California State University, Stanislaus Auxiliary and Business Services

Transcription

1 Financial Statements (With Supplementary Information) and Independent Auditor s Report June 30, 2017 and 2016

2 Index Page Independent Auditor s Report 2 Financial Statements Statements of Financial Position 4 Statements of Activities 5 Statements of Functional Expenses 6 Statements of Cash Flows 8 Notes to Financial Statements 9 Supplementary Information Schedule of Net Position 23 Schedule of Revenues, Expenses and Changes in Net Position 24 Other Information 25 1

3 Independent Auditor s Report The Board of Directors California State University, Stanislaus Report on the Financial Statements We have audited the accompanying financial statements of California State University, Stanislaus (a California State University Auxiliary Organization), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the 2017 financial statements referred to above present fairly, in all material respects, the financial position of California State University, Stanislaus as of June 30, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 2

4 Prior Period Financial Statements The financial statements of California State University, Stanislaus as of and for the year ended June 30, 2016 were audited by other auditors, whose report dated September 15, 2016 expressed an unmodified opinion on those statements. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the 2017 financial statements as a whole. The supplementary information included on pages 23 to 33 is presented for purposes of additional analysis and is not a required part of the 2017 financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the 2017 financial statements. The information has been subjected to the auditing procedures applied in the audit of the 2017 financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 2017 financial statements or to the 2017 financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the 2017 financial statements as a whole. Los Angeles, California September 14,

5 Statements of Financial Position June 30, 2017 and 2016 Assets Current assets Cash and cash equivalents $ 942,191 $ 940,945 Accounts receivable 67,313 67,546 Interest receivable 6,532 6,399 Due from related parties 10 1,484 Prepaid expenses 1, Total current assets 1,017,276 1,016,874 Investments 1,089,458 1,018,690 Property and equipment, net 6,901,787 7,291,543 Total $ 9,008,521 $ 9,327,107 Liabilities and Net Assets Current liabilities Accounts payable $ 876 $ 4,700 Interest payable 45,583 49,662 Due to related parties 18,677 17,578 Warrior card 54,846 54,931 Current portion of capital lease 115, ,000 Current portion of bond payable 275, ,000 Current portion of bond premium 20,584 5,907 Total current liabilities 530, ,778 Postretirement benefit obligation 155, ,972 Pension obligation 1,041, ,421 Capital lease, net of current portion 3,805,000 3,920,000 Bond payable, net of current portion 1,561,230 1,832,966 Bond premium, net of current portion 87, ,721 Total liabilities 7,180,195 7,381,858 Commitments and contingencies Net assets Unrestricted board designated 1,828,326 1,945,249 Total liabilities and net assets $ 9,008,521 $ 9,327,107 See Notes to Financial Statements. 4

6 Statements of Activities Years Ended June 30, 2017 and Operating revenues and support Commissions $ 567,154 $ 557,954 Rental income 650, ,000 Other 102, ,011 Total operating revenues and support 1,319,769 1,310,965 Operating expenses Program services Bookstore 499, ,981 Campus dining 228, ,797 Residential life village 344, ,437 Vending 11,062 10,682 Warrior card 24,565 37,283 Investment 5,683 5,592 Club colors 1,840 1,781 Total program services 1,114,570 1,183,553 General and administrative 122, ,953 Total operating expenses 1,237,394 1,334,506 Change in net assets from operating activities 82,375 (23,541) Nonoperating (expense) revenue Investment return, net 30,873 17,371 Insurance rebate 3,845 2,121 Loss on disposal of property and equipment (3,295) Pension related (charges) credits other than net periodic pension cost (230,721) 258,184 Net nonoperating (expense) revenue (199,298) 277,676 Change in net assets (116,923) 254,135 Net assets, beginning 1,945,249 1,691,114 Net assets, end $ 1,828,326 $ 1,945,249 See Notes to Financial Statements. 5

7 Statements of Functional Expenses Year Ended June 30, 2017 Program services Campus Residential Warrior General and Bookstore dining life village Vending card Investment Club colors administrative Total Accounting and legal $ 88,408 $ 62,406 $ 86,675 $ 10,401 $ 8,668 $ 1,733 $ 1,734 $ 87,192 $ 347,217 Awards, gifts and donations 11,656 11,656 Bank charges 4,220 2,303 6,523 Benefits 8,670 8,670 Board functions Depreciation 172,868 65, , ,606 Insurance 4,719 6,806 10, ,306 28,489 Interest 188,448 90, ,014 Membership and dues ,068 Outside services 54,729 8, ,484 Overhead, Chancellor's office 5,661 5,661 Postage and freight 2,651 2,651 Professional development Repairs and maintenance 7,111 37, ,795 State pro rata charges 2,260 2,260 Supplies 266 1,136 1,149 1,891 4,442 Taxes and licenses 3, ,004 Travel 86 4,046 4,132 Utilities 25, ,216 Total $ 499,332 $ 228,057 $ 344,031 $ 11,062 $ 24,565 $ 5,683 $ 1,840 $ 122,824 $ 1,237,394 See Notes to Financial Statements. 6

