Foundation of California State University, Monterey Bay

Transcription

1 Foundation of California State University, Monterey Bay Annual Report For the Years Ended

2 Annual Report For the Years Ended Table of Contents Page Independent Auditors Report 1 3 Management s Discussion and Analysis 4 15 Financial Statements for the Years ended Statements of Net Position 17 Statements of Revenues, Expenses and Changes in Net Position 18 Statements of Cash Flows Notes to Financial Statements Supplemental Information Independent Auditors Report On Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards (i)

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4 Board of Directors Foundation of California State University, Monterey Bay Seaside, California Page 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Foundation of California State University, Monterey Bay as of, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis on pages 4 through 15 be presented to supplement the basic financial statements. Such information, although not a basic part of the financial statements, is required by the Government Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Foundation of California State University, Monterey Bay s basic financial statements. The accompanying supplementary information for inclusion in the financial statements of the California State University on pages 35 through 43 is presented for purposes of additional analysis as required by the California State University and is not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. 2

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6 Management s Discussion and Analysis The Foundation of California State University, Monterey Bay (Foundation) is an auxiliary in good standing of California State University, Monterey Bay (CSUMB or University). The Foundation is an IRC Section 501(c)(3) not-for-profit public benefit corporation and its primary objective is to support the University. The Foundation provides support for the advancement of education and to foster, encourage and promote the scientific, literary, educational and charitable activities of the University. In addition, the Foundation s books maintain endowment investments. Foundation management believes that having this separate philanthropic organization will elevate the level of interest in University fundraising in the community, improve the University s ability to raise funds for scholarships and endowments, streamline the accounting process, and simplify investment tracking and reporting for all vested parties. As management of the Foundation, we offer readers of these financial statements this narrative overview and analysis of the financial activities of the Foundation for the fiscal years ended June 30, 2016 and We encourage readers to read the information presented here in conjunction with additional information that we have provided in the Foundation s financial statements, which follow this narrative. The Foundation s financial statements are presented here and are incorporated in the University s financial statements as a component unit. Financial Highlights At June 30, 2016, the Foundation s total net position increased by 7.5 percent or $1.4 million due to robust additions to endowments that were offset by unfavorable market conditions for a second year. Total operating revenues increased by 8.9 percent or $1,796 from $20,254 to $22,050. Total operating expenses increased by 25.2 percent or $71 thousand from $280 thousand to $351 thousand. Scholarship expenses increased by 46.6 percent or $78 thousand from $167 thousand to $246 thousand. Gifts and donations, noncapital, increased by 95.3 percent or $263 thousand from $276 thousand to $539 thousand. Realized and unrealized gains and losses on investments increased by $628 thousand or 56.1 percent from a $1.1 million loss to a $492 thousand loss. Additions to permanent endowments increased by 67.9 percent or $740 thousand from $1.1 million to $1.8 million. 4

7 Management s Discussion and Analysis Overview of the Financial Statements This annual report consists of a series of financial statements. The Statements of Net Position, Statements of Revenues, Expenses and Changes in Net Position and Statements of Cash Flow (on pages 17 through 20) all provide information about the Foundation s activities and present a longterm view of its finances. These statements are prepared using the accrual basis of accounting which recognizes expenses when incurred and revenue when earned rather than when payment is made or received and is widely used by most private sector companies. They also report the Foundation s net position and change in net position. You can think of the Foundation s net position the difference between assets (plus deferred outflows of resources) and liabilities (plus deferred inflows of resources) as one way to measure the Foundation s financial health, or fiscal position. Over time, increases or decreases in the Foundation s net position are one indicator of whether its financial health is improving or deteriorating. Condensed Comparative Financial Information In fiscal year 2015/16, net position increased by $1.4 million or 7.5 percent over 2014/15. This increase is due to additions to permanent endowments that were offset by poor market returns. In fiscal year 2014/15, the Foundation s net position increased by $285 thousand or 1.5 percent over 2013/14. The year saw modest contributions and a very poor market. 5

8 Management s Discussion and Analysis Table 1: Condensed Summary of Net Position as of June 30, 2016, 2015, and Assets Current assets $ 455,412 $ 509,225 $ 564,960 Noncurrent assets: Endowment investments 20,216,033 18,648,360 18,265,128 Other noncurrent assets 6,037 11,730 71,750 Total Assets 20,677,482 19,169,315 18,901,838 Liabilities Current liabilities 82,949 5,142 23,148 Total Liabilities 82,949 5,142 23,148 Net Position Restricted for: Nonexpendable endowments 12,716,806 10,846,783 9,756,864 Expendable 7,872,197 8,312,925 9,117,318 Unrestricted 5,530 4,465 4,508 Total Net Position $ 20,594,533 $ 19,164,173 $ 18,878,690 6

9 Management s Discussion and Analysis Graph 1: Breakdown of Current Assets as of June 30, 2016, 2015 and , , , , , , , , , ,000-41,734 3,853 17,461-5,000 5,000 Cash and cash equivalents Receivables Pledges receivable 2015/ / /14 Current assets, or assets that can normally be converted to cash in less than one year, consist of Cash and cash equivalents, Receivables, and Pledges receivable. In 2015/16, Receivables increased by $38 thousand or percent to $42 thousand due to increases in contributions that are received through the Corporation. This follows a 2014/15 decrease of $13 thousand or 77.9 percent from $17 thousand to $4 thousand. 7

