NORTHWESTERN STATE UNIVERSITY STATE OF LOUISIANA Natchitoches, Louisiana

Transcription

1 NORTHWESTERN STATE UNIVERSITY STATE OF LOUISIANA Natchitoches, Louisiana Component Unit Financial Statements As of and for the Year Ended June 30, 2011 With Supplemental Information Schedules

2 NORTHWESTERN STATE UNIVERSITY STATE OF LOUISIANA Natchitoches, Louisiana Component Unit Financial Statements As of and for the Year Ended June 30, 2011 With Supplemental Information Schedules August 29, 2011

3 NORTHWESTERN STATE UNIVERSITY STATE OF LOUISIANA Component Unit Financial Statements As of and for the Year Ended June 30, 2011 With Supplemental Information Schedules CONTENTS Affidavit 1 Management, Discussion, and Analyses (MD&A) 2 Statement of Net Assets 8 Statement of Revenues, Expenses, and Changes in Net Assets 9 Simplified Statement of Activities 10 Statement of Cash Flows 11 Page No. Notes to the Financial Statements 13 A. Summary of Significant Accounting Policies 1. Basis of Presentation 2. Reporting Entity 3. Basis of Accounting 4. Cash Equivalent 5. Investments 6. Inventories 7. Noncurrent Cash and Investments 8. Capital Assets Including Capital Leases 9. Deferred Revenues 10. Noncurrent Liabilities 11. Net Assets 12. Classification of Revenues 13. Scholarship Discounts and Allowances 14. Eliminating Interfund Activity B. Budgetary Practices 17 C. Deposits with Financial Institutions and Investments 18 D. Accounts Receivable 24 E. Capital Assets 25 F. Collections (Works of Art and Historical Treasures) 26 G. NOT USED 26 H. General Fund 26 I. Long-Term Liabilities 26

4 J. Short-Term Debt 27 K. Compensated Absences 27 L. On-Behalf Payments for Fringe Benefits and Salaries 28 M. Contingent Liabilities 28 N. Related Party Transactions 29 O. Violations of Finance-Related Legal or Contractual Provisions 29 P. Leases 29 Q. Net Assets 31 R. Other Post Employment Benefits 32 S. Accounting Changes 35 T. Prior-Year Restatement of Net Assets 35 U. Pledges of Gifts 35 V. Segment Information 35 W. Per Diem Paid Board Members 35 X. Pension Plans 35 Y. Debt Refunding 36 Z. Government Mandated Nonexchange Transactions (Grants) 36 AA. Donor Restricted Endowments 36 BB. NOT USED 36 CC. Disaggregation of Payable Balances 37 DD. Subsequent Events 37 EE. NOT USED 37 FF. Impairment of Capital Assets 37 GG. Employee Termination Benefits 37 HH. II. JJ. KK Revenues Pledged or Sold Pollution Remediation Obligations Debt Service Reserves American Recovery and Reinvestment Supplemental Information Schedules: Long-Term Debt Schedule: 1-A Bonds Payable 1-B Reimbursement Contracts Payable 1-C Notes Payable

5 Long-Term Debt Amortization Schedule: 2-A Bonds Payable Amortization 2-B Notes Payable Amortization 2-C Capital Lease Amortization 2-D Reimbursement Contracts Payable Amortization Schedule 3 Schedule of Per Diem Paid 46 Schedule 4 Schedule of Expenses by University 47 Schedule 16 Schedule of Cooperative Endeavors

6 Schedule Number STATE OF LOUISIANA Annual Financial Statements Fiscal Year Ending June 30, 2011 Northwestern State University Business Affairs Natchitoches, LA Division of Administration Legislative Auditor Office of Statewide Reporting P.O. Box and Accounting Policy Baton Rouge, Louisiana P.O. Box Baton Rouge, Louisiana Physical Address: Physical Address: 1201 N. Third Street 1600 N. Third Street 6 th Floor, Suite 130 Baton Rouge, Louisiana Baton Rouge, Louisiana AFFIDAVIT Personally came and appeared before the undersigned authority, Dr. Randall J. Webb, President of Northwestern State University who duly sworn, deposes and says that the financial statements herewith given present fairly the financial position of Northwestern State University at June 30, 2011 and the results of operations for the year then ended in accordance with Generally Accepted Accounting Principles as prescribed by the Governmental Accounting Standards Board. Sworn and subscribed before me, this 29th day of August, DR. RANDALL J. WEBB, PRESIDENT NOTARY PUBLIC Prepared by: Title: Vice President for Business Affairs & Controller Telephone No.: address: jonesc@nsula.edu Date: August 29,