8 Statements of Functional Expenses Year Ended June 30, 2016 Program services Campus Residential Warrior General and Bookstore dining life village Vending card Investment Club colors administrative Total Accounting and legal $ 86,787 $ 61,262 $ 85,086 $ 10,210 $ 8,509 $ 1,702 $ 1,702 $ 85,711 $ 340,969 Awards, gifts and donations 32,000 32,000 Bank charges 5,103 2,584 7,687 Benefits 39,904 39,904 Depreciation 173,746 71, ,510 1, ,649 Insurance 8,178 7,951 9, ,936 30,795 Interest 218,830 95, ,278 Membership and dues Minor equipment 9, ,036 Outside services 3,105 45,001 7,476 55,582 Overhead, Chancellor's office 9,303 9,303 Postage and freight Repairs and maintenance 6,980 40,465 4,687 52,132 State pro rata charges 4,038 4,038 Supplies 4,682 2,062 6,744 Taxes and licenses 3, ,971 Travel ,976 2,118 Utilities 21, ,684 Total $ 550,981 $ 225,797 $ 351,437 $ 10,682 $ 37,283 $ 5,592 $ 1,781 $ 150,953 $ 1,334,506 See Notes to Financial Statements. 7

9 Statements of Cash Flows Years Ended June 30, 2017 and Cash flows from operating activities Change in net assets $ (116,923) $ 254,135 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation 395, ,650 Amortization of bond issuance cost 3,264 3,264 Amortization of bond premium (5,907) (11,609) Loss on disposal of property and equipment 3,295 Net realized and unrealized (gains) losses on investments 5,800 14,786 Changes in operating assets and liabilities Accounts receivable 233 5,164 Interest receivable (133) (774) Due from related parties 1,474 1,339 Prepaid and other assets (730) Accounts payable (3,824) (2,331) Interest payable (4,079) (7,962) Due to related parties 1,099 14,143 Warrior card (85) 11,671 Postretirement benefit obligation (19,810) 31,178 Pension obligation 192,679 (88,693) Net cash provided by operating activities 451, ,961 Cash flows from investing activities Purchases of property and equipment (9,145) (5,792) Proceeds from sales of investments 123, ,668 Purchases of investments (200,435) (329,928) Net cash provided by (used in) investing activities (85,713) 4,948 Cash flows from financing activities Principal payments on capital lease (105,000) (310,562) Principal payments on bond payable (260,000) (250,000) Net cash used in financing activities (365,000) (560,562) Net increase in cash and cash equivalents 1,246 71,347 Cash and cash equivalents, beginning 940, ,598 Cash and cash equivalents, end $ 942,191 $ 940,945 Supplemental disclosure of cash flow information Interest paid during the year $ 279,829 $ 330,584 See Notes to Financial Statements. 8

10 Notes to Financial Statements June 30, 2017 and 2016 Note 1 Organization and summary of significant accounting policies Business activity California State University, Stanislaus (the Organization ) was incorporated in the State of California on October 3, 1960, under the name of California State University, Stanislaus Foundation. Effective July 1, 1998, the Organization changed its name to California State University, Stanislaus. The Organization also authorized the use of the name California State University, Stanislaus Foundation (the Foundation ) for a new nonprofit corporation. The operations and assets of noncommercial activities were transferred to the Foundation effective that date. The Organization was formed and operates as an auxiliary organization of California State University, Stanislaus ( CSU Stanislaus or the University ) which has campuses in Turlock and Stockton, California. The Organization arranges for services to students and faculty including dormitory, food service and campus bookstore. The bookstore and food services are provided by way of lease agreements with independent commercial vendors. Basis of accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Financial statement presentation To ensure the observance of certain constraints and restrictions placed on the use of resources, the accounts of the Organization are maintained in accordance with the principles of net asset accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into net asset classes that are in accordance with specified activities or objectives. Accordingly, all financial transactions have been recorded and reported by net asset class as follows: Unrestricted These generally result from revenues generated by receiving unrestricted contributions, providing services, and receiving income from investments less expenses incurred in providing program related services, raising contributions and performing administrative functions. Temporarily restricted The Organization reports gifts of cash and other assets as temporarily restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or the purpose of the restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from purpose or time restriction. At June 30, 2017 and 2016, the Organization does not have any temporarily restricted net assets. Permanently restricted These net assets are from donors who stipulate that resources are to be maintained permanently, but permit the Organization to expend all of the income (or other economic benefits) derived from the donated assets. At June 30, 2017 and 2016, the Organization does not have any permanently restricted net assets. Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits and all highly liquid investments with an initial maturity at date of purchase of three months or less. 9

