Southern Arkansas University. Magnolia, Arkansas

Transcription

1 Southern Arkansas University Magnolia, Arkansas Annual Financial Report Independent Auditor s Report and Other Reports June 30, 2001 LEGISLATIVE JOINT AUDITING COMMITTEE

2 TABLE OF CONTENTS JUNE 30, 2001 Independent Auditor's Report Combined Report(s) on Compliance, Internal Controls and Other Matters FINANCIAL STATEMENTS Exhibit Balance Sheet Statement of Changes in Fund Balances Statement of Current Funds Revenues, Expenditures and Other Changes Notes to Financial Statements A B C SUPPORTING SCHEDULES Expenditures of Federal Awards 1 Federal Award Programs - Findings and Questioned Costs 2 Federal Award Programs - Summary of Prior Audit Findings 3 Schedule

3 INDEPENDENT AUDITOR'S REPORT Southern Arkansas University Legislative Joint Auditing Committee We have audited the balance sheet of Southern Arkansas University, an Institution of Higher Education of the State of Arkansas, as of June 30, 2001 and the related statements of changes in fund balances and current funds revenues, expenditures, and other changes for the year then ended as listed in the table of contents. These financial statements are the responsibility of Southern Arkansas University s management. 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 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Southern Arkansas University as of June 30, 2001 and changes in fund balances and the current funds revenues, expenditures, and other changes for the year then ended, in conformity with accounting principles generally accepted in the United States. In accordance with Government Auditing Standards, we have also issued our report dated February 7, 2002 on our consideration of Southern Arkansas University's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying financial information listed as supporting schedules in the table of contents, including the schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statements of Southern Arkansas University. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. DIVISION OF LEGISLATIVE AUDIT Charles L. Robinson, CPA, CFE Legislative Auditor Little Rock, Arkansas February 7, 2002 EDHE10501

4 COMBINED REPORT(S) ON COMPLIANCE, INTERNAL CONTROLS AND OTHER MATTERS Southern Arkansas University Legislative Joint Auditing Committee The underlying purpose of this letter is to convey certain observations and recommendations regarding state and federal compliance and internal control in conjunction with our audit of Southern Arkansas University. This letter reflects various requirements and pronouncements of the American Institute of Certified Public Accountants (AICPA), the United States General Accounting Office (GAO), the United States Office of Management and Budget (OMB), the Single Audit Act of 1984 and the Single Audit Act Amendments of Section I of this letter is designed to satisfy certain requirements for compliance and internal control over financial reporting, whereas, Section II is designed to satisfy certain requirements for compliance requirements applicable to each major federal award program and internal control over compliance in accordance with OMB Circular A-133. SECTION I: REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the financial statements of Southern Arkansas University (Institution), an Institution of Higher Education of the State of Arkansas, as of and for the year ended June 30, 2001, and have issued our report thereon dated February 7, We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the Institution s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of the state constitution, state and federal laws and regulations, and federal contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.

5 Internal Control Over Financial Reporting In planning and performing our audit, we considered Southern Arkansas University s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Other matters involving compliance and/or internal control were reported to the Institution management in a separate letter. SECTION II: REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL AWARD PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Compliance We have audited the compliance of Southern Arkansas University with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, The Institution s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of Federal Award Programs - Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the Institution s management. Our responsibility is to express an opinion on the Institution compliance based on our audit. We conducted our audit of compliance in accordance with generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Institution s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Institution s compliance with those requirements. In our opinion, Southern Arkansas University complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, Internal Control Over Compliance The management of the Institution is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the Institution internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A