10 Management s Discussion and Analysis 20,000,000 Graph 2: Breakdown of Noncurrent Assets as of June 30, 2016, 2015 and ,216,033 18,648,360 18,265,128 15,000,000 10,000,000 5,000,000 6,037 1,753 56,779-9,977 14,971 - Restricted cash & cash equivalents Pledges receivable, net Endowment investments 2015/ / /14 Noncurrent assets consist of Restricted cash and cash equivalents, Pledges receivable, and Endowment investments. Restricted cash and cash equivalents increased by $4 thousand or percent in 2015/16 from $2 thousand to $6 thousand. In 2014/15 restricted cash and cash equivalents decreased by $55 thousand or 96.9 percent as a result of the Recruitment in Science Education (RISE) endowment contribution received just before June 30, 2014 being invested in July Restricted cash and cash equivalents consist of cash or money market balances associated with endowments. Pledges receivable decreased by $10 thousand or 100 percent in 2015/16 due to the 1 st Capital Bank pledge to support the Business and Information Technology Building being converted into a permanent endowment. Pledge receivables decreased by $5 thousand in 2014/15 from $15 thousand to $10 thousand due to a payment made for the same pledge. 8

11 Management s Discussion and Analysis In 2015/16, Endowment investments increased from $18.6 million to $20.2 million for an increase of $1.6 million or 8.4 percent. The change in endowments is a result of $1.9 million in contributions to permanent endowments, $454 thousand to quasi and term endowments, $638 thousand in investment income, $492 thousand in realized and unrealized net losses, and $946 thousand in endowment distributions, scholarship expenses, and bank fees. Endowment investments increased from $18.3 million to $18.6 million in 2014/15 for an increase of $383 thousand or 2.1 percent. The change in endowments was a result of $1.1 million in contributions to permanent endowments, $181 thousand to quasi and term endowments, $888 thousand in investment income, $1.1 million in realized and unrealized net losses, and $711 thousand in endowment distributions, scholarship expenses and bank fees. Graph 3: Breakdown of Current Liabilities as of June 30, 2016, 2015 and ,000 80,000 76,500 70,000 60,000 50,000 40,000 30,000 20,000 10, ,643 1,055 14,522 3,699 8,132 Accounts payable Payable to Corporation Due to University 2015/ / /14 Current liabilities, amounts owed within one year, consist of Accounts payable, Payable to Corporation, and Due to University. 9

12 Management s Discussion and Analysis Payable to Corporation in 2015/16 increased to $6 thousand from $1 thousand for a $5 thousand or percent increase. This is due to an increase in procurement card activity for alumni outreach activities and other event-related payables at the end of the previous year. Payable to the Corporation decreased by 92.7 percent or $14 thousand from $15 thousand to $1 thousand in 2014/15 due to less of these types of activities. Due to University increased in 2015/16 by 1,968.1 percent or $73 thousand from $4 thousand to $77 thousand due to the increase in disbursement of awards to the Undergraduate Research Opportunities Center (UROC), Imagine College and RISE programs. The Due to University decreased to $4 thousand in 2014/15 from $8 thousand because of decreased UROC activities at the end of the year. Results of Operations In fiscal year 2015/16, the Foundation s net position increased by 7.5 percent or $1.4 million mostly as a result of $1.8 million in contributions to the endowments, $561 thousand in other revenue, and $639 thousand in investment income, offset by a $492 thousand decline in the endowment pool, and $1.1 million in expenses. 10

13 Management s Discussion and Analysis Table 2: Condensed Summary of Changes in Net Position for Years Ended June 30, 2016, 2015, and Operating Revenues Sales and services of auxiliary enterprises $ 17,060 $ 16,569 $ 12,547 Other operating revenues 4,990 3,685 3,239 Total Operating Revenues 22,050 20,254 15,786 Operating Expenses Salaries and benefits 457 3,496 2,467 Scholarships 245, , ,150 Other operating expenses 104, ,344 71,746 Total Operating Expenses 350, , ,363 Operating Loss (328,812) (260,026) (242,577) Nonoperating Revenues (Expenses) Gifts and donations, noncapital 539, , ,736 Endowment distribution to Corporation (673,315) (541,411) (438,534) Other nonoperating revenues 63,338 (279,054) 2,712,506 Total Nonoperating Revenues (Expenses) (70,851) (544,411) 2,461,708 Other Changes in Net Position Capital grants and gifts ,050 Additions to permanent endowments 1,830,023 1,089, ,161 Total Other Changes in Net Position 1,830,023 1,089, ,211 Increase in Net Position 1,430, ,483 2,355,342 Net Position Net position - beginning of year 19,164,173 18,878,690 16,523,348 Net position - end of year $ 20,594,533 $ 19,164,173 $ 18,878,690 11

