ANNUAL SYSTEM FINANCIAL REPORT

Transcription

1 SYSTEM FINANCIAL REPORT 2016

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3 ANNUAL SYSTEM FINANCIAL REPORT Funds associated with the following functions and revenue sources: housing, dining, services and activities fee, student union building fee, recreation center fee, Wildcat Shop, and parking fees. Fiscal Year Ended June 30, 2016

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5 CONTENTS AUDITOR S REPORT MANAGEMENT DISCUSSION AND ANALYSIS ANNUAL SYSTEM FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS APPENDIX

6 WASHINGTON STATE AUDITOR S OFFICE INDEPENDENT AUDITOR S REPORT ON FINANCIAL STATEMENTS CENTRAL WASHINGTON UNIVERSITY SYSTEM JULY 1, 2015 THROUGH JUNE 30, 2016 Board of Trustees Central Washington University System Ellensburg, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of the Central Washington University System, Kittitas County, Washington, as of and for the years ended June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the University System s basic financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our 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 University System 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 University System 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 financial position of the Central Washington University System, as of June 30, 2016 and 2015, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. 1 Central Washington University 2016 Annual System Financial Report

7 Matters of Emphasis As discussed in Note 1, the financial statements of Central Washington University System are intended to present the financial position, and the changes in financial position, and, where applicable, cash flows of only that portion of the business-type activities of the University that is attributable to the transactions of the Housing, Dining, Bookstore, Parking, and Student Activity Funds. They do not purport to, and do not, present fairly the financial position of the University as of June 30, 2016 and 2015, the changes in its financial position, or, where applicable, its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the financial statements, in 2015, the University System adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and pension plan information 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 Matters We have audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of Central Washington University as of and for the years ended June 30, 2016 and 2015, and our report thereon, dated December 28, 2016, expressed an unmodified opinion on those financial statements. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated December 28, 2016 on our consideration of the University System 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 University System s internal control over financial reporting and compliance. Pat McCarthy State Auditor Olympia, WA Central Washington University 2016 Annual System Financial Report 2

8 MANAGEMENT DISCUSSION AND ANALYSIS The System is composed of the housing and dining fund, services and activities fee fund, student union building fee fund, recreation center fee fund, Bookstore fund and the parking fund of the university. The System was established in 2004 as a segment of the university with the intent of formalizing a grouping of similar entities for the purpose of generating revenue to repay bonded debt. By organizing in this fashion the System is intended to support the pledge of revenue to the special revenue bonds issued. The management discussion and analysis (MD&A) provides an overview of the financial position and activities of the System for the fiscal year ended June 30, The MD&A focuses on the current year s activities, and resulting changes and facts to assist readers in understanding the accompanying financial statements. The MD&A should be read in conjunction with the accompanying financial statements and notes to the financial statements. The financial statements, notes, and this discussion and analysis are the responsibility of management. Activities from the System s component units are included in the accompanying financial statements. During Fiscal 2015 the university adopted Governmental Accounting Standards Board (GASB) Statement no. 68. This new accounting standard required the System to recognize the System s portion of the State of Washington s net pension liability for certain benefit plans. (See note 8). FINANCIAL HIGHLIGHTS FOR FISCAL YEAR 2016 The System s overall financial standing continues to be sound, with total assets and deferred outflows of $179.9 million and total liabilities and deferred inflows of $133.6 million. The System s net position totals $46.3 million. Compared to the Fiscal Year 2015 figures, total assets are relatively unchanged, while total liabilities and deferred inflows are down by $2.6 million and net position has increased by $1.9 million. Total operating revenues increased by 10% or $5.1 million. This is primarily a result of increases in room and board rates and an increase in incoming freshmen which generates a larger student body to participate in our programs. Total operating expenses increased 6.5% percent, or $3.0 million primarily due to increases in staffing costs and the increase in costs of goods sold associated with an increase in sales revenue. During 2016 Net Position increased by $1.9 million primarily due to revenue increases and cost control in the operations. Unrestricted net position is one indicator of an organization s overall financial condition and an increase generally indicates improving fiscal conditions. During 2016 the Unrestricted net position increased by $700 thousand. This increase was due to two main factors: an increase in net operating income of $1.9 million which was partially offset by the costs associated with capitalized purchases of equipment and infrastructure. 3 Central Washington University 2016 Annual System Financial Report

9 MANAGEMENT DISCUSSION AND ANALYSIS (continued) Unrestricted net position is often accumulated for designated purposes or is held in order to meet the CWU debt policy. 1 The following table and graph show the System s unrestricted net position for the nine most recent fiscal years: UNRESTRICTED NET POSITION (Dollars in thousands) $27,283 $26,585 $31,661 $31,569 $28,243 $26,585 $21,184 $18,445 $19,130 UNRESTRICTED NET POSITION (in thousands) $35,000 $30,000 $25,000 $27,283 $26,585 $31,661 $31,569 $28,243 $26,585 $21,184 $18,445 $19,130 $20,000 $15,000 $10,000 $5,000 $ Unrestricted USING THE ANNUAL REPORT This annual report consists of a series of financial statements: the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Net Position, and the Statement of Cash Flows. These statements provide information on the System as a whole and present a long-term view of the System s finances. The statements help answer the basic question, Is the System, as a whole, financially better off or worse off as a result of the year s activities? 2 Other non-financial factors, such as the condition of the working assets (physical infrastructure), changes in student enrollment, and on-campus occupancy need to be considered in order to assess the overall health of the System. 1 Please see a full discussion of CWU s debt policy on page Please refer to Note 1 on page 17 for activities included in the System s basic financial statements. Central Washington University 2016 Annual System Financial Report 4

10 MANAGEMENT DISCUSSION AND ANALYSIS (continued) STATEMENT OF NET POSITION The Statement of Net Position presents the financial position of the System at one point in time and includes all assets and liabilities of the System. Net position is the difference between assets and liabilities and may be thought of as one way to measure the System s financial health, or financial position. Assets and liabilities are classified as either current or noncurrent. Current assets are those resources that are convertible to cash within one year and are available to satisfy current liabilities. Current assets include cash and cash equivalents, short-term investments, accounts receivable, and inventory. Non-current assets are mainly long-term investments and property, equipment, and intangibles. Current liabilities are those obligations of the System that are due within one year of the statement date. Non-current liabilities are comprised of long-term debt and other obligations of the System. Net position is reported in three categories: net investment in capital assets, restricted net position (both nonexpendable and expendable), and unrestricted net position. Net investment in capital assets consists of capital assets less the balance of the outstanding debt incurred during the construction or improvement of those assets. Restricted net position is limited in use due to the constraints put in place by the donors or by law. Unrestricted net position includes assets that do not qualify as either invested in capital assets, net of related debt, or restricted net position. However the university may have imposed restrictions on the use of some assets within this category, for example, reserving certain funds for bond payments, to support the emergency reserve fund designated by the Board of Trustees, or funds accumulated to complete capital renovation and construction. The unrestricted net position balances shown are not only cash balances, but consist of investments, accounts receivable, inventories, and other non- liquid assets. The unrestricted net position balance fluctuates over time and should indicate the ability of the System to withstand external stresses. Decreases are not necessarily an indicator of trouble in the System; they may occur due to planned expenditures of funds set aside for a specific purpose, for example to replace or renovate buildings or infrastructure. This type of decrease may be advantageous to the System and could indicate opportunities for the future. The following table shows the Condensed Statement of Net Position at June 30, 2016, 2015 and 2014: CONDENSED STATEMENT OF NET POSITION JUNE 30, 2015, 2014 AND 2013 (in thousands) (Restated) 2014 $ Change % Change Current assets $ 37,554 $ 35,785 $ 36,275 $ 1, % Capital assets, net 139, , ,753 (3,331) (1.6%) Other non-current assets ,853 (108) 12% Total Assets 177, , ,882 (669) 0.4% Deferred out-flows 2,164 2,241 2,409 (77) (3%) Current liabilities 9,100 8,116 8, % Non-current liabilities 123, , ,240 (2,659) (2.1%) Total liabilities 132, , ,459 (1,836) (1.2%) Deferred in-flows 760 1,752 (992) (56.6%) Investment in capital assets, net 19,032 17,808 17,171 1,224 7% Restricted Unrestricted 27,283 26,585 31, % Total net position $ 46,316 $ 44,393 $ 48,832 $ 2, % Current ratio (Current assets to current liabilities) Primary reserve ratio (Expendable net assets to operating expenses) Central Washington University 2016 Annual System Financial Report