6 Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. GENERAL COMMENTS RELATED ORGANIZATION - There is in existence a nonprofit entity with significant financial resources which is related to Southern Arkansas University, but whose accounts are appropriately not recorded in the accounting system of the Institution. This related nonprofit entity was established, ostensibly, for the benefit of the Institution. One entity such as that described above, of which we have knowledge, is Southern Arkansas University Foundation, Inc. Activities surrounding such organization as that described above, including but not limited to the following, have not been independently evaluated by the appropriate bodies outside of Southern Arkansas University: A. Fund raising activities on behalf of related nonprofit entity by employees of the Institution. B. The holding of Officer, Director, and quasi-employee positions of related nonprofit entity by employees and/or directors of the Institution. STUDENT ENROLLMENT DATA - In accordance with Ark. Code Ann , we performed tests of the student enrollment data for the year ended June 30, 2001, as reported to the State Department of Higher Education, to provide reasonable assurance that the data was properly reported. Our testing was limited to the fall and spring terms of the year. The enrollment data reported was as follows: Second First Summer Summer Term 2000 Fall Term Spring Term Term 2001 Student Headcount 850 3,075 2, Student Semester Credit Hours 3,805 39,938 37,166 3,282 During our review, nothing came to our attention that would cause us to believe that the student enrollment data was not substantially correct. These reports are intended for the information and use of the Legislative Joint Auditing Committee, state executive and oversight management, Institution management, the federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specific parties. However, this report is a matter of public record and its distribution is not limited. DIVISION OF LEGISLATIVE AUDIT Little Rock, Arkansas February 7, 2002 William R. Baum, CPA, CFE Deputy Legislative Auditor -4-

7 BALANCE SHEET JUNE 30, 2001 WITH COMPARATIVE TOTALS AT JUNE 30, 2000 Exhibit A Endowment Plant Funds Current Funds and Renewal and Retirement of Investment Agency Total All Funds Unrestricted Restricted Loan Funds Similar Funds Unexpended Replacement Indebtedness in Plant Funds June 30, 2001 June 30, 2000 ASSETS Cash and equivalents $ 1,783,964 $ 93,846 $ 94,165 $ 1,334,508 $ 1,753,563 $ 90,555 $ 226,899 $ 205,384 $ 5,582,884 $ 5,128,210 Cash on deposit with UAS 1,067 1,067 6,596 Investments: Certificates of deposit 500, ,517 1,350,000 2,151,517 2,145,000 U.S. Treasury bonds 255, , ,938 U.S. Government obligations 566, , ,259 1,285,640 Preferred stock 4,994 4,994 Common stock 871, ,750 1,044,573 Mutual funds/other 142, ,253 Accounts receivable - students 526, , ,662 Accounts receivable - State Treasury 850,000 Accounts receivable - Dept of Ed 159, , ,384 Accounts receivable - grants 356, , ,516 Accounts receivable - other Notes receivable Inventories Prepaid expenses Accrued interest 333, ,358 60,323 1,191,973 1,191,973 1,095, , , ,717 2,600 2, , ,534 2,131 2,406 $ 277, , ,285 Land Buildings 30,561,888 30,561,888 29,487,245 Improvements other than buildings 4,021,487 4,021,487 3,963,305 Equipment 5,262,271 5,262,271 4,957,697 Library holdings 6,440,489 6,440,489 6,105,962 Livestock 402, , ,490 TOTAL ASSETS $ 3,578,069 $ 610,520 $ 1,287,205 $ 3,175,358 $ 1,753,563 $ 392,072 $ 1,829,058 $ 46,965,870 $ 205,384 $ 59,797,099 $ 58,770,494 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Deferred revenues $ 219,220 $ 78,658 $ 13,252 $ 311,130 $ 193, , , ,997 Deposits/assets held in custody for others 54,340 $ 205, , ,501 Advance payments 94,571 94,571 90,529 Other payables 61,054 61,054 39,390 Bonds payable $ 4,660,000 4,660,000 5,163,000 Compensated absences payable 396, , ,361 Total Liabilities 825, ,011 13,252 4,660, ,384 6,270,164 6,664,535 Fund Balances: Unrestricted 2,752,552 1,740,311 $ 392,072 $ 1,289,120 6,174,055 7,426,583 Restricted 44,509 $ 3,175,358 3,219,867 3,201,677 U. S. Government grants refundable $ 1,119,551 1,119,551 1,080,482 University funds 167, , ,282 Bond reserves 539, , ,951 Net investment in plant 42,305,870 42,305,870 39,970,984 Total Fund Balances 2,752,552 44,509 1,287,205 3,175,358 1,740, ,072 1,829,058 42,305,870 53,526,935 52,105,959 TOTAL LIABILITIES AND FUND BALANCES $ 3,578,069 $ 610,520 $ 1,287,205 $ 3,175,358 $ 1,753,563 $ 392,072 $ 1,829,058 $ 46,965,870 $ 205,384 $ 59,797,099 $ 58,770,494 See accompanying summary of significant accounting policies and notes to financial statements

