Wichita State University Intercollegiate Athletic Association. Inc. Financial Statements and Report of Independent Auditors.

Transcription

1 Athletic Association. Inc. Financial Statements and Report of Independent Auditors June 30,2007

2 CONTENTS Page Report of Independent Auditors Financial Statements Statement of Financial Position Statement of Activities Statement of Cash Flows Notes to Financial Statements Supplementary information Schedule of Revenues and Expenses by Major Activity

3 -- -. MEMBERS OF THEAMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS THE DIVISION FOR CPA FIRMS Report of Independent Auditors Board of Directors Wichita State University Intercollegiate Athletic Association, Inc. We have audited the accompanying statement of financial position of Wichita State University Intercollegiate (the Athletic Association), a component unit of Wichita State University, as of June 30, 2007 and the related statements of revenues and expenses and cash flows for the year then ended. These financial statements are the responsibility of the Athletic Association's managenlent. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are ftee of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Athletic Association's intemal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of June 30, 2007, and the changes in its net assets and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forn~ing an opinion on the basic financial statements taken as a whole. The supplementary information, as presented on page 13, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. September 21,2007 Wichita, Kansas 300 WEST D O U G L A S. S U I T E 100 O WICHITA, K A N S A S C ~ * F A X ~ TUCSON 0 W I C H I T A * TULSA

4 STATEMENT OF FINANCIAL POSITION June ASSETS Cash and short-term investments Deposits -Wichita State University Foundation Cash and cash equivalents Pooled investments - Wichita State University Foundation Debt service reserve funds held by bond trustee Accounts receivable Contributions receivable Deferred loan costs Prepaid expenses and other Capital assets, net of accumulated depreciation of $668,791 Total assets Accounts payable and accrued liabilities Accrued interest Deferred revenue Booster groups Men's basketball tickets Other Revenue bonds payable Total liabilities LlABlLITIES AND NET ASSETS Net assets Unrestricted Temporarily restricted Total net assets Total liabilities and net assets The accompanying notes are an integralpart ofthis statement. -2-

5 STATEMENT OF ACTIVITIES For the year ended June 30,2007 Revenues Ticket sales Student fm SASO memberships Contributions Direct institutional suppnt Indirect facilitie and administrative support Royalties, licensing, advertisaunlts and sponsorships Program sales, concessions and novelties NCAA and conierence distributions Television, radio and internet rights Endowment and investmat incorne Guarantees other Total revalues Net assets released from restrictions Total revenues Expenses Coaching salaxies, benefits and bonuses Administralive and suppon staff salaries and benefits Athletic student aid Fundraising. ma-keling and prnnotion Team t~avel Indirect facilities and a&ninisbdtive support Direct facilities, maintenance and rental Game expenses Equipment, unifollns and supplies Recruiting Guarantees Medical expenses a?.d mdcz! i~.ssrr~ce Memberships and dues hterert Other Total expenses Change in net assets before transfers Cash msferred to Wichita State Universlty Foundation for Eck Stadium Phase N fmancing obligations Capital structure additions trsnsfmed to the State of Kansas Increase in net assets Nct assets, beginning of year Net assets, end of year Unrestricted Roundhouse Temporarily Renaissance restricted Grand Operations Project Total operations Total The accompanying notes are an integralpart of this statement

6 STATEMENT OF CASH mows For the year ended June 30,2007 Increase (decrease) in cash and cash equivalents Cash flows from operating activities Increase in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation Amortization and accretion Changes in operating assets and liabilities Accounts receivable Contributions receivable Prepaid expenses and other Accounts payable and accrued liabilities Accrued interest Deferred revenue Net cash provided by operating activities Cash flows from investing activities Increase in pooled investments Increase in debt service funds held by bond trustee Purchase of capital equipment Net cash used in investing activities Cash flows from financing activities Repayment of revenue bonds payable Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flow information Cash paid for interest Re accompanying notes are an integralpart of this statement -4-