11 MANAGEMENT DISCUSSION AND ANALYSIS (continued) Total assets and deferred outflows were reduced by $745 thousand at the end of fiscal year This is primarily due to depreciation charges on the capital (working) asset. Depreciation was $4.2 million in Depreciation expense was partially offset by additions to capital assets, primarily $2 million expended to improve infrastructure. These improvements were mainly the completion of a renovation of the Short Getz Apartment facility and new point of sale software in the Wildcat Shop (Bookstore). Net capital assets decreased $2.3 million for net additions to property and equipment, less depreciation expense. 3 Cash and equivalents remained consistent at $31.9 million compared to $31.6 million in the preceding year. The Deferred Outflows balance has two components this year. The Deferred Gain or Loss on Refunding Outflows number represents costs associated with previous debt issuances. This accounting treatment is the result of GASB 63 & 65 which were adopted in This component of the Deferred Outflows balance was amortized and reduced by $121 thousand at June 30, 2016 and will continue to be amortized on a straight-line basis through the term of the replacement bonds. The second component, Deferred Pension Contribution, is a result of the adoption of GASB 68 and was amortized to $1 thousand using the prescribed formula during (See notes 1 and 8). Total liabilities decreased by $1.6 million during fiscal year 2016 from $134.5 million to a total of $132.9 million. The bonds payable and bond premium (net) liabilities decreased $3.8 million due primarily to the regularly scheduled principal payments totaling $3.5 million that were paid thereby reducing the outstanding balance. No new debt issuances are contemplated at present for the System. Deferred In-flows of $1.7 million were recorded in the System ledgers during This amount represents the Deferred Pension Earnings related to the adoption of the new account standard (GASB 68) and was amortized to $760 thousand using the prescribed formula during (See notes 1 and 8). The current ratio, current assets divided by current liabilities, measures the System s ability to meet current obligations. The System s current ratio at June 30, 2016 was 4.1 to 1, which means the System s current assets are 4.1 times that of its current liabilities. The System s current ratio at June 30, 2015 was 4.4 to 1. Total net position increased $1.9 million during fiscal year The total change in net position is equal to the year s operating activity less the effects of the financing activities, specifically the debt service payments. The increase shown here is primarily the result of the annual operation of the System which generated an operating income of $6.8 million. This operating income was offset by long term debt commitments that are associated with the working assets which made this result possible. The primary reserve ratio is calculated by dividing unrestricted net position by operating expenses. This measures the ability of the System to continue operating at current levels, within current restrictions and constraints, lacking any future revenues. Proof of an adequate reserve ratio is often required to secure long-term financing. The System s primary reserve ratio at June 30, 2016 is 0.58 to 1, which indicates that in an extreme emergency situation the System could continue its current operations for approximately 7 months. In 2015, this ratio was at a similar number of.57 to 1. A recent industry financial analysis guide, Strategic Financial Analysis For Higher Education published by KPMG suggests, For institutions, an analysis of financial statements suggests that a Primary Reserve Ratio of.40x or better is advisable to give institutions the flexibility to transform the enterprise. This is some confirmation that the System s Primary Reserve Ratio is above what, we believe, could be considered a reasonable percentage. 3 For further discussion please see the Capital Asset and Long-Term Liabilities Highlights on page 21. Central Washington University 2016 Annual System Financial Report 6

12 MANAGEMENT DISCUSSION AND ANALYSIS (continued) STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION The Statement of Revenues, Expenses, and Changes in Net Position provides information about the System s activities during the year by reporting all the revenues and expenses for the year. In the Statement of Revenues, Expenses and Changes in Net Position, all of the current year s revenues and expenses are taken into account, regardless of when cash is received or paid. When revenues and other support exceed expenses, the result is an increase in net position. When the reverse occurs, the result is a decrease in net position. The relationship between revenues and expenses may be thought of as the System s operating results. Revenues and expenses are categorized as either operating or non-operating. Operating revenues are revenues earned by the System in exchange for its goods and services. These revenues include tuition and fees, grants and contracts, sales and services of educational departments and auxiliary enterprise revenues. Operating expenses are those incurred during the normal operations of the System and include, salaries and wages, operating expenses, depreciation, cost of sales and services. Non-operating revenues and expenses are those derived from non-exchange transactions. Examples include interest paid on capital debt, insurance proceeds, investment income, interest rebates, and gains or losses on capital assets. CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (in thousands) $ Change % Change Operating revenues $ 56,832 $ 51,690 $ 52,569 $ 5, % Operating expenses 50,029 46,977 46,405 2, % Operating income (loss) 6,802 4,712 6,163 2, % Total non-operating revenues net of expenses (4,880) (5,219) (5,284) 340 (7%) Increase in net position $ 1,923 $ (507) $ 879 $ 2,591 (511%) Net income margin (Increase in net position to total revenue) 3.38% (0.98%) 1.67% From June 30, 2015 operating expenses increased 6.5% and operating revenues decreased 10%. Net income margin is a measure of current year financial status. The margin is calculated by dividing increase in net position by total revenue. The System s net income margin for fiscal year 2016 is 3.38%. A positive operating margin is good, as it signifies the System is not spending more than it is taking in. The majority of the non-operating expenses relate to interest expense on long-term debt ($5.8 million). There also were two items in non-operating revenues during fiscal 2016: 1) $630 thousand received as part of the Build America Bonds program, and 2) $240 thousand earned on investments. 7 Central Washington University 2016 Annual System Financial Report

13 MANAGEMENT DISCUSSION AND ANALYSIS (continued) Revenues Revenues from auxiliary enterprises such as housing, Bookstore and foodservice increased 10% from fiscal year The following table shows revenues by source for the fiscal years ended June 30, 2016, 2015 and 2014: OPERATING REVENUES (in thousands) $ Change % Change Services and activities $ 12,909 $ 12,255 $ 12,483 $ % University store 9,447 8,974 8, % Parking 1,139 1,043 1, % Housing and dining 33,337 29,418 30,102 3, % Total operating revenues $ 56,832 $ 51,690 $ 52,569 $ 5, % Increases in student participation in the System offerings were the primary cause of the increase in total operating revenues. Housing and Dining rate increases enhanced the operating revenue above the amount that could be expected due to increases in student counts alone. These planned rate increases coupled with the increase in participation in the Housing and Dining program allowed for a 13.3% increase in operating revenue. As the Services and Activities is a component of and embedded in tuition an increase in student count caused a 5.3% increase in gross Services and Activities fees. The Housing rate increase from fiscal year 2015 to 2016 was 5% and the Dining rate increase was 4%, these combined are an approximate aggregate increase of 4.5%. The remainder, or 8.8%, of the fiscal year 2016 revenue figure increase of 13.3% was generated through an increase in student participation. The Services and Activities fee rate was unchanged from fiscal 2015 to The 5.3% revenue increase shown in the table above is attributable to an increase in students. OPERATING REVENUES FY 2016 University store; 16.6% Parking; 2.0% Housing and dining; 58.7% Services and activities; 22.7% No major changes in these percentages have occurred from the previous fiscal year; Housing and Dining Services continue to generate the largest portion of operating revenue. Central Washington University 2016 Annual System Financial Report 8

14 MANAGEMENT DISCUSSION AND ANALYSIS (continued) EXPENSES The following table shows expenses by natural classification for the fiscal years ended June 30, 2016, 2015 and 2014: OPERATING EXPENSES (in thousands) $ Change % Change Salary and wages $ 15,002 $ 14,141 $ 14,016 $ 861 6% Benefits 4,003 3,815 3, % Goods and services 24,430 22,522 22,888 1,907 8% Tuition (fees) waivers % Personal services % Other % Equipment (681) (74%) Travel % Depreciation 4,260 4,178 4, % Total operating expenses $ 50,030 $ 46,977 $ 46,405 $ 3,052 6% Salaries and wages expense for the System increased by 6% in fiscal year 2016 as a result of cost of living adjustments and the addition of staff as student participation in the System s programs increased. Benefits also increased, by 5%, for these same reasons. Of the total increase in operating expenses of $3.0 million, roughly $1 million was associated with salaries and benefits. This was primarily due to increased staff levels to accommodate the added number of student customers. Goods and services expenses showed the largest dollar increase over the prior year of nearly $2 million. This increase was largely due to an increase in Bookstore and Dining sales which have a corresponding increase in the cost of goods sold. Overall, operating expenses increased 6% in FY These expenses include equipment purchases, travel, office expenses, supplies, utilities, repairs, rents and leases, fees, other general expenses and costs of goods sold. Costs of Goods Sold is a large component due to the operation of the Bookstore and Dining Service. These two operations have industry standard cost components of approximately 76% and 35% respectively. Goods and Services costs were increased by 8% as the number of student served by these two operations increased during the year. Equipment expense decreased due to the completion of two large projects in the prior fiscal year. Those projects were primarily upgrades to the KCWU Student Radio Station, wireless internet access in the residence halls, fire alarms in several System buildings, and to flooring in the SURC, all of which required major non-recurring purchases of equipment. Many of these projects had been delayed during fiscally constrained years and the decrease shown in fiscal year 2016 is the result of returning to a normal level of expenditures. The $333 thousand increase in student waivers shown in fiscal 2016 is primarily due to the advent of a new Housing and Dining waiver program that the university has determined is important to recruiting and the retention of students. 9 Central Washington University 2016 Annual System Financial Report

