, ,853, , , ,604, , , , , , , Total $ 2,751, $ 31, $ 313, $ 2,406, $ 1,526, Principal and interest payment for these revenue certificates are shown below: Year Ending Principal Interest Total 2004 $ 76, $ 114, $ 191, , , , , , , , , , , , , , , , , , , , , , , , , Sub Total $ 2,438, $ 1,419, $ 3,858, Less Bond Discount $ (31,972.27) $ (31,972.27) TOTAL $ 2,406, $ 1,419, $ 3,826,

15 Obligations under Capital Lease Payable. Florida Gulf Coast University Foundation (Foundation) issued the series 2000 and 2002 Certificates of Participation (COPS) in the amount of $22,000,000 and $8,000,000 respectively for the purpose of constructing student housing facilities on land leased from the University. The University leased back the land and the completed student housing facilities from the Foundation to manage and operate. Revenue from the student housing facilities is pledged to pay rent to the Foundation or its assignees equal to the debt service on the COPS. The variable interest rate on the COPS is based upon a weekly determination by the remarketing agent. As of June 30, 2003 the rate was 1.15 percent. The following is a schedule of future minimum payments remaining under the leases at fiscal year end: Year Ending Principal Interest Total 2004 $ 300, $ 354, $ 654, , , , , , , , , , , , , ,500, ,509, ,009, ,300, ,269, ,569, ,200, , ,182, ,400, , ,039, ,800, , ,016, Total $ 29,800, $ 6,321, $36,121,

16 7. COMPENSATED ABSENCES LIABILITY Employees earn the right to be compensated during absences for annual leave (vacation) and sick leave pursuant to Section 6C-5.920, Florida Administrative Code; and pursuant to bargaining agreements between the Florida Board of Education and the United Faculty of Florida. Leave earned is accrued to the credit of the employee and records are kept on each employee s unpaid (unused) leave balance. GASB Statement No. 16 requires that the university accrue a liability in the statement of net assets for employees right to receive compensation for future absences when certain conditions are met, whereas State appropriations fund only the portion of accrued leave that is used or paid in the current fiscal year. Although the liability is expected to be funded primarily from future appropriations, generally accepted accounting principles do not permit the recording of a receivable in anticipation of future appropriations. Consequently, the recording of the liability for compensated absences without the corresponding recognition of such future resources, results in the appearance of a reduced ability to meet current obligations. At June 30, 2003, the estimated liability for annual/compensatory leave and sick leave and special compensation is $2,423, and $552, and $70, The net assets at June 30 of $175,744, would have been $178,791, had such liability for compensated absences not been applied against it. The current compensated absences liability is based on actual payouts over the last three years, calculated as a percentage of those years total compensated absences liability. 8. INSURANCE RISK EXPOSURE In accordance with a program for central insurance purchases adopted by the Florida Cabinet in 1969, the Department of Management Service has been granted authority to purchase insurance on behalf of all state agencies. This authority was granted with the enactment of Section , Florida Statutes. Other actions by the Legislature have resulted in the development of State selfinsurance funds providing hazard insurance for property and casualty insurance for state employee workers compensation, general liability, fleet automotive of $4 million are commercially insured up to $300 million per loss event. Payments on tort claims are limited to $100,000 per person and $200,000 per occurrence as set by Section , Florida Statutes. Premiums are calculated on the cash needs of the program and are based on the amount of risk exposure for each state agency. There have been no significant reductions in insurance coverage from the prior year coverage. Settlements have not exceeded insurance coverage during the past three years. 9. OPERATING LEASES The University has long-term commitments for assets leased under operating leases. These assets are not recorded on the statement of net assets; however, the operating lease payments are recorded as expenses in the statement of revenues, expenses, and changes in net assets when paid or incurred. Future minimum lease commitments for these operating leases as of June 30, 2003 were as follows: Year Ending Building Operating June 30 Leases 2004 $ 101, $ 104, $ 22, $ 4, Total $ 233, CONSTRUCTION COMMITMENTS The major construction commitments of the university for those projects for which the estimated cost is $1 million or more at fiscal year end are shown below: Project Number Project Name Total Estimated Amount Expended Amount Unspent BR1008 Campus Support $ 6,979, $ 6,970, $ 8, BR1009 Academic III Support 7,699, ,665, , BR1011 Academic IV 7,600, ,069, , BR1012 Loop Road 1,777, ,741, , BR1016 North Lake 1,822, ,785, , BR1017 Library Remodeling 1,000, , , BR1020 Multi-Purpose Building 9,680, ,826, ,853, BR1021 Teaching Gym 17,900, ,332, , BR1024 Academic 5 8,450, , ,444, BR1025 Library Expansion 15,500, ,499, BR1026 Environmental Demonstration Laboratory 1,000, , , BR1029 Student Support Center 2,190, , ,125, BR1033 Kliest Health Education Center 2,000, ,000, Total $ 83,598, $ 51,657, $ 31,941,