7 NOTES TO FINANCIAL STATEMENTS June 30,2007 NOTE A - SUMMARY OF ACCOUNTWG POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows. 1. Reporting entitv The (the Athletic Association) was incorporated to schedule, manage and promote athletic contests of Wichita State University in harmony with the general education policy of the University. The Athletic Association has eight women's and seven men's sports which compete in Division I of the National Collegiate Athletic Association and in the Missouri Valley Conference. Men and women compete in basketball, golf, tennis, cross country, indoor and outdoor track. Women also compete in softball and volleyball, while men compete in baseball. The Athletic Board of Directors serves as an advisory body to the President of the University and the Director of Athletics. The Athletic Board consists of nineteen members who are appointed by the President from the following constituencies: twelve University personnel, three students, and four persons from the community. The Athletic Board provides the President and the Director of Athletics with its views on all significant questions relating to Athletic Association policies and activities. The management functions of the Athletic Associatioil are delegated to the Director of Athletics by the Preside~~t. 2. Financial statement presentation The financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements ofnotfor-projit Organizations. Under SFAS No. 117, The Athletic Association is required to report information regarding its fmancial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. As of June 30, 2007, the Athletic Association does not have any permanently restricted net assets. The financial statements of the Athletic Association have been prepared on the accrual basis of accounting. 3. Use of estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the fmancial statements, and the reported mounts of revenues and expenses duiig the reporting period. Actual resuits couid differ from those estimates.

8 NOTES TO FINANCIAL. STATEMENTS June 30,2007 NOTE A - SUMMARY OF ACCOUNTWG POLICIES -continued 4. Cash and cash eauivalents For purposes of the statement of cash flows, the Athletic Association considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Included in cash equivalents are short-term investments, consisting of money market savings accounts, repurchase agreements, and deposits held at the Wichita State University Foundation. The Athletic Association maintains some of its cash balances at high credit quality financial institutions. At times, such funds may be in excess of the Federal Depository insurance limits. 5. Investments The Athletic Association accounts for its investments at fair value. Fair values of investments are based upon quoted market prices or quoted market prices of comparable investments. Investment earnings or losses, including realized and unrealized gains and losses on investments, interest and dividends are included in the statement of revenues and expenses as increases or decreases in unrestricted net assets unless restricted by the donor. 6. Accounts veceivable Accounts receivable consist of ticket sales, NCAA and conference distributions, and other operating receivables. Past due accounts determined not to be collectible by management are charged off to other operating expense. Accounts receivable at June 30, 2007 are considered by management to be fully collectible. 7. Caaital assets Capital assets are recorded at cost at the date of acquisition, or fair value at the date of donation in the case of contributed assets. Equipment purchased for amounts equal to or greater than $5,000 is recorded at cost. Equipment is depreciated over its estimated useful life of 5 to 8 years. Depreciation expense for the year ended June 30,2007 was $188,838. Expenditures for repairs and maintenance which neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Capital assets as of June 30,2007 are summarized as follows: Equipment $ 1,847,409 Accumulated depreciation 668,791 Net capital assets $ 1,178,618

9 NOTES TO FINANCIAL STATEMENTS June 30,2007 NOTE A - SUMMARY OF ACCOUNTING POLICIES - continued 8. Contributions Contributions are recognized at fair value and are considered to be available for unrestricted use unless specifically restricted by the donor, or designated by the donor as support for future periods. When the donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassif ed to unrestricted net assets and are reported in the statement of revenues and expenses as net assets released from restrictions. 9. Income taxes The Athletic Association is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code on income related to its exempt purpose. NOTE B - OWNERSHIP, CONTROL AND MANAGEMENT All land and structures pertinent to the operation of the Athletic Association including Charles Koch Arena, Cessna Stadium, Eck Stadidyler Field, Wilkins Stadium and the Sheldon Coleman Tennis Complex are owned by the State of Kansas and have not been reflected as assets in the accompanying statements. The Slate of Kansas through the University pays directly the salaries of certain Athletic Association personnel. The financial statements reflect $1,886,223 in 2007 of state appropriations as revenue and a like amount of salaries as expenses. In February 2002, the Athletic Association and the University entered into a one-year agreement that states, in general terms, their mutual responsibilities relative to the development and operation of the University's intercollegiate athletic program and the use of University facilities in connection therewith. The agreement was amended in November The amended agreement provides that the University shall provide full maintenance and housekeeping for the athletic complex at Charles Koch Arena (including Geist Student Services Building, Preferred Health Systems Multipurpose Center and Via Christi Athletic TrainingiWeight Complex), Cessna Stadium, the Wilkins Softball Stadium, Eck StadiumITyler Field and the Coleman Temis Complex. Utilities and certain other costs on all facilities are also to be paid by the University. The operating costs paid by the University have been reflected in the Athletic Association's fmancial statements as indirect facilities and administrztive support. The agreement continues automatically for successive one-year terms, subject to the right of either party to terminate the agreement at the end of the original term or at the end of any subsequent annual term by giving the other party 180 days written notice of the desire to terminate the agreement. NOTE C -FUNDS HELD BY THE WlCHITA STATE UNIVERSITY FOUNDATION The Wichita State University Foundation (the Foundation) coordinates fund-raising for and manages inveshents or. behalf of the Uriversity and the Athletic Association. Funds held by the Foundation which are designated for athletics and controlled by the Athletic Association are included in the Athletic Association's fmancial statements, including those funds designated for the Roundhouse Renaissance project (Note D). The Athletic Association is not a party to the revenue bonds or the lease ageement related to the Eck Stadium Phase IV project. Accordingly, funds held by the Foundation for the Eck Stadium Phase IV project are not included in the Athletic Association's financial statements. However, the Athletic Association has agreed to provide the funding as describd in Note H.