7 State of Louisiana Northwestern State University Management Discussion and Analysis For the Year Ended June 30, 2011 The Management s Discussion and Analysis of Northwestern State University s financial performance presents a narrative overview and analysis of Northwestern State University s financial activities for the year ended June 30, This document focuses on the current year s activities, resulting changes, and currently known facts in comparison with the prior year s information. Please read this section in conjunction with Northwestern State University s financial statements, which follow this section. FINANCIAL HIGHLIGHTS Northwestern State University s net assets overall changed from $70,061,859 to $77,352,372 or 10.41% from June 30, 2010 to June 30, The overall reasons for this change included: Increase in Capital Assets Increase in Endowments Carry-forward of Operating Funds Enrollment changed from 9,247 to 9,244 from June 30, 2010 to June 30, Northwestern State University s operating revenues changed from $52,941,362 to $48,467,119 or (8.45)% from June 30, 2010 to June 30, Operating expenses, however, changed by 1.49% from $106,288,383 to $107,873,722 for the year ended June 30, Tuition increases are the primary reasons for this change. Non-operating revenues (expenses) fluctuate depending upon levels of state operating and capital appropriations. The change to $62,359,107 in 2011 from $48,765,671 in 2010 is attributed primarily due to increase in ARRA funding as well as federal non-operating revenues, primarily Pell Grants. OVERVIEW OF THE FINANCIAL STATEMENTS This financial report consists of three sections: management s discussion and analysis (this section), the basic financial statements (including the notes to the financial statements), and required supplementary information. Basic Financial Statements The basic financial statements present information for Northwestern State University as a whole, in a format designed to make the statements easier for the reader to understand. The statements in this section include the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and the Statement of Cash Flows. The Statement of Net Assets (page 8) presents the current and long-term portions of assets and liabilities separately. The difference between total assets and total liabilities is net assets and may provide a useful indicator of whether the financial position of Northwestern State University is improving or deteriorating. The Statement of Revenues, Expenses, and Changes in Net Assets (page 9) presents information showing how Northwestern State University s assets changed as a result of current year operations. Regardless of when cash is affected, all changes in net assets are reported when the underlying transactions occur. As a result, there are transactions included that will not affect cash until future fiscal periods. The Statement of Cash Flows (pages 11-12) presents information showing how NSU s cash changed as a result of current year operations. The Statement of Cash Flows is prepared using the direct method and includes the reconciliation of operating income (loss) to net cash provided (used) by operating activities (indirect method) as required by GASB 34. 2

8 State of Louisiana Northwestern State University Management Discussion and Analysis For the Year Ended June 30, 2011 The financial statements provide both long-term and short-term information about Northwestern s overall financial status. The financial statements also include notes that explain some of the information in the financial statement and provide more detailed data. The statements are followed by a section of other supplementary information that further explains and supports the information in the financial statements. Northwestern State University s financial statements are prepared on an accrual basis in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. Under this basis of accounting, revenues are recognized in the period in which they are earned, expenses are recognized in the period in which they are incurred, and depreciation of assets is recognized in the Statement of Revenues, Expenses, and Changes in Net Assets. All assets and liabilities associated with the operation of the University are included in the Statement of Net Assets. 3

9 State of Louisiana Northwestern State University Management Discussion and Analysis For the Year Ended June 30, 2011 FINANCIAL ANALYSIS Statement of Net Assets as of June 30, 2011 (in thousands) Total Current and other assets $62,627 $53,192 Capital assets 60,510 58,158 Total assets 123, ,350 Other liabilities 41,475 36,693 Long-term debt outstanding 4,310 4,595 Net assets: Total liabilities 45,785 41,288 Invested in capital assets, net of debt 55,915 53,288 Restricted 21,244 19,941 Unrestricted 193 (3,167) Total net assets $77,352 $70,062 This schedule is prepared from NSU s statement of net assets as shown on page 8, which is presented on an accrual basis of accounting whereby assets are capitalized and depreciated. Significant Statement of Net Asset Changes from 2011 includes: Current and other assets increased primarily due to surplus from current operations in restricted funds and Carry Forward General Funds. Capital assets increased primarily due to projects funded by Facility Planning and Control. Other liabilities increase is primarily due to increase of deferred revenues, operating payables and current year reductions of long term debt, and the other post-employment benefits accrued liability. Unrestricted net assets increased primarily due to the Carry Forward. NSU has a 0% increase in net assets restricted for debt service and other purposes due to capital leases. Net assets invested in capital assets, net of related debt, consists of capital assets net of accumulated depreciation, reduced by the amount of outstanding indebtedness attributable to the acquisition, construction, or improvement of those assets. Restricted net assets represent those assets that are not available for spending as a result of legislative requirements, donor agreements, or grant requirements. Conversely, unrestricted net assets are those that do not have any limitations on what these amounts may be spent. 4

10 State of Louisiana Northwestern State University Management Discussion and Analysis For the Year Ended June 30, 2011 Statement of Revenues, Expenses, and Changes in Net Assets (in thousands) Operating Revenues: Student tuition and fees, net Grants and contracts Auxiliary Other Total operating revenues Operating Expenses: Educational and general Instruction Research Public service Academic support Student services Institutional support Operations and maintenance of plant Depreciation Scholarships and fellowships Other operating expenses Total operating expenses Operating Income (loss) Nonoperating Revenues (Expenses) State appropriations Gifts Federal non-operating revenues (expenses) Other nonoperating revenues (expenses) Net nonoperating revenues (expenses) Income (loss) before other revenues, exp, gains, losses Capital appropriations Capital grants and gifts Additions to permanent endowments Other additions, net Change in Net Assets Net assets at the beginning of the year, restated Net assets at the end of the year $ 33,877 7,394 3,079 4,117 $ 48,467 36,743 1,876 2,099 7,754 7,862 10,696 11,092 4,574 16,118 9, ,874 (59,407) 33, ,621 11,367 62,359 2,952 3, ,290 70,062 $77,352 $ 32,082 7,669 2,946 3,822 $ 52,941 40,119 1,895 2,190 8,367 7,864 11,264 8,722 4,626 13,369 7, ,288 (53,347) 33, ,868 1,327 48,766 (4,581) -0-3, (121) 70,183 $70,062 5