8 STATEMENT OF CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2001 Exhibit B Plant Funds Current Funds Endowment and Renewal and Retirement of Investment Unrestricted Restricted Loan Funds Similar Funds Unexpended Replacements Indebtedness in Plant REVENUES AND OTHER ADDITIONS Unrestricted current fund revenues Gifts, grants and contracts $ 21,067, ,243 $ 6,509,872 $ 64,117 $ 3,876 $ 588,294 Acquisition of plant facilities Retirement of indebtedness $ 1,982, ,000 Investment income 6, ,501 53,119 $ 19,755 $ 93,902 Interest on loans receivable 19,185 Auxiliary enterprises 4,002,251 Repayment of cancellations 53,101 Adjustments to fair market value of investments 12,890 Insurance proceeds 221,899 Other additions 34,072 34,702 TOTAL REVENUES AND OTHER ADDITIONS 25,796,178 6,543, , , ,014 19, ,792 2,485,208 EXPENDITURES AND OTHER DEDUCTIONS Educational and general expenditures 21,164,100 6,576,983 Auxiliary enterprises expenditures 3,821,237 Administrative and collection costs 59,196 48,918 Loan cancellations, write-offs and assignments 44,236 Expended for plant facilities 2,052,550 Retirement of indebtedness Interest on indebtedness Disposition of plant facilities Adjustments to fair market value of investments 18,690 Disbursements to SAU 142, , , ,322 TOTAL EXPENDITURES AND OTHER DEDUCTIONS 24,985,337 6,576, , ,043 2,052, , ,322 TRANSFERS AMONG FUNDS - ADDITIONS (DEDUCTIONS) Mandatory: Principal and interest Nonmandatory: Other nonmandatory (710,951) 710, ,690 45,896 21, ,392 20,000 (424,350) TOTAL TRANSFERS AMONG FUNDS (607,261) 45,896 21, ,392 20, ,601 NET INCREASE (DECREASE) FOR THE YEAR 203,580 12,857 60,441 5,334 (921,144) 39,755 (317,558) 2,334,886 FUND BALANCES AT BEGINNING OF YEAR 2,546,146 31,652 1,226,764 3,170,024 2,661, ,317 2,146,557 39,970,984 Prior period adjustments 2,826 (59) 59 FUND BALANCES AT END OF YEAR $ 2,752,552 $ 44,509 $ 1,287,205 $ 3,175,358 $ 1,740,311 $ 392,072 $ 1,829,058 $ 42,305,870 See accompanying summary of significant accounting policies and notes to financial statements

9 STATEMENT OF CURRENT FUND REVENUES, EXPENDITURES AND OTHER CHANGES FOR THE YEAR ENDED JUNE 30, 2001 Exhibit C REVENUES Tuition and fees State appropriations Gifts, grants and contracts Sales and services of educational departments Sales and services of auxiliary enterprises Other sources TOTAL REVENUES EXPENDITURES AND MANDATORY TRANSFERS Educational and General: Instruction Research Public service Academic support Student services Institutional support Operation and maintenance of plant Scholarships and fellowships Other Educational and General Expenditures Total Year Ended June 30, 2001 Year Ended Increase Unrestricted Restricted Total June 30, 2000 (Decrease) $ 7,473,020 $ 7,473,020 $ 6,394,067 $ 1,078,953 12,619,851 12,619,851 12,329, , ,243 $ 6,509,872 7,236,115 6,435, , , , ,845 84,264 4,002,251 4,002,251 3,444, , ,704 34, ,776 49, ,005 25,796,178 6,543,944 32,340,122 29,121,388 3,218,734 9,540, ,977 10,294,325 9,502, ,048 56,736 23,903 80,639 53,946 26, , , , ,604 (165,322) 2,195,824 9,703 2,205,527 2,073, ,568 1,517, ,087 2,229,812 2,054, ,841 2,411,025 2,411,025 2,202, ,004 3,202,464 3,202,464 2,762, ,130 2,116,593 4,477,331 6,593,924 5,369,281 1,224,643 15,085 15, ,589 21,164,100 6,576,983 27,741,083 24,892,889 2,848,194 Mandatory transfers for: Principal and interest 449, , ,530 3,144 Total Educational and General 21,613,774 6,576,983 28,190,757 25,339,419 2,851,

