CALIFORNIA STATE UNIVERSITY, FRESNO ATHLETIC CORPORATION ANNUAL REPORT

Transcription

1 ANNUAL REPORT

2 FINANCIAL STATEMENTS (WITH INDEPENDENT AUDITOR S REPORT THEREON) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015

3 TABLE OF CONTENTS PAGE General Information 1-3 Independent Auditor s Report 4-5 Management s Discussion and Analysis (Unaudited) 6-11 Basic Financial Statements: Statements of Net Position 12 Statements of Revenues, Expenses, and Changes in Net Position 13 Statements of Cash Flows Notes to Financial Statements Required Supplementary Information 35 Other Supplementary Information: Summary of Revenues and Expenses 36 Schedule of Revenues and Expenses Information Prepared in Accordance with Instructions from the California State University Office of the Chancellor 44-49

4 AS OF JUNE 30, 2016 BOARD OF DIRECTORS: Clinton G. Moffitt Dr. Frank R. Lamas Paula Castadio Dawn Lewis Dr. Maritere Lopez Cameran Patterson Sandy Brown Vinci Ricchiuti Christopher Tozlian vacant vacant Jim Bartko University Officer designated by the President Interim Chief Financial Officer California State University, Fresno Administrative Director designated by the President Vice President for Student Affairs California State University, Fresno University Officer designated by the President Vice President for University Advancement California State University, Fresno University Faculty Athletic Representative Kinesiology Department California State University, Fresno Faculty Director nominated by the Board of Directors History Department California State University, Fresno Associated Student Body President California State University, Fresno Community Director Fresno, California Community Director Budget Committee Chair Clovis, California Community Director Audit Committee Chair Fresno, California Male Student Athlete Director Academic Counseling Female Student Athlete Director Academic Counseling University Athletic Director (nonvoting) California State University, Fresno Page 1

5 AS OF JUNE 30, 2016 OFFICERS: Clinton G. Moffitt Vinci Ricchiuti Chairman of the Board Secretary AUDIT COMMITTEE: Christopher Tozlian Committee Chair Jim Sabbatini Dr. Maritere Lopez Juan Carlos Gonzalez Erin Goldfarb BUDGET COMMITTEE: Vinci Ricchiuti Committee Chair Dawn Lewis Christopher Tozlian Dr. Frank R. Lamas Sandy Brown Page 2

6 AS OF JUNE 30, 2016 CORPORATE DATA: Executive Offices Auditors Legal Counsel California State University, Fresno Fresno, California Harold H. Haak Administrative Center Telephone: (559) Macias Gini & O Connell, LLP 4675 MacArthur Court, Suite 600 Newport Beach, California Telephone: (949) Robert E. Bergin, Attorney at Law Lang Richert & Patch 5200 N. Palm, 4 th Floor Fresno, California Telephone: (559) Page 3

7 Certified Public Accountants Sacramento Walnut Creek San Francisco Oakland Board of Directors California State University, Fresno Athletic Corporation Fresno, California Independent Auditor s Report Los Angeles Century City Encino Newport Beach San Diego Report on the Financial Statements We have audited the accompanying financial statements of California State University, Fresno Athletic Corporation (the Corporation), a component unit of California State University, Fresno, as of and for the fiscal years ended June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the Corporation s basic financial statements as listed in the table of contents. 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the 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 Corporation 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 Corporation 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 financial statements referred to above present fairly, in all material respects, the respective financial position of the California State University, Fresno Athletic Corporation as of June 30, 2016 and 2015, and the changes in its financial position and its cash flows for the fiscal years then ended in accordance with accounting principles generally accepted in the United States of America. Macias Gini & O Connell LLP 4675 MacArthur Court, Suite 600 Newport Beach, CA

8 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 6 11 and required supplementary pension information on page 35 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Corporation s basic financial statements. The other supplementary information on pages is presented for purposes of additional analysis and is not a required part of the basic 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 basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 16, 2016, on our consideration of the Corporation s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Corporation s internal control over financial reporting and compliance. Newport Beach, California September 16,