11 State of Louisiana Northwestern State University Management Discussion and Analysis For the Year Ended June 30, 2011 Non-operating revenues increased by 27.88% to $62 million, primarily attributable to increased ARRA and Pell Grant funding. State appropriations changed from $33.5 to $33.3 million due to reduction in state general fund revenues. NSU s total net assets increased by $7,290,513 or 10.41%. STATEMENT OF CASH FLOWS Another way to assess the financial health of Northwestern State University is to look at the Statement of Cash Flows. The Statement of Cash Flows assists readers of this statement to assess: The ability to generate future cash flows The ability to meet obligations as they come due A need for external financing Statement of Cash Flows (in thousands) Cash and cash equivalents provided (used) by: Operating activities Capital financing activities Non-capital financing activities Investing activities Net increase in cash and cash equivalents Cash and cash equivalents Beginning of year End of year $(50,604) (3,307) 57, ,265 35,508 $38,773 $(43,921) (2,660) 48, ,971 33,537 $35,508 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of June 30, 2011, NSU had invested $60,510,286 in capital assets, net of accumulated depreciation. This amount represents a net increase (including additions and disposals, net of depreciation) of $2,352,722 or 4.05% over the previous fiscal year. More detailed information about the system s capital assets is presented in Note E to the financial statements. 6

12 State of Louisiana Northwestern State University Management Discussion and Analysis For the Year Ended June 30, 2011 Capital Assets at Year-end (Net of Depreciation, in thousands) Land Live Stock Software development in progress Construction in progress Infrastructure Land Improvements Buildings Equipment Intangibles Totals $1, ,226 3,453 1,252 43,984 6,254 0 $60,510 $1, , ,378 43,140 5,353 1,450 $58,158 Debt NSU had $4,595,000 in bonds and notes outstanding at year-end, compared to $4,870,000 last year, a decrease of 5.65% as shown in the table below. Reimbursement Contracts Payable Revenue Bonds and Notes Total Outstanding Debt at Year-end (in thousands) $95 $125 4,500 4,745 $4,595 $4,870 Northwestern State University had no new debt. See Notes I and P for details relating to changes in and the composition of long-term liabilities and capital leases. ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE There are no known facts, decisions or conditions that are expected to have a significant effect in financial position or results of operations. CONTACTING NORTHWESTERN S MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of Northwestern State University s finances and to show Northwestern s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Vice President for Business Affairs & Controller at (318)

13 STATE OF LOUISIANA NORTHWESTERN STATE UNIVERSITY STATEMENT OF NET ASSETS FOR THE PERIOD ENDED JUNE 30, 2011 Assets 2011 Current Assets Cash and cash equivalents (Note C) $ 36,262,217 Investments (Note C) 0 Derivative instrument 0 Deferred outflow of resources 0 Receivables, net (Note D) 3,694,800 Pledges receivables 0 Due from State Treasury 4,091,361 Due from Federal Government (Note D) 3,049,034 Inventories 413,987 Deferred charges and prepaid expenses 233,323 Notes receivable 13,534 Other current assets 78,192 Total current assets 47,836,448 Noncurrent Assets Restricted assets: Cash and cash equivalents (Note C) 2,511,563 Investments (Note C) 10,328,818 Accounts Receivable, net (Note D) 13,995 Notes Receivable, net 1,936,086 Other 0 Investments (Note C) 0 Pledges receivable 0 Notes receivable, net 0 Capital assets, net (Note E) 60,510,286 Easements 0 Intangible Assets 0 Other noncurrent assets 0 Total noncurrent assets 75,300,748 Total assets $ 123,137,196 Liabilities Current Liabilities Accounts payable and accrued liabilities 3,254,990 Derivative instrument 0 Deferred inflow of resources 0 Due to State Treasury 0 Due to Federal Government 0 Deferred revenues 2,937,228 Amounts held in custody for others 31,166 Other Liabilities 0 Current Portion of Noncurrent Liabilities: Compensated absences payable (Note I) 499,537 Capital lease obligations (Note I) 0 Claims and litigation payable (Note I) 0 Notes payable (Note I) 0 Pollution Remediation Obligation (Note I) 0 Contracts payable (Note I) 0 Reimbursement Contracts payable (Note I) 30,000 Bonds payable (Note I) 255,000 Other current liabilities 0 Total current liabilities 7,007,921 Long-term Portion of Noncurrent Liabilities Compensated absences payable 1,805,906 Capital lease obligations 0 Claims and litigation payable (Note I) 0 Notes payable (Note I) 0 Pollution Remediation Obligation 0 Contracts payable (Note I) 0 Reimbursement contracts payable 65,000 OPEB payable 32,629,015 Bonds payable 4,245,000 Other noncurrent liabilities 31,982 Total noncurrent liabilities 38,776,903 Total liabilities 45,784,824 Net Assets Invested in capital assests,net of related debt 55,915,286 Restricted for: Nonexpendable 11,042,124 Expendable 10,201,486 Unrestricted 193,476 Total net assets 77,352,372 Total liabilities and net assets $ 123,137,196 8