10 STATEMENT OF CURRENT FUND REVENUES, EXPENDITURES AND OTHER CHANGES FOR THE YEAR ENDED JUNE 30, 2001 Exhibit C EXPENDITURES AND MANDATORY TRANSFERS (Continued) Auxiliary Enterprises: Expenditures Mandatory transfers for: Principal and interest Total Auxiliary Enterprises Total Year Ended June 30, 2001 Year Ended Increase Unrestricted Restricted Total June 30, 2000 (Decrease) $ 3,821,237 $ 3,821,237 $ 3,477,887 $ 343, , , ,132 2,145 4,082,514 4,082,514 3,737, ,495 TOTAL EXPENDITURES AND MANDATORY TRANSFERS 25,696,288 $ 6,576,983 32,273,271 29,076,438 3,196,833 OTHER TRANSFERS AND ADDITIONS (DEDUCTIONS Excess of restricted receipts over transfers to revenues Other transfers Other transfers (deductions) (38,983) 38, ,000 67, ,268 76, ,589 (96,310) (21,372) (117,682) (80,000) (37,682) NET INCREASE/DECREASE IN FUND BALANCES $ 203,580 $ 12,857 $ 216,437 $ 2,646 $ 213,791 See the accompanying summary of significant accounting policies and notes to financial statements

11 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 1: Reporting Entity Southern Arkansas University, formerly State Agricultural and Mechanical College, was established by an act of the Arkansas Legislature in 1909 as a district agricultural school for Southwest Arkansas. Southern Arkansas University is a component unit of the State of Arkansas. The Vice President for Academic Affairs administers the academic program of Southern Arkansas University. The program includes the following four (4) schools: School of Business Administration, School of Education, School of Liberal and Performing Arts and the School of Science and Technology, plus the Division of Graduate Studies and Applied Studies. Southern Arkansas University is accredited by the North Central Association of Colleges and Secondary Schools, the National Council for the Accreditation of Teacher Education and the National League for Nursing. A five (5) member Board of Trustees governs Southern Arkansas University. The Governor appoints board members. NOTE 2: Summary of Significant Accounting Policies Accrual Basis The financial statements of Southern Arkansas University have been prepared on the accrual basis, except for depreciation accounting. The statement of current funds revenues, expenditures, and other changes is a statement of financial activities of current funds related to the current reporting period. It does not purport to present the results of operations or the net earnings or loss for the period, as would an income statement. Fund Accounting To ensure observance of limitations and restrictions placed on the use of the resources available to Southern Arkansas University, the accounts are maintained in accordance with the principles of fund accounting. Resources are classified for accounting and reporting purposes into funds which may be used for specified activities or objectives. Separate accounts are maintained for each fund; however, in the accompanying financial statements, where applicable, funds that have similar characteristics have been combined into fund groups. Within each fund group, fund balances restricted by outside sources are so indicated and are distinguished from unrestricted funds allocated for specific purposes by action of the Board of Trustees. Externally restricted funds may only be utilized for the purposes established by the source of such funds whereas unrestricted funds are under the control of the Institution to use in achieving any of its educational purposes. Current Funds Current funds balances are separated into those which are restricted by donors or grantors and those which are unrestricted. -9-