15 MANAGEMENT DISCUSSION AND ANALYSIS (continued) Travel expense increased due to student travel costs authorized by the Services and Activities committee. Depreciation expense increased by $81 thousand which is the natural result of improvements to the System s building infrastructure. There is no cash cost associated with depreciation, the expense is required to conform to GAAP. The allocation of operating expenses among the natural classification categories has not changed significantly from fiscal year The following chart depicts the uses of operating funds according to natural classification for fiscal year 2016: OPERATING EXPENSE FY 2016 Goods and services; 49% Tuition (fees) waivers; 1% Personal services; 1% Other; 1% Equipment; 0% Travel; 2% Depreciation; 9% Benefits; 8% Salary and wages; 30% Central Washington University 2016 Annual System Financial Report 10

16 MANAGEMENT DISCUSSION AND ANALYSIS (continued) STATEMENT OF CASH FLOWS The Statement of Cash Flows shows inflows and outflows of cash without regard to accrual items. Cash flows from operating activities on the Statement of Cash Flows will always differ from the operating gain or loss on the Statement of Revenues, Expenses, and Changes in Net Position (SRECNP) because of the inclusion of non-cash items, such as depreciation expense, on the SRECNP. Also, the SRECNP is prepared on the accrual basis of accounting, meaning that it shows revenues earned and expenses incurred. The primary cash receipts from operating activities consist of tuition and fees, grants and contracts, and auxiliary income from the Housing, Dining Services and Bookstore operations. Cash outlays include payment of wages and benefits, and operating expenses such as utilities, supplies, insurance and repairs and costs of goods sold through the Dining and Bookstore operations. Cash flows from capital and related financing activities include all plant funds and related long-term debt activities (except depreciation and amortization), as well as capital gifts, grants and appropriations. Purchase and sale of investments and income earned on investments are included in cash flows from investing activities. The Condensed Statement of Cash Flows for the fiscal years ended June 30, 2016, 2015 and 2014 is shown below: CONDENSED STATEMENT OF CASH FLOWS (in thousands) Cash flows from operating activities $ 10,741 $ 9,483 $ 10,349 Cash flows from non-capital financing activities Cash flows from investing activities Cash flows from capital and related financing activities (10,604) (11,389) (10,343) Increase in cash and cash equivalents during the year 377 (1,678) 142 Cash and cash equivalents, beginning of year 31,604 33,282 33,140 Cash and cash equivalents, end of year $ 31,981 $ 31,604 $ 33,282 There has been no significant change in the amount of cash on hand in the previous three fiscal years The increase in cash on hand at June 30, 2016 was primarily related to the results of operations during CAPITAL ASSETS AND LONG-TERM LIABILITIES HIGHLIGHTS On June 30, 2016, the System had $139.4 million invested in net capital assets, as reflected in the following table. This represents a net decrease of $2.3 million or 1.6% during the fiscal year. CAPITAL ASSETS (in thousands) Land $ 1,098 $ 1,098 $ 1,098 Equipment 3,571 3,189 3,020 Improvements and Infrastructure 10,841 8,618 8,173 Buildings 175, , ,931 Construction in progress Art Total 190, , ,952 Total accumulated depreciation and amortization (51,541) (47,357) (43,199) Capital assets, net $ 139,394 $ 141,725 $ 144, Central Washington University 2016 Annual System Financial Report

17 MANAGEMENT DISCUSSION AND ANALYSIS (continued) Depreciable capital assets, net of depreciation, decrease during fiscal year 2016 by $1.9 million. Construction in progress for projects underway totaled $114 thousand at June 30, The total depreciation expense was $4.2 million for the year ended June 30, The difference between the net additions of working assets ($1.9 million) and the depreciation expense of $4.2 million results in a net reduction of $2.3 million in capital assets, net. Art, a new component of capital assets, had an increase of $40 thousand during Fiscal This represents the System s support of a student initiative to purchase a bronze wildcat to enhance school spirit and pride. The System was proud to be a part of this project. Non-current Liabilities The System experienced one substantial change in long-term obligations from FY 2014 to FY This change is a direct result of the implementation of GASB 68 discussed below and in note 8. LONG-TERM OBLIGATIONS (in thousands) (Restated) 2014 Construction accounts payable $ 0 $ 0 $ 1,126 Accrued leave liabilities Net bond premium/discount, net of amortization 3,703 3,917 4,148 Bonds payable, net of current portion 115, , ,780 Pension liability 4,147 2,951 Total non-current liabilities 123, , ,240 Unrestricted net position $ 27,283 $ 26,585 $ 31,661 Viability ratio (unrestricted net position to non-current liabilities) 22% 21% 25% Non-Current liabilities decreased during 2016 by $2.6 million. This decrease was due to $3.7 million in regularly scheduled principal payments on long term debt. At June 30, 2016, $56.8 million of System revenues (100%) were pledged as security for outstanding System bonds. The viability ratio measures the System s ability to retire long-term debt using available current resources. The ratio is calculated by dividing unrestricted net position by long-term debt. The System s viability ratio at June 30, 2016 was.22 to 1. This is an improvement from the previous year s figure of.21 to 1. Central Washington University 2016 Annual System Financial Report 12

18 MANAGEMENT DISCUSSION AND ANALYSIS (continued) DEBT POLICY The university s formal debt policy is CWUP , Debt Issuance and Repayment. 4 The policy is detailed and spells out many constraints intended to maintain the health of the university s debt program. One of these constraints is maintenance of a designation of net position for building repair and improvements. 5 This designated portion of the unrestricted net position of the System is the funding mechanism for the major renovations. The university has retained Scion LLC, to conduct a feasibility study for potential additions to the System s building infrastructure to enhance the System s offerings to students. This report is not yet complete and the System has no firm plans for debt issuance at present. On August 9th, 2016 the System successfully completed an advance refunding of the Bonds of Those bonds were originally issued for the construction of a residence hall on the CWU campus. By taking advantage of this opportunity the System s annual debt service will be reduced by approximately $280 thousand per year for the next 22 years, resulting in a gross savings of about $6 million dollars over the life of the replacement bonds. Since this transaction occurred subsequent to the end of fiscal 2016, it has not affected the financial statements presented. (See Note 11) FINANCIAL CONTACT The System s financial statements are designed to present users with a general overview of the System s finances and to demonstrate accountability. If you have questions about the report or need additional financial information, contact the Director of Financial Services, 400 East University Way, Ellensburg, WA 98926, CWUP , Debt Issuance and Repayment is available at cwu.edu/resources-reports/cwup debt-issuance-and-repayment. 5 Please see CWUP , Sect. 9(G), Capital Reserve and Replacement. 13 Central Washington University 2016 Annual System Financial Report

19 ANNUAL SYSTEM FINANCIAL STATEMENTS CENTRAL WASHINGTON UNIVERSITY SYSTEM STATEMENT OF NET POSITION AS OF JUNE 30, 2016 AND (Restated) Assets Current assets Cash and cash equivalents $ 31,981,328 $ 31,604,406 Accounts receivable, net 3,639,872 2,809,937 Inventories 1,933,570 1,370,662 Total current assets 37,554,770 35,785,006 Non-current assets Issuance costs, net of amortization 643, ,244 Capital assets, net of depreciation 139,393, ,724,803 Pension assets, net 168, ,324 Total non-current assets 140,206, ,644,371 Deferred out-flows Deferred pension contribution (1,268) (47,910) Deferred gain or loss on refunding 2,165,268 2,288,667 Total deferred out-flows 2,164,001 2,240,756 Total assets and deferred out-flows 179,925, ,670,133 Liabilities Current liabilities Accounts payable 2,320,173 1,841,342 Accrued liabilities 1,655,441 1,320,613 Deposits payable 710, ,057 Unearned revenues 536, ,698 Current portion bond premium 203, ,083 Current portion bond payable 3,675,000 3,515,000 Total current liabilities 9,100,205 8,115,794 Non-current liabilities Accrued leave liabilities 308, ,289 Net bond premium/discount, net of amortization 3,702,624 3,917,112 Bonds payable, net of current portion 115,590, ,265,000 Pension liability 4,147,715 2,951,545 Total non-current liabilities 123,749, ,408,946 Total liabilities 132,849, ,524,740 Deferred in-flows Deferred pension earnings 760,027 1,752,485 Total liabilities and deferred in-flows 133,609, ,277,225 Net position Net investment in capital assets 19,032,415 17,807,518 Unrestricted 27,283,299 26,585,390 Total net position $ 46,315,714 $ 44,392,908 See Accompanying Notes to the Financial Statements Central Washington University 2016 Annual System Financial Report 14