10 NOTES TO FINANCIAL STATEMENTS June NOTE C - FUNDS HELD BY THE WICHITA STATE ZlNlVERSITY FOUNDATION - continued A summary of such funds at June 30,2007 and for the year then ended is as follows: Eck Stadium Phase IV Project See Note H for information regarding this project. Cash and investments, July 1,2006 $ 73,852 Revenues All American Club 201,191 Eck Stadium skyboxes 276,OI 1 Transfers from Athletic Association 38, ,149 Expenses Debt service 248,304 Transfers to Athletic Association 97,250 Other ,200 Cash and investments, June 30,2007 $ 242,949 Other Funds The Foundation holds other funds designated for athletics which are not control!ed by the Athletic Association. Such funds are comprised primarily of endowed scholarship funds. The Athletic Association records contributions when such hds are disbursed to the Athletic Association for their restricted use. These funds received $67,695 of contributions during the year, and total cash and investments in these funds totaled $3,928,327 at June 30, 2007.

11 NOTES TO FINANClAL STATEMENTS June NOTE D - ROUNDHOUSE RENAISSANCE PROJECT In October 2000, the Athletic Association commenced plans for renovation of Charles Koch Arena (formerly Henry Levitt Arena). The renovation was designated Roundhouse Renaissance. The project is being funded from private gifts, the sale of bonds, student fees, and Champions Club memberships. A summary of Roundhouse Renaissance funds, all of which are included on the Athletic Association financial statements, as of June 30, 2007 and for the year then ended is as follows: Cash and investments, July 1,2006 $ 2,697,064 Contributions and contributions receivable collected 820,699 Student fees 564,990 Investments earnings 136,709 Project expenditures Principal paid on revenue bonds Interest paid on revenue bonds Cash and investments, June 30,2007 Cash and investments consist of Deposits - Wichita State University Foundation $ 1,903 Debt service reserves held by bond trustee 3,414,411

12 NOTE E - CONTRIBUTIONS RECEIVABLE NOTES TO FINANCIAL STATEMENTS June 30,2007 Contributions receivable are unsecured donor pledges made through the Wichita State University Foundation for the Roundhouse Renaissance project and other Athletic Association activities. Contributions receivable are discounted at a rate of 4.00%. Roundhouse Renaissance project $ 2,431,492 Basketball Margin of Excellence 2,000 Unconditional promises to give before unamortized discount and allowance for uncollectible contributions 2,433,492 Less unamortized discount (429,812) 2,003,680 Less allowance for uncoilectible contributions (60,837) Net contributions receivable $ 1,942,843 Amounts due in: Less than one year One to five years More than five years NOTE F - OTHER DEFERRED REVENUE Other deferred revenue is comprised primarily of net revenue from certain special events which are not completed at yearend and ticket sales for future events. NOTE G - ROUNDHOUSE RENAISSANCE BOND DEBT During 2002, the Kansas Development Finance Authority issued Athletic Facilities Revenue Bonds Series 2002D in the amount of $15,445,000. The bonds were obtained for the purpose of renovating Charles Koch Arena (formerly Henry Levitt Arena). Proceeds of the bonds were deposited directly with the bond trustee with the Athletic Association recording a liability for the face value of the bonds less original discount of $73,715. The bonds are to be repaid over a twenty-yea- period with interest rates ranging from 3.5% to 5%. Tne bonds are coiiateraiized by future revenues of the Athletic Association including certain contributions pledged to the Wichita State University Foundation and certain student fee revenue. The bond trustee is required to maintain a debt service reserve account balance equal to the lessor of 1) 10% of the original principal balance, 2) the maximum debt service of the following fiscal year or 3) 125% of the average future annual debt service.