12 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 2: Summary of Significant Accounting Policies (Continued) Endowment and Similar Funds Endowment and similar funds are subdivided into appropriate classifications. Endowment funds have been received from benefactors who, by the terms of their conveying instruments, have stipulated that the principal of their gift may never be expended. Funds functioning as endowments are funds, which the Board of Trustees of Southern Arkansas University, rather than the donor, has determined are to be retained and invested until the Board, at its discretion, authorizes their expenditure. The principal of such funds may be either restricted or unrestricted as to use. Income derived from investments of endowment and similar funds is accounted for in the funds to which it is restricted, or if unrestricted, as revenues in unrestricted current funds. Investments Investments are stated at fair value. Fair value is market value if a market price or quote is readily available. Carrying amounts of investments are adjusted for increases or decreases in values. Gains and losses on investment transactions are accounted for in the funds that owned such assets. Inventories Inventories are valued at cost with cost being generally determined on a first-in, first-out basis. Investment in Plant Plant assets consisting of land, buildings, library holdings, equipment, livestock, improvements and construction in progress are stated at cost or, if contributed, at fair market value on date of gift. Interest costs incurred during construction were not capitalized by Southern Arkansas University. Encumbrances Encumbrances are defined as commitments related to unperformed contracts for goods or services. Southern Arkansas University does not record encumbrances in its accounting system and none are recorded in the accompanying financial statements. -10-

13 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 2: Summary of Significant Accounting Policies (Continued) Compensated Absences Payable Employees accrue and accumulate annual leave in accordance with policies established by the Board of Trustees. Full time, non-classified, University employees accrue leave at the rate of fifteen hours per month, classified employees at a variable rate (from 8 to 15 hours per month), depending upon the number of years employed in state government. Under the University s policy, an employee may carry accrued leave forward from one fiscal year to another, up to a maximum of 240 hours (30 working days). Employees who terminate their employment are entitled to payment for all accumulated annual leave, up to the maximum allowed. The University accrues the dollar value of leave benefits which are payable upon retirement, termination, or death of its employees. This liability has been projected to be $396,332 at June 30, It is the policy of the University to recognize the cost of sick leave when paid. Employees who leave University employment are not paid for accrued sick leave. Therefore, no liability has been shown in the financial statements. NOTE 3: Public Fund Deposits and Investments Cash deposits are carried at cost. The Institution s cash deposits at year-end are shown below: Carrying Amount Bank Balance Insured (FDIC) $ 200,000 $ 200,000 Uninsured, Collateralized 4,539,753 5,310,982 Total Deposits $ 4,739,753 $ 5,510,982 The above deposits do not include cash on deposit in the state treasury or cash on hand in the amounts of $789,431 and $53,700 for the year ended June 30, 2001, respectively. Investments are reported at fair value. Fair value for reporting purposes is market value if a market price or quote is readily available. Investments that do not have readily available market prices or quotes are reported at estimated fair value. The Institution s investments at year-end are shown below by category to give an indication of the level of risk assumed. Category 1 includes investments that are insured or registered or for which the securities are held by Southern Arkansas University or its agent in the Institution's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the broker's or dealer's trust department or agent in the Institution s name. Category 3 includes uninsured and unregistered investments for which the securities are held by the broker or dealer, or by its trust department or agent but not in the Institution's name. -11-

14 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 3: Public Fund Deposits and Investments (Continued) Type of Category Carrying Market Investment Amount Value Certificates of Deposit $ 2,151,517 $ 2,151,517 $ 2,151,517 U.S. Govt. Agencies $ 1,072,478 1,072,478 1,072,478 Mutual Funds 142, , ,181 Corporate Stocks 876, , ,744 Mineral Interests Totals $ 2,151,517 $ 0 $ 2,091,475 $ 4,242,992 $ 4,242,992 Of the above investments in Category 1, none were uninsured and uncollateralized at June 30, NOTE 4: Income Taxes Southern Arkansas University is tax exempt under Internal Revenue Service code. It is also exempt from state income taxes under Arkansas law. Accordingly, no provision for income taxes is made in the financial statements. NOTE 5: Long-Term Debt Debt payments on bonds amounted to $710,951 for the fiscal year ended June 30, The retirement of some bond issues is secured, by a specific pledge of certain gross revenues, surplus revenues and specific fees. Debt service accounts are funded at various times during the year by transfers from the applicable funds. A summary of long-term debt is as follows: Amount Debt Maturities Date of Final Rate of Authorized Outstanding To Date of Issue Maturity Interest and Issued June 30, 2001 June 30, /01/ , % $ 2,831,000 $ 325,000 $ 2,506,000 10/01/ % 750, , ,000 04/01/ % 963,000 67, ,000 05/01/ % 480,000 35, ,000 10/01/ % 1,000, ,000 95,000 10/01/ % 3,570,000 3,170, ,000 Totals $ 9,594,000 $ 4,660,000 $ 4,934,