14 Management s Discussion and Analysis Graph 4: Breakdown of Operating Revenues for the Years Ended June 30, 2016, 2015 and ,000 17,060 16,569 16,000 14,000 12,547 12,000 10,000 8,000 6,000 4,000 4,990 3,685 3,239 2,000 - Sales and services of auxiliary enterprises 2015/ / /14 Other operating revenues Operating revenues consist of Sales and services of auxiliary enterprises and Other operating revenues. In 2015/16, Sales and services of auxiliary enterprises increased $4 hundred to $17 thousand for an increase of 3.0 percent. The increase is due to improving event and merchandise sales of the Alumni Associations. In 2014/15, Sales and services of auxiliary enterprises increased 32.1 percent or $4 thousand from $13 thousand to $17 thousand due to the same activities. Other operating revenues increased in 2015/16 by 35.4 percent or $1 thousand from $4 thousand to $5 thousand, due to continued alumni interest and/or participation in the affinity insurance program administered by Liberty Mutual. Other operating revenues increased in 2014/15 by 13.8 percent or $4 hundred, due to the same reason. 12

15 Management s Discussion and Analysis Graph 5: Breakdown of Operating Expenses for the Years Ended June 30, 2016, 2015 and , , , , , , , , , ,344 71,746 50, ,496 2,467 Salaries & benefits Scholarships Other operating expenses 2015/ / /14 Operating expenses consist of Salaries and benefits, Scholarships, and Other operating expenses. In 2015/16, Salaries and benefits decreased to $5 hundred from $3,500, for a $3 thousand or 86.9 percent decrease. These expenses consist of reimbursements for RISE student advisor wages and salaries. In 2014/15, Salaries and benefits increased $1,500 or 41.7 percent from $2 thousand to $3,500. The increase was due to the expense of RISE student advisors. Scholarships increased from $167 thousand in 2014/15 to $246 thousand in 2015/16. This 46.6 percent or $78 thousand increase is a result of additional scholarship recipients in the Imagine College and RISE programs. In 2014/15, Scholarships decreased from $184 thousand in 2013/14 to $167 thousand in 2014/15. This 9.1 percent or $17 thousand decrease was a result of fewer scholarship recipients in those same programs. Other operating expenses decreased in 2015/16 by 4.1 percent or $4 thousand from $109 thousand to $105 thousand. This is due to less spending on community outreach and hospitality expense in conjunction with event revenues. In 2014/15, other operating expenses increased by 52.4 percent or $37 thousand from $72 thousand to $109 thousand due to additional spending in those areas. 13

16 Management s Discussion and Analysis Graph 6: Breakdown of Nonoperating Revenue (Expenses) for the Years Ended June 30, 2016, 2015 and ,000,000 Gifts and donations, noncapital Endowment distribution to Corporation Investment income Realized and unrealized gains and losses on investments 2,500,000 2,304,316 2,000,000 1,500,000 1,000, , , , , , , ,449 - (500,000) (1,000,000) (1,500,000) (673,315) (541,411) (438,534) (492,108) (1,120,261) (2,000,000) 2015/ / /14 In 2015/16, Gifts and donations, noncapital increased to $539 thousand from $276 thousand for a 95.3 percent change or $263 thousand increase. The net increase is primarily the result of contributions made to UROC of $320 thousand and a decrease in support to the Imagine College term endowment of $100 thousand. In 2014/15, Gifts and donations, noncapital increased to $276 thousand from $188 thousand for a 47.0 percent change or $88 thousand increase. The increase was the result of a $100 thousand donation to the Imagine College term endowment. The Endowment distribution to Corporation of $673 thousand is a net number and represents the annual endowment payout for scholarships and professorships of $693 thousand and a $20 thousand contribution from the Corporation. This represents a 24.4 percent change or $132 thousand increase from $541 thousand in 2014/15. Calculations for disbursements are made December 31 each year from all eligible endowments. A transfer is then made in June to the Corporation for scholarship and professorship expenses for the following academic year. In 2015/16, the Foundation earned $639 thousand in dividends and interest income on investments. This was a decrease of $249 thousand or 28.1 percent from the $888 thousand earned in 2014/15. In 2014/15, investment income increased 80.0 percent or $395 thousand from $493 thousand to $888 thousand. 14

17 Management s Discussion and Analysis In 2015/16, the Foundation recognized $492 thousand in realized and unrealized losses, a $628 thousand or 56.1 percent improvement over the $1.1 million in losses in 2014/15, and was a result of an improving but still underperforming financial market. In 2014/15, the Foundation recognized a $1.1 million loss or a change of $3.4 million or percent decrease from a $2.3 million gain in 2013/14. Other Changes in Net Position In 2015/16, additions to permanent endowments totaled $1.8 million. Contributions included gifts for the development of four new endowed funds and contributions towards existing funds. In 2014/15, additions to permanent endowments of $1.1 million were made. Currently Known Facts, Decisions and Conditions The Foundation s management believes the following will impact future reporting periods: Market Conditions Endowment investments account for 97.8 percent of the Foundation s total assets. The Foundation manages its investments via its Investment Committee, which works in conjunction with the investment consultant, Verus Investments. It is important to remember that the majority of the Foundation s investments participate in a long-term investment strategy and that there is a smoothing effect of returns over time. Future investment earnings will continue to fluctuate and be affected by interest rate fluctuations and uncertain market conditions. Requests for Information This report is designed to provide an overview of the Foundation s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to: Controller University Corporation at Monterey Bay 100 Campus Center Building 201, Suite 101B Seaside, CA