11 Notes to Financial Statements June 30, 2017 and 2016 Accounts receivable Accounts receivable are stated at unpaid balances less an allowance for doubtful accounts. The Organization provides for losses on receivables using the allowance method, which is based on experience and other circumstances. The Organization considers all accounts receivable to be fully collectible and, as such, an allowance for doubtful accounts is not considered. Investments Investments are reported at their fair values in the statement of financial position. Realized and unrealized gains and losses are included in the statement of activities as investment return. Property and equipment Property and equipment are stated at cost less accumulated depreciation and amortization. The Organization capitalizes all expenditures for property and equipment in excess of $5,000. Depreciation and amortization are computed using the straightline method over the estimated useful lives of the assets, which range from 5 to 40 years. Leasehold improvements are stated at cost and are amortized using the straightline method over the estimated useful lives of 3 to 20 years. Repairs and maintenance are changed to expenses as incurred. Debt issuance costs Debt issuance costs, net of accumulated amortization, are reported as a direct deduction from the face amount of the bond payable to which such costs relate. Amortization of debt issuance costs is reported as a component of interest expense and is computed using an imputed interest rate on the related loan. Fair value measurements The Organization values its financial assets and liabilities based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1 Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in inactive markets; or modelderived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. Level 3 Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. A financial instrument s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying value of cash and cash equivalents, receivables, and payables approximates fair value as of June 30, 2017 and 2016, due to the relatively short maturities of these instruments. 10

12 Notes to Financial Statements June 30, 2017 and 2016 Revenue recognition The Organization recognizes revenues from auxiliary services when earned. Revenues from bookstore sales commissions, rents, and royalties are recognized when earned. Functional allocation of expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income taxes The Organization is a nonprofit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the Revenue Taxation Code of California. Accordingly, no provision for income taxes is included in the accompanying financial statements. The Organization has no unrecognized tax benefits at June 30, 2017 and The Organization s federal and state income tax returns prior to fiscal years 2014 and 2013, respectively, are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. If applicable, the Organization recognizes interest and penalties associated with tax matters as part of income tax expense and includes accrued interest and penalties with accrued expenses in the statements of financial position. 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 certain reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Change in accounting principle During the year ended June 30, 2017, the Organization adopted the provisions of Accounting Standards Update , Simplifying the Presentation of Debt Issuance Costs ( ASU ), which modifies the presentation of debt issuance costs and the related amortization. The change in accounting under ASU improves the reporting of debt issuance costs by no longer reporting them as assets. It also improves the reporting of the related amortization by including it as a component of interest expense. ASU has been adopted by the Organization on a retrospective basis. As a result, total assets as well as bond payable for the year ended June 30, 2016 have been reduced by the effect of the reclassification of debt issuance costs, net of accumulated amortization, of $22,034. Reclassifications Certain reclassifications of 2016 amounts have been made to conform with the 2017 presentation. Subsequent events The Organization has evaluated subsequent events through September 14, 2017, which is the date the financial statements were available to be issued. 11

13 Notes to Financial Statements June 30, 2017 and 2016 Note 2 Cash and cash equivalents The Organization maintains its cash in bank deposit accounts that are insured by the Federal Deposit Insurance Corporation ( FDIC ) up to a limit of $250,000 per depositor. At June 30, 2017, the Organization s deposits with financial institutions held uninsured cash of $350,053. In addition, the Organization has deposited cash in the State Treasury s Local Agency Investment Fund ( LAIF ). Deposits in LAIF are carried at fair value as reported by LAIF and are not insured by the federal government nor the State of California. The Organization has not experienced any losses in its bank deposit accounts and believes it is not exposed to any significant credit risk on cash Deposits with financial institutions $ 603,475 $ 529,706 Investments in LAIF 338, ,239 Total cash and cash equivalents $ 942,191 $ 940,945 Investments in LAIF As of June 30, 2017 and 2016, there are investments in LAIF, which is a voluntary program created by statute as an alternative for California s local governments and special districts that allows them the opportunity to participate in a major investment portfolio. It is under the administration of the California State Treasurer s Office and is used to fund the Organization s operating deficit. The amounts held in LAIF are considered liquid and therefore treated as a cash equivalent. Realized gains, losses and interest income are included in investment return in the statements of activities. The Organization s investments in LAIF are measured and reported at fair value based on quoted prices for similar assets in an active market (Level 2). Note 3 Investments The Organization s investments consist of marketable securities and corporate bonds, both of which are measured and reported at fair value on a recurring basis based on quoted prices available in active markets for identical investments as of the reporting date (Level 1). The investments consist of: Mutual funds Fixed income domestic $ 535,958 $ 516,334 Fixed income international 57,429 56,600 Corporate bonds domestic 496, ,756 $ 1,089,458 $ 1,018,690 12