13 NOTES TO FINANCIAL STATEMENTS NOTE G - ROUNDHOUSE RENAISSANCE BOND DEBT - continued A schedule of changes in the Athletic Association's Roundhouse Renaissance revenue bonds payable for the year ended June 30,2007 follows: Bonds payable, July 1,2006 Principal paid Discount accretion Bonds payable, June 30,2007 Scheduled principal and interest payments on Roundhouse Renaissance revenue bonds payable are as follows: Year ended June Thereafter Principal Interest Unamortized discount NOTE H - COMMITMENTS AND CONTINGENCES The Athletic Association has entered into various long-term contracts with certain of its coaches. The contracts provide for the payment of various amounts of damages should the contracts be terminated without "good cause" prior to their expiration dates. Management is not aware of any liabilities related to contract terminations. The Eck Stadium Phase IV project was partially funded through the sale of bonds. During fiscal year 2000, $3,500,000 of revenue bonds were issued by the Wichita Public Building Commissio~l. The bonds are to be repaid through a lease agreement with the Board of Trustees of Wichita State University. Because <he Athletic Association is not a party to the revaxe bonds or the lease agreement, neither the constmction costs funded by the bond issue nor the revenue bonds themselves are reflected in the accompanying financial statements. The Athletic Association will fund the required lease payments not otherwise funded by sbbox rentals and All American Club memberships which are designated for that purpose.

14 NOTES TO FINANCIAL STATEMENTS June 30,2007 NOTE %I - COMMITMENTS AND CONTINGENCZES - continued The final annual lease payment to be paid by the Board of Tmstees of Wicbita State University of $525,000 was paid December 15,2006. NOTE I - NET ASSETS RESTRICTED FOR OTHER PURPOSES Other restricted expendable net assets are available for the following purposes: Baseball $ 485,133 Men's basketball 541,339 Other sports 98,034 $1,124,506 NOTE J - PENSION PLAN The Athletic Association maintains a qualified deferred compensation plan under section 403(b) of the Internal Revenue Code. The plan is a defined contribution plan. Under the plan, all employees, after one year of service, are required to defer 5.5% of their compensation. The Athletic Association contributes an additional 8.5%. As discussed in Note B, certain Athletic Association personnel are paid through the University's payroll. These employees participate in the University's deferred compensation plan under the same terms and conditions as the Athletic Association plan. The Athletic Association's contributions to these plans totaled $260,316 for the year ended June 30,2007.

15 Supplementary Information

16 Wichita State University Intcrcaliogiate Athletic Association, Ine. Schedule of Revenues and Expenses by Major Activity For the pear ended iune 30,2007 Non- Total Roundhouse Men's Women's Other program Special from Renaissance Grand basketball B~seball basketball sports specific activities operations Project total Revenues Ticket sales Student fees SASO mimbmhipr Contributions Direct institutional support Indirect facilities and administrative suppaif Royalties, licensing, advertisements and sponsorships Program sales, cancessioos and novelties NCAA and conference distributions Television, radio and internet rights Endowment and investmat income Guarantees Other Total revenuer Expenses Coaching salancs, benefits and bonuses Adlninistrotive and support staff salaries and benefits Athletic studen? aid Fundraising, marketing and promotion Team travel indirect facilities and administrative support Dirsct facilities, mnintenenaoco and rental Game expenses Equipment, unifonns and supplies Recruiting Gtinnntees Medical enpcnses and medical inmruncc Mnnberships and dues Interest Other Total expens- Excess (deficiency) of roenuos over (under) expenses