20 ANNUAL SYSTEM FINANCIAL STATEMENTS (continued) CENTRAL WASHINGTON UNIVERSITY SYSTEM STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2016 AND Operating revenues Services and activities $ 12,908,906 $ 12,254,949 University store 9,446,753 8,974,063 Parking 1,139,004 1,043,399 Housing and dining 33,337,205 29,417,543 Total operating revenue 56,831,869 51,689,953 Operating expenses Services and activities 10,169,569 9,412,566 University store 9,087,478 8,775,264 Parking 1,301,528 1,016,916 Housing and dining 25,211,269 23,594,530 Depreciation 4,259,599 4,178,204 Total operating expenses 50,029,443 46,977,481 Operating income (loss) 6,802,426 4,712,473 Non-operating revenues (expenses) Investment income 240, ,378 Interest on indebtedness (5,749,621) (6,079,106) Non-operating income, net of expenses 629, ,247 Net non-operating revenues (expenses) (4,879,620) (5,219,482) Income or (loss) before other revenues, expenses, gains, or losses 1,922,806 (507,009) Increase (decrease) in net position 1,922,806 (507,009) Net position, beginning of year 44,392,908 44,899,917 Net position, end of year $ 46,315,714 $ 44,392,908 See Accompanying Notes to the Financial Statements 15 Central Washington University 2016 Annual System Financial Report

21 ANNUAL SYSTEM FINANCIAL STATEMENTS (continued) CENTRAL WASHINGTON UNIVERSITY SYSTEM STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2016 AND Cash flows from operating activities Auxiliary enterprise charges and student fees $ 56,012,686 $ 51,448,846 Payments to vendors (27,479,543) (27,899,169) Payments to employees for salaries and benefits (17,792,105) (14,066,382) Net cash provided by operating activities 10,741,038 9,483,295 Cash flows from non-capital financing activities 0 0 Cash flows from investing activities Investment proceeds 0 0 Investment income 240, ,378 Other investment activity Net cash provided by investing activities 240, ,378 Cash flows from capital and related financing activities Purchases of capital assets (1,928,743) (2,276,150) Proceeds from sales of capital debt Principal paid on capital debt (3,515,000) (3,560,000) Interest paid on capital debt (5,790,375) (6,184,486) Other capital activities 629, ,247 Net cash provided by capital and related financing activities (10,604,261) (11,389,390) Net increase in cash and cash equivalents 376,922 (1,677,717) Cash and cash equivalents, beginning of year 31,604,406 33,282,122 Cash and cash equivalents, end of year $ 31,981,328 $ 31,604,406 Reconciliation of operating income to net cash used by operating activities Operating income $ 6,802,426 $ 4,712,473 Adjustments to reconcile operating profit to net cash provided by operating activities Depreciation expense 4,259,599 4,178,204 Loss on disposal of asset Change in assets and liabilities Accounts receivable (829,935) (105,107) Inventories (562,907) 43,968 Accounts payable 480, ,073 Other liabilities (1,500) 200 Accrued expenses 334,828 (15,647) Unearned revenue (23,586) 24,545 Deposits payable 34,338 (160,545) Accrued liabilities 247,444 90,208 Net cash provided by operating activities $ 10,741,038 $ 9,483,295 See Accompanying Notes to the Financial Statements * Non cash items are included when considering the statement of cash flows. Central Washington University 2016 Annual System Financial Report 16

22 NOTES TO FINANCIAL STATEMENTS CENTRAL WASHINGTON UNIVERSITY June 30, 2016 and June 30, 2015 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity Central Washington University System (the System) is composed of the Housing and Dining Fund, the Services and Activities Fee Fund, the Bookstore Fund, and the Parking Fund of the university. Significant accounting policies are summarized as follows: Financial Statement Presentation The System s financial statements for the fiscal year ended June 30, 2016, are prepared in accordance with Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments, GASB Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities and GASB Statement No. 68, Accounting and Financial Reporting for Pensions. The financial statements include a statement of net position; a statement of revenues, expenses, and changes in net position; a statement of cash flows; and notes to the financial statements. Comparative totals for the year ended June 30, 2015 are presented where appropriate. Basis of Accounting The System s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the financial statements of a special purpose government entity engaged in business type activities to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. Cash Equivalents For purposes of the statements of cash flows, the System considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Accounts Receivable Accounts receivable consists primarily of rents and charges for services provided to students. Accounts receivable are recorded net of estimated uncollectible amounts. The estimate is based on a fixed percentage of outstanding receivables. Inventories Inventories consist primarily of merchandise and consumables held by the System to carry out the System s primary function: providing services to students. They are valued at cost based on the retail method or the average cost method. Cost methods are applied on a basis consistent with prior years. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. The university s capitalization policy includes all items with a unit cost of $5,000 or more and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, five to fifty years, in accordance with state guidelines. 17 Central Washington University 2016 Annual System Financial Report

23 NOTES TO FINANCIAL STATEMENTS (continued) Deferred Outflows of Resources Deferred outflows of resources are a consumption of net assets by the university that is applicable to a future reporting period. The deferred outflow gain or loss on refunding represents the difference between the reacquisition price and the carrying value of the System revenue bonds series 2004 which were advance refunded during The remaining portion of deferred outflows relates to GASB 68 changes in the pension contribution. For 2016, it consisted of the amortization of contributions made after the measurement date. Deferred Inflows of Resources Deferred inflows of resources are transactions that result in the acquisition of net assets in one period that are applicable to future periods. The deferred inflow being presented relates to the portion of pension earnings attributable to CWU since the implementation of GASB 68. Unearned Revenues Unearned revenues include amounts received for rents and fees for services recorded prior to the end of the fiscal year but related to the subsequent accounting period. Compensated Absences Employee vacation, compensatory time, and sick leave are accrued at year-end for financial statement purposes. The liability and expenses incurred are recorded as accrued leave liabilities for vacation, compensatory time, and sick leave payable in the statements of net position and as a component of operating expenses in the statements of revenues, expenses, and changes in net position. Non-current Liabilities Non-current liabilities include principal amounts of revenue bonds payable and amounts for accrued compensated absences and other liabilities that are not estimated to be paid within the next fiscal year. Net Position The System s net position is classified as follows: Net Investment in Capital Assets: This represents the university s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are included as a component of Net Investment in Capital Assets. Unrestricted: Unrestricted represents resources derived from student tuition and fees, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the university and may be used at the discretion of the governing board to meet current expenses for any purpose. The auxiliary enterprises are substantially self-supporting activities that provide services for students, faculty, and staff. Income Taxes The System, as part of CWU, is excluded from federal income taxes under Section 115(a) of the Internal Revenue Code, as amended. Classification of Revenues The System has classified its revenues as either operating or non-operating revenues according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student room and board fees, (2) student fees, (3) parking fines or fees, (4) retail sales and (5) conference revenues. Non-operating revenues: Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as investment income. Central Washington University 2016 Annual System Financial Report 18