14 Notes to Financial Statements June 30, 2017 and 2016 Investment return is summarized as follows: Realized losses $ (7,972) $ (15,708) Unrealized gains 2, Interest and dividends 36,277 31,508 Income from investment in LAIF 2,678 2,060 33,155 18,782 Portfolio management fees (2,282) (1,411) Total $ 30,873 $ 17,371 Note 4 Fair value measurements At June 30, 2017, financial assets that are carried at fair value are classified in the table below in one of the three categories as described in Note 1: Level 1 Level 2 Level 3 Total Mutual funds $ 593,387 $ $ $ 593,387 Corporate bonds 496, ,071 Total investments 1,089,458 1,089,458 Cash equivalent 5,171 5,171 Investment in LAIF 338, ,716 Total $ 1,094,629 $ 338,716 $ $ 1,433,345 At June 30, 2016, financial assets that are carried at fair value are classified in the table below in one of the three categories as described in Note 1: Level 1 Level 2 Level 3 Total Mutual funds $ 572,934 $ $ $ 572,934 Corporate bonds 445, ,756 Total investments 1,018,690 1,018,690 Cash equivalent 47,677 47,677 Investment in LAIF 411, ,239 Total $ 1,066,367 $ 411,239 $ $ 1,477,606 13

15 Notes to Financial Statements June 30, 2017 and 2016 Financial assets valued using Level 1 inputs are based on quoted market prices within active markets and are valued on a recurring basis. Financial assets valued using Level 2 inputs are valued based on investment yields. The Organization reviews valuations and assumptions provided by fund administrators for reasonableness and believes that the carrying amounts of these financial instruments are reasonable estimates of fair value. For the years ended June 30, 2017 and 2016, there have been no changes in the valuation methodologies. The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Foundation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Note 5 Property and equipment Property and equipment consist of the following: Land $ 287,300 $ 287,300 Buildings 5,926,828 5,926,828 Lease improvements 6,008,727 6,008,727 Equipment, furniture and fixtures 450, ,151 12,673,772 12,683,006 Less accumulated depreciation (5,771,985) (5,391,463) $ 6,901,787 $ 7,291,543 Depreciation expense for the years ended June 30, 2017 and 2016 is $395,606 and $402,649, respectively. Note 6 Capital lease On October 1, 2007, the Organization entered into a 32year lease agreement with the Board of Trustees of the California State University (the Board ) as lessee for financing the acquisition of the bookstore from the State of California. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of its future minimum lease payments as of the inception date. The California State University System (the CSU System ) issued a Systemwide Revenue Bonds Series 2008A ( Series 2008A Bond ) in relation to the capital lease. On May 1, 2016, the CSU System completed a partial refinance of the Series 2008A Bond connected with the bookstore capital lease by issuing the Systemwide Revenue Bonds Series 2016A ( Series 2016A Bond ). The face amount of the Series 2016A Bond refinanced was $3,810,000. In addition, $215,000 that remained outstanding from the Series 2008A Bond was applied to the Series 2016A Bond, of which $110,000 remained outstanding as of June 30, 2017.

16 Notes to Financial Statements June 30, 2017 and 2016 The bond bears interest at a rate varying from 2% to 5% per annum. Principal and unpaid interest will be due and payable on or before May 1 and November 1 in each year through November 1, There is a bond premium of $712,681 and bond issuance cost of $12,561, both of which are recorded by the University. Future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2017 are as follows: Payment Principal Interest 2018 $ 296,250 $ 115,000 $ 181, , , , , , , , , , , , ,425 Thereafter 4,812,600 3,350,000 1,462,600 Total $ 6,239,650 $ 3,920,000 $ 2,319,650 Interest expense for the years ended June 30, 2017 and 2016 was $188,448 and $218,830, respectively. At June 30, 2017, the gross amount of the capital lease and related accumulated amortization recorded under the capital lease are as follows: Capital lease $ 4,979,508 Less accumulated amortization (1,464,123) $ 3,515,385 Note 7 Longterm debt On April 1, 2008, the Organization entered into a loan agreement with the Board. In conjunction with the issuance of the Systemwide Revenue Bonds Series 2008A, the Organization requested $3,845,000 to refund previously issued bonds, which were used in the development and construction of the Residential Life Village II. The loan bears interest at a rate varying from 3.5% to 5% per annum. Principal and unpaid interest will be due and payable on or before May 1 and November 1 in each year through November 1, The bonds were issued at a premium in the amount of $213,809, which is being amortized over the life of the bonds. Amortization of bond premium for the year ended June 30, 2017 and 2016 was $5,907 and $11,609, respectively. The bond issuance cost was $48,964, which is also being amortized over the life of the bonds. Amortization of bond issuance cost was $3,264 for the years ended June 30, 2017 and 2016 and is included in interest expense. Bond issuance costs, net of accumulated amortization, totaled $18,770 and $22,034, respectively, as of June 30, 2017 and

17 Notes to Financial Statements June 30, 2017 and 2016 Future minimum principal payments on the Organization s bonds payable as of June 30, 2017 are as follows: Principal Interest 2018 $ 275,000 $ 82, ,000 69, ,000 54, ,000 39, ,000 23,000 Thereafter 350,000 5,833 Total balance due 1,855, ,000 Less unamortized debt (18,770) Less current maturities (275,000) $ 1,561,230 $ 275,000 Interest expense for the years ended June 30, 2017 and 2016 was $87,302 and $92,183, respectively. Bond premium amortization for the years subsequent to June 30, 2017 is as follows: 2018 $ 20, , , , ,740 Thereafter 5,347 Total $ 107,721 16

