UNIVERSITY OF CENTRAL MISSOURI A COMPONENT UNIT OF THE STATE OF MISSOURI FINANCIAL STATEMENTS JUNE 30, 2012

Transcription

1 A COMPONENT UNIT OF THE STATE OF MISSOURI FINANCIAL STATEMENTS JUNE 30, 2012

2 Contents Page Independent Accountants Report Management s Discussion And Analysis Financial Statements Statement Of Net Assets Statement Of Financial Position Statement Of Revenues, Expenses, And Changes In Net Assets Statement Of Activities Statement Of Cash Flows Notes To Financial Statements Required Supplementary Information Other Postemployment Benefits - Schedule Of Funding Progress... 50

3 RubinBrown LLP Certified Public Accountants & Business Consultants Grandview Drive Suite 600 Overland Park, KS Independent Accountants Report T F W rubinbrown.com E info@rubinbrown.com Board of Governors University of Central Missouri A Component Unit of the State of Missouri Warrensburg, Missouri We have audited the accompanying basic financial statements of University of Central Missouri (the University) and its discretely presented component unit, collectively, a component unit of the State of Missouri, as of and for the year ended June 30, 2012, as listed in the table of contents. These financial statements are the responsibility of the University s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of University of Central Missouri Foundation, a discretely presented component unit of the University, which statements reflect total assets of $38,863,336 and $38,187,005 as of June 30, 2012 and 2011, respectively, and total revenues of $4,601,949 and $8,338,577, respectively, for the years then ended. Those statements were audited by other accountants whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for University of Central Missouri Foundation, is based solely on the reports of the other accountants. The financial statements of the University as of June 30, 2011 were audited by other auditors, whose report dated November 7, 2011, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, 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 of material misstatement. The financial statements of University of Central Missouri Foundation, which comprise the financial statements of the discretely presented component unit, were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other accountants provide a reasonable basis for our opinion.

4 University Of Central Missouri A Component Unit Of The State Of Missouri In our opinion, based on our audit and the reports of the other accountants, the 2012 financial statements referred to above present fairly, in all material respects, the financial position of the University and of its discretely presented component unit as of June 30, 2012 and the changes in its financial position and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report for the year ended June 30, 2012 dated November 5, 2012 on our consideration of the University s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management s discussion and analysis and the schedule of funding progress of the other postemployment benefit plan, as listed in the table of contents, are not required parts of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United State of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquires, 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. November 5, 2012 Page 2

5 MANAGEMENT S DISCUSSION AND ANALYSIS YEARS ENDED JUNE 30, 2012 AND 2011 Overview Established in 1871, the University of Central Missouri (the University) was originally known as the State Normal School for the Second Normal District, an institution created by the Missouri General Assembly to educate teachers for the state s public schools. Building upon this tradition, the University has evolved to meet academic and career needs of new generations of Missouri students and beyond as a major comprehensive institution with four academic colleges and 150 areas of study. The University has achieved national recognition for many of its academic programs, including aviation, criminal justice and education, and it is a leader among Missouri s public universities in program-specific accreditations. The University takes ongoing pride in providing a student-centered learning environment where tenured professors teach the majority of classes. The University boasts a 17:1 student-faculty ratio and a graduate job placement rate above 90 percent, exceeding the national average for 18 consecutive years. The University s environment of student success helped UCM reach a record enrollment of 11,878 students, the highest in its 140-year history, for the 2012 Fall semester. The University s students are served by 446 full-time faculty members. Sixty-eight percent of the faculty members have earned doctorates. The University is also well known for its culture of friendship and service that extends far outside its campus boundaries. It has 22 international exchange agreements with institutions worldwide, and more than 540 international students contribute to a diverse student body. Students from nearly every county in Missouri, 43 states and 52 countries from around the globe attend the University. Through our International Center, students can study in over 60 countries at more than 285 institutions. The University is the only public university in Missouri to own and operate its own airport. Other special facilities which contribute to a quality learning environment include its 100,000-watt public broadcasting facilities, KMOS-TV and KTBG-FM, the Prussing Research Farm, and the Missouri Safety Center. Page 3

6 Management s Discussion And Analysis (Continued) Academic Programs The academic programs at the University are organized under four colleges: the College of Arts, Humanities, and Social Sciences; the Harmon College of Business and Professional Studies; the College of Education; and the College of Health, Science and Technology. The University also has The Honors College, which is one of the oldest honors colleges in the Midwest, and The School of Graduate and Extended Studies. In addition to opportunities on the Warrensburg campus, a number of degree programs can be taken at the University s main extended campus location, the 40,000-square-foot UCM Summit Center in Lee s Summit, Missouri, which serves more than 1,000 students in the Kansas City metropolitan area. Many undergraduate courses and programs also are offered online. Including its airport and other special facilities, the University occupies more than 1,500 acres. The University offers the following undergraduate degrees: Bachelor of Arts, Bachelor of Fine Arts, Bachelor of Music, Bachelor of Music Education, Bachelor of Science, Bachelor of Science in Business Administration, Bachelor of Science in Education, and Bachelor of Social Work. It offers Master of Arts, Master of Arts in Teaching, Master of Business Administration, Master of Science, and Master of Science in Education degrees. The University provides additional graduate-level study for Education Specialist degrees in the areas of School Administration and Human Services, in addition to cooperating with two other institutions on doctoral programs. The Ed.D. in Educational Leadership is conferred by the University of Missouri-Columbia, and the Ph.D. in Technology Management is conferred by Indiana State University. Awards and Accomplishments In the summer of 2012, the University was named to two national lists that help guide students in their college selection process. UCM was recognized by The Princeton Review as one of the best colleges and universities in the Midwest for the seventh consecutive year, and was also ranked by U.S. News & World Report among the nation s best regional institutions. U.S. News & World Report rankings are included in the 2013 Best Colleges guidebook. Page 4