15 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 5: Long-Term Debt (Continued) The changes in long-term debt are as follows: Balance Balance July 1, 2000 Retired June 30, 2001 Bonds payable $ 5,163,000 $ 503,000 $ 4,660,000 Total long-term debt principal and interest payments are as follows: Principal Interest Total 2002 $ 521,000 $ 184,009 $ 705, , , , , , , , , , , , ,327 To Maturity 2,635, ,483 3,109,483 Totals $ 4,660,000 $ 1,222,659 $ 5,882,659 NOTE 6: Commitments Southern Arkansas University was contractually obligated for the following at June 30, 2001: A. Construction Contracts Estimated Project Name Completion Date Contract Balance Residence Hall Renovation Sims-Grisham-Blair Architects March, 2004 $ 25,000 Tinsley-Mullins Engineers March, ,513 Dolph Camp Renovation Sims-Grisham-Blair Architects January, ,703 Arkansas Industrial Mechanical January, ,854 Total $ 790,070 B. Operating Leases - Noncapital leases with initial or remaining noncancellable lease terms in excess of 1 year. Southern Arkansas University has a copier rental agreement through the fiscal year ending June 30, Future rental payments total $195,

16 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 7: Retirement Plans Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA/CREF) Plan Description. Southern Arkansas University participates in TIAA/CREF, a defined contribution plan. The plan is a 403(b) program as defined by Internal Revenue Service Code of 1986 as amended, and is administered by TIAA/CREF. TIAA is an insurance company offering participants a traditional annuity with guaranteed principle and a specific interest rate plus the opportunity for additional growth through dividends. CREF is an investment company which offers a variable annuity. Arkansas law authorizes participation in the plan. Funding Policy. TIAA/CREF is a contributory plan. Members contribute 4-8% of earnings to the plan. Southern Arkansas University follows a matching schedule which ranges from 6% to 10% for contributory members. Southern Arkansas University and participants' contributions for the year ended June 30, 2001 were $848,960 and $879,669, respectively. Arkansas Teacher Retirement System Plan Description. Southern Arkansas University contributes to the Arkansas Teacher Retirement System (ATRS), a cost-sharing multiple-employer defined benefit pension plan for employees who do not elect a qualified alternative retirement plan. ATRS provides retirement and disability benefits, annual cost-ofliving adjustments, and death benefits to plan members and beneficiaries. Benefit and contribution provisions are established by State law and can be amended only by the Arkansas General Assembly. The Arkansas Teacher Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for ATRS. That report may be obtained by writing to Arkansas Teacher Retirement System, 1400 West Third Street, Little Rock, Arkansas or by calling Funding Policy. ATRS has contributory and non-contributory plans. Contributory members are required by law to contribute 6% of their salaries. Each participating employer is required by law to contribute at a rate established the by Arkansas General Assembly. The current employer rate is 12%. Southern Arkansas University s contributions to ATRS for the years ended June 30, 2001, 2000 and 1999 were $70,468, $72,883 and $78,992, respectively, equal to the required contributions for each year. Arkansas Public Employees Retirement System Plan Description. Southern Arkansas University contributes to the Arkansas Public Employees Retirement System (PERS), a cost-sharing multiple-employer defined benefit pension plan. Employees may elect coverage under PERS as a qualified retirement system. PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit and contribution provisions are established by State law and can be amended only by the Arkansas General Assembly. The Arkansas Public Employees Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for PERS. That report may be obtained by writing to Arkansas Public Employees Retirement System, One Union National Plaza, 124 W. Capitol, Little Rock, Arkansas or by calling