18 Financial Statements For the Years Ended 16

19 Statements of Net Position Assets Current Assets: Cash and cash equivalents $ 413,678 $ 500,372 Receivables: Corporation 41,734 3,694 University Pledges receivable, net - 5,000 Total Current Assets 455, ,225 Noncurrent Assets: Restricted cash and cash equivalents 6,037 1,753 Pledges receivable, net - 9,977 Endowment investments 20,216,033 18,648,360 Total Noncurrent Assets 20,222,070 18,660,090 Total Assets 20,677,482 19,169,315 Liabilities Current Liabilities: Accounts payable Payable to Corporation 5,643 1,055 Due to University 76,500 3,699 Total Current Liabilities 82,949 5,142 Total Liabilities 82,949 5,142 Net Position Net Position: Restricted for: Nonexpendable - endowments 12,716,806 10,846,783 Expendable: Pledges receivable - 14,977 Scholarships 3,825,823 4,401,836 Other 4,046,374 3,896,112 Unrestricted 5,530 4,465 Total Net Position $ 20,594,533 $ 19,164,173 The accompanying notes are an integral part of these financial statements. 17

20 Statements of Revenues, Expenses and Changes in Net Position Years Ended Operating Revenues: Sales and services of auxiliary enterprises $ 17,060 $ 16,569 Other operating revenues 4,990 3,685 Total Operating Revenues 22,050 20,254 Operating Expenses: Salaries and benefits 457 3,496 Supplies and services 6,945 2,599 Travel 1,458 3,154 Scholarships 245, ,440 Other operating expenses 96, ,591 Total Operating Expenses 350, ,280 Operating Loss (328,812) (260,026) Nonoperating Revenues (Expenses): Gifts and donations, noncapital 539, ,054 Endowment distribution to Corporation (673,315) (541,411) University Support, noncapital (83,256) (47,156) Investment income 638, ,363 Realized and unrealized gains and (losses) on investments (492,108) (1,120,261) Net Nonoperating Revenues (Expenses) (70,851) (544,411) Other Changes in Net Position: Additions to permanent endowments 1,830,023 1,089,920 Net Other Changes in Net Position 1,830,023 1,089,920 Increase in Net Position 1,430, ,483 Net Position: Net position - beginning of year 19,164,173 18,878,690 Net position - end of year $ 20,594,533 $ 19,164,173 The accompanying notes are an integral part of these financial statements. 18

21 Statements of Cash Flows Years Ended Cash Flows from Operating Activities: Receipts from sales and services of auxiliary enterprises $ 17,219 $ 16,410 Payments to vendors (7,985) (5,859) Payments/Receipts from Corporation, net 4,588 (13,467) Payments to University (173,156) (175,369) Other receipts 4,990 3,685 Other payments (96,502) (103,591) Net Cash Used in Operating Activities (250,846) (278,191) Cash Flows from Noncapital Financing Activities: Gifts and donations 516, ,815 Additions to permanent endowments 1,830,023 1,089,920 Endowment distribution to Corporation (673,315) (541,411) Contributions to University, noncapital (83,256) (47,156) Net Cash Provided by Noncapital Financing Activities 1,589, ,168 Cash Flows from Investing Activities: Proceeds from sale of investments 1,923,481 8,889,156 Purchase of investments (3,983,262) (10,392,649) Investment income received 638, ,363 Net Cash Used in Investing Activities (1,421,079) (615,130) Net Decrease in Cash (82,410) (97,153) Cash and Cash Equivalents - Beginning of year 502, ,278 Cash and Cash Equivalents - End of Year $ 419,715 $ 502,125 The accompanying notes are an integral part of these financial statements 19

22 Statements of Cash Flows (Continued) Years Ended Reconciliation of Cash and Cash Equivalents to Statements of Net Position: Cash and cash equivalents $ 413,678 $ 500,372 Restricted cash and cash equivalents 6,037 1,753 Cash and Cash Equivalents - End of Year $ 419,715 $ 502,125 Reconciliation of Operating Loss to Net Cash Used by Operating Activities: Operating loss $ (328,812) $ (260,026) Change in assets and liabilities: Receivables 159 (159) Accounts payable 418 (106) Payable to Corporation 4,588 (13,467) Due to University 72,801 (4,433) Net Cash Used in Operating Activities $ (250,846) $ (278,191) Supplemental Schedule of Noncash Financing and Investing Activities: Contributions of investments $ 1,592,646 $ 9,144 Decrease in fair value of investments $ (492,108) $ (1,120,261) The accompanying notes are an integral part of these financial statements 20

23 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Reporting Entity The Foundation of California State University, Monterey Bay (Foundation), a nonprofit 501(c)(3) public benefit corporation, began operations in July 2010 to support the academic mission of the California State University, Monterey Bay (University). The Foundation is an auxiliary organization of the University and is presented in the University's financial statements as a component unit. The Foundation is governed by the Board of Directors, which is comprised of community members, the University President, a faculty member, an alumni member, and a student member. The activities administered by the Foundation include the following: Public relations and community outreach programs Endowment management Private giving Fund development, including support for alumni programs Fund management Fundraising activities Basis of Presentation The Financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB). Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants, gifts, and similar items are recognized as soon as all eligibility requirements have been met. Other Accounting Policies Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments purchased with original maturities of three months or less. The Foundation considers all balances in demand deposit and money market accounts to be cash equivalents for the purposes of the Statements of Net Position and Statements of Cash Flows. 21