7 Management s Discussion And Analysis (Continued) The Princeton Review selected UCM as one of its Best in the Midwest colleges and universities. As such, UCM is one of 153 Midwestern schools named in the nationally known education services company s edition of Best Colleges: Region by Region. Selection is based on a qualitative evaluation of academic excellence as well as results from student surveys, school visits, and opinions of independent high school-based college advisers whose recommendations are invited. The Princeton Review does not numerically rank institutions. University Foundation The University of Central Missouri Foundation (Foundation) is a legally separate, taxexempt component unit of the University. The Foundation s primary function is to raise and hold funds to support the University and its programs. Although the University does not control the timing or amount of receipts from the Foundation, the majority of the Foundation s resources and related income are restricted by donors for the benefit of the University. The Foundation is considered a component unit of the University because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University. During the years ended June 30, 2012 and 2011, the Foundation provided support to the University of $3,268,870 and $3,780,624, respectively. Management Discussion And Analysis This discussion and analysis of the University s financial statements provides a comparative overview of the University s financial performance during the years ended June 30, 2012, 2011, and Since the management s discussion and analysis is designed to focus on current activities, resulting changes and current known facts, please read it in conjunction with the University s basic financial statements and the footnotes. These financial statements are prepared in accordance with Governmental Accounting Standards Board (GASB) pronouncements. Effective July 1, 2004, the University adopted GASB Statement No. 39, Determining Whether Certain Organizations are Component Units An Amendment of GASB Statement No. 14. The Foundation meets the criteria set forth for component units under GASB Statement No. 39. Thus, the University s Annual Report includes audited University Foundation financial statements which are prepared in accordance with Financial Accounting Standards Board (FASB) standards. Page 5

8 Management s Discussion And Analysis (Continued) The University has implemented GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45), as of fiscal year ended June 30, Prior to GASB 45, the University followed a payas-you-go accounting approach in which the benefit cost was reported after the employee retired. With the implementation of GASB 45, the University is required to recognize the costs of other postemployment benefits in the accounting periods the benefits are earned rather than when benefits are paid or provided. The annual expense and liability associated with other postemployment benefits includes an estimate of the benefits attributed to services received from employees in the current year in addition to an amortization component related to past service costs. Statement Of Net Assets The Statement of Net Assets presents the consolidated financial position of the University at a point in time. The Statement of Net Assets has three major components which include 1.) Assets, 2.) Liabilities, and 3.) Net Assets. A description of each component is as follows: Assets - Current assets are those anticipated to be liquidated within one year or less and include items such as cash and cash equivalents, investments, accounts receivable, inventories, loans to students and prepaid expenses. Non-current assets include that portion of accounts receivable, investments, loans to students and prepaid expenses not expected to liquidate within one year plus capital assets such as buildings, building improvements, infrastructure, equipment etc. Liabilities - Current liabilities are those anticipated to be recognized within one year or less and include items such as accounts payable and accrued liabilities, accrued compensated absences, deferred revenue, interest payable, student deposits, the current portion of long-term debt and accrued settlements. Non-current liabilities include that portion of accrued liabilities, compensated absences, long-term debt and settlements that are not due within one year. Net Assets - Net assets represent University total assets less total liabilities. Net assets are classified in three major categories which include 1.) Invested in Capital Assets, 2.) Restricted, and 3.) Unrestricted. 1.) Invested in Capital Assets represents buildings, building improvements, equipment etc. that is net of accumulated depreciation and related debt. 2.) Restricted net assets are those whose purpose has been determined by an outside party for a specific use such as scholarships, loans, and capital projects. Page 6

9 Management s Discussion And Analysis (Continued) 3.) Unrestricted net assets represent balances from operational activities that have not been restricted by parties external to the University. This includes funds that have been designated for specific purposes as well as amounts that have been contractually committed for goods and services not yet received. A summary of the University s assets, liabilities and net assets at June 30: Current assets $ 66.2 $ 60.4 Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Net assets Invested in capital assets, net of related debt Restricted Unrestricted Total Net Assets $ $ $250.0 $219.7 $225.7 $200.0 $150.0 $100.0 $66.2 $60.4 $63.6 $ $50.0 $25.8 $28.5 $- Current assets Noncurrent assets Current liabilities Noncurrent liabilities Page 7