17 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 7: Retirement Plans (Continued) Arkansas Public Employees Retirement System (Continued) Funding Policy. PERS has contributory and non-contributory plans. Contributory members are required by law to contribute 6% of their salaries. Each participating employer is required by law to contribute at a rate established by the Arkansas General Assembly. The current statutory employer rate is 10% of annual covered payroll. Southern Arkansas University s contributions to PERS for the years ended June 30, 2001, 2000 and 1999 were $206,967, $199,870 and $206,099, respectively, equal to the required contributions for each year. NOTE 8: Related Organizations Southern Arkansas University is one of two campuses of the Southern Arkansas University System. The financial statements do not include the assets, liabilities, fund balances, and changes in fund balances, relating to the Southern Arkansas University Tech campus. The financial statements do not include assets, liabilities, fund balances, and changes in fund balances, relating to the Southern Arkansas University Foundation, Inc. The Southern Arkansas University Foundation operates as a nonprofit benevolent corporation for charitable educational purposes. A summary of the Foundation's financial condition as of June 30, 2001, follows: ASSETS Cash and investments $ 11,555,326 LIABILITIES AND FUND BALANCES Fund balances $ 11,555,326 Major components of the changes in fund balances during 2001 consisted of: Donations $ 979,420 Other revenue and additions 864,292 Total 1,843,712 Expenditures 67,255 Other Deductions 747,851 Total 815,106 Net Increase/(Decrease) in Fund Balance $ 1,028,

18 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 NOTE 9: Other Obligations Southern Arkansas University has entered into an agreement with the City of Magnolia. Whereby, the University agreed to pay the City an amount equal to the principal and interest of a $370,000 bond, issued by the City, to extend sewer services to include the University. This contract requires this payment over a twenty-year period beginning October 16, 1996 with the final installment due October 15, Southern Arkansas University has pledged student tuition fees to secure the obligation. The amount paid for the year ended June 30, 2001 was $20,609. NOTE 10: New Accounting Pronouncements In November 1999, the Governmental Accounting Standards Board (GASB) issued Statement 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities--- an amendment of GASB Statement 34. As originally issued, Statement 34, Basic Financial Statements-- -and Management s Discussion and Analysis---for State and Local Governments was not applicable to public institutions. Rather than issuing separate standards, GASB decided to provide financial reporting guidance for public institutions by amending Statement 34 to extend its applicability to them. Statement 35 supersedes GASB Statement 15, which currently allows public institutions to choose one of two models when preparing their financial statements---the model contained in the 1973 AICPA Industry Audit Guide, Audit of Colleges and Universities (AICPA College Guide model), or the governmental model. As a component unit of the State of Arkansas, Southern Arkansas University will be required to implement GASB Statement 35 at the same time as the State of Arkansas implements GASB Statement 34, which is the year ending June 30, Under the provisions of the GASB standards, the Institution will be reporting as a special purpose government engaged only in business type activity (BTA). BTA reporting will require Southern Arkansas University to present only the basic financial statements and required supplementary information (RSI) for an enterprise fund that includes management s discussion and analysis (MD&A), a statement of net assets or a balance sheet, a statement of revenues, expenses, and changes in net assets, a statement of cash flows, notes to the financial statements, and other applicable RSI. The required basic financial statements described above are prepared using the economic resources measurement focus and the accrual basis of accounting. Fund financial statements are not required for BTA reporting. Statement 34 will also require the Institution to retroactively and prospectively report all capital assets, net of accumulated depreciation, including infrastructure assets (long-lived capital assets such as roads, bridges, etc.), in the statement of net assets, and report depreciation expense in the statement of revenues, expenses, and changes in net assets. Retroactive reporting of capital assets will require a prior period adjustment to net assets. Management has not yet determined the effect of the implementation of this statement on the Institution s financial statements. NOTE 11: Subsequent Event On October 1, 2001, subsequent to the year-end, Southern Arkansas University exercised its call option on the 1964 Series A, B, C and 1965 Series A bond issues. Therefore, the University has extinguished long-term debt in the amount of $483,