18 Notes to Financial Statements June 30, 2017 and 2016 Note 8 Board designated net assets Designated funds consist of funds reserved for the following items: Residential life village plant $ 698,417 $ 738,686 Bookstore activities 267, ,873 Stockton auxiliary campus 257, ,942 Residential life village activities 178, ,243 Postretirement benefits 155, ,972 Dining activities 116, ,235 General and administrative 64,793 68,430 Dining plant 11,100 50,000 Bookstore facility 57,600 50,400 Warrior cash 14,997 14,527 Vending activities 5,319 4,061 Club colors activities Note 9 Pension plan $ 1,828,326 $ 1,945,249 Plan description The Organization contributes to the California Public Employees Retirement System ( CalPERS ), a costsharing multipleemployer public employee retirement system that acts as a common investment and administrative agent for participating entities within the State of California. The four auxiliary organizations at California State University, Stanislaus contribute to CalPERS through the Organization. All direct fulltime Organization employees are covered by the plan. Reimbursed employees are covered by CSU Stanislaus plan. Starting July 1, 2008, the Organization s fulltime employees were paid by California State University, Stanislaus. The Organization has not participated in CalPERS since The defined benefit plan uses the Entry Age Normal Actuarial Cost Method, which is a projected benefit cost method. According to this cost method, the normal cost for an employee is the level amount that would fund the projected benefit if it were paid annually from the date of employment until retirement. The auxiliaries fund the plan based upon a percentage of qualified payrolls. CalPERS also uses the level percentage of payroll method to amortize any unfunded actuarial liabilities. The Organization does not have any active employees and did not make any contribution to the plan during the years ended June 30, 2017 and As of June 30, 2017 and 2016, the Organization s pension plan was underfunded by $1,041,100 and $848,421, respectively. According to the actuarial report for the plan years ended June 30, 2017 and 2016, the total pool accrued liability was $13,889,938,645 and $13,137,020,035, respectively. Total pooled plan assets for the years ended June 30, 2017 and 2016 were $11,466,469,739 and $10,349,221,827, respectively. 17

19 Notes to Financial Statements June 30, 2017 and 2016 For the years ended June 30, 2017 and 2016, plan assets, which are allocated by CalPERS, were $3,643,795 and $3,709,356, and the total actuarial present value of accumulated plan benefits is $4,790,226 and $4,638,454. The plan was 76% and 80% funded, respectively, for the years ended June 30, 2017 and The total pension obligation for the active plans is $1,041,100 and $848,421 as of June 30, 2017 and 2016, respectively. The Organization represents less than 5% of total plan assets. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Headquarters Office, Lincoln Plaza North, 400 Q Street, Sacramento, California Information about benefits and contributions expected to be paid in each of the next five fiscal years and the five years thereafter has not been provided by CalPERS. Note 10 Postretirement benefit plan The Organization provides lifetime postretirement medical coverage to employees (and their dependents) who retire at age 50 or older with at least five years of service with the Organization, the Associated Students Inc. of California State University, Stanislaus or the University Student Union of California State University, Stanislaus. The Organization pays a portion of the cost of the benefit, up to a predetermined cap. Retirees are responsible for costs in excess of the cap. As of June 30, 2017 and 2016, the Organization had two retired employees who were eligible to participate in the plan. The two retired employees covered under this plan were originally employees of the California State University, Stanislaus Foundation. During the year ended June 30, 2009, the Organization agreed to pay for the employees postretirement benefits because the Foundation had no discretionary funds to pay this obligation. No contributions were made to the plan during the years ended June 30, 2017 and The plan s obligations and funded status for the Organization at June 30, 2017 and 2016 are as follows: 18

20 Notes to Financial Statements June 30, 2017 and 2016 Obligations and funded status at June Change in benefit obligation Benefit obligation at beginning of year $ 174,972 $ 143,794 Interest cost 6,204 6,226 Actuarial (gain)/loss (17,785) 33,049 Benefits paid (8,229) (8,097) Benefit obligation at end of year $ 155,162 $ 174,972 Funded status Benefit obligation $ 155,162 $ 174,972 Unrecognized net actuarial gain (202,673) (194,702) Accrued benefit cost $ 357,835 $ 369,674 Measurement date June 30, 2017 June 30, 2016 Unfunded status at end of year $ (155,162) $ (174,972) Amounts recognized in the statements of financial position Postretirement benefit obligation $ 155,162 $ 174,972 Net periodic benefit cost (credit) Interest cost $ 6,204 $ 6,226 Amortization of net gain (9,814) (12,551) Net periodic benefit cost (credit) $ (3,610) $ (6,325) Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing costs between the employer and plan members to that point. 19