10 Management s Discussion And Analysis (Continued) Comparative Analysis Of Fiscal Years 2012 And 2011 Current Assets - Current assets for Fiscal Year 2012 totaled $66.2 million which is an increase of $5.8 million from Fiscal Year 2011 current assets of $60.4 million. This increase is attributed to total cash and short-term investments increasing as a result of the University s investment in short term securities at year end. Non-current Assets - Total non-current assets decreased approximately $6.0 million. The decrease is primarily due to a shift in the University carrying a larger amount of short term investments at year end. In addition, the University had a decrease in capital asset of approximately $2.0 million resulting from retirements of assets. Current Liabilities - Current liabilities totaled $25.8 million decreasing by approximately $2.7 million compared to the prior year total of $28.5 million. This is primarily attributed to a decrease in accounts payable and accrued liabilities of $2.7 million. Non-current Liabilities - Total non-current liabilities decreased approximately $5.2 million. This decrease is primarily attributed to the debt service principal payments. In addition, the amount of long-term liabilities decreased due to regular debt service payments and a decrease in other non-current liabilities totaling ($0.2 mil). Net Assets - At June 30, 2012, the University s net assets were $196.5 million. These are comprised of Unrestricted - $64.3 million; Invested in capital assets, net of related debt - $121.2 million; Restricted for loans - $6.7 million and Other restricted - $4.3 million. Page 8

11 Management s Discussion And Analysis (Continued) Restricted $ (in millions) Unrestricted $64.3 Invested in capital assets $121.2 Restricted $ (in millions) Unrestricted $61.4 Invested in capital assets $118.6 Page 9

12 Management s Discussion And Analysis (Continued) Comparative Analysis Of Fiscal Years 2011 And 2010 Current Assets - Current assets for Fiscal Year 2011 totaled $60.4 which was a decrease of $27.9 million from Fiscal Year 2010 current assets of $88.3 million. This decrease ($26 mil) resulted from the University s investment in longer term securities at year end. In addition, the University had a state appropriation receivable ($1.3 mil) in the prior year that was satisfied in Non-current Assets Total non-current assets increased approximately $37.2 million. The increase was primarily due to an increase in the University carrying long term investments of $28.1 million as compared to Fiscal Year 2010 of $4.0 million. In addition, the University capital assets increased by $13.1 million which included the completed Student Recreation and Wellness Center and the Morrow Garrison Renovation. Current Liabilities Current liabilities totaled $28.5 million decreasing by approximately $2.3 million compared to the prior year total of $30.8 million. This was primarily attributed to the decrease in accounts payable and accrued liabilities of $1.8 million and additional decreases in Accrued Compensated Absences ($0.1), Long-Term Debt Current Portion ($0.4) and Student Deposits ($0.1). Net Assets At June 30, 2011, the University s net assets were $188.8 million. These were comprised of Unrestricted - $61.4 million; Invested in capital assets, net of related debt - $118.6 million; Restricted for loans - $6.7 million; Other restricted - $2.1 million. Page 10

13 Management s Discussion And Analysis (Continued) Operating Results The Statement of Revenues, Expenses and Changes in Net Assets (SRECNA) present the operating results of the University as a whole. The statements, prepared in accordance with GASB, distinguish revenues and expenses between operating and nonoperating categories, and provide a view of the University s operating margin. Comparative summary statements of revenue, expenses and changes in net assets for the years ended June 30, 2012 and 2011 are as follows: Operating Revenue Tuition and fees $ 76.3 $ 71.8 Scholarship allowances (14.9) (15.1) Net tuition and fees Federal grants and contracts State grants and contracts 0.1 Auxiliary enterprises Scholarship allowances (4.3) (4.4) Net auxiliary enterprises Other Total Operating Revenue Operating Expenses Operating Loss (65.0) (72.1) Non-Operating Revenue (Expenses) State appropriations Federal grants and contracts State grants and contracts Other grants and contracts Loss on disposal of capital assets (0.1) Contributions Investment income Interest on capital asset - related debt (2.7) (0.6) Other non-operating revenue (expenses) (0.3) (0.2) Net Non-Operating Revenue Increase (Decrease) In Net Assets Capital Grants And Gifts Net Assets - Beginning Of Year Net Assets - End Of Year $ $ Page 11

14 Management s Discussion And Analysis (Continued) Comparative Analysis Of Fiscal Years 2012 And 2011 Operating Revenues For the year ended June 30, 2012, tuition and fee revenues (net of scholarship allowances and bad debt expense) increased approximately $4.7 million or approximately 8% compared to Fiscal Year The increase in tuition and fees is primarily attributed to an increase in enrollment (3.4%) and tuition and fee increases of (4.2%). Fiscal Year 2011 tuition and fees were approximately $2.4 million above the year ended June 30, 2010 as the result of increased credit hour production, a minimal tuition and fee increase and the implementation of an additional $2.75 per credit hour fee for the operation of the new fitness and wellness center. Auxiliary enterprises experienced an increase of $1.8 million above Fiscal Year 2011 which is primarily attributed to a Student Housing rate increase of 3.0% for Fiscal Year 2012 coupled with an increase in on-campus student residents. Non-Operating Revenues - Although state appropriations are considered part of the University s budgeting process and specifically included as general operating funds, the Governmental Accounting Standards Board (GASB) require state appropriations to be separately reported as non-operating revenue. The University s financial position is closely tied to the State of Missouri and the associated general revenue and lottery proceeds appropriated by the Legislature. State appropriation revenue decreased from $54.8 million in Fiscal Year 2011 to $51.2 million in Fiscal Year This decrease was a result of the State of Missouri funding reduction of 7%. Following is a historical trend of the University s state appropriation funding (net of withholdings). Page 12