24 NOTES TO FINANCIAL STATEMENTS (continued) Reclassification The beginning balances for Assets were restated for Fiscal Year Previously, the asset in LEOFF2 had been consolidated with the liabilities of the remaining plans. This restatement will result in a separate beginning asset balance of $225,335. Because this balance had been consolidated against the liabilities balance, the beginning liability balance was increased as well by $225,335 from the original $2,726,221 to $2,951,545. New Accounting Standards Adopted In fiscal year 2016 the university adopted GASB statements 68, 69, 71, 72, 76, 77, 78, and 79. The only statement to affect the System was: GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans which provides minor allowances to government entities regarding the GASB 68 requirements in disclosure on Pensions. This GASB was taken into account with the current year calculations and associated disclosure notes of the university. In fiscal year 2015, the university adopted and implemented two new accounting standards as follows: GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68) which improves financial reporting by state and local governmental pension plans. The System s FY 2015 beginning unrestricted fund balance on the SNP was changed based on this pronouncement. GASB Statement No. 71, Pension Transition for Contributions made subsequent to the measurement date an amendment of GASB Statement No. 68 (GASB 71) which addresses issues regarding the application of the transition provisions of Statement No. 68. NOTE 2 CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS Cash and Cash Equivalents At June 30, 2016 and June 30, 2015, the carrying amount of the System s cash and cash equivalents were as follows: In order to maximize investment income, the System s excess cash is pooled with other CWU funds and commonly invested. The CWU investment pool is invested in accordance with the CWU investment policy. CASH AND CASH EQUIVALENTS June 30, 2016 June 30, 2015 Cash and equivalents, operating $ 31,981,328 $ 31,604,406 Cash, restricted for capital projects 0 0 Total $ 31,981,328 $ 31,604, Central Washington University 2016 Annual System Financial Report

25 NOTES TO FINANCIAL STATEMENTS (continued) NOTE 3 ACCOUNTS RECEIVABLE Accounts receivable, due from other agencies and related allowance for uncollectible accounts consist of the following as of June 30, 2016: ACCOUNTS RECEIVABLE Services and activities $ 716,656 $ 807,093 University store 1,650, ,876 Parking 125, ,333 Housing and dining 1,480,990 1,440,698 Sub Total 3,973,367 3,196,000 Less allowance for doubtful accounts (333,490) (386,063) Net accounts receivable $ 3,639,873 $ 2,809,937 Central Washington University 2016 Annual System Financial Report 20

26 NOTES TO FINANCIAL STATEMENTS (continued) NOTE 4 CAPITAL ASSETS Following are the changes in capital assets for the year ended June 30, 2016: CAPITAL ASSETS Balance at Balance at June 30, 2015 Additions Disposals June 30, 2016 Depreciable assets Buildings $ 175,270,253 $ $ $ 175,270,253 Improvements and infrastructure 8,617,581 2,223,694 10,841,273 Equipment 3,189, ,279 (76,326) 3,571,147 Construction in progress 866, ,749 (866,982) 113,749 Art 40,000 40,000 Non-depreciable assets Land $ 1,098,055 $ $ $ 1,098,055 Total cost $ 189,082,065 $ 2,795,722 $ (943,308) $190,943,477 Less accumulated depreciation Buildings 40,552,392 3,590,988 44,143,380 Improvements and infrastructure 4,264, ,970 4,654,334 Equipment 2,540, ,640 (76,326) 2,742,819 Total accumulated depreciation 47,357,261 4,259,598 (76,326) 51,540,533 Net plant assets $ 141,724,802 $ (1,463,876) $ (866,982) $139,393,947 The total depreciation expense was $4,259,599 for the year ended June 30, Following are the changes in capital assets for the year ended June 30, 2015: CAPITAL ASSETS Balance at Balance at June 30, 2014 Additions Disposals June 30, 2015 Depreciable assets Buildings $ 174,930,795 $ 339,458 $ $ 175,270,253 Improvements and infrastructure 8,173, ,570 8,617,581 Equipment 3,019, ,863 (19,566) 3,189,194 Construction in progress 730, ,982 (730,105) 866,982 Art 40,000 40,000 Non-depreciable assets Land $ 1,098,055 $ $ $ 1,098,055 Total cost $ 187,951,863 $ 1,879,871 $ (749,671) $189,082,065 Less accumulated depreciation Buildings 39,921,493 3,630,899 40,552,392 Improvements and infrastructure 3,966, ,926 4,264,364 Equipment 2,310, ,380 (19,566) 2,540,505 Total accumulated depreciation 43,198,622 4,178,205 (19,566) 47,357,261 Net plant assets $ 144,753,241 $ (2,298,334) $ (730,105) $141,724,802 The total depreciation expense was $4,178,205 for the year ended June 30, Central Washington University 2016 Annual System Financial Report

27 NOTES TO FINANCIAL STATEMENTS (continued) NOTE 5 ACCRUED LEAVE LIABILITIES At termination of employment, employees may receive cash payment for all accumulated vacation and compensatory time. Employees who retire get 25% of the value of their accumulated sick leave credited to a Voluntary Employees Beneficiary Association (VEBA) account, which can be used for future medical expenses or insurance purposes. The amounts of unpaid vacation and compensatory time accumulated by university employees are accrued as expenses when incurred. The amounts represent a liability to the university and are recorded and reported accordingly. The sick leave liability is recorded as an actuarial estimate of one-fourth the total balance on the payroll records. The accrued leave liability balance as of June 30, 2016 was $1,049,562. The accrued leave liability balance as of June 30, 2015 was $912,954. NOTE 6 REVENUE BONDS AND NOTES PAYABLE The following schedule of bonds payable provides a listing of outstanding debt at the end of fiscal year 2016 by the CWU System. REVENUE BONDS AND NOTES PAYABLE Balance at Principal Balance at June 30, 2015 Additions Retirements Payments June 30, 2016 CWU System bonds CWU System Bonds of 2008 $ 32,020,000 $ $ $ (845,000) $ 31,175,000 CWU System Bonds of 2010 Series A 2,515,000 (585,000) 1,930,000 CWU System Bonds of 2010 Series B 29,770,000 29,770,000 CWU System Bonds of ,760,000 (315,000) 6,445,000 CWU System Bonds of ,715,000 (1,770,000) 49,945,000 Total bonds payable $ 122,780,000 $ $ $ (3,515,000) $ 119,265,000 Bond discounts and $ (694,243) $ $ 50,336 $ $ (643,907) issuance costs Bond premium 4,120,195 (214,448) 3,905,707 Total $ 126,205,952 $ $ (164,152) $ (3,515,000) $122,526,800 Central Washington University 2016 Annual System Financial Report 22

28 NOTES TO FINANCIAL STATEMENTS (continued) The following schedule of bonds payable provides a listing of outstanding debt at the end of fiscal year 2015 by the CWU System. REVENUE BONDS AND NOTES PAYABLE Balance at Principal Balance at June 30, 2014 Additions Retirements Payments June 30, 2015 CWU System bonds CWU System Bonds of 2008 $ 32,835,000 $ $ $ (815,000) $ 32,020,000 CWU System Bonds of 2010 Series A 2,515,000 2,515,000 CWU System Bonds of 2010 Series B 30,505,000 (735,000) 29,770,000 CWU System Bonds of ,070,000 (310,000) 6,760,000 CWU System Bonds of ,415,000 (1,700,000) 51,715,000 Total bonds payable $ 126,340,000 $ $ $ (3,560,000) $122,780,000 Bond discounts and $ (727,072) $ $ 32,829 $ $ (694,243) issuance costs Bond premium 4,378,860 (258,665) 4,120,195 Total $ 129,991,788 $ $ (255,836) $ (3,560,000) $126,205,952 Central Washington University System Bonds, Series 2008, issued in the original amount of $36,495,000 and mature in varying annual amounts to May 1, Principal and interest on these revenue bonds are collateralized by a pledge of revenues. A principal payment of $845,000 was required and paid during Fiscal A principal payment of $880,000 is scheduled for May 1, Central Washington University System Bonds, Series 2010 A, tax exempt issued in the original amount of $2,515,000 maturing in varying annual amounts to May 1, Principal and interest on these revenue bonds are collateralized by a pledge of revenues. A principal payment of $585,000 was scheduled and paid during Fiscal A principal payment of $610,000 is scheduled for May 1, The Central Washington University System Bonds Series 2010 B, taxable Build America Bonds issued in the original amount of $31,950,000 maturing in varying annual amounts to May 1, Principal and interest on these revenue bonds are collateralized by a pledge of revenues. The Series 2010 B bonds were issued under the American Recovery Act of 2008 Build America Bond Program as taxable bonds. Under this program the university expects to receive a subsidy from the United States federal government of 35% of interest paid through maturity. The subsidy received during fiscal 2015 was $630,674. This amount is shown as non-operating revenue on the Statement of Revenue, Expenses and Changes in Net Assets. No principal payment was scheduled during Fiscal No principal payment is scheduled for fiscal Central Washington University System Bonds, Series 2012, issued in the original amount of $7,655,000 and mature in varying annual amounts to May 1, Principal and interest on these revenue bonds are collateralized by a pledge of revenues. A principal payment of $315,000 was required and paid during Fiscal A principal payment of $325,000 is scheduled for May 1, Central Washington University System Bonds, Series 2013, issued in the original amount of $53,415,000 and mature in varying annual amounts to May 1, Principal and interest on these revenue bonds are collateralized by a pledge of revenues. A principal payment of $1,770,000 was required and paid of scheduled during A principal payment of $1,860,000 is scheduled for May 1, Central Washington University 2016 Annual System Financial Report