9 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 The following discussion and analysis provides an overview of the financial position and performance of the California State University, Fresno Athletic Corporation ( Corporation ) during the fiscal years ended June 30, 2016 and The discussion has been prepared by management and should be read in conjunction with the financial statements and accompanying notes, which follow this section. Reporting Entity The Corporation was incorporated as a nonprofit entity under the laws of the State of California on April 26, The Corporation was formed to meet the expanding needs and regulations related to administering the various intercollegiate sports programs at California State University, Fresno ( University ). The Corporation is supported primarily by contributions and game revenues. The Save Mart Center is not a part of the Corporation, nor administered by the Corporation; and therefore, none of its activities are reflected in these financial statements. Overview of the Financial Statements The financial statements of the Corporation for the fiscal years ended June 30, 2016 and 2015 have been prepared in accordance with Governmental Accounting Standards Board (GASB) Statement 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. The Corporation is a component unit of California State University, Fresno. The Statements of Net Position include all assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the Corporation with the difference between these reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of the financial position of the Corporation. The Statements of Revenues, Expenses, and Changes in Net Position present information showing how net position changed during the most recent two fiscal years. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Revenues and expenses are classified as either operating or nonoperating. This distinction results in operating deficits, as the GASB Statement No.35 reporting model requires classification of state support, student fees, and contributions, significant revenues to fund current operations, as nonoperating revenue. The Statements of Cash Flows present inflows and outflows of cash during the most recent two fiscal years and is summarized by operating, noncapital financing, capital and related financing, and investing activities. This statement is prepared using the direct method of cash flows and therefore presents gross rather than net amounts for the years activities. When used with related disclosures and information in the other financial statements, the information provided in these statements should help financial report users assess the Corporation s ability to generate future net cash flows, its ability to meet obligations as they come due, and its need for occasional external financing. Notes to Financial Statements provide additional information that is essential to a full understanding of the data provided in the Corporation s financial statements. The notes are included immediately following the financial statements within this report. Page 6

10 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 Financial Highlights During the current fiscal year, the Corporation continued to make improvements and enhancements to athletic facilities. These projects are driven by a mission to help create a competitive advantage for the teams and to improve fan experience. The projects included a new video board at the football stadium, the renovation of the Spalding G. Wathen Tennis Center, and soccer/lacrosse locker room upgrades. New NCAA legislation in 15/16 permitted athletic departments to pay the full cost of attendance for its student athletes whereas previously incidental and transportation costs were excluded. This attributed to a $1.3 million increase in athletic aid costs for the Corporation. The Corporation began the first phase to develop wrestling and water polo programs; including preparing facilities and offices and hiring coaches. Competition is expected to begin during the 2017/2018 athletic season. Fiscal year 2016 As of June 30, 2016, the Corporation s change in net position increased $3.3M compared to the prior year. However, this increase does not depict an accurate financial outcome for the current year. As shown in the table below, the increased change in net position was the result of a decrease in nonrecurring asset write-offs, which approximated $850,000 for 2016, as compared to approximately $5,000,000 for By excluding the effect of the write-offs, the Corporation s net income actually declined $900,000 compared to the prior year. This decrease is attributable to various factors including: declining football and conference revenues of approximately $1.9 million, increased athletic aid costs of $1.3 million, and one-time facility improvements of $750,000. In addition, there were costs in the current year associated with football coaching staff transitions and various staffing positions being filled. As a result of declining game revenues and rising costs, the Corporation relied on increased University support of $3.4 million and contribution revenues to meet cashflow and operational needs Total revenues and contributions $ 42,735,762 $ 39,838,372 Total expenses 41,655,972 37,886,558 Net income 1,079,790 1,951,814 Loss on donation/disposal of property and equipment (850,923) (5,006,103) Change in net position $ 228,867 $ (3,054,289) Fiscal year 2015 During the fiscal year ended June 30, 2015, the Corporation recognized a loss from the donation of buildings to the University; this had a significant negative effect on net position. This one-time transaction decreased net position by $5,006,103, however, this decrease was offset by the Corporation otherwise being profitable as shown above. There were various factors that led to the income of $1,951,814 noted in the table above. Capital contribution revenue increased $544,462, primarily due to donor financed facility improvements such as the renovation of locker rooms, replacement of the North Gym court floor, weight room enhancements, and a new synthetic softball diamond halo. Additionally, University support increased $1,893,282 to maintain positive cashflow during the year. Page 7