17 11. STATE RETIREMENT PLANS Florida Retirement System. Pursuant to Chapter 121, Florida Statutes, the Florida Legislature established the Florida Retirement System (FRS) to provide a retirement and survivor benefit program for participating public employees. Approximately half of the employees working in regularly established positions of the University are covered by the FRS, a State-administered cost-sharing multiple-employer public employee defined benefit retirement plan. Participating employers include all State departments, counties, district school boards, and community college. Many municipalities and special districts have elected to be participating employers. The Florida Legislature has reduced the vesting period from 10 to 6 years of service. Any member employed in a regularly established position on (as of) July 1, 2001 with a total of 6 or more years of creditable service will be considered vested. Former members who are not employed with a participating FRS employer on July 1, 2001, must return to covered employment for one year to become eligible for the six-year vesting provision. An exception to this one-year requirement applies to former members who are within one year of vesting under the pre-2001 vesting requirements. These members will only be required to work the lesser of one year or the amount of time it would have taken to vest normal retirement benefits at age 62 or at any age after 30 years of service, which may include up to 4 years of credit for military service. The Deferred Retirement Optional Program (DROP) is a program under which an eligible member of the FRS may elect to participate, deferring receipt of retirement benefits while continuing employment with a FRS employer. The deferred monthly benefit accrues on behalf of the participant, plus interest compounded monthly, for the specified period of the DROP participation. Upon termination of employment, the participant receives the total DROP benefits and begins to receive previously determined retirement benefits. Employers pay all contributions for regular class employees. For the fiscal year, the rate assessed against regular class, special risk class and senior management service class amounted to 5.76, and 6.06 percent, respectively. The University s liability for any unfunded pension benefit obligation is limited to the payment of the required contribution at the rates established by law on future payrolls of the University. The University s fiscal year payroll for all employees totaled $39,407,154.41, including $10,324, paid to employees who were members of the Florida Retirement System. Required contributions made to the FRS in the fiscal year totaled $661,131.62, which represents 6.4 percent of covered payroll. Contribution for the fiscal year totaled $785, Additional information on the FRS, including the ten-year historical trend information and the total unfunded pension benefit obligation is presented in the annual financial report of the FRS. During the fiscal year and as of June 30, 2003, the FRS held no securities issued by the University. Optional Retirement Program. Pursuant to Section , Florida Statutes, the Florida Legislature created an Optional Retirement Program (ORP) for eligible State University System faculty and administrators. The program, which became effective July 1, 1984, was expanded in 1988 to include the State University System Executive Service. The program is designed to aid the University system in recruiting employees by offering more portability to those employees who are not expected to remain in the FRS for 6 or more years. The Optional Retirement Program is a defined contribution plan, which provides full and immediate vesting of all contributions submitted to the participating companies on behalf of the participant. Employees in eligible positions are allowed to make an irrevocable election to participate in the Optional Retirement Program rather than the FRS, and purchase retirement and death benefits through contracts provided by certain insurance carriers. The university contributes on behalf of the participant the same percentage of the participant s salary as would have been contributed to the FRS. A portion of the total contribution is transferred to the FRS Trust Fund to help amortize the unfunded actuarial accrued liability of the FRS, and an additional small amount remains in the Optional Retirement Program Trust Fund for program administrative costs. The remaining contribution is invested in the company or companies selected by the participant to create a fund for the purchase of annuities at retirement. The participant may contribute by salary reduction an amount not to exceed the percentage contributed by the University to his annuity account. There were 329 University participants during the fiscal year. Required contributions made to the Optional Retirement Program in the fiscal year totaled $1,676,544.53, including $745, from employee contributions, which represents 10.4 and 4.6 percent, respectively, of covered payroll, which totaled $16,054, During the fiscal year and as of June 30, 2003, the Optional Retirement Program held no securities issued by the University. Public Employee Optional Retirement Program. In the 2000 legislative session, the Florida Legislature created a new defined contribution program called the Public Employee Optional Retirement Program (PEORP). This new program is an option to the FRS and is self-directed by the employee. A retirement account is established for each employee who selects this option and an employer contribution is directed to the individual account. The employee has the responsibility of selecting how their funds are invested within the approved set of investment choices and may take their funds when they leave the FRS. There were 32 university participants during the fiscal year. Required contributions made to the PEORP in the fiscal year totaled $44,243.79, which represents 5.79 percent of covered payroll, which totaled $764, OTHER POSTEMPLOYMENT BENFITS 17

18 To assist retirees of all State-administered retirement systems in paying health insurance costs, the Florida Legislature established the Retiree Health Insurance Subsidy (HIS). During , the HIS program was funded by required contributions consisting of 1.11 percent assessed against the payroll for all active employees covered in State-administered retirement systems. Eligible retirees, spouses, or financial dependents under any State-administered retirement system must provide proof of health insurance coverage, which can include Medicare. During the (period), participants received an extra $5.00 per month for each year of creditable service completed at the time of retirement, up to $150 per month. If contributions fail to provide full subsidy benefits to all participants, the subsidy payments may be reduced or canceled. 13. PRIOR PERIOD ADJUSTMENTS Net asset adjustments are made only when amounts were considered material, or if there is a change in accounting practices. All other non-material adjustments were reported through current year operations. During the fiscal year there were no prior adjustments to net assets. 14. FUNCTIONAL DISTRIBUTION OF EXPENSES The operating expenses on the statement of revenue, expenses, and changes in net assets are presented in the natural classifications. Below are those same expenses presented in functional classifications as recommended by NACUBO. The functional classification (instruction, research, etc.) is assigned to a department based on the nature of the activity which represents the material portion of the activity attributable to the department. For example, activities of academic departments for which the primary departmental function is instruction may include some activities other than direct instruction such as research and public service. However, when the primary mission of the departments consists of instructional program elements, all expenses of the department are reported under the instruction classification. Functional Classification Amount Instruction $19,427, Research 733, Public Service 3,663, Academic Support 7,008, Student Services 4,479, Institutional Support 10,026, Operation and Maintenance of Plant 3,773, Scholarships and Fellowships 4,604, Auxiliary Operations 6,763, Total Functional Expenses $60,479, Depreciation and Deletions 5,351, Total Operating Expenses $65,831,