24 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments Investments are reported at fair value using quoted market prices at the financial statement date. Realized and unrealized gains and losses are included in the Statements of Revenues, Expenses and Changes in Net Position. Receivables Receivables consist of monies due from the University Corporation at Monterey Bay (Corporation) and the University. No allowance for doubtful accounts is calculated as management believes these receivables are collectible. Pledges Receivable Pledges are unconditional promises to make future payments to the Foundation. Pledges receivable are recognized as gift revenue in the period pledged when all applicable eligibility requirements are met. Multi-year pledges are recorded at the net present value of expected future cash flows net of discounts and the allowance for doubtful accounts. There was no allowance for doubtful accounts as of June 30, At June 30, 2016, there were no net pledge receivables due to the conversion of a 1 st Capital Bank pledge into an endowment. Conditional pledges which depend on the occurrence of a specified future or uncertain event are recognized as gift revenue when the conditions are substantially met. Endowments Endowments are managed in a unitized investment pool. Investment earnings and related expenses are allocated based upon each individual endowment s unit market value. Endowment investments include cash and money market funds. In January 2009, California adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and therefore the Foundation has the ability to spend from endowments that are underwater. Under UPMIFA, there is elimination of the historic dollar value rule and the Foundation may spend from these endowments as it determines is prudent after considering donor intent, the purpose of the fund and relevant economic factors. Also, there is broader investment freedom as long as decisions are made with regard to the overall resources of the institution and its charitable purpose. In April 2011, the Foundation Board approved a 70/30 hybrid spending policy. 70% of the spending rate is determined by last year s spending adjusted for inflation as calculated by CPI (Consumer Price Index) as of December and the remaining 30% is determined by 4.5% of the average of the endowment s market value for the last twelve quarters. This spending policy was used to determine the payout rate for the 2016/17 academic year, resulting in $693 thousand. For the 2015/16 academic year, the hybrid spending policy was used in the calculation and the resulting payout was $532 thousand. Endowment reserves (accumulated net appreciation) on true endowments totaling $2.7 million as of June 30, 2016, were included in restricted-expendable net position. 22

25 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Net Position The Foundation s net position is required to be classified for accounting and reporting purposes into the following net position categories: Net investment in capital assets includes capital assets, net of accumulated depreciation and amortization, and deferred outflows of resources, less the outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. The Foundation does not have any assets in this category. Restricted, nonexpendable consists of net position subject to externally imposed restrictions that they must be retained in perpetuity. Net position in this category consists of permanent endowments held by the Foundation. Restricted, expendable consists of net position subject to externally imposed restrictions that can be fulfilled by the actions of the Foundation pursuant to those restrictions or that expire by the passage of time. Unrestricted consists of all other categories of net position. Unrestricted may be designated for use by management of the Foundation. These designations limit the area of operations for which expenditures of net position may be made and require that unrestricted net position be used to support future operations in these areas. The Foundation has adopted a policy of utilizing restricted expendable funds, when available, prior to unrestricted funds. Classification of Current and Noncurrent Assets and Liabilities The Foundation considers assets to be current that can reasonably be expected, as part of its normal business operations, to be converted to cash and be available for liquidation of current liabilities within twelve months of the Statements of Net Position date. Liabilities that can reasonably be expected, as part of normal business operations, to be liquidated within twelve months of the Statements of Net Position date are considered to be current. All other assets and liabilities are considered to be noncurrent. Classification of Revenues and Expenses The Foundation considers operating revenues and expenses in the Statements of Revenues, Expenses and Changes in Net Position to be those revenues and expenses that result from exchange transactions or from other activities that are connected directly to the Foundation s primary functions. Exchange transactions include charges for services rendered and the acquisition of goods and services. 23

26 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In accordance with GASB Statement No. 35, certain significant revenues relied upon and budgeted for fundamental operational support of the core mission of the Foundation are mandated to be recorded as Nonoperating revenues. Nonoperating revenues and expenses include the Foundation s net investment income, private gifts for other than capital purposes and endowment distributions to the Corporation. Capital gifts and additions to permanent endowments are classified as Other changes in net position. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation. Fair Value Measurements As defined in GASB Statement No. 72, Fair Value Measurement and Application, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Foundation uses valuation techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. GASB Statement No. 72 establishes a hierarchy of inputs to valuation techniques used to measure fair value. That hierarchy has three levels: Level 1 Quotes prices (unadjusted) in active markets for identical assets or liabilities; Level 2 Observable inputs, other than Level 1 prices, for the asset or liability, either directly or indirectly; Level 3 Unobservable inputs for the asset or liability. For fiscal year ended June 30, 2016, the application of valuation techniques applied to the Foundation s financial statements has been consistent. 24