15 Management s Discussion And Analysis (Continued) $60 $58 Net Appropriation (in millions) $59.0 $57.8 $56 $54 $52 $51.1 $52.1 $51.0 $52.4 $52.2 $53.4 $55.7 $54.9 $51.2 $50 $48 $ Fiscal Year 2012 interest on capital asset related debt increased $2.1 million over Fiscal Year 2011 primarily due to the first full year of interest payments on the Student Recreation and Wellness Center Bond and the ESCO Energy Savings Program lease as the prior interest payments were capitalized as part of the construction project expenses. Federal grants and contracts revenue decreased by $0.6 million over Fiscal Year 2011 amount of $19.9 million primarily due to the reduction in funding of Regional Professional Development Center ($0.2 mil) and the lapse of the American Reinvestment and Recovery Act directed funding ($0.4 mil) The following graph summarizes the University s Fiscal Year 2012 revenue sources: Auxiliary 19% Federal grants/contracts 1% State appropriations 33% Tuition and fees 40% Contributions 1% Other revenue 6% Page 13

16 Management s Discussion And Analysis (Continued) Operating Expenses For The Years Ended June 30, (In Millions) Compensation and benefits $ 99.8 $ Contractual services Supplies and materials Scholarships and fellowships Depreciation Utilities Other Total $ $ Operating Expenses Total operating expenses increased $0.2 million from $165.4 million in Fiscal Year 2011 to $165.7 million in Fiscal Year Fiscal Year 2012 Compensation and Benefits decreased $2.8 million from the prior year resulting from the faculty early retirement program ($1.5 million) implemented in Fiscal Year 2011, decrease in administrative salaries and wages due to a 90 day hiring freeze ($1.2 mil) and associated fringe benefits ($0.3 mil) health care premiums, a decrease retiree insurance expense ($0.1 million) and a decrease in the postemployment benefit obligation expenditures ($0.1 million). These savings were partially offset by a two percent across the board salary increase. Supplies and materials decreased $1.2 million over Fiscal Year 2011 total of $14.6 million primarily due to the one-time expenditures of furniture and equipment for the Student Recreation and Wellness that opened in Scholarships and fellowships decreased $0.5 million primarily due to reduction of funded scholarship allowances for Fiscal Year Fiscal Year 2012 depreciation expense increased $2.9 million from the prior year resulting from Fiscal Year 2011 new assets put into use Student Recreation and Wellness Center, Audrey J. Walton Clubhouse, Morrow Garrison Renovation and the ESCO Energy Savings Program. In addition, other expenses increase by $1.0 million over Fiscal Year 2011 due primarily to increase in maintenance and repair expense ($1.0 mil) for Fiscal Year Page 14

17 Management s Discussion And Analysis (Continued) For the year ended June 30, 2011, operating expenses increased by approximately $5.7 million above the year ended June 30, This increase was primarily related to increased expenses of $2.6 million for compensation and benefits resulting from accruing for the faculty early retirement program, increase in healthcare premiums and retirement benefits including the annual recording of costs associated with GASB 45. Scholarships and fellowships increased by $1.2 million primarily due to increased support of state funded scholarship initiatives, increased enrollment and Foundation funded scholarships. Cash Flows For The Years Ended June 30, (In Millions) Cash Provided By (Used In) Operating activities $ (53.9) $ (58.9) Non-capital financing activities Capital and related financing activities (18.8) (24.2) Investing activities (7.4) 11.3 Increase (Decrease) In Cash And Cash Equivalents (6.8) 8.2 Cash And Cash Equivalents - Beginning Of Year Cash And Cash Equivalents - End Of Year $ 6.6 $ 13.4 The Statement of Cash Flows shows the sources and uses of University cash. The statement presents a beginning and ending cash balance only and does not include the University s investment in CD s, Treasury or Government Securities, or Corporate Bonds. During the year ended June 30, 2012, cash used in operating activities amounted to ($53.9) million, which resulted from tuition and fees, grants and contracts, sales and services of educational activities and auxiliary enterprises, and associated collections that were offset by payments to suppliers, utilities, employees, scholarships and fellowships and other payments. Cash provided by non-capital financing activities of $73.3 million includes state appropriations, gifts and grants for other than capital purposes and other receipts. Page 15