11 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 Condensed Statements of Net Position Current assets $ 7,799,932 $ 7,948,537 $ 6,270,733 Capital assets, net 7,350,540 7,417,810 12,664,510 Other noncurrent assets 27,120 39,365 46,503 Total assets 15,177,592 15,405,712 18,981,746 Deferred outflows of resources 417, ,203 - Current liabilities 4,505,707 5,350,420 5,865,237 Noncurrent liabilities 3,050,536 2,427, ,038 Total liabilities 7,556,243 7,777,814 6,655,275 Deferred inflows of resources 364, ,345 - Net position Net investment in capital assets 6,630,517 7,417,810 12,567,200 Unrestricted 1,044,106 27,946 (240,729) Total net position $ 7,674,623 $ 7,445,756 $ 12,326,471 Current and other noncurrent assets In fiscal year 2016, the decrease in current assets was attributable to the liquidation of investments to payoff employment contract obligations of $560,000. Noncurrent assets consist of pledge receivables. Capital assets, net The Corporation s capital assets, net of accumulated depreciation, as of June 30, 2016, 2015, and 2014, are comprised of the following: Buildings and building improvements $ 3,306,825 $ 3,504,318 $ 8,420,667 Improvements other than buildings 1,606,157 1,725,226 1,824,972 Equipment 2,437,558 2,158,835 2,297,400 Intangible assets - 14,761 59,041 Construction work in progress - 14,670 62,430 Total $ 7,350,540 $ 7,417,810 $ 12,664,510 In fiscal year 2016, the Corporation replaced various assets including the football stadium video board. The net book value of the disposals amounted to approximately $850,000. The reduction in capital assets related to the disposals and depreciation of $650,000 which was offset by acquisitions of $1.5 million. The acquisitions included a new football stadium video board, lockers, and a golf van. As of June 30, 2015, construction work in process consisted of a progress payment for lockers for the soccer and lacrosse locker room. This project was completed in August Page 8

12 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 Deferred outflows of resources As part of GASB 68, the Corporation was required to record contributions made to the pension plan during the current fiscal year as deferred outflows of resources. These contributions will reduce the net pension liability in the following fiscal year. In 2016, deferred outflows of resources also consists of pension deferrals associated with the net pension liability. These deferrals will be amortized and recognized in pension expense in future years. Current and noncurrent liabilities Current liabilities continue to decrease, which is attributable to declining football season ticket presales and the payout of employment contract obligations. Unearned revenue will be recognized in the following year. Detail of the significant balances in current liabilities is presented below Football ticket presales $ 2,460,000 $ 2,660,000 $ 3,150,000 Contract incentives 700, , ,000 Employment contract obligations - 700, ,000 $ 3,160,000 $ 4,060,000 $ 4,685,000 Noncurrent liabilities totaled $3,050,536 and $2,427,394 as of June 30, 2016 and 2015, respectively. These amounts were comprised of accrued compensated absences, long-term debt, and net pension liability. The increase relates to the acquisition of debt to finance the purchase of a football stadium video board. The loan amounted to $890,000 to be paid over 5 years. Long-term balance as of June 30, 2016 amounted to $545,801. The pension liability in 2016 was consistent with the prior year. Deferred inflows of resources Deferred inflows of resources consist of pension deferrals associated with net pension liability. These deferrals will be amortized and recognized in pension expense in future years. Net position The net position category Net investment in capital assets represents the Corporation s capital assets, net of accumulated depreciation, and net of outstanding principal balances of debt attributable to the acquisition, construction, or improvements of those assets. The decrease in 2016 is related to the acquisition of debt to finance the purchase of capital assets. Positive unrestricted net position of $1,044,106 is reported as of June 30, This is an increase from the prior year due to the current year positive change in unrestricted net position of $1,016,160. Page 9