27 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Foundation is qualified as a tax exempt organization under the provision of Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes on related income. As such, the Foundation is generally not subject to federal or state income taxes. However, the Foundation remains subject to income taxes on any income which is derived from a trade or business, regularly carried on and not in furtherance of the purpose for which it was granted exemption. No income tax provision has been recorded as the net income, if any, from any unrelated trade or business, in the opinion of management, is not material to the financial statements taken as a whole. Recent Pronouncements In June 2012, the GASB issued GASB Statement No. 68, Accounting and Financial Reporting for Pensions-an amendment of GASB Statement No. 27, effective for periods beginning after June 15, Because the Foundation does not have any employees, implementation of this Statement did not impact the financial statements of the Foundation. In January 2013, the GASB issued GASB Statement No. 69, Government Combinations and Disposals of Government Operations, effective for periods beginning after December 15, Implementation of this Statement did not have a significant impact on the financial statements of the Foundation. In November 2013, the GASB issued GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date-an amendment of GASB Statement No. 68, effective for periods beginning after June 15, Because the Foundation does not have any employees, implementation of this Statement did not impact the financial statements of the Foundation. In June 2015, the GASB issued GASB Statement No. 72, Fair Value Measurement and Application, effective for periods beginning after June 15, Management implemented GASB Statement No. 72 for the Foundation s June 30, 2016 financial statements. Implementation of this statement resulted in additional fair value measurement disclosures. See Note 3 to Financial Statements for further discussion. In June 2015, the GASB issued GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, effective for periods beginning after June 15, Because the Foundation does not have any employees, implementation of this Statement did not impact the financial statements of the Foundation. 25

28 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In June 2015, the GASB issued GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, effective for periods beginning after June 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. In June 2015, the GASB issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, effective for periods beginning after June 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. In June 2015, the GASB issued GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, effective for periods beginning after June 15, Implementation of this Statement did not have a significant impact on the financial statements of the Foundation. In August 2015, the GASB issued GASB Statement No. 77, Tax Abatement Disclosures, effective for periods beginning after December 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. In December 2015, the GASB issued GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pensions Plans, effective for periods beginning after December 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. In December 2015, the GASB issued GASB Statement No. 79, Certain External Investment Pools and Pool Participants, effective for periods beginning after June 15, 2015, except for the provisions in paragraphs 18, 19, 23 26, and 40, which are effective for reporting periods beginning after December 15, Partial implementation of this Statement did not have a significant impact on the financial statements of the Foundation. Management has not currently determined what impact, if any, the implementation of the remainder of this Statement may have on the financial statements of the Foundation. In January 2016, the GASB issued GASB Statement No. 80, Blending Requirements for Certain Component Units an amendment of GASB Statement No. 14, effective for periods beginning after June 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. 26

29 Notes to Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In March 2016, the GASB issued GASB Statement No. 81, Irrevocable Split-Interest Agreements, effective for periods beginning after December 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. In March 2016, the GASB issued GASB Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73, effective for periods beginning after June 15, 2016, except for the requirements of paragraph 7 in a circumstance in which an employer s pension liability is measured as of a date other than the employer s most recent fiscal year-end. In that circumstance, the requirements of paragraph 7 are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, Management has not currently determined what impact, if any, the implementation of this Statement may have on the financial statements of the Foundation. Subsequent Events Events subsequent to June 30, 2016 have been evaluated through September 9, 2016, which is the date the financial statements were available to be issued. Management did not identify any subsequent events that required disclosure. NOTE 2. DEPOSITS Deposits The Foundation maintains cash for operating needs in checking, deposit and money market accounts, with Federal Deposit Insurance Corporation (FDIC) insured financial institutions. At June 30, 2016, the Foundation s checking, deposit and money market accounts were insured by the FDIC up to $250,000. At June 30, 2016, the Foundation had $171,724 in uninsured cash deposits. 27

30 Notes to Financial Statements NOTE 3. INVESTMENTS Investments comprised the following at : Mutual Funds: Equity Funds $ 11,181,610 $ 10,182,695 Bond Funds 5,023,303 4,690,098 Alternative Funds 3,011,120 3,775,567 Money Market Funds* 1,000,000 - Total** $ 20,216,033 $ 18,648,360 * Represents investment in ASB Real Estate which was held in cash as of June 30, ** Total excludes Money Market fund balance of $1,190 which was held in cash as of June 30, Investment Fair Values The Foundation categorizes its fair values measurements within the fair value hierarchy established by generally accepted accounting principles. At June 30, 2016 the Foundation s investments were valued using quoted market prices in active markets and are all classified within Level 1 of the fair value hierarchy. Investment Policies The Foundation s Board oversees the management of its investments and establishes investment policy. The Board has delegated to its Investment Committee the implementation of the investment policy. The Investment Committee establishes investment guidelines and selects investment managers. The Foundation prohibits investments that jeopardize the safety of principal concept or non-profit status of the Foundation. The Foundation has developed and implemented a socially responsible investing policy. The endowed portfolio is an investment pool in which a large number of individual endowments participate in order to benefit from diversification and economies of scale. The primary investment objective of the endowed investment portfolio is growth of principal sufficient to preserve purchasing power and to provide income to support current and future expenditures consistent with endowment restrictions. The long term goal is that the total return on the portfolio, net of investment and administration fees, should equal the rate of inflation, plus the payout rate which is used to support current activities. Investments authorized by the Investment Committee include high quality, readily marketable securities. 28