14 STATE OF LOUISIANA NORTHWESTERN STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FOR THE PERIOD ENDED JUNE 30, 2011 OPERATING REVENUES Student tuition and fees $ 44,692,086 Less scholarship allowances (10,815,291) Net student tuition and fees 33,876,795 Gifts received by foundation 0 Endowment income 0 Federal appropriations 0 Federal grants and contracts 2,183,636 State and local grants and contracts 4,433,468 Nongovernmental grants and contracts 776,479 Sales and services of educational departments 1,258,059 Hospital income 0 Auxiliary enterprise revenues (see note HH for revenue amounts pledged as security for bond issues) 3,082,155 Less scholarship allowances (2,772) Net auxiliary revenues 3,079,383 Other operating revenues 2,859,299 Total operating revenues $ 48,467,119 OPERATING EXPENSES Education and general: Instruction 36,743,367 Research 1,876,181 Public service 2,098,751 Academic support 7,753,518 Student services 7,862,113 Institutional support 10,695,904 Operations and maintenance of plant 11,091,494 Depreciation 4,573,907 Scholarships and fellowships 16,118,051 Auxiliary enterprises 8,912,079 Hospital 0 Other operating expenses 148,357 Total operating expenses 107,873,722 Operating income (loss) (59,406,603) NONOPERATING REVENUES (EXPENSES) State appropriations $ 33,370,746 Gifts 0 Federal nonoperating revenues (expenses) 17,621,199 ARRA revenues 10,401,200 Net investment income (loss) 1,764,565 Interest expense (243,648) Payments to or on behalf of the university 0 Other nonoperating revenues (expenses) (554,955) Net nonoperating revenues (expenses) 62,359,107 Income (loss) before other revenues, expenses, gains, losses 2,952,504 Capital appropriations 3,628,408 Capital grants and gifts 509,601 Additions to permanent endowments 200,000 Other additions, net 0 Increase (decrease) in Net Assets 7,290,513 Net assets at the beginning of the year 70,061,859 Net assets at the end of the year $ 77,352,372 9

15 STATE OF LOUISIANA NORTHWESTERN STATE UNIVERSITY SIMPLIFIED STATEMENT OF ACTIVITIES FOR THE PERIOD ENDED JUNE 30, 2011 Program Revenues Net (Expense) Operating Capital Revenue and (-) Charges for Grants and Grants and Changes in Expenses Services Contributions Contributions Net Assets University ($108,672,325) $41,073,536 $17,994,783 $4,138,009 ($45,465,997) General revenues: State appropriations 33,370,746 Grants and contributions not restricted to specific programs 17,621,199 Interest 1,764,565 Miscellaneous 0 Special items 0 Extraordinary item - loss on impairment of capital assets 0 Transfers 0 Total general revenues and special items, and transfers 52,756,510 Change in net assets 7,290,513 Net assets beginning of year 70,061,859 Net assets end of year $ 77,352,372 10

16 STATE OF LOUISIANA NORTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 2011 Cash flow from operating activities Tuition and fees $ 34,682,934 Federal appropriations 0 Grants and contracts 6,028,004 Sales and services of educational departments 1,258,059 Hospital Income 0 Auxiliary enterprise receipts (5,832,696) Payments for employee compensation (42,860,073) Payments for benefits (8,886,085) Payments for utilities (2,694,321) Payments for supplies and services (18,903,044) Payments for scholarships and fellowships (16,118,051) Loans to students (312,863) Collections of loans to students 411,304 Other receipts (payments) 2,623,219 Net cash provided (used) by operating activities $ (50,603,613) Cash flows from non-capital financing activities State appropriations $ 29,430,811 Gifts and grants for other than capital purposes 17,621,199 Private gifts for endowment purposes 200,000 TOPS receipts 5,387,565 TOPS disbursements (5,387,565) FEMA receipts 0 FEMA disbursements 0 ARRA receipts 10,401,200 Direct lending receipts 37,886,217 Direct lending disbursements (37,886,217) Federal Family Education Loan Program receipts 0 Federal Family Education Loan Program disbursements 0 Other receipts (payments) (554,955) Net cash provided by noncapital financing activities $ 57,098,255 Cash flows from capital financing activities Proceeds from capital debt $ 0 Capital appropriations received 0 Capital grants and gifts received 0 Proceeds from sale of capital assets 0 Purchases of capital assets (2,788,620) Principal paid on capital debt and leases (275,000) Interest paid on capital debt and leases (243,648) Deposit with trustees 0 Other sources 0 Net cash used by capital financing activities $ (3,307,268) Cash flows from investing activities Proceeds from sales and maturities of investments $ 0 Interest received on investments 1,764,565 Purchase of investments (1,686,878) Net cash provided (used) by investing activities $ 77,687 Net increase (decrease) in cash and cash equivalents $ 3,265,061 Cash and cash equivalents at beginning of the year $ 35,508,719 Cash and cash equivalents at the end of the year $ 38,773,780 11

17 STATE OF LOUISIANA NORTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 2011 Reconciliation of Net Operating Revenues (Expenses) to Net Cash Provided (used) by Operating Activities Operating income (loss) $ (59,406,603) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation expense 4,573,907 Changes in assets and liabilities: (Increase) decrease in accounts receivables, net (710,977) (Increase) decrease in inventories 69,463 (Increase) decrease in deferred charges and prepaid expenses 10,700 (Increase) decrease in notes receivable 98,441 (Increase) decrease in other assets (10,695) Increase (decrease) in accounts payable and accrued liabilities (579,054) Increase (decrease) in deferred revenue 151,537 Increase (decrease) in amounts held in custody for others 0 Increase (decrease) in compensated absences (155,877) Increase (decrease) in OPEB payable 5,348,471 Increase (decrease) in other liabilities 7,074 Net cash provided (used) by operating activities: $(50,603,613) Noncash Investing, Noncapital Financing, and Capital and Related Financing Transactions Capital Appropriations $ 3,628,408 Capital Gifts and Grants 509,601 Reconciliation of Cash and Cash Equivalents to the Statement of Net Assets Cash and cash equivalents classified as current assets $ 36,262,217 Cash and cash equivalents classified as noncurrent assets 2,511,563 Total cash and cash equivalents $ 38,773,780 12