13 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 Condensed Statements of Revenues, Expenses, and Changes in Net Position Operating revenues Athletic operations $ 16,564,940 $ 19,144,744 $ 18,306,885 Merchandise sales and commissions 382, , ,863 Other operating revenues 133, , ,317 Total operating revenues 17,080,816 19,899,316 19,316,065 Operating expenses Athletic operations 27,935,817 26,721,068 25,172,643 Management and general 3,284,588 2,917,625 3,462,755 Operation and maintenance of plant 2,694,574 1,952,087 1,682,311 Student grants and scholarships 7,062,342 5,448,979 5,096,893 Depreciation and amortization 647, , ,032 Total operating expenses 41,624,965 37,880,021 36,265,634 Operating loss (24,544,149) (17,980,705) (16,949,569) Nonoperating revenues (expenses) 24,055,784 14,199,510 16,366,991 Loss before capital contributions (488,365) (3,781,195) (582,578) Capital contributions 717, , ,444 Change in net position 228,867 (3,054,289) (400,134) Net position at beginning of year 7,445,756 10,500,045 * 12,726,605 Net position at end of year $ 7,674,623 $ 7,445,756 $ 12,326,471 *Due to the implementation of GASB 68 in 2015 beginning net position was restated. Operating revenues Operating revenues decreased approximately $2,800,000 during fiscal year 2016 primarily due to a decline in football revenues. Football gates receipts decreased $950,000, which is attributed to hosting a game against Nebraska in the 2014/2015 season for which tickets were sold at premium prices and the game nearly sold out. In addition, guarantees were $250,000 less compared to prior year, the football team did not participate in a bowl which reduced conference revenues by $970,000, and television contract revenues decreased $300,000. Other factors that contributed to the decrease were College Football Playoff and prior year one-time conference revenues decreased $400,000 and Bulldog Shop commissions decreased $150,000 per the terms of the contract. Operating expenses Overall operating expenses increased approximately $3,800,000 during the fiscal year ended June 30, A portion of this increase is attributable to a 25% increase in the NCAA imposed athletic scholarship cap which led to an increase in athletic aid costs of $1,350,000. In addition, athletics provided scholarships of $250,000 to band members in the current year. Facility maintenance costs increased $750,000 due to the tennis court renovation project that was completed in the current year. Salaries and benefit costs increased $760,000 which is attributable to the Corporation hiring senior athletic director positions and transitioning football assistant coaches. The cost of the coaching staff transition was approximately $400,000. Game guarantee and travel costs will fluctuate year to year depending on competition schedules and travel destinations. In the current year, team expenses increased approximately $1,000,000, a portion of this increase related to men s basketball competing in Italy and football travelling to Hawaii. Costs associated with event operations increased by $275,000 which was related to various factors such as renting speakers for the new football stadium video board, men s basketball hosting more games than in the prior year, and the Mountain West Page 10

14 MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE FISCAL YEARS ENDED JUNE 30, 2016 AND 2015 Conference implementing an increased fee structure for officials. Various football ticket promotions were added in the current year, which increased marketing costs related to complementary tickets by $320,000. Overall cost increases were offset by a significant reduction of $990,000 in football post season costs due to football not attending a bowl game. Additionally, depreciation decreased by $200,000 in the current year which related to the prior year donation of buildings to the University. Nonoperating revenues and expenses Nonoperating revenues consist primarily of contribution revenue, student fees, and University support. Contribution revenue includes donations that fund the cost of athletic aid. The current year increase amounted to approximately $1,350,000 which corresponds to the increase in the cost of athletic aid noted previously. There were also a few significant one-time donations amounting to $700,000 to cover men s basketball team travel costs to Italy and other operating costs. University support increased $3,400,000 in 2016 due to the operational needs of the Corporation. Nonoperating expenses include loss on disposal of assets and interest expense. In the prior year, the Corporation recognized a loss on disposal of assets amounting to $5,006,103 related to the donation of buildings to the University. In 2016, the Corporation replaced the football video board and recognized a loss of $850,000. Capital contributions Capital contributions primarily come from booster organizations. The amounts contributed each year vary depending on facility needs and donation drives. In fiscal year 2016, the Corporation continued to improve locker rooms and athletic facilities, projects included the tennis court renovation, soccer locker room upgrades, and design costs associated with the football stadium improvements; these costs were partially funded by donations. Request for Information The financial report is designed to provide a general overview of the Corporation s finances. For questions concerning any information in this report or for additional financial information, contact Clinton G. Moffitt, Interim Chief Financial Officer, California State University, Fresno, 5200 North Barton Avenue, Fresno, California or call (559) Page 11