18 Management s Discussion And Analysis (Continued) Cash used for capital and related financing activities was ($18.8) million. The University had capital expenditures of $11.3 million including: $1.0 million in aviation T-hangars; $1.7 million Audrey J. Walton Clubhouse; $2.9 million Telecom & Information Technology Infrastructure Equipment. Additional other capital expenditures totaling approximately $5.7 million include Art Center improvements, various roof replacements, parking lot improvements, residential housing renovations, Military and Veterans Center, various building improvements and capital equipment purchases. Capital related financing included principal and interest on capital debt and leases of $7.5 million which were partially offset by gifts and grants for capital purposes of $1.3 million. Cash and cash equivalents at June 30, 2012, were $6.6 million, which decreased $6.8 million from June 30, This decrease is attributed to more cash being invested in short term and long term treasury securities versus the prior year. During the year ended June 30, 2011, cash used in operating activities amounted to ($58.9) million, which resulted from tuition and fees, grants and contracts, sales and services of educational activities and auxiliary enterprises, and associated collections that were offset by payments to suppliers, utilities, employees, scholarships and fellowships and other payments. Cash provided by non-capital financing activities of $80.0 million included state appropriations, gifts and grants for other than capital purposes and other receipts. Cash used for capital and related financing activities was $24.2 million. This included debt refinance proceeds ($9.7 million), purchases of capital assets ($20.4) million, principal and interest on capital debt and leases ($9.0 million) which were partially offset by state appropriations for capital purposes of $5.2 million. Cash and cash equivalents at June 30, 2011, were $13.4 million, which increased $8.2 million from June 30, Page 16

19 STATEMENT OF NET ASSETS June 30, 2012 And 2011 Page 1 Of Assets Current Assets Cash and cash equivalents $ 6,287,828 $ 12,614,895 Restricted cash and investments - current 366,117 3,039,233 Short-term investments 46,109,448 32,171,337 Accounts receivable, net of allowance; $6,077,466; $5,089,716 5,636,880 5,800,876 Interest receivable 135, ,024 Federal and state grants receivable 1,606,049 1,098,730 Due from foundation - current portion 58,098 50,000 Inventories 3,228,375 3,040,926 Loans to students, net 1,399,703 1,343,797 Prepaid expenses 1,339,681 1,095,777 Total Current Assets 66,167,631 60,373,595 Noncurrent Assets Noncurrent investments 24,032,341 28,110,777 Loans to students, net 6,099,905 6,007,230 Due from foundation 422, ,577 Capital assets, net 188,383, ,459,443 Deferred bond issue costs, net 790, ,469 Total Noncurrent Assets 219,728, ,738,496 Total Assets 285,896, ,112,091 See the accompanying report letter and notes to financial statements. Page 17

20 STATEMENT OF NET ASSETS June 30, 2012 And 2011 Page 2 Of Liabilities Current Liabilities Accounts payable and accrued liabilities $ 14,461,593 $ 17,156,439 Accrued compensated absences 2,075,566 2,095,113 Deferred revenue 2,668,000 2,829,420 Interest payable 541, ,785 Long-term debt - current portion 5,889,973 5,455,259 Accrued settlement - current portion 50,000 50,000 Student deposits 147, ,452 Total Current Liabilities 25,834,015 28,469,468 Noncurrent Liabilities Accrued compensated absences 1,670,010 1,756,157 Accrued settlement 422, ,577 Other long-term liability 987,414 1,075,430 Long-term debt 60,500,145 65,563,538 Total Noncurrent Liabilities 63,580,386 68,865,702 Total Liabilities 89,414,401 97,335,170 Net Assets Invested in capital assets, net of debt 121,155, ,624,276 Restricted for Non-Expendable Loans 6,670,690 6,706,829 Expendable Scholarships and fellowships 42,133 59,383 Loans 1,209,847 1,215,610 Other 3,129, ,368 Unrestricted 64,274,929 61,382,455 Total Net Assets $ 196,481,943 $ 188,776,921 See the accompanying report letter and notes to financial statements. Page 18

21 FOUNDATION STATEMENT OF FINANCIAL POSITION June 30, 2012 And Assets Cash and cash equivalents $ 1,959,350 $ 2,400,589 Investments 35,026,330 34,220,706 Contributions receivable, net 550, ,232 Accrued investment income 166, ,982 Cash surrender value or life insurance 335, ,966 Beneficial interest in charitable trusts, net 825, ,159 Prepaid expenses 750 5,371 Total Assets $ 38,863,336 $ 38,187,005 Liabilities Annuities payable $ 1,341,488 $ 1,422,624 Accrued expenses 146, ,663 1,488,151 1,649,287 Net Assets Unrestricted 6,596,116 7,695,565 Temporarily restricted 11,444,849 11,419,574 Permanently restricted 19,334,220 17,422,579 37,375,185 36,537,718 $ 38,863,336 $ 38,187,005 See the accompanying report letter and notes to financial statements. Page 19