29 NOTES TO FINANCIAL STATEMENTS (continued) Maturity Information The scheduled maturities of the System revenue bonds are as follows: DEBT SERVICE REQUIREMENTS Fiscal Year Principal Interest Total 2017 $ 3,675,000 $ 5,658,905 $ 9,333, ,845,000 5,493,705 9,338, ,010,000 5,318,730 9,328, ,770,000 5,136,105 9,906, ,975,000 4,914,355 9,889, ,715,000 21,145,576 46,860, ,320,000 14,653,934 47,973, ,620,000 7,235,901 34,855, ,335,000 1,575,055 12,910,055 Total $ 119,265,000 $ 71,132,266 $ 190,397,266 *Amounts do not reflect federal subsidies to be received for Build America Bonds Interest. NOTE 7 RETIREMENT PLANS As employees of CWU, System permanent staff are eligible to participate in the Central Washington University Retirement Plan (CWURP), or the Public Employees Retirement System (PERS). The System contributions to these funds are as follows: RETIREMENT PLANS Fiscal Year Amount 2002 $ 99, $105, $129, $132, $200, $304, $423, $563, $429, $440, $539, $547, $697, $700, $839,731 The CWURP is a defined contribution plan administered by the university. Contributions to the plan are invested in annuity contracts or mutual fund accounts offered by the three fund sponsors. Employee contribution rates, based on age, are 5%, 7.5%, or 10% of salary. The university matches the contributions of employees. Within parameters established by the legislature, contribution requirements may be established or amended by Central Washington University s Board of Trustees. Central Washington University 2016 Annual System Financial Report 24

30 NOTES TO FINANCIAL STATEMENTS (continued) PERS is a defined benefit pension plan administered by the State of Washington Department of Retirement Systems. The Office of the State Actuary, using funding methods prescribed by statute, determines actuarially required contribution rates for employees and employers. PERS CONTRIBUTION RATES Plan Member University Member University Member University PERS I 6.00% 9.21% 6.00% 9.21% 6.00% 9.21% PERS II 4.92% 9.21% 4.92% 9.21% 4.92% 9.21% PERS III VARIOUS 9.21% VARIOUS 9.21% VARIOUS 9.21% NOTE 8 PENSION LIABILITY (GASB 68) The following table represents the System s aggregate pension amounts for all plans subject to the requirements of the GASB Statement 68, Accounting and Financial Reporting for Pensions, for the year 2015: AGGREGATE GASB 68 ENTRIES Original fund balance $ 3,911,437 Pension asset 56,781 Plus pension liability 1,196,170 Less pension expense 213,851 Less deferred in-flows of resources related to pensions 992,458 Plus deferred out-flows of resources related to pensions 26,386 Net increase/decrease in pension fund balance 20,256 New GASB 68 fund balance $ 3,931,693 The following table represents the System s aggregate pension amounts for all plans subject to the requirements of the GASB Statement 68, Accounting and Financial Reporting for Pensions, for the years , including the 2014 restatement of assets and liabilities: AGGREGATE PENSION AMOUNTS - ALL PLANS Beg Bal/Restated 2015 for FY16 FY16 G68 FB Pension liabilities $ 2,951,545 $ 1,196,170 $ 4,147,715 Pension assets 225,325 (56,781) 168,543 Deferred out-flows of resources 47,910 (46,642) 1,268 Deferred in-flows of resources 1,752,485 (992,458) 760,027 Pension expense/expenditures 615, , ,773 System s GASB 68 fund balance 3,911,437 20,256 3,931, Central Washington University 2016 Annual System Financial Report

31 NOTES TO FINANCIAL STATEMENTS (continued) State Sponsored Pension Plans Substantially all of CWU s full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing, multiple-employer public employee defined benefit and defined contribution retirement plans. The state legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems Communications Unit P.O. Box Olympia, WA Or the DRS CAFR may be downloaded from the DRS website at Public Employees Retirement System (PERS) PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher education employees not participating in higher education retirement programs. PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component. Contributions PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as 2% of the member s average final compensation (AFC) times the member s years of service. The AFC is the average of the member s 24 highest consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, The PERS Plan 1 member contribution rate is established by state statute at 6%. The employer contribution rate is developed by the Office of the State Actuary and includes an administrative expense component that is currently set at 0.18%. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered payroll) for 2015 were as follows: PERS PLAN 1 Actual Contribution Rates Employer Employee July 01, 2014-June 30, % 6% The System s actual contributions to the plan were $12,470 for the year ended June 30, Central Washington University 2016 Annual System Financial Report 26

32 NOTES TO FINANCIAL STATEMENTS (continued) PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as 2% of the member s average final compensation (AFC) times the members years of service for Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the members 60 highest-paid consecutive service months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3 members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire under one of two provisions: With a benefit that is reduced by three percent for each year before age 65; or With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-to-work rules. PERS Plan 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of 5% for each year of retirement before age 65. This option is available only to those who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of 5% and escalate to 15% with a choice of six options. Employers do not contribute to the defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan. Contributions The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include a component to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18%. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3 contribution rates. The PERS Plan 2/3 required contribution rates (expressed as a percentage of covered payroll) for 2015 were as follows: the System s actual contributions to the plan were $521,024 for the year ended June 30, PERS PLAN 2/3 Actual Contribution Rates Employer Employee July 01, 2014-June 30, % 4.92% Employee PERS plan % Varies 27 Central Washington University 2016 Annual System Financial Report

33 NOTES TO FINANCIAL STATEMENTS (continued) Law Enforcement Officers and Fire Fighters Retirement System (LEOFF) LEOFF membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. Central Washington University participates solely in LEOFF Plan 2. LEOFF Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as 2% of the final average salary (FAS) per year of service (the FAS is based on the highest consecutive 60 months). Members are eligible for retirement with a full benefit at 53 with at least five years of service credit. Members who retire prior to the age of 53 receive reduced benefits. If the member has at least 20 years of service and is age 50, the reduction is three percent for each year prior to age 53. Otherwise, the benefits are actuarially reduced for each year prior to age 53. LEOFF 2 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 2 members are vested after the completion of five years of eligible service. Contributions The LEOFF Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The employer rate included an administrative expense component set at 0.18%. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 2015 were as follows: LEOFF PLAN 2 Actual Contribution Rates Employer Employee Ports and universities 8.59% 8.41% The System s actual contributions to the plan were $24,653 for the year ended June 30, The legislature, by means of a special funding arrangement, appropriates money from the State General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. For the state fiscal year ending June 30, 2015, the state contributed $58,339,032 to LEOFF Plan 2. Central Washington University 2016 Annual System Financial Report 28

34 NOTES TO FINANCIAL STATEMENTS (continued) Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2015 with a valuation date of June 30, The actuarial assumptions used in the valuation were based on the results of the Office of the State Actuary s (OSA) Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2014 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, Plan liabilities were rolled forward from June 30, 2014, to June 30, 2015, reflecting each plan s normal cost (using the entry-age cost method), assumed interest and actual benefit payments. Inflation: 3% total economic inflation; 3.75% salary inflation Salary increases: In addition to the base 3.75% salary inflation assumption, salaries are also expected to grow by promotions and longevity Investment rate of return: 7.5% Mortality rates were based on the RP-2000 report s Combined Healthy Table and Combined Disabled Table, published by the Society of Actuaries. The OSA applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100% Scale BB. Mortality rates are applied on a generational basis; meaning, each member is assumed to receive additional mortality improvements in each future year throughout his or her lifetime. There were minor changes in methods and assumptions since the last valuation. The OSA updated demographic assumptions, consistent with the changes from the Experience Study Report, used when valuing the PERS 1 and TERS 1 Basic Minimum COLA. The OSA corrected how valuation software calculates a member s entry age under the entry age normal actuarial cost method. Previously, the funding age was rounded, resulting in an entry age one year higher in some cases. For purposes of calculating the Plan 2/3 Entry Age Normal Cost contribution rates, the OSA now uses the current blend of Plan 2 and Plan 3 salaries rather than using a long-term membership assumption of two-thirds Plan 2 members and one-third Plan 3 members. The OSA changed the way it applies salary limits, as described in the Experience Study Report. Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.5%. To determine that rate, an asset sufficiency test included an assumed 7.7% long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. (All plans use 7.7% except LEOFF 2, which has assumed 7.5%). Consistent with the longterm expected rate of return, a 7.5% future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue being made at contractually required rates (including PERS 2/3 and TRS 2/3 employers, whose rates include a component for the PERS 1, and TRS 1 plan liabilities). Based on these assumptions, the pension plans fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.5% was used to determine the total liability. 29 Central Washington University 2016 Annual System Financial Report