18 NORTHWESTERN STATE UNIVERSITY STATE OF LOUISIANA Notes to the Financial Statements For the Year Ended June 30, 2011 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. BASIS OF PRESENTATION In April of 1984, the Financial Accounting Foundation established the Governmental Accounting Standards Board (GASB) to promulgate generally accepted accounting principles and reporting standards with respect to activities and transactions of state and local governmental entities. In July of 1984, the GASB issued Statement 1, which provided that all statements and interpretations issued by the National Council on Governmental Accounting (NCGA) continue as generally accepted accounting principles until altered, amended, supplemented, revoked or superseded by subsequent GASB pronouncements. In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. As a component unit of the State of Louisiana, Northwestern State University is required to report its financial statements in accordance with GASB 34 and 35 as amended by GASB 37, and 38. The financial statement presentation required by GASB 34 and 35 provides a comprehensive, entity-wide perspective of the institution s assets, liabilities, net assets, revenues, expenses, changes in net assets, and cash flows, and replaces the fund-group perspective previously required. The GASB, Code Section 2100 has defined the governmental reporting entity to be the State of Louisiana. Therefore, the accompanying financial statements of the university contain sub-account information of the various funds of the State of Louisiana. As such, the accompanying financial statements present information only as to the transactions of the programs of the university as authorized by Louisiana statutes and administrative regulations. 2. REPORTING ENTITY Northwestern State University is a publicly supported institution of higher education. Using the criteria established in GASB Statement 14, The Financial Reporting Entity as amended by GASB 39, the institution is reported as a discrete component unit of the State of Louisiana since it is legally separate from and is financially accountable to the State. Annually, the State of Louisiana issues a comprehensive financial report, which includes the activity contained in the accompanying financial statements. The Louisiana Legislative Auditor audits the basic financial statements. 13

19 3. BASIS OF ACCOUNTING For financial reporting purposes, the institution is considered a special-purpose government engaged only in business-type activities. Accordingly, the institution 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. All significant intra-agency transactions have been eliminated. The institution has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The institution has elected not to apply FASB pronouncements issued after the applicable date. The financial statements of the university have been prepared on the accrual basis of accounting. 4. CASH EQUIVALENT The institution considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 5. INVESTMENTS The institution accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investments Pools. Changes in the carrying value of investments, resulting in unrealized gains or losses, are reported as a component of investment income in the statement of revenues, expenses, and changes in net assets. 6. INVENTORIES Inventories are valued at the lower of cost or market. (The university uses both perpetual and periodic inventory systems and values its inventory using the first-in, first-out (FIFO) valuation method, except for the warehouse inventory, which uses the weighted-average method). The institution accounts for its inventories using the consumption method. 7. NONCURRENT CASH AND INVESTMENTS Cash and investments that are externally restricted to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital or other noncurrent assets, are classified as noncurrent assets in the Statement of Net Assets. 14

20 8. CAPITAL ASSETS Capital assets are reported at cost at the date of acquisition or their estimated fair value at the date of donation. For movable property, the institution s capitalization policy includes all items with a unit cost of $5,000 or more and an estimated useful life 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 life of the assets, generally 40 years for buildings and infrastructure, 20 years for depreciable land improvements, and 3 to 10 years for most movable property. Library collections regardless of age, with a total acquisition value of $5,000,000 or more will be capitalized and depreciated. 9. DEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year, but are related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. 10. NONCURRENT LIABILITIES Noncurrent liabilities include (1) principle amounts of revenue bonds payable, notes payable, and capital lease obligations with contractual maturities greater than one year; (2) estimated amounts for accrued compensated absences and other liabilities that will not be paid within the next fiscal year; and (3) other liabilities that, although payable within one year, are to paid from funds that are classified as noncurrent assets. 11. NET ASSETS The institution s net assets are classified as follows: (a) INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT This represents the institution s total investment in capital assets, net of accumulated depreciation and reduced by outstanding debt obligations related to acquisition, construction, or improvement of those capital assets. (b) RESTRICTED NET ASSETS - EXPENDABLE Restricted expendable net assets include resources that the institution is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. (c) RESTRICTED NET ASSETS - NONEXPENDABLE Restricted nonexpendable net assets consist of endowment and similar type funds which donors or other outside sources have stipulated, as a condition of 15