22 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For The Years Ended June 30, 2012 And 2011 Page 1 Of Operating Revenues Tuition and fees, net of scholarship allowances; $14,881,681; $15,129,177 and bad debt expense; $1,113,727; $642,717 $ 61,449,851 $ 56,722,687 Federal grants and contracts 1,617,743 1,815,209 State grants and contracts 80,602 32,347 Interest on student receivables 575, ,905 Sales and services of educational activities 1,980,746 1,548,216 Auxiliary enterprises Housing, net of scholarship allowances; $4,307,304; $4,367,642 18,103,023 16,734,947 Bookstore 6,357,523 6,180,485 Other auxiliary enterprises 5,031,542 4,664,702 Other operating revenues 5,503,070 5,130,392 Total Operating Revenues 100,699,399 93,358,890 Operating Expenses Compensation and benefits 99,795, ,570,791 Contractual services 12,301,651 11,916,173 Supplies and services 13,396,951 14,691,431 Scholarships and fellowships 7,159,294 7,683,090 Depreciation 14,574,318 11,074,930 Utilities 5,328,828 5,412,356 Other 13,102,827 12,094,269 Total Operating Expenses 165,659, ,443,040 Operating Loss (64,960,043) (72,084,150) See the accompanying report letter and notes to financial statements. Page 20

23 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For The Years Ended June 30, 2012 And 2011 Page 2 Of Nonoperating Revenues (Expenses) State appropriations $ 51,182,273 $ 54,873,873 Federal grants and contracts 19,264,091 19,875,928 State grants and contracts 542, ,419 Other grants and contracts 1,227,774 1,174,307 Contributions 2,024,807 2,279,432 Loss on disposal of capital assets (93,580) (23,348) Investment income 217, ,916 Interest on capital asset - related debt (2,677,426) (565,283) Other nonoperating expenses (324,547) (151,797) Net Nonoperating Revenues 71,364,068 78,428,447 Income Before Other Revenues And Expenses, Gains Or Losses 6,404,025 6,344,297 Capital Appropriation - State 3,899,412 Capital Grants And Gifts 1,300,997 1,749,650 Increase In Net Assets 7,705,022 11,993,359 Net Assets - Beginning Of Year 188,776, ,783,562 Net Assets - End Of Year $ 196,481,943 $ 188,776,921 See the accompanying report letter and notes to financial statements. Page 21

24 FOUNDATION STATEMENT OF ACTIVITIES For The Year Ended June 30, 2012 Temporarily Permanently Unrestricted Unrestricted Unrestricted Total Revenue And Other Support Gifts $ 252,318 $ 2,002,713 $ 1,653,086 $ 3,908,117 In-kind gifts 1, , ,948 Other income ,588 65,841 Investment income 419, ,175 6, ,334 Net realized and unrealized loss on investments and benficial interests in trusts (503,549) (33,210) (10,532) (547,291) Net assets realeased from restrictions 3,197,964 (3,197,964) Total Revenue And Other Support 3,367,852 (415,146) 1,649,243 4,601,949 Expenses Foundation expenses General administratvie expenses 402, ,863 Fundraising expenses 218, ,248 Total Foundation expenses 621, ,111 Contributions to the University for the following purposes Program expenses Scholarships 602, ,629 Academic support - TV/Radio 413, ,313 Student services - athletics 424, ,992 Instruction and other departmental 333, ,250 Support services Institutional support - plant facilities 1,359,980 1,359,980 Total contributions to the University 3,134,164 3,134,164 Total Expenses 3,755,275 3,755,275 Increase (Decrease) In Net Assets Before Other Changes (387,423) (415,146) 1,649, ,674 Other Changes Adjustments to actuarial liability of annuities payable (2,240) 10,378 8,138 Other (73,351) (15,576) 71,582 (17,345) Reclassification of net assets (638,675) 458, ,438 Total Other Changes (712,026) 440, ,398 (9,207) Increase (Decrease) In Net Assets (1,099,449) 25,275 1,911, ,467 Net Assets - June 30, ,695,565 11,419,574 17,422,579 36,537,718 Net Assets - June 30, 2012 $ 6,596,116 $ 11,444,849 $ 19,334,220 $ 37,375,185 See the accompanying report letter and notes to financial statements. Page 22

25 FOUNDATION STATEMENT OF ACTIVITIES For The Year Ended June 30, 2011 Temporarily Permanently Unrestricted Unrestricted Unrestricted Total Revenue And Other Support Gifts $ 265,427 $ 1,398,437 $ 1,101,444 $ 2,765,308 In-kind gifts ,495 69, ,114 Other income ,711 56,345 Investment income 403, ,447 7, ,084 Net realized and unrealized gain on investments 3,919,052 1, ,571 4,029,726 Net assets realeased from restrictions 4,153,087 (4,153,087) Total Revenue And Other Support 8,742,404 (1,691,894) 1,288,067 8,338,577 Expenses Foundation expenses: General administratvie expenses 379, ,836 Fundraising expenses 236, ,097 Total Foundation Expenses 615, ,933 Contributions to the University for the following purposes: Program expenses: Scholarships 658, ,626 Academic support - TV/Radio 499, ,078 Student services - athletics 394, ,318 Instruction and other departmental 602, ,335 Support services: Institutional support - plant facilities 1,894,147 1,894,147 Total Contributions to the University 4,048,504 4,048,504 Total Expenses 4,664,437 4,664,437 Increase (Decrease) In Net Assets Before Other Changes 4,077,967 (1,691,894) 1,288,067 3,674,140 Other Changes Adjustments to actuarial liability of annuities payable (20,661) 282, ,010 Other 39,440 30,901 (103,063) (32,722) Total Other Changes 39,440 10, , ,288 Increase (Decrease) In Net Assets 4,117,407 (1,681,654) 1,467,675 3,903,428 Net Assets - June 30, ,578,158 13,101,228 15,954,904 32,634,290 Net Assets- June 30, 2011 $ 7,695,565 $ 11,419,574 $ 17,422,579 $ 36,537,718 See the accompanying report letter and notes to financial statements. Page 23