35 NOTES TO FINANCIAL STATEMENTS (continued) Long-Term Expected Rate of Return The long-term expected rate of return on the DRS pension plan investments of 7.5% was determined using a building-block-method. The Washington State Investment Board (WSIB) used a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, including inflation) to develop each major asset class. Those expected returns make up one component of WSIB s capital market assumptions. The WSIB uses the capital market assumptions and their target asset allocation to simulate future investment returns at various future times. The long-term expected rate of return of 7.5% approximately equals the median of the simulated investment returns over a 50-year time horizon. Estimated Rates of Return by Asset Class Best estimates of arithmetic real rates of return for each major asset class included in the pension plan s target asset allocation as of June 30, 2015, are summarized in the table below. The inflation component used to create the table is 2.2% and represents the WSIB s most recent long-term estimate of broad economic inflation. ESTIMATED RATES OF RETURN BY ASSET CLASS % Long-Term Expected Real Rate of Return Asset Class Target Allocation Arithmetic Fixed income 20% 1.70% Tangible assets 5% 4.40% Real estate 15% 5.80% Global equity 37% 6.60% Private equity 23% 9.60% 100% Sensitivity of NPL The table below presents the System s proportionate share of the net pension liability calculated using the discount rate of 7.5%, as well as what the university System s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.5%) or 1-percentage point higher (8.5%) than the current rate. SENSITIVITY OF NPL CWU Systems 1% Decrease Current Rate 1% Increase CWU Systems Plan Allocation % 6.50% 7.50% 8.50% PERS % $ 2,279,316 $ 1,872,124 $ 1,521,977 PERS 2/ % 6,653,945 2,275,591 (1,076,751) LEOFF % 168,785 (168,543) (422,396) Pension Plan Fiduciary Net Position Detailed information about the state s pension plans fiduciary net position is available in the separately issued DRS financial report. Central Washington University 2016 Annual System Financial Report 30

36 NOTES TO FINANCIAL STATEMENTS (continued) Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2015, the System reported a total pension liability of $4,147,715 and an asset of $168,543 for its proportionate share of the net pension balances as follows: PENSION LIABILITIES Plan Liability (or Asset) PERS 1 $ 272,706 PERS 2/3 923,464 LEOFF 2 (168,543) The amount of the liability/(asset) reported above for LEOFF Plan 2 reflects a reduction for state pension support provided to the university. The amount recognized by the university as its proportionate share of the net pension liability/(asset), the related state support, and the total portion of the net pension liability/(asset) that was associated with the System were as follows: PENSION LIABILITIES Plan Liability (or Asset) LEOFF 2 employer s proportionate share (CWU Systems only) $ (168,543) LEOFF 2 state s proportionate share of the net pension liability/(asset) associated with the employer (102,611,457) TOTAL $ (102,780,000) At June 30, the System s proportionate share of the collective net pension liabilities was as follows: COLLECTIVE NET PENSION LIABILITIES Proportionate Share Proportionate Share Change in Plan June 30, 2014 June 30, 2015 Proportion PERS % % % PERS 2/ % % % 31 Central Washington University 2016 Annual System Financial Report

37 NOTES TO FINANCIAL STATEMENTS (continued) At June 30, the System s proportionate share of the collective net pension liabilities was as follows: COLLECTIVE NET PENSION LIABILITIES Proportionate Share Proportionate Share Change in Plan June 30, 2014 June 30, 2015 Proportion LEOFF % % % Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30 are used as the basis for determining each employer s proportionate share of the collective pension amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1. In fiscal year 2015, the State of Washington contributed percent of LEOFF 2 employer contributions pursuant to RCW and all other employers contributed the remaining percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 2015, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2014, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended June 30, 2015, the System recognized a net pension expense as follows: PENSION EXPENSE Plan Pension Expense PERS 1 $ 175,133 PERS 2/3 69,296 LEOFF 2 (30,579) TOTAL $ 213,851 Central Washington University 2016 Annual System Financial Report 32

38 NOTES TO FINANCIAL STATEMENTS (continued) Deferred Outflows of Resources and Deferred Inflows of Resources At June 30, 2015, the System reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERS 1 Deferred Out-flows Deferred In-flows of Resources of Resources Differences between expected and actual experience $ 0 $ 0 Net difference between projected and actual investment earnings on pension plan investments 0 102,425 Changes of assumptions 0 0 Changes in proportion and differences between contiributions and proportionate share of contributions 228,940 0 Contributions subsequent to the measurement date 0 0 Total $ 228,940 $ 102,425 PERS 2/3 Deferred Out-flows Deferred In-flows of Resources of Resources Differences between expected and actual experience $ 241,895 $ 0 Net difference between projected and actual investment earnings on pension plan investments 0 607,474 Changes of assumptions 3,666 0 Changes in proportion and differences between contiributions and proportionate share of contributions 0 (133,431) Contributions subsequent to the measurement date 0 0 Total $ 245,561 $ 474,043 LEOFF 2 Deferred Out-flows Deferred In-flows of Resources of Resources Differences between expected and actual experience $ 14,758 $ 0 Net difference between projected and actual investment earnings on pension plan investments 0 51,067 Changes of assumptions Changes in proportion and differences between contiributions and proportionate share of contributions 0 3,630 Contributions subsequent to the measurement date 0 0 Total $ 15,202 $ 54, Central Washington University 2016 Annual System Financial Report

39 NOTES TO FINANCIAL STATEMENTS (continued) Deferred outflows of resources related to pensions resulting from the Systems contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows: AMORTIZATION OF IN-FLOWS - PERS 1 SYSTEM Differences Between Projected and Actual Earnings on Plan Investments Proportionate Entity s Share Amount Share (Amortization Table) 2016 $ (110,917,000) % $ (39,697) 2017 (110,917,000) % (39,697) 2018 (110,917,000) % (39,697) ,562, % 16,664 AMORTIZATION OF IN-FLOWS - PERS 2/3 SYSTEM Differences Between Projected and Actual Earnings on Plan Investments Proportionate CWU Share Amount Share (Amortization Table) 2016 $ (372,375,000) % $ (237,156) 2017 (372,375,000) % (237,156) 2018 (372,376,000) % (237,157) ,289, % 103,995 AMORTIZATION OF IN-FLOWS - PERS 2/3 SYSTEM Differences Between Expected and Actual Experience Proportionate CWU Share Amount Share (Amortization Table) 2016 $ 111,711, % $ 71, ,711, % 71, ,711, % 71, ,684, % 28,458 AMORTIZATION OF IN-FLOWS - PERS 2/3 SYSTEM Changes of Assumption Proportionate CWU Share Amount Share (Amortization Table) 2016 $ 1,693, % $ 1, ,693, % 1, ,693, % 1, , % 432 Central Washington University 2016 Annual System Financial Report 34

40 NOTES TO FINANCIAL STATEMENTS (continued) AMORTIZATION OF OUT-FLOWS - PERS 2/3 SYSTEM Changes in Proportionate Share Amortization (Over 4.4 years) 2015 $ (12,190) 2016 (12,190) 2017 (12,190) 2018 (12,190) 2019 (4,876) CWU Change in Proportionate Share $ (53,636) AMORTIZATION OF IN-FLOWS - LEOFF 2 SYSTEM Differences Between Projected and Actual Earnings on Plan Investments Proportionate CWU Share Amount Share (Amortization Table) 2016 $ (121,738,000) % $ (19,963) 2017 (121,738,000) % (19,963) 2018 (121,738,000) % (19,963) ,797, % 8,822 AMORTIZATION OF IN-FLOWS - LEOFF 2 SYSTEM Differences Between Expected and Actual Experience Proportionate CWU Share Amount Share (Amortization Table) 2016 $ 17,308, % $ 2, ,308, % 2, ,308, % 2, ,308, % 2, ,308, % 2, ,461, % 568 AMORTIZATION OF IN-FLOWS - LEOFF 2 SYSTEM Changes of Assumption Proportionate CWU Share Amount Share (Amortization Table) 2016 $ 521, % $ , % , % , % , % , % Central Washington University 2016 Annual System Financial Report