21 the gift instrument, that the principle is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principle. (d) UNRESTRICTED NET ASSETS Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, 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 and for any purpose. When an expense is incurred that can be paid using either restricted or unrestricted resources, the University s policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. 12. CLASSIFICATION OF REVENUES The institution has classified its revenue as either operating or non-operating revenues according to the following criteria: (a) OPERATING REVENUE - Operating activity include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, net of scholarship discounts and allowances, and (3) most Federal, state, and local grants and contracts and Federal appropriations. (b) NONOPERATING REVENUE Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions. 13. SCHOLARSHIP DISCOUNTS AND ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship discounts and allowances is the difference between the stated charge for goods and services provided by the institution, and the amount that is paid by students and/or third parties making payments on the student s behalf. 14. ELIMINATING INTERFUND ACTIVITY Activities between Northwestern State University and the institution s service units are eliminated for purposes of preparing the Statement of Revenues, Expenses and Changes in Net Assets, and the Statement of Net Assets. 16

22 B. BUDGETARY PRACTICES The annual budget for the General Fund of the university is established by annual Legislative action and by Title 39 of the Louisiana Revised Statutes. The submission of the budget for approval by the Board of Regents and the Legislative budget process is required. The other funds of the university, although subject to internal budgeting, are not required to be submitted for approval through the Legislative budget process. State law provides that appropriations lapse at the end of the fiscal year with the exception noted in Note H, General Fund. In compliance with these legal restrictions, budgets are adopted on the accrual basis of accounting with some exceptions. The following is a list of exceptions, but is not all inclusive, (1) depreciation is not recognized; (2) leave costs are treated as budgeted expenditures to the extent that they are expected to be paid; (3) summer school tuition and fees and summer school faculty salaries and related benefits for June are not prorated but are recognized in the succeeding year; and (4) certain capital leases are not recorded. 1. BUDGETARY COMPARISON The following is an appropriation budgetary comparison for current year General Fund appropriation: Original Budgeted Final Actual Adjustment to Budget Basis Actual on Budget Basis Variance Favorable (Unfavorable) REVENUES: Appropriated by Legislature: State General Fund (Direct) 29,878,545 33,370,746 33,370,746 33,370,746 State General Fund By Self- Generated Revenues 35,172,393 31,210,393 34,248,650 34,248,650 3,038,257 State General Fund By Interagency Transfers 10,322,762 10,322,762 10,323,937 10,323,937 1,175 Interim Emergency Board Federal Funds Statutory Dedications Other Total Revenues 75,373,700 74,903,901 77,943,333 77,943,333 3,039,432 EXPENDITURES: Program Expenditures 75,373,700 74,903,901 73,795, ,615 73,981, ,568 Unalotted Expenditures Total Expenditures 75,373,700 74,903,901 73,795, ,615 73,981, ,568 UNEXPENDED APPROPRIATION - CURRENT YEAR 4,147,615 (185,615) 3,962,000 3,962,000 17

23 C. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS 1. Deposits with Financial Institutions For reporting purposes, deposits with financial institutions include savings, demand deposits, time deposits, and certificates of deposit. Further, the university may invest in time certificates of deposit in state banks organized under the laws of Louisiana, national banks having their principal office in the State of Louisiana, in savings accounts or shares of savings and loan associations and savings banks and in share accounts and share certificate accounts of federally or state chartered credit unions. As reflected on the statement of net assets, the institution had deposits in bank accounts totaling $38,773,780 at June 30, Deposits in bank accounts are stated at cost, which approximates market. Under state law these deposits must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These pledged securities are held in the name of the pledging fiscal agent bank in a holding or custodial bank in the form of safekeeping receipts held by the state treasurer. The deposits at June 30, 2011, consisted of the following: Deposits in bank accounts Cash Certificates of Deposits Other (Describe) Total Deposits per Statement of Net Assets $38,767,280 $38,767,280 Deposits in bank accounts per banks $42,456,510 $42,456,510 Bank balances of Deposits Exposed to Custodial Credit Risk: a. Uninsured and Uncollateralized b. Uninsured and collateralized with securities held by the pledging institution c. Uninsured and collateralized with securities held by the pledging institution s trust department or agent, but not in the entity s name Cash in State Treasury and petty cash must not be reported in the note disclosure. However, to aid in reconciling amounts reported on the Statement of Net Assets to amounts reported in this note, list below any cash in treasury and petty cash that are included in the Statement of Net Assets. Cash in State Treasury $ 0 Petty cash $ 6,500 Investments with a maturity of less than 3 months when purchased $ 0 18

24 The following is a breakdown by banking institution, program, account number, and amount of the bank balances shown above: Banking Institution Program Amount 1. Peoples State Bank Disbursement Account $41,523, Peoples State Bank Payroll Account 63, Peoples State Bank Student Loan EFT Account 668, Peoples State Bank SGA Loan Account Capital One Bank Alexandria Clearing Account 2, Merchants & Farmers Bank & Trust Leesville Clearing Account 2, Regions Bank Shreveport Clearing Account 2, Edward Jones (Perot) NSU LEQSF Edward Jones (Daily) NSU LEQSF Cross Financial NSU LEQSF 131, Sage Point Financial NSU LEQSF 61,588 Total $42,456, Investments Northwestern State University does maintain investment accounts as authorized by Louisiana Revised Statutes 49:327(C)(3), and the Louisiana Education Quality Support Fund (LEQSF). These funds are invested in accordance with the Louisiana Board of Regents Eminent Scholars and Endowed Professorships Program Statement of Investment Policy and Objectives. Custodial Credit Risk Investments can be exposed to custodial credit risk if the securities underlying the investment are uninsured, not registered in the name of the entity, and are held by either the counterparty or the counterparty s trust department or agent but not in the entity s name. Repurchase agreements are not subject to credit risk if the securities underlying the repurchase agreement are exempt from credit risk disclosure. In the following table is a list of each type of investment disclosing the carrying amount, market value, and applicable category of risk: 19