21 Notes to Financial Statements June 30, 2017 and 2016 Actuarial methods and assumption Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the plan members to that point. The actuarial methods and assumption used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the longterm perspective of the calculations Weighted average assumptions at June 30, Discount rate 3.84% 3.62% Expected longterm return on plan assets N/A N/A Rate of compensation increase N/A N/A Medical trend Initial health care costs trend rate 5.50% 5.80% Ultimate health care costs trend rate 4.50% 4.50% Year that the rate reaches the ultimate trend rate 4 years 5 years Expected benefit payments 2018 $ 8, , , , , ,617 The Organization expects to contribute $8,430 during the next fiscal year. 20

22 Notes to Financial Statements June 30, 2017 and 2016 Note 11 Related party transactions The Organization enters into transactions with related parties, including: California State University, Stanislaus ( CSU Stanislaus ) Associated Students Incorporated of California State University, Stanislaus ( ASI ) California State University, Stanislaus Foundation ( Foundation ) University Student Union of California State University, Stanislaus ( USU ) Transactions with related parties consist of the following for the year ended June 30, 2017: CSU Stanislaus ASI Foundation USU Total Due from related parties $ 10 $ $ $ $ 10 Due to related parties (17,192) (1,485) (18,677) Payments made to services, space, and programs 1,162, ,442 1,171,939 Gifts to other auxiliaries 8,000 8,000 Payments received for services, space, and programs (704,871) (3,899) (89) (15,073) (723,932) Transactions with related parties consist of the following for the year ended June 30, 2016: CSU Stanislaus ASI Foundation USU Total Due from related parties $ $ 298 $ $ 1,186 $ 1,484 Due to related parties (15,724) (1,854) (17,578) Payments made to services, space, and programs 1,136,056 32, ,088 1,174,604 Payments received for services, space, and programs (695,430) (2,126) (4,101) (10,088) (711,745) The Organization often also makes contributions of gifts to the University. There were no gifts given during the years ended June 30, 2017 and 2016, respectively. 21

23 Supplementary Information 22

24 Schedule of Net Position June 30, 2017 (For inclusion in the California State University) Assets Current assets: Cash and cash equivalents $ 603,475 Shortterm investments 338,716 Accounts receivable, net 73,855 Capital leases receivable, current portion Notes receivable, current portion Pledges receivable, net Prepaid expenses and other current assets 1,230 Total current assets 1,017,276 Noncurrent assets: Restricted cash and cash equivalents Accounts receivable, net Capital leases receivable, net of current portion Notes receivable, net of current portion Student loans receivable, net Pledges receivable, net Endowment investments Other longterm investments 1,089,458 Capital assets, net 6,901,787 Other assets Total noncurrent assets 7,991,245 Total assets 9,008,521 Deferred outflows of resources: Unamortized loss on debt refunding(s) Net pension liability Others Total deferred outflows of resources Liabilities Current liabilities: Accounts payable 19,553 Accrued salaries and benefits Accrued compensated absences, current portion Unearned revenue Capital lease obligations, current portion 115,000 Longterm debt, current portion 275,000 Claims liability for losses and loss adjustment expenses, current portion Depository accounts Other current liabilities 100,429 Total current liabilities 509,982 Noncurrent liabilities: Accrued compensated absences, net of current portion Unearned revenue Grants refundable Capital lease obligations, net of current portion 3,805,000 Longterm debt, net of current portion 1,687,721 Claims liability for losses and loss adjustment expenses, net of current portion Depository accounts Other postemployment benefits obligations 155,162 Net pension liability 1,041,100 Other liabilities Total noncurrent liabilities 6,688,983 Total liabilities $ 7,198,965 Deferred inflows of resources: Service concession arrangements Net pension liability Unamortized gain on debt refunding(s) Nonexchange transactions Others Total deferred inflows of resources Net position: Net investment in capital assets 1,019,066 Restricted for: Nonexpendable endowments Expendable: Scholarships and fellowships Research Loans Capital projects Debt service Others Unrestricted 790,490 Total net position $ 1,809,556 See Independent Auditor s Report. 23

25 Schedule of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2017 (For inclusion in the California State University) Revenues: Operating revenues: Student tuition and fees, gross $ Scholarship allowances (enter as negative) Student tuition and fees (net of scholarship allowances of $ 0) Grants and contracts, noncapital: Federal State Local Nongovernmental Sales and services of educational activities Sales and services of auxiliary enterprises, gross 1,217,154 Scholarship allowances aux ent (enter as negative) Sales and services of auxiliary enterprises (net of scholarship allowances of $ 0) 1,217,154 Other operating revenues 83,471 Total operating revenues 1,300,625 Expenses: Operating expenses: Instruction Research Public service Academic support Student services 463,274 Institutional support Operation and maintenance of plant 99,500 Student grants and scholarships Auxiliary enterprise expenses Depreciation and amortization 395,606 Total operating expenses 958,380 Operating income (loss) 342,245 Nonoperating revenues (expenses): State appropriations, noncapital Federal financial aid grants, noncapital State financial aid grants, noncapital Local financial aid grants, noncapital Nongovernmental and other financial aid grants, noncapital Other federal nonoperating grants, noncapital Gifts, noncapital 19,144 Investment income (loss), net 30,873 Endowment income (loss), net Interest expense (275,750) Other nonoperating revenues (expenses) excl. interagency transfers (230,171) Other nonoperating revenues (expenses) interagency transfers Net nonoperating revenues (expenses) (455,904) Income (loss) before other revenues (expenses) (113,659) State appropriations, capital Grants and gifts, capital Additions (reductions) to permanent endowments Increase (decrease) in net position (113,659) Net position: Net position at beginning of year, as previously reported 1,923,215 Restatements Net position at beginning of year, as restated 1,923,215 Net position at end of year $ 1,809,556 See Independent Auditor s Report. 24