41 NOTES TO FINANCIAL STATEMENTS (continued) AMORTIZATION OF OUT-FLOWS - PERS 2/3 SYSTEM Changes in Proportionate Share Amortization (Over 6.2 years) 2015 $ CWU Total $ 4,851 NOTE 9 NATURAL CLASSIFICATIONS The System s primary purpose is providing services to students and conference participants. Expenses are reported in categories reflecting these activities on the statement of revenues, expenses, and changes in net assets. The following is a schedule of operating expenses by natural classification. NATURAL CLASSIFICATIONS June 30, 2016 June 30, 2015 June 30, 2014 Salaries and wages $ 15,001,651 $ 14,140,943 $ 14,016,409 Employee benefits 4,002,750 3,815,111 3,392,948 Personal services 294, , ,978 Goods and services 24,429,542 22,522,414 22,888,433 Travel 807, , ,958 Equipment 240, , ,857 Student fee waivers 578, , ,091 Misc. 414, , ,521 Depreciation 4,259,599 4,178,204 4,117,971 Total $ 50,029,543 $ 46,977,481 $ 46,405,167 Central Washington University 2016 Annual System Financial Report 36

42 NOTES TO FINANCIAL STATEMENTS (continued) NOTE 10 OTHER POST-EMPLOYMENT BENEFITS During fiscal year 2008, the university adopted GASB Statement No.45 Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions. This statement establishes standards for the measurement, recognition, and display of other post-employment benefits (OPEB) expenditures and related liabilities (assets), note disclosures, and required supplementary information in the financial reports of state and local government employers. Health care and life insurance programs for employees of the State of Washington are administered by the Washington Health Care Authority (HCA). The HCA calculates the premium amounts each year that are sufficient to fund the statewide health and life insurance programs on a pay as you go basis. These costs are passed through to individual state agencies based upon active employee headcount; the agencies pay the premiums for active employees to the HCA. State of Washington retirees may elect coverage through state health and life insurance plans, for which they pay less than the full cost of the benefits, based on their age and other demographic factors. The health care premiums for active employees, which are paid by the agency during employees working careers, subsidize the underpayments of retirees. An additional factor in the OPEB obligation is a payment that is required by the state legislature to reduce the premiums for retirees covered by Medicare (an explicit subsidy). This is also passed through to state agencies via active employee rates charged to the agency. There is no formal state or university plan that underlies the subsidy of retiree health and life insurance. CWU has a pension which supplements the defined contribution retirement plan (CWURP) for pre-1998 enrollees. The state actuary adjusts the amount for the unfunded accrued liability related to future payments to this group. Beginning in 2015, the UAL will be amortized over a rolling ten-year period. This methodology is consistent with the amortization of the unfunded liabilities for PERS Plan 1 and TRS Plan 1. The current UAL IS approximately $7.3 million, and the university s 2015 Annual Required Contribution (ARC) is $855,000. No estimate of what portion of the university s OPEB obligation relates directly to the System is available. 37 Central Washington University 2016 Annual System Financial Report

43 NOTES TO FINANCIAL STATEMENTS (continued) NOTE 11 SUBSEQUENT EVENTS Advance Refunding System Revenue Bonds On August 9, 2016 the System issued $29,175,000 in System Revenue Refunding Bonds, Series 2016 with an average coupon rate of 3.36% and a True Interest Cost (TIC) of 2.7%. The bonds are dated September 8, 2016 and bear interest from that date. Interest on the bonds will be payable semiannually on each May 1 and November 1 commencing on May 1, The bonds will mature subject to redemption provisions, from May 1, 2019 to 2038 inclusive, and were issued at coupon rates ranging from 2.25% to 5%. The proceeds of the Series 2016 Bonds were used to advance refund the callable par of $29,380,000 of the System Revenue Bonds Series The Series 2008 Bonds were originally issued to construct a student residence hall on the CWU campus. The net proceeds of the refunding bonds were used to purchase U.S. Government Securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability will be removed from the statement of net assets. The advance refunding was undertaken to reduce total debt service payments by $6 million over the next 22 years and resulted in a Net Present Value (NPV) savings of $4.6 million. Central Washington University 2016 Annual System Financial Report 38

44 APPENDIX REQUIRED SUPPLEMENTARY INFORMATION (RSI) Notes to RSI Methods and assumptions used in calculations of actuarial determined contributions for PERS, TRS and LEOFF The Office of the State Actuary (OSA) calculates the Actuarially Determined Contributions (ADC) based on the results of an actuarial valuation consistent with the state s funding policy defined under Chapter RCW. Consistent with the state s contribution rate adoption process, the results of an actuarial valuation with an odd-numbered year valuation date determine the ADC for the biennium that ensues two years later. For example, the actuarial valuation with a June 30, 2013 valuation date, completed in the Fall of 2014, determines the ADC for the period beginning July 1, 2015 and ending June 30, REQUIRED SUPPLEMENTARY INFORMATION - STATE SPONSORED PLANS Schedule of Proportionate Share of the Net Pension Liability - PERS 1 as of June 30, 2016 *Last 10 Fiscal Years Employer s proportion of the net pension liability/(asset) % % Employer s proportionate share of the net pension liability $ 1,599,419 $ 1,872,124 Total $ 1,599,419 $ 1,872,124 Employer s covered employee payroll $ 97,957 $ 130,105 Employer s proportionate share of the net pension liability as a percentage of covered employee payroll % % Plan fiduciary net position as a percentage of the total pension liability 7.62% 6.9% REQUIRED SUPPLEMENTARY INFORMATION - STATE SPONSORED PLANS Schedule of Employer Contributions - PERS 1 as of June 30, 2016 *Last 10 Fiscal Years Statutorily or contractually required contributions $ 13,108 $ 11,983 Contributions in relation to the statutorily or contractually required contributions (13,108) (11,983) Contribution deficiency (excess) Covered employer payroll $ 142,380 $ 130,105 Contributions as a percentage of covered employee payroll 9.21% 9.21% 39 Central Washington University 2016 Annual System Financial Report

45 APPENDIX (continued) REQUIRED SUPPLEMENTARY INFORMATION - STATE SPONSORED PLANS Schedule of Proportionate Share of the Net Pension Liability - PERS 2/3 as of June 30, 2016 *Last 10 Fiscal Years Employer s proportion of the net pension liability/(asset) % % Employer s proportionate share of the net pension liability $ 1,352,127 $ 2,275,591 Total $ 1,352,127 $ 2,275,591 Employer s covered employee payroll $ 5,757,138 $ 5,657,293 Employer s proportionate share of the net pension liability as a percentage of covered employee payroll 23.49% 40.22% Plan fiduciary net position as a percentage of the total pension liability 10.80% 8.4% REQUIRED SUPPLEMENTARY INFORMATION - STATE SPONSORED PLANS Schedule of Employer Contributions - PERS 2/3 as of June 30, 2016 *Last 10 Fiscal Years Statutorily or contractually required contributions $ 529,030 $ 521,038 Contributions in relation to the statutorily or contractually required contributions (529,030) (521,038) Contribution deficiency (excess) Covered employer payroll $ 5,757,138 $ 5,657,293 Contributions as a percentage of covered employee payroll 9.19% 9.21% Central Washington University 2016 Annual System Financial Report 40

46 APPENDIX (continued) REQUIRED SUPPLEMENTARY INFORMATION - STATE SPONSORED PLANS Schedule of Proportionate Share of the Net Pension Liability - LEOFF 2 as of June 30, 2016 *Last 10 Fiscal Years Employer s proportion of the net pension liability/(asset) % % Employer s proportionate share of the net pension liability $ $ LEOFF 2 employers only State s proportionate share of the net pension liability/(asset) associated with the employer 225, ,543 Total $ 225,325 $ 168,543 Employer s covered employee payroll $ 283,455 $ 287,000 Employer s proportionate share of the net pension liability as a percentage of covered employee payroll 79.49% 58.73% Plan fiduciary net position as a percentage of the total pension liability 32.44% 32.8% REQUIRED SUPPLEMENTARY INFORMATION - STATE SPONSORED PLANS Schedule of Employer Contributions - LEOFF 2 as of June 30, 2016 *Last 10 Fiscal Years Statutorily or contractually required contributions $ 24,340 $ 24,653 Contributions in relation to the statutorily or contractually required contributions (24,340) (24,653) Contribution deficiency (excess) Covered employer payroll $ 283,455 $ 287,000 Contributions as a percentage of covered employee payroll 8.59% 8.59% 41 Central Washington University 2016 Annual System Financial Report

47

48 CWU is an AA/EEO/Title IX Institution. For accommodation 16-HR-43TS