31 Notes to Financial Statements NOTE 3. INVESTMENTS (Continued) The equity portion of the investments may include both domestic and international equities, including foreign currency denominated, common and preferred stocks and actively managed and passive (index) strategies. Overall, the investments are measured against the Standard & Poor s 500, Russell 2500, MSCI Europe, Australasia, and Far East (EAFE), MSCI All County World Index (ACWI) ex US and MSCI Emerging Markets indices. The fixed income portion of the investments may include both domestic and international securities, along with common bond substitutes. Investment guidelines establish set ranges for the percentage of the total bond portfolio that can be invested in U.S. government, investment grade, non-investment grade and foreign bonds. The fixed income portfolio is measured against the Barclays Capital Aggregate Bond and JP Morgan EMBI Global Total Return. The Alternatives portion includes funds which seek to achieve a real rate of return in excess of U.S. inflation. These funds can be made up of a mixture of stocks, bonds and other assets such as commodities. The portfolio is measured against the FTSE NAREIT All REIT, HFRI Fund of Funds Index and the PIMCO Custom Benchmark (45% BC U.S. TIPS, 20% Bloomberg Commodity, 15% JPM ELMI + (Unhedged), 10% DJ U.S. Select REIT, 10% Bloomberg Gold Subindex). Investment Risk Factors There are many factors that can affect the value of investments. Some, such as custodial credit risk, concentration of credit risk, and foreign currency risk may affect both the equity and fixed income securities. Equity securities respond to such investment behavioral factors as economic conditions, individual company earnings, performance and market liquidity, while fixed income securities are sensitive to credit risks and changes in interest rates. Equity securities held by the Foundation through mutual funds comprised $11,181,610 or 55.3 percent of the total investments of the Foundation. Equities are subject to both unsystematic and systematic risk. Unsystematic risk is the risk of a price change due to the unique circumstances of a specific security or group of related securities. The Foundation addresses unsystematic risk by investing in widely diversified equity mutual funds. Equity securities are also subject to systematic risk or market risk. Systematic risk recognizes that equity securities, as an asset class, can change in value as a result of such factors as inflation, exchange rates, political instability, war, economic conditions and interest rates. This type of risk is not specific to a particular company or industry and cannot be substantially mitigated by diversification. 29

32 Notes to Financial Statements NOTE 3. INVESTMENTS (Continued) Credit Risk Fixed income securities are subject to credit risk, which is the chance that a bond issue will fail to pay interest or principal in a timely manner, or that negative perceptions of the issuer s ability to make these payments will cause security prices to decline. The following schedule of credit risk profile of Foundation s investments summarizes the fair value of the fixed income securities subject to credit risk. The Foundation maintains policies to manage credit risk which include requiring minimum credit ratings issued by nationally recognized statistical rating organizations, including Standard and Poor s or Moody s Investor Services, for certain investments. For investments in securities rated below investment grade, the Foundation and its investment advisor monitor the investments and fund manager to determine if the portfolio is managed according to the stated guidelines. A security s tier can be established either by an independent rating organization or by a determination of the investment adviser. Money market fund shares and U.S. government securities are automatically considered Tier 1 securities. The credit ratings of the Foundation s fixed income securities held in investments and money market funds at June 30, 2016, are as follows: Fair Value Rating Bond Mutual Funds: Met West Total Return Bond I $ 2,196,426 (1) Dodge & Cox Income 2,184,390 (2) JP Morgan Emerging ETF 642,487 (3) Money Market Fund: Schwab Government Money Fund 1,190 Tier 1 Total $ 5,024,493 (1) Credit ratings range from AAA to below CCC with 88% at rating of BBB or above. (2) Credit ratings range from AAA to below B with 88% at a Baa rating or above. (3) Credit ratings range from AA to below B with 57% at a BBB rating or above. Custodial Credit Risk Custodial risk is the risk that in the event of the failure of the custodian, the investments may not be returned. Substantially all of the Foundation s investments are issued, registered or held in the name of the Foundation by custodian banks and brokers, as its agent. Other types of investments represent ownership interest that do not exist in physical or book entry form. 30

33 Notes to Financial Statements NOTE 3. INVESTMENTS (Continued) Concentration of Credit Risk Concentration of credit risk is the risk associated with a lack of diversification, such as having substantial investments in a few individual issuers; thereby exposing the organization to greater risks resulting from adverse conditions or developments. The Foundation maintains investment policies that limit the holdings of any individual security (except those issued or guaranteed by the federal government) to 10% of invested funds. GASB requires disclosure of investments in any one individual issuer that represent 5% or more of total investments. The Foundation had no investments that exceeded this threshold at June 30, 2016 or Interest Rate Risk Interest rate risk is the risk that fixed income securities will decline because of rising interest rates. The Foundation measures interest rate risk using the weighted average maturity method. The weighted average maturities of the Foundation s fixed income securities and money market funds at June 30, 2016, were as follows: Weighted Average Maturity (Years) Fair Value Bond Mutual Funds: Met West Total Return Bond I $ 2,196, Dodge & Cox Income 2,184, JP Morgan Emerging ETF 642, Money Market Fund: Schwab Government Money Fund 1, Total $ 5,024,493 Foreign Currency Risk Exposure from foreign currency risk results from investments in foreign currency denominated equity or fixed income investments. The Foundation maintains international equity investments by investing in international mutual funds that are broadly diversified over many developed and emerging markets. Exposure from foreign currency risk from these investments is permitted and it may be fully or partially hedged by the individual mutual fund managers but hedging is not permitted for speculation or to create leverage. As of June 30, 2016, the exposure to foreign currency risk of the International Equity Funds was as follows: 31