19 EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2001 Schedule 1 Federal Agency or Federal Grantor/Pass Through CFDA Pass-Through Federal Grantor/Program or Cluster Title Number Number Expenditures STUDENT FINANCIAL ASSISTANCE CLUSTER U. S. Department of Education: Federal Supplemental Educational Opportunity Grants $ 111,330 Federal Family Educational Loans ,846,444 Federal Work-Study Program ,956 Federal Perkins Loan Program ,251,169 Federal Pell Grant Program ,910,550 TOTAL STUDENT FINANCIAL ASSISTANCE CLUSTER 9,593,449 TRIO - CLUSTER U. S. Department of Education: Office of Assistant Secretary for Post-Secondary Education Trio - Student Support Services (Note 3) ,195 Trio - Upward Bound (Note 3) ,974 TOTAL TRIO CLUSTER 707,169 OTHER PROGRAMS Environmental Protection Agency: Office of Administration Surveys, Studies, Investigations and Special Purpose Grants (Pass Through Grantor - Ouachita National Forest) (Note 3) ,961 U.S. Department of Transportation: National Highway Traffic Safety Administration Alcohol Traffic Safety and Drunk Driving Prevention Incentive Grants (Pass Through Grantor - Arkansas State Highway and Transportation Department) (Note 3) ,502 National Science Foundation: Education and Human Resources - (Pass Through Grantor - ADHE) NSF-6-#osr 12, U. S. Department of Education: Office of Assistant Secretary for Elementary and Secondary Education Eisenhower Professional Development State Grants (Pass Through Grantor - Arkansas Department of Higher Education) (Note 3) ,059 Office of Postsecondary Education: Teacher Quality Enhancement Grants (Note 3) ,254 U.S. Department of Health and Human Services: Administration for Children and Families Foster Care - Title IV-E (Pass Through Grantor - University of Arkansas) (Note 3) ,127 TEA Case Consultation (Pass Through Grantor - University of Arkansas) (Note 3) ,779 U. S. Department of Labor: Employment and Training Administration Job Training Partnership Act (Pass Through Grantor - Southeast Arkansas Economic Development District, Inc.) (Note 3) ,814 TOTAL OTHER PROGRAMS TOTAL EXPENDITURES OF FEDERAL FUNDS $ 837,993 11,138,

20 EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2001 Schedule 1 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Note 1: Note 2: Basis of Presentation - The accompanying schedule of expenditures of federal awards includes the federal grant activity of Southern Arkansas University and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the presentation of, the basic financial statements. Loans Outstanding - Southern Arkansas University had the following loan balances outstanding at June 30, These loan balances are also included in the federal expenditures presented in the schedule. Federal CFDA Amount Cluster/Program Title Number Outstanding Student Financial Aid - Cluster $ 1,191,973 Note 3: The Pass-Through Entity Identifying Number was not available

21 FEDERAL AWARD PROGRAMS - FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2001 Schedule 2 SECTION I - SUMMARY OF AUDITOR'S RESULTS FINANCIAL STATEMENTS Type of auditor's report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? Reportable condition(s) identified that are not considered to be material weakness(es)? yes yes no none reported Noncompliance material to financial statements noted? FEDERAL AWARDS yes no Internal control over major programs: Material weakness(es) identified? Reportable condition(s) identified that are not considered to be material weakness(es)? Type of auditor's report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? yes yes Unqualified yes no none reported no Identification of major programs: CFDA Numbers Various , Name of Federal Programs or Cluster Student Financial Aid Cluster TRIO-Cluster Foster Care - Title VI-E Dollar threshold used to distinguish between Type A and Type B programs $ 300,000 Auditee qualified as low-risk auditee? yes no SECTION II - FINANCIAL STATEMENT FINDINGS No findings noted. No findings and questioned costs noted. SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

22 FEDERAL AWARD PROGRAMS - SUMMARY OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2001 Schedule 3 There were no findings in the prior audit