26 Other Information June 30, 2017 (For inclusion in the California State University) 1 Noncurrent restricted cash and cash equivalents at June 30, 2017: Portion of restricted cash and cash equivalents related to endowments $ All other restricted cash and cash equivalents Total restricted cash and cash equivalents $ 2.1 Composition of investments at June 30, 2017: Current Unrestricted Current Restricted Total Current Noncurrent Unrestricted Noncurrent Restricted Total Noncurrent Total State of California Surplus Money Investment Fund (SMIF) $ 338,716 $ $ 338,716 $ $ $ $ 338,716 State of California Local Agency Investment Fund (LAIF) Corporate bonds 496, , ,071 Wachovia Short Term Fund Wachovia Medium Term Fund Wachovia Equity Fund CSU Consolidated Investment Pool (includes SWIFT and 0948 SMIF) Common Fund Short Term Fund Common Fund Others Debt securities Fixed income securities (Treasury notes, GNMA's) Certificates of deposit Notes receivable Mutual funds 593, , ,387 Money market funds Repurchase agreements Commercial paper Asset backed securities Mortgage backed securities Municipal bonds US agency securities US treasury securities Equity securities Exchange traded funds Alternative investments: Inverse floaters Interestonly strips Agency passthrough Private equity (including limited partnerships) Alternative investments Hedge funds Managed futures Real estate investments (including REITs) Commodities Derivatives Other alternative investment types Other external investment pools: Other major investments: Total investments 338, ,716 1,089,458 1,089,458 1,428,174 Less endowment investments (enter as negative number) Total investments, net of endowments $ 338,716 $ $ 338,716 $ 1,089,458 $ $ 1,089,458 $ 1,428, Investments held by the University under contractual agreements at June 30, 2017 : Portion of investments in note 2.1 held by the University under contractual agreements: See Independent Auditor s Report. 25

27 Other Information June 30, 2017 (For inclusion in the California State University) 2.3 Restricted current investments at June 30, 2017 related to: Total restricted current investments at June 30, 2017 $ 2.4 Restricted noncurrent investments at June 30, 2017 related to: Endowment Investments Total restricted noncurrent investments at June 30, 2017 $ See Independent Auditor s Report. 26

28 Other Information June 30, 2017 (For inclusion in the California State University) 2.5 Fair value hierarchy in investments at June 30, 2017: Fair Value Measurements Using Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Net Asset Value (NAV) State of California Surplus Money Investment Fund (SMIF) $ $ $ $ $ State of California Local Agency Investment Fund (LAIF) 338, ,716 Corporate bonds 496, ,071 Wachovia Short Term Fund Wachovia Medium Term Fund Wachovia Equity Fund CSU Consolidated Investment Pool (includes SWIFT and 0948 SMIF) Common Fund Short Term Fund Common Fund Others Debt securities Fixed income securities (Treasury notes, GNMA's) Certificates of deposit Notes receivable Mutual funds 593, ,387 Money market funds Repurchase agreements Commercial paper Asset backed securities Mortgage backed securities Municipal bonds US agency securities US treasury securities Equity securities Exchange traded funds Alternative investments: Inverse floaters Interestonly strips Agency passthrough Private equity (including limited partnerships) Alternative investments Hedge funds Managed futures Real estate investments (including REITs) Commodities Derivatives Other alternative investment types Other external investment pools: Other major investments: Total investments $ 1,428,174 $ 1,089,458 $ 338,716 $ $ See Independent Auditor s Report. 27

29 Other Information June 30, 2017 (For inclusion in the California State University) 3 Capital assets 3.1 Composition of capital assets at June 30, 2017: Balance June 30, 2016 Prior Period Adjustments Reclassifications Balance June 30, 2016 (Restated) Additions Reductions Transfer of completed CWIP Balance June 30, 2017 Nondepreciable/Nonamortizable capital assets: Land and land improvements $ 287,300 $ $ $ 287,300 $ $ $ $ 287,300 Works of art and historical treasures Construction work in progress (CWIP) Intangible assets: Intangible assets Rights and easements Patents, copyrights and trademarks Internally generated intangible assets in progress Licenses and permits Other intangible assets: Total intangible assets Total nondepreciable/nonamortizable capital assets 287, , ,300 Depreciable/Amortizable capital assets: Buildings and building improvements 5,926,828 5,926,828 5,926,828 Improvements, other than buildings Infrastructure Leasehold improvements 6,008,727 6,008,727 6,008,727 Personal property: Equipment 389,098 71, ,151 9,144 (18,378) 450,917 Library books and materials Intangible assets: Intangible assets Software and websites Rights and easements Patents, copyrights and trademarks Licenses and permits Other intangible assets: Total intangible assets Total depreciable/amortizable capital assets 12,324,653 71,053 12,395,706 9,144 (18,378) 12,386,472 Total capital assets 12,611,953 71,053 12,683,006 9,144 (18,378) 12,673,772 See Independent Auditor s Report. 28