15 STATEMENTS OF NET POSITION AS OF JUNE 30 Assets Current assets Cash and cash equivalents (Note 2) $ 2,948,804 $ 4,374,618 Accounts receivable, net (Note 3) 4,446,807 2,430,098 Contributions receivable, net (Note 4) 24,500 9,500 Deposits and prepaid expenses 379, ,795 Investments (Note 6) - 561,526 Total current assets 7,799,932 7,948,537 Noncurrent assets Contributions receivable, net (Note 4) 27,120 39,365 Capital assets, net (Note 7) 7,350,540 7,417,810 Total noncurrent assets 7,377,660 7,457,175 Total assets 15,177,592 15,405,712 Deferred outflows of resources Pension deferrals (Note 11) 417, ,203 Total deferred outflows of resources 417, ,203 Liabilities Current liabilities Accounts payable and accrued liabilities 403, ,101 Accrued salaries and benefits payable 1,058, ,171 Other employment contract obligations (Note 12) - 696,718 Accrued compensated absences current portion 278, ,363 Unearned revenue (Note 1) 2,508,630 2,830,694 Deposits held in trust 82,831 38,373 Long-term debt obligations current portion (Notes 10) 174,222 - Total current liabilities 4,505,707 5,350,420 Noncurrent liabilities Accrued compensated absences, net of current portion 834, ,090 Long-term debt obligations (Note 10) 545,801 - Net pension liability (Note 11) 1,670,490 1,610,304 Total noncurrent liabilities 3,050,536 2,427,394 Total liabilities 7,556,243 7,777,814 Deferred inflows of resources Pension deferrals (Note 11) 364, ,345 Total deferred inflows of resources 364, ,345 Net position Net investment in capital assets 6,630,517 7,417,810 Unrestricted 1,044,106 27,946 Total net position $ 7,674,623 $ 7,445,756 See accompanying notes to financial statements Page 12

16 STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE FISCAL YEARS ENDED JUNE Operating revenues Athletic operations $ 16,564,940 $ 19,144,744 Merchandise sales and commissions 382, ,396 Other operating revenues 133, ,176 Total operating revenues 17,080,816 19,899,316 Operating expenses Athletic operations 27,935,817 26,721,068 Management and general 3,284,588 2,917,625 Operation and maintenance of plant 2,694,574 1,952,087 Student grants and scholarships 7,062,342 5,448,979 Depreciation (Note 7) 647, ,262 Total operating expenses 41,624,965 37,880,021 Operating loss (24,544,149) (17,980,705) Nonoperating revenues (expenses) University support 12,484,689 9,021,839 Student fees 4,472,917 4,328,466 Contributions, noncapital 8,000,410 5,862,524 Investment loss, net (20,302) (679) Interest expenses (31,007) (6,537) Loss on disposal of property and equipment (850,923) - Asset donation to the University - (5,006,103) Net nonoperating revenues (expenses) 24,055,784 14,199,510 Loss before capital contributions (488,365) (3,781,195) Capital contributions 717, ,906 Increase (decrease) in net position 228,867 (3,054,289) Net position Net position at beginning of year 7,445,756 10,500,045 Net position at end of year $ 7,674,623 $ 7,445,756 See accompanying notes to financial statements Page 13

17 STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED JUNE 30 Cash flows from operating activities Cash received from customers and donors $ 14,742,043 $ 18,702,964 Payments to suppliers (18,933,117) (17,585,938) Payments to employees (15,643,265) (14,207,580) Payments to students (7,062,342) (5,448,979) Net cash used in operating activities (26,896,681) (18,539,533) Cash flow from investing activities Proceeds from sales of investments 537,653 - Investment income, net 3,571 1,144 Net cash provided by investing activities 541,224 1,144 Cash flow from noncapital financing activities University support 12,484,689 9,021,839 Student fees 4,472,917 4,328,466 Contributions received for other than capital purposes 7,997,655 5,878,862 Proceeds from borrowings under line of credit 750,000 2,400,000 Re-payments of borrowings under line of credit (750,000) (2,400,000) Net cash provided by noncapital financing activities 24,955,261 19,229,167 Cash flow from capital and related financing activities Capital contributions 717, ,906 Purchase of buildings and equipment (544,797) (599,665) Proceeds from sale of equipment 3,500 - Principal paid on capital debt (169,977) (97,310) Interest paid on capital debt (31,576) (5,581) Net cash provided by (used in) capital and related financing activities (25,618) 24,350 Net (decrease) increase in cash and cash equivalents (1,425,814) 715,128 Cash and cash equivalents at beginning of year 4,374,618 3,659,490 Cash and cash equivalents at end of year $ 2,948,804 $ 4,374,618 See accompanying notes to financial statements Page 14