26 STATEMENT OF CASH FLOWS For The Years Ended June 30, 2012 And 2011 Page 1 Of Cash Flows From Operating Activities Tuition and fees $ 61,360,602 $ 58,538,583 Grants and contracts 1,698,345 1,847,556 Sales and services of educational activities 1,980,746 1,548,216 Payments to suppliers (28,872,561) (25,573,386) Payments for utilities (5,328,828) (5,412,356) Payments to employees (99,989,283) (100,888,829) Payments for scholarships and fellowships (7,159,294) (7,683,090) Loans issued to students (1,386,239) (1,381,979) Collection of loans to students 1,812,957 1,846,913 Sales and services of auxiliary enterprises 29,602,168 25,194,732 Other payments (7,599,757) (6,963,877) Net Cash Used In Operating Activities (53,881,144) (58,927,517) Cash Flows From Noncapital Financing Activities State appropriations 51,182,273 54,873,873 Gifts and grants for other than capital purposes 22,552,151 25,221,646 Other payments (384,875) (71,048) Net Cash Provided By Noncapital Financing Activities 73,349,549 80,024,471 Cash Flows From Capital And Related Financing Activities Capital appropriations - state 5,241,702 Proceeds from sale of capital assets 90,726 31,199 Purchase of capital assets (11,381,375) (20,430,195) Principal paid on capital debt and leases (4,975,925) (5,911,932) Interest paid on capital debt and leases (2,542,789) (3,130,514) Net Cash Used In Capital And Related Financing Activities (18,809,363) (24,199,740) See the accompanying report letter and notes to financial statements. Page 24

27 STATEMENT OF CASH FLOWS For The Years Ended June 30, 2012 And 2011 Page 2 Of 2 Cash Flows From Investing Activities Investment income $ 200, $ 424, Proceeds from sales and maturities of investments 33,960,000 70,227,861 Purchases of investments (41,558,606) (59,341,620) Net Cash Provided By (Used In) Investing Activities (7,398,156) 11,310,765 Net Increase (Decrease) In Cash And Cash Equivalents (6,739,114) 8,207,979 Cash And Cash Equivalents - Beginning Of Year 13,393,059 5,185,080 Cash And Cash Equivalents - End Of Year $ 6,653,945 $ 13,393,059 Reconciliation Of Cash And Cash Equivalents To The Statement Of Net Assets Cash and cash equivalents $ 6,287,828 $ 12,614,895 Cash and cash equivalents in restricted cash and investments - current 366, ,164 Total Cash And Cash Equivalents $ 6,653,945 $ 13,393,059 Reconciliation Of Changes In Net Assets To Net Cash Used In Operating Activities Changes In Net Assets Adjustments to reconcile changes in net assets to net cash used in operating activities: Operating loss (64,960,043) (72,084,150) Depreciation 14,574,318 11,074,930 Changes in assets and liabilities: (Increase) decrease in accounts receivable 15,415 (618,081) (Increase) decrease in inventory (187,449) 210,933 (Increase) decrease in prepaid expenses (243,904) 9,498 (Increase) decrease in accounts payable and accrued liabilities (2,742,606) 813,787 Increase (decrease) in deferred revenue (161,420) 120,438 Increase (decrease in salaries and benefits (193,710) 1,681,962 Increase (decrease) in student deposits 18,255 (136,834) Net Cash Used In Operating Activities $ (53,881,144) $ (58,927,517) Supplemental Cash Flows Information Accounts payable incurred for capital asset purchases $ 837,808 $ 816,370 Capital lease obligation incurred for capital asset purchase 4,752,178 Capital assets donated 24,989 53,200 See the accompanying report letter and notes to financial statements. Page 25