30 Other Information June 30, 2017 (For inclusion in the California State University) Less accumulated depreciation/amortization: (enter as negative number, except for reduction, enter as positive number) Buildings and building improvements (2,931,132) (2,931,132) (156,511) (3,087,643) Improvements, other than buildings Infrastructure Leasehold improvements (2,070,242) (2,070,242) (218,388) (2,288,630) Personal property: Equipment (319,036) (71,053) (390,089) (20,707) 15,084 (395,712) Library books and materials Intangible assets: Intangible assets Software and websites Rights and easements Patents, copyrights and trademarks Licenses and permits Other intangible assets: Total intangible assets Total accumulated depreciation/amortization (5,320,410) (71,053) (5,391,463) (395,606) 15,084 (5,771,985) Total capital assets, net $ 7,291,543 $ $ $ 7,291,543 $ (386,462) $ (3,294) $ $ 6,901, Detail of depreciation and amortization expense for the year ended June 30, 2017: Depreciation and amortization expense related to capital assets Amortization expense related to other assets Total depreciation and amortization $ $ 395, ,606 4 Longterm liabilities activity schedule Beginning Balance Prior Period Adjustments Reclassifications Beginning Balance Restated Additions Reductions Ending Balance Current Portion Longterm Portion Balance June 30, 2016 Prior Period Adjustments Reclassifications Balance June 30, 2016 (Restated) Additions Reductions Balance June 30, 2017 Current Portion Longterm Portion Accrued compensated absences $ $ $ $ $ $ $ $ $ Claims liability for losses and loss adjustment expenses Capital lease obligations: Gross balance 4,025,000 4,025,000 (105,000) 3,920, ,000 3,805,000 Unamortized net premium / (discount) on capital lease obligations Total capital lease obligations 4,025,000 4,025,000 (105,000) 3,920, ,000 3,805,000 Longterm debt: Auxiliary revenue bonds Other bonds (nonrevenue bonds) Commercial paper Notes payable related to SRB 2,115,000 2,115,000 (260,000) 1,855, ,000 1,580,000 Other: (list by type) Total 2,115,000 2,115,000 (260,000) 1,855, ,000 1,580,000 Unamortized net bond premium / (discount) 113, ,628 (5,907) 107, ,721 Total longterm debt 2,228,628 2,228,628 (265,907) 1,962, ,000 1,687,721 Total longterm liabilities $ 6,253,628 $ $ $ 6,253,628 $ $ (370,907) $ 5,882,721 $ 390,000 $ 5,492,721 See Independent Auditor s Report. 29

31 Other Information June 30, 2017 (For inclusion in the California State University) 5 Future minimum lease payments Capital lease obligations related to SRB Principal and Year Ending June 30: Principal SRB Interest SRB Interest SRB Principal Only Interest Only Total capital lease obligations Principal and Interest Other Principal Interest Principal and Interest 2018 $ 115, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,500 1,419, , ,500 1,419, , ,000 1,416, , ,000 1,416, ,170, ,300 1,415,300 1,170, ,300 1,415, ,000 21, , ,000 21, , Total minimum lease payments $ 3,920, ,319,650 6,239,650 3,920,000 2,319,650 6,239,650 Less: amounts representing interest (2,319,650) Present value of future minimum lease payments 3,920,000 Unamortized net premium / (discount) on capital lease obligation Total capital lease obligations 3,920,000 Less: current portion (115,000) Capital lease obligations, net of current portion $ 3,805,000 6 Longterm debt schedule All other capital lease obligations Auxiliary revenue bonds All other longterm debt Total longterm debt Year ended June 30: Principal Only Interest Only Principal and Interest Principal Only Interest Only Principal and Interest Principal Only Interest Only 2018 $ 275,000 82, , ,000 82, , ,000 69, , ,000 69, , ,000 54, , ,000 54, , ,000 39, , ,000 39, , ,000 23, , ,000 23, , ,000 5, , ,000 5, , Total minimum debt payments $ 1,855, ,000 2,130,000 1,855, ,000 2,130,000 Less: amounts representing interest (275,000) Present value of future minimum payments 1,855,000 Unamortized net bond premium / (discount) 107,721 Total longterm debt 1,962,721 Less: current portion (275,000) Longterm debt, net of current portion $ 1,687,721 Principal and Interest See Independent Auditor s Report. 30