18 STATEMENTS OF CASH FLOWS (continued) FOR THE FISCAL YEARS ENDED JUNE 30 Reconciliation of operating loss to net cash used in operating activities Operating loss $ (24,544,149) $ (17,980,705) Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation (Note 7) 647, ,262 Change in assets and liabilities: Accounts receivable (2,016,709) (776,526) Prepaid expenses and other assets 192,974 (197,173) Deferred outflows of resources (25,371) (82,227) Accounts payable and accrued liabilities (26,887) 46,245 Other employment contract obligations (696,718) 21,573 Unearned revenue (322,064) (419,826) Deposits held in trust 44,458 (39,403) Net pension liability 60,186 (526,098) Deferred inflows of resources (210,045) 574,345 Net cash used in operating activities $ (26,896,681) $ (18,539,533) Supplemental schedule of noncash transactions Trade-out and complementary tickets (Note 15) $ 3,602,113 $ 3,310,188 Gifts in-kind $ 380,236 $ 333,361 Financed capital asset purchases $ 890,000 $ - Donation of capital asset $ - $ 5,006,103 See accompanying notes to financial statements Page 15

19 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES California State University, Fresno Athletic Corporation ( Corporation ) was incorporated as a nonprofit entity under the laws of the State of California on April 26, The Corporation was formed to meet the expanding needs and regulations related to administering the various sports programs at California State University, Fresno ( University ). The Corporation is supported primarily by contributions and game revenues. The Save Mart Center is not a part of the Corporation, nor administered by the Corporation; and therefore, none of its activities are reflected in these financial statements. The Corporation is a component unit of the University. Effective August 8, 2014, the Corporation executed an operating agreement with Follett Higher Education Group, Inc. ( Follett ), in which Follett assumed the operation of the Bulldog Shop. The agreement provides for a commission to be paid on gross revenues as defined. The commission is calculated as 26% of the first $2 million in gross revenues plus 28% on gross revenues in excess of $2 million or 90% of the previous year s calculated commission, whichever is greater, with a minimum commission of $500,000 in fiscal year 2014/2015 and $300,000 in subsequent years. Additionally, the agreement provided that beginning July 1, 2015, Follett will reimburse the Corporation for the property lease payments on the Bulldog Shop until the lease ends December 31, The agreement expires June 30, 2019, with the option to extend with the same terms for three subsequent two-year renewals. Basis of presentation The basic financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Restricted support and revenues are recognized when expenses have been incurred for the purpose specified by the donor. When both restricted and unrestricted resources are available for use, it is the Corporation s policy to use restricted resources first, then unrestricted resources as they are needed. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and cash equivalents The Corporation considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. Accounts receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Allowances for doubtful accounts in the amounts of $19,000 and $8,100 have been established as of June 30, 2016 and 2015, respectively. Page 16

20 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Contributions receivable Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are discounted utilizing a rate commensurate with the risks involved. The discounts on those amounts are computed using risk-free interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are not included as revenue until the conditions are substantially met. Capital assets Acquisitions of capital assets of $5,000 or more are capitalized. Capital assets are stated at cost or, if donated, at the approximate fair value at the date of donation, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Accrued compensated absences Athletic Corporation employees accrue annual leave at rates based upon length of service and job classification, and compensatory time based upon job classification and hours worked. Vested unused vacation pay, if not taken, is paid upon separation from employment with the Corporation. All unused leave balances are accrued when incurred in the financial statements. Unused sick leave is not included in the compensated absences liability, as accrued unused sick leave is not paid upon separation.. Accrued compensated absences totaled $1,112,326 and $1,089,453 for the fiscal years ended June 30, 2016 and 2015, respectively. Accrued compensated balances for Athletic Corporation employees totaled $249,306 and $317,710 for the fiscal years ended June 30, 2016 and 2015, respectively. Accrued compensated balances for University employees working in Athletics totaled $863,020 and $771,743 for the fiscal years ended June 30, 2016 and 2015, respectively. Unearned revenue Unearned revenue represents gate receipts, as well as other sources of revenue, received during the fiscal years ended June 30, 2016 and 2015, but related to operations for the fiscal years ended June 30, 2017 and 2016, respectively. Deposits held in trust These deposits consist of monies held on behalf of athletic programs associated with the Corporation. The Corporation performs collection and disbursement functions on behalf of camps, clinics, and trusts. The Corporation generally receives a fee for administering these funds which is calculated based on a percentage of the revenue. The Corporation is acting as an agent for the transactions of these programs and accordingly the activity of the programs is not recorded in the statements of revenues, expenses, and changes in net position. Deposits held in trust totaled $82,831 and $38,373 for the years ended June 30, 2016 and 2015, respectively. Deferred outflows of resources and deferred inflows of resources Deferred outflows of resources is a consumption of net position by the Corporation that is applicable to a future period and deferred inflows of resources is an acquisition of net position by the Corporation that is applicable to a future reporting period. Both deferred inflows and outflows are reported in the Statements of Net Position, but are not recognized in the financial statements as revenue and expenses until the period(s) to Page 17