28 NOTES TO FINANCIAL STATEMENTS June 30, 2012 And Summary Of Significant Accounting Policies Nature Of Operations University of Central Missouri (the University) is a state educational institution organized and existing under the laws of the State of Missouri and is a component unit of the State of Missouri. The University was founded in 1871 and is one of 13 four-year, public-supported institutions of higher education in Missouri. The University s main campus is located in the city of Warrensburg and offers a variety of programs and services at multiple locations. Major federally funded student financial aid programs in which the University participates include the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work Study, Federal Direct Loan, Federal Perkins Loan, Academic Competitiveness Grants and National Science and Mathematics Access to Retain Talent Grants. The University extends unsecured credit to students. Basis Of Accounting And Presentation The financial statements of the University have been prepared on the accrual basis of accounting. Revenues, expenses, gains, losses, assets and liabilities from exchange and exchange-like transactions are recognized when the exchange transaction takes place, while those from government-mandated nonexchange transactions (principally federal and state grants and state appropriations) are recognized when all applicable eligibility requirements are met. Internal activity and balances are eliminated in preparation of the financial statements. Operating revenues and expenses include exchange transactions and programspecific, government-mandated nonexchange transactions. Governmentmandated nonexchange transactions that are not program specific (such as state appropriations), investment income and interest on capital asset-related debt are included in nonoperating revenues and expenses. The University first applies restricted net assets when an expense or outlay is incurred for purposes for which both restricted and unrestricted net assets are available. The University prepares its financial statements as a business-type activity in conformity with applicable pronouncements of the Governmental Accounting Standards Board (GASB). Pursuant to GASB Statement No. 20, the University has elected to apply the provisions of all relevant pronouncements of the Financial Accounting Standards Board (FASB) that were issued on or before November 30, 1989, and do not conflict with or contradict GASB pronouncements. Page 26

29 Notes To Financial Statements (Continued) Use Of 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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and other changes in net assets during the reporting period. Actual results could differ from those estimates. Cash Equivalents The University considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2012 and 2011, cash equivalents consisted primarily of money market funds. Investments And Investment Income Investments in U.S. Treasury obligations and U.S. agencies obligations are carried at fair value. Fair value is determined using quoted market prices. Investments in nonnegotiable certificates of deposit are carried at cost. Investment income consists of interest income and the net change for the year in the fair value of investments carried at fair value. Accounts Receivable Accounts receivable consists of tuition and fee charges to students and charges for auxiliary enterprise services provided to students, faculty and staff. Accounts receivable are recorded net of estimated uncollectible amounts. Deferred Bond Issue Costs Bond issue costs incurred on outstanding revenue bond issues have been deferred and are being amortized over the life of the bonds using the straight-line method. Total amortization was $251,050 and $80,749 for the years ended June 30, 2012 and 2011, respectively. Inventories Inventories include bookstore merchandise, golf equipment and consumable supplies. Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Page 27

30 Notes To Financial Statements (Continued) Loans To Students The University makes loans to students under various federal and other loan programs. Such loans receivable are recorded net of estimated uncollectible amounts. The allowance for uncollectible loans netted against loans to students was $980,308 and $991,381 at June 30, 2012 and 2011, respectively. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair value at the date of donation if acquired by gift. Depreciation is computed using the straightline method over the estimated useful life of each asset. Land improvements Buildings and improvements Infrastructure Furniture, fixtures and equipment Library materials 15 years years 15 years 5-15 years 10 years The University capitalizes interest costs as a component of construction in progress, based on the weighted average rates paid for long-term borrowing for projects not funded with tax-exempt debt. For those projects funded with taxexempt debt, interest costs of borrowing specifically for the project are capitalized net of interest earned on investments acquired with the proceeds of the borrowing. Total interest capitalized was: Total interest expense incurred on borrowings for project $ $ 2,469,670 Interest income from investment of proceeds of borrowings for project (25,864) Net interest cost capitalized on borrowings for specific projects 2,443,806 Interest costs capitalized for projects with no specific borrowings 155, ,783 Total Interest Capitalized $ 155,986 $ 2,606,589 Interest capitalized $ 155,986 $ 2,632,453 Interest charged to expense 2,677, ,283 Total $ 2,833,412 $ 3,197,736 Page 28

31 Notes To Financial Statements (Continued) Compensated Absences University policies permit most employees to accumulate vacation benefits that may be realized as paid time off or, in limited circumstances, as a cash payment. Expense and the related liability are recognized as vacation benefits are earned whether the employee is expected to realize the benefit as time off or in cash. Sick leave benefits expected to be realized as paid time off are recognized as expense when the time off occurs and no liability is accrued for such benefits employees have earned but not yet realized. Compensated absence liabilities are computed using the regular pay and termination pay rates in effect at the statement of net assets date plus an additional amount for compensation-related payments such as social security and Medicare taxes computed using rates in effect at that date. Deferred Revenue Deferred revenue represents unearned student fees and advances on grants and contract awards for which the University has not met all of the applicable eligibility requirements. Net Assets Net assets of the University are classified in four components. Net assets invested in capital assets, net of related debt, consist of capital assets net of accumulated depreciation and reduced by the outstanding balances of borrowings used to finance the purchase or construction of those assets. Restricted expendable net assets are noncapital assets that must be used for a particular purpose as specified by creditors, grantors or donors external to the University, including amounts deposited with trustees as required by bond indentures, reduced by the outstanding balances of any related borrowings. Restricted nonexpendable net assets are noncapital assets that are required to be maintained in perpetuity as specified by parties external to the University, including the federal portion of loan funds and funds held for which the income is used to provide scholarships. Unrestricted net assets are remaining assets less remaining liabilities that do not meet the definition of invested in capital assets, net of related debt or restricted. Classification Of Revenues The University has classified its revenues as either operating or nonoperating revenues according to the following criteria: Page 29