25 Investment Exposed to Custodial Credit Risk All Investments Regardless of Custodial Credit Risk Exposure Type of Investment Uninsured, Unregistered, and Held by Counterparty Uninsured, Unregistered and Held by Counterpartys Trust Dept. Or Agent not in Entity s name Reported Amount Fair Value Negotiable CD s None None Repurchase agreements None None U.S. Government Obligations** Cross Financial 709, ,397 U.S. Agency Obligations None None Common & preferred stock Edward Jones (Perot) SagePoint Financial 160, , , ,892 Mortgages (including SMOs & MBSs) None None Corporate bonds Cross Financial 143, ,480 Mutual Funds Cross Financial Edward Jones (Perot) Edward Jones (Daily) SagePoint Financial 1,552,428 2,431,494 2,635,051 2,267,870 1,552,428 2,431,494 2,635,051 2,267,870 Real estate External investment pool Other: (identify) None Total Investments None None None $10,328,818 None None None $10,328,818 *Unregistered - not registered in the name of the government or entity. ** These obligations generally are not exposed to custodial credit risk because they are backed by the full faith and credit of the U.S. Government. 20

26 3. DERIVATIVES The institution does not invest in derivatives as part of its investment policy. Accordingly, the exposure to risks from these investments are as follows: Credit risk Market risk Legal risk None None None 4. Credit Risk, Concentration of Credit Risk, Interest Rate Risk, and Foreign Currency Risk Disclosures A. Credit Risk of Debt Investments Rating Agency Used Rating Fair Value Moody s AAA $709,397 Moody s A2 50,887 Moody s A3 69,399 Moody s BAA1 23,194 Un-Rated (Mutual Funds) 9,475,941 Total $10,328,818 B. Interest rate Risk Investment Maturities (in Years) Type of Debt Investment Fair Value Less Than Greater Than 10 U.S. Government obligations 709,397 51, , ,872 U.S. Agency obligations U.S. Treasury obligations Mortgage backed securities Collateralized mortgage obligations Corporate bonds 143,480 23,194 52,602 51,535 16,149 Other bonds Mutual funds 8,886,843 8,886,843 Other - Stocks 589, ,098 Total Debt Investments $10,328,818 $9,550,635 $582,627 $179,407 $16,149 21

27 C. Concentration of Credit Risk The institution does not have investments in any one issuer that represents 5% or more of total investments not including U.S. Government Securities, Mutual Funds, and External Investment Pool. D. Foreign Currency Risk The institution does not have deposits or investments that are exposed to foreign currency risk. 5. Policies The institution does not have investments subject to credit risk of foreign currency risk. Invested funds are invested in accordance with the Louisiana Board of Regents Eminent Scholars and Endowed Professorships Program Statement of Investment Policy and Objectives. 6. Other Disclosures Required for Investments a. Investments in pools managed by other governments or mutual funds: NONE b. Securities underlying reverse repurchase agreements: NONE c. Unrealized investment losses: NONE d. Commitments as of June 30, 2011, to resell securities under yield maintenance repurchase agreements: 1. Carrying amount and market value at June 30 of securities to be resold: NONE 2. Description of the terms of the agreement: N/A e. Losses during the year due to default by counterparties to deposit or investment transactions: NONE f. Amounts recovered from prior-period losses which are not shown separately on the balance sheet: NONE Legal or Contractual Provisions for Reverse Repurchase Agreements g. Source of legal or contractual authorization for use of reverse repurchase agreements: NONE h. Significant violations of legal or contractual provisions for reverse repurchase agreements that occurred during the year: NONE 22

28 Reverse Repurchase Agreements as of the SNA Date i. Credit risk related to the reverse repurchase agreements outstanding at the SNA date, that is, the aggregated amount of reverse repurchase agreement obligations including accrued interest compared to aggregate market value of the securities underlying those agreements including interest: NONE j. Commitments on June 30, 2011, to repurchase securities under yield maintenance agreements: NONE k. Market value on June 30, 2011, of the securities to be repurchased: NONE l. Description of the terms of the agreements to repurchase: NONE m. Losses recognized during the year due to default by counter parties to reverse repurchase agreements: NONE n. Amounts recovered from prior-period losses which are not separately shown on the operating statement: NONE Fair Value Disclosures o. Methods and significant assumptions used to estimate fair value of investments, if fair value is not based on quoted market prices: N/A p. Basis for determining which investments, if any, are reported at amortized cost: N/A q. For investments in external investment pools that are not SEC-registered, a brief description of any regulatory oversight for the pool: N/A r. Whether the fair value of your investment in the external investment pool is the same as the value of the pool shares: N/A s. Any involuntary participation in an external investment pool: N/A t. If you are unable to obtain information from a pool sponsor to determine the fair value of your investment in the pool, methods used and significant assumptions made in determining that fair value and the reasons for having had to make such an estimate: N/A u. Any income from investments associated with one fund that is assigned to another fund: N/A Land and Other Real Estate Held as Investments by Endowments (GASB 52) v. Northwestern State University does not own land or other real estate held as investments by endowments. 23