21 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) which they relate. Deferred outflows of resources consist of pension contributions made by the Corporation subsequent to the pension plan measurement date. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan s fiduciary net position of the California Public Employees Retirement System (CalPERS) cost-sharing multiple-employer defined benefit plan and additions to/deductions from the plan s fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. Donations and contributions Unrestricted contributions are recorded as revenue when received. Noncash donations are recorded at estimated fair market value. Contributions received with donor restrictions are recorded as revenue when all applicable eligibility requirements, generally timing and use restriction, have been met. Unexpended contributions with donor purpose restrictions are classified under restricted net position. The Corporation receives various donated services and materials from the business community and other University supporters. In some instances, athletic event tickets are awarded to the donor in exchange for services and materials. Fair values of donated services and materials are reported to the donors for purposes of substantiating the contributions (approximately $1,789,944 and $1,743,265 for the fiscal years ended June 30, 2016 and 2015, respectively). Net position The Corporation s financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted. Net investment in capital assets This category includes capital assets, net of accumulated depreciation, and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. Restricted This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. As of June 30, 2016 and 2015, the Corporation did not have restricted net position. Unrestricted All other categories of net position. Unrestricted net position may be designated for specific purposes by the Board of Directors. Classification of revenues and expenses The Corporation considers operating revenues and expenses in the statement of revenues, expenses, and changes in net position to be those revenues and expenses that result from exchange transactions or Page 18

22 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 AND 2014 NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) from other activities that are connected directly with the Corporation s primary functions. Exchange transactions include charges for services rendered and the acquisition of goods and services. Certain other transactions are reported as nonoperating revenues and expenses in accordance with GASB Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities an amendment of GASB Statement No. 34. These nonoperating activities include the Corporation s contribution revenue, University support, student fees, net investment activity, and interest expense. Income taxes The Corporation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the corporation s tax-exempt purpose is subject to taxation as unrelated business income. The Corporation recognizes accrued interest and penalties associated with uncertain tax provisions as part of the income tax provision, when applicable. There are no amounts accrued in the financial statements related to uncertain tax positions. U.S. GAAP provides accounting and disclosure guidance about positions taken by an entity in its tax returns that might be uncertain. Management has considered its tax positions and believes that all of the positions taken in its federal and state tax returns are more likely than not to be sustained upon examination. Income tax returns are filed in U.S. federal and state of California jurisdictions. Tax returns remain subject to examination by the U.S. federal jurisdiction for three years after the return is filed and for four years by the California jurisdiction. There are currently no tax years under examination. Reclassifications Certain prior year information was reclassified to conform with the current year presentation. During the fiscal year ended June 30, 2016, the Corporation valued and reported in-kind contributions related to athletic equipment contracts. Prior year contribution revenues and operating expenses have been reclassified for comparative purposes. The effect of this change does not impact net position. NOTE 2: CASH AND CASH EQUIVALENTS Cash and cash equivalents at June 30, 2016 and 2015, consists of cash on hand and in banks of $2,948,804 and $4,374,618, respectively. Custodial credit risk for deposits Custodial credit risk for deposits is the risk that in the event of a bank failure, the Corporation s deposits may not be returned. Cash balances held in banks are insured up to $250,000 per institution by the Federal Deposit Insurance Corporation (FDIC). As of June 30, 2016 and 2015, the Corporation has $3,119,688 and $4,236,054, respectively, of funds on deposit at financial institutions that are in excess of insurance amounts and are exposed to custodial credit risk. The Corporation has not experienced any losses and the risk of loss is not significant. The Corporation does not have a custodial credit risk policy. Page 19

23 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable at June 30, 2016 and 2015, consist of the following: Accounts receivable, general $ 4,400,492 $ 2,419,548 Accounts receivable, students 6,720 10,239 Accounts receivable, ticketing 2,300 2,777 Less : Allowance for doubtful accounts (19,000) (8,100) 4,390,512 2,424,464 Accounts receivable, University 56,295 5,634 $ 4,446,807 $ 2,430,098 NOTE 4: CONTRIBUTIONS RECEIVABLE Contributions receivable arising from promises to give for athletic operations consist of the following: Due in one year or less $ 30,000 $ 15,000 Less: Allowance for doubtful accounts (5,500) (5,500) 24,500 9,500 Due between one year and five years 30,000 45,000 Less: Discount (2,880) (5,635) 27,120 39,365 $ 51,620 $ 48,865 Current portion $ 24,500 $ 9,500 Noncurrent portion 27,120 39,365 $ 51,620 $ 48,865 The discount rate used at June 30, 2016 and 2015, is 7.0%. A summary of changes in contributions receivable for the years ended June 30, 2016 and 2015 is presented below Balance, July 1 $ 48,865 $ 65,203 Payments on pledges - (30,000) Allowance adjustment - 5,800 Discount 2,755 7,862 Balance, June 30 $ 51,620 $ 48,865 Page 20

24 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 5: FAIR VALUE MEASUREMENTS Governmental Accounting Standards Board Statement No. 72, Fair Value Measurement and Application, effective for fiscal years beginning after June 15, 2015, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Level 2 Level 3 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Corporation has the ability to access. Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in inactive markets; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for assets and liabilities. There have been no changes in the methodologies used at June 30, Mutual funds: Valued at net asset value (NAV) of shares held by the Corporation at year end. Defined contribution plan obligation: Valued at an amount equal to the net asset value of the plan investments at year end as the Corporation does not bear the risk of changes in market value. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Corporation 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. Page 21

25 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 6: INVESTMENTS The Corporation entered into three annuity agreements to satisfy the obligations of the employment contract described in Note 12. Earnings and losses on the investments after the date of contribution increase or decrease the future benefit to the employee. The Corporation held investments in mutual funds that were invested at the direction of the employee. The fair value of the mutual funds as of June 30, 2015 was $561,526. On October 30, 2015, the investments were liquidated and used to pay the obligation of the employment contract. Investment earnings Net investment earnings (losses) were $(20,302) and $(679) for the fiscal years ended June 30, 2016 and 2015, respectively, and is comprised of interest, dividends, realized and unrealized gains and losses due to changes in the fair value of investments held at year-end, net of investment fees. Credit risk The Corporation does not have a credit risk policy. Credit risk is the risk that an issuer or other counterparty to a debt instrument will not fulfill its obligations to the holder of the investment. This is measured by the assignment of ratings by nationally recognized statistical rating organizations. There is no further credit risk to the Corporation at June 30, 2016, as all investments have been liquidated. Interest rate risk The Corporation does not have an interest rate risk policy. Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer maturity of an investment, the greater the sensitivity its fair value is to changes in market interest rates. As a means of limiting its exposure to fair value losses from rising interest rates, short-term investments are limited to relatively liquid instruments such as savings accounts and mutual funds. Interest rate risk is mitigated by ensuring sufficient liquidity to meet cash flow needs and only then investing in longer-term securities. Refer to the tables below for the interest rate risk disclosure as of June 30, The Corporation does not have any investments at June 30, Maturity Less than 3 3 to 12 Over 1 Moody's months months year Credit Rating (90 days) ( days) (360+ days) Total Mutual Funds Not rated $ 561,526 $ - $ - $ 561,526 Concentration of credit risk The Corporation does not have an investment policy. As of June 30, 2016 and 2015, the Corporation did not have any investments in any one issuer that represent 5% or more of total Corporation investments. Page 22