29 D. ACCOUNTS RECEIVABLE Accounts receivable are shown on the Statement of Net Assets, net of an allowance for doubtful accounts as follows: List Types Accounts Receivable Doubtful Accounts Net Accounts Receivable Amts. not scheduled for collection within a year Student tuition and fees $3,124,350 $1,215,167 $1,909,183 $13,995 Auxiliary enterprises 825, , ,544 None Contributions and gifts None State and private grants and contracts 889, ,679 None Lab Schools 51,350 20,141 31,209 None Other 271,514 2, ,180 None Total $5,162,884 $1,454,089 $3,708,795 $13,995 Due from Federal Government $3,049,034 $0 $3,049,034 $0 24

30 E. CAPITAL ASSETS SCHEDULE OF CAPITAL ASSETS Capital assets not depreciated: Prior Restated Balance Period Balance Balance 6/30/2010 Adjustment 6/30/2010 Additions *Transfers **Retirements 6/30/2011 Land $ 1,333,355 $ - $ 1,333,355 $ - $ - $ - $ 1,333,355 Non-depreciable land improvements - Non-depreciable easements Capitalized collections - Livestock 50,700 50,700 5,550 (4,400) 51,850 Software - development in progress 956, ,341 Construction in progress 5,452,736 5,452,736 2,712,187 (4,939,159) 3,225,764 Other capital assets: Total capital assets not being depreciated $ 6,836,791 $ - $ 6,836,791 $ 3,674,078 $ (4,939,159) $ (4,400) $ 5,567,310 Infrastructure $ - $ - $ - $ 146,675 $ 3,395,199 $ - $ 3,541,874 ** Accumulated depreciation - - (88,547) (88,547) Total infrastructure ,128 3,395,199-3,453,327 Depreciable land improvements 3,583,997 3,583, $ 3,583,997 ** Accumulated depreciation (2,206,398) (2,206,398) (125,389) (2,331,787) Total land improvements 1,377,599-1,377,599 (125,389) - - $ 1,252,210 Buildings 96,836,629 96,836,629 1,774,375 1,543,960 (3,105,887) 97,049,077 ** Accumulated depreciation (53,696,359) (53,696,359) (2,111,902) 2,742,770 (53,065,491) Total buildings 43,140,270-43,140,270 (337,527) 1,543,960 (363,117) 43,983,586 Equipment (including library books) 27,870,978 27,870,978 1,886,456 (1,060,213) 28,697,221 ** Accumulated depreciation (21,068,074) (21,068,074) (2,248,069) 872,775 (22,443,368) Total equipment 6,802,904-6,802,904 (361,613) - (187,438) 6,253,853 Software (internally generated & purchased) 1,392,163 1,392,163-1,392,163 ** Accumulated depreciation (1,392,163) (1,392,163) - (1,392,163) Capital asset summary: Total intangibles Total other capital assets $ 51,320,773 $ - $ 51,320,773 (766,401) 4,939,159 (550,555) $ 54,942,976 Capital assets not being depreciated $ 6,836,791 $ - $ 6,836,791 $ 3,674,078 $ (4,939,159) $ (4,400) $ 5,567,310 Other capital assets, book value 129,683, ,683,767 3,807,506 4,939,159 (4,166,100) 134,264,332 Total cost of capital assets 136,520, ,520,558 7,481,584 - (4,170,500) 139,831,642 Accumulated depreciation/amortization (78,362,994) - (78,362,994) (4,573,907) - 3,615,545 (79,321,356) Capital assets, net $ 58,157,564 $ - $ 58,157,564 $ 2,907,677 $ - $ (554,955) $ 60,510,286 25

31 F. COLLECTIONS (WORK OF ART and HISTORICAL TREASURES) The university does not have capitalizable collections. G. NOT USED H. GENERAL FUND At June 30, 2011, the General Fund had no unexpended appropriation. As provided by Louisiana Revised Statute 17:3886(A), the university adopted a building and facility preventative maintenance program which was approved by the Louisiana Board of Regents. This program allows the university to retain any funds appropriated or allocated that were unexpended and unobligated at the end of the fiscal year. At least 50% of the retained funds will be maintained in a preventative maintenance reserve fund and will be used solely for preventative maintenance purposes in accordance with the approved plan, subject to approval by the supervisory board, the Louisiana Board of Regents, and the Joint Legislative Committee on the Budget. All retained funds will be spent for non-recurring projects. As shown in the Statement of Net Assets at June 30, 2011, included in restricted net assets are amounts totaling $-0-, which will be retained for these purposes. I. LONG-TERM LIABILITIES (Current and Noncurrent Portion) The following is a summary of bond reimbursement contracts and other long-term debt transactions of the university for the year ended June 30, 2011: Balance 06/30/10 Additions Reductions Balance 06/30/11 Amounts due within one year Bonds and notes payable: Bonds payable $4,745,000 ($245,000) $4,500,000 $255,000 Notes payable Total bonds and notes payable $4,745,000 ($245,000) $4,500,000 $255,000 Other liabilities: Compensated absences payable 2,461,320 2,423,188 (2,579,065) 2,305, ,537 Capital lease obligations Claims & litigation payable Pollution & remediation obligations Contracts payable Reimbursement contracts payable 125,000 (30,000) 95,000 30,000 OPEB payable 27,280,544 5,348,471 32,629,015 0 Total other liabilities 29,866,864 7,771,659 (2,609,065) 35,029, ,537 Total long-term liabilities $34,611,864 $7,771,659 ($2,854,065) $39,529,458 $784,537 26