34 Notes to Financial Statements NOTE 3. INVESTMENTS (Continued) Currency Fair Value Euro $ 548,918 British Pound 463,984 Japanese Yen 515,122 Swiss Franc 239,144 South African Rand 140,293 Korean Won 340,508 Brazilian Real 393,173 Taiwan Dollar 216,599 Indian Rupee 228,090 Chinese Yuan 97,234 Other Currencies 3,265,254 Total International Funds Subject to Foreign Currency Risk $ 6,448,319 NOTE 4. OPERATING AGREEMENTS CSU The Foundation entered into a new operating agreement with the Trustees of the CSU on July 1, 2015 with a term end date of June 30, It describes the terms and conditions under which the Foundation may operate as an auxiliary organization within the CSU. No amounts are paid to the Trustees of the CSU under this agreement. Corporation On July 1, 2010 the Foundation entered into an agreement with the Corporation for accounting and financial reporting services. This agreement will renew automatically in 12-month increments unless terminated by choice by either party. The Corporation currently does not charge the Foundation for services; however, it reserves the right to establish an annual fixed fee in future years. NOTE 5. RISK MANAGEMENT The Foundation manages its risk through the purchase of insurance through California State University Risk Management Authority (CSURMA)/Auxiliaries Organization Risk Management Authority (AORMA), a joint powers public entity risk pool, for coverage of liability and general organizational risk. CSURMA/AORMA provides self-insured omission claims under $25,000 are self-insured. 32

35 Notes to Financial Statements NOTE 5. RISK MANAGEMENT (Continued) There have been no settlements in the past year that have exceeded insurance limits. There are no self-insurance claims liabilities recorded in the accompanying financial statements because any amounts at June 30, 2016, are expected to be minimal. Likewise, no amounts have been paid to CSURMA/AORMA by June 30, 2016, related to the Foundation s estimated future funding for claims liability. NOTE 6. RELATED PARTY TRANSACTIONS The Foundation is involved in transactions with the Corporation and the University. Amounts at June 30 and transactions for the years then ended are summarized below: University: Foundation receivable from the University $ - $ 159 Foundation payable to the University 76,500 3,699 Expenses for salaries of University personnel working on contracts, grants, and other programs 2,723 49,161 Expenses for other than salaries of University personnel 2,241 3,985 Gifts, grants, or capital contributions to the University 82,681 8, Corporation: Foundation receivable from the Corporation $ 41,734 $ 3,694 Foundation payable to the Corporation 5,643 1,055 Expense reimbursements to Corporation 4,426 20,500 Endowment distribution to Corporation 693, ,911 Net contributions from Corporation 409,864 33,835 33

36 Supplemental Information 34

37 Schedule of Net Position June 30, 2016 (for inclusion in the California State University) Assets: Current assets: Cash and cash equivalents $ 413,678 Short-term investments Accounts receivable, net 41,734 Leases receivable, current portion Notes receivable, current portion Pledges receivable, net Prepaid expenses and other current assets Total current assets 455,412 Noncurrent assets: Restricted cash and cash equivalents 6,037 Accounts receivable, net Leases receivable, net of current portion Notes receivable, net of current portion Student loans receivable, net Pledges receivable, net Endowment investments 20,216,033 Other long-term investments Capital assets, net Other assets Total noncurrent assets 20,222,070 Total assets 20,677,482 Deferred outflows of resources: Unamortized loss on debt refunding Net pension liability Others Total deferred outflows of resources Liabilities: Current liabilities: Accounts payable 82,949 Accrued salaries and benefits Accrued compensated absences, current portion Unearned revenue Capitalized lease obligations, current portion Long-term debt obligations, current portion Claims liability for losses and loss adjustment expenses, current portion Depository accounts Other liabilities Total current liabilities 82,949 Noncurrent liabilities: Accrued compensated absences, net of current portion Unearned revenue Grants refundable Capitalized lease obligations, net of current portion Long-term debt obligations, net of current portion Claims liability for losses and loss adjustment expenses, net of current portion Depository accounts Other postemployment benefits obligations Net pension liability Other liabilities Total noncurrent liabilities Total liabilities 82,949 Deferred inflows of resources: Service concession arrangements Net pension liability Unamortized gain on debt refunding Nonexchange transactions Others Total deferred inflows of resources Net Position: Net investment in capital assets Restricted for: Nonexpendable endowments 12,716,806 Expendable: Scholarships and fellowships 3,825,823 Research Loans Capital projects Debt service Others 4,046,374 Unrestricted 5,530 Total net position $ 20,594,533 See accompanying independent auditors' report. 35

38 Schedule of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2016 (for inclusion in the California State University) Revenues: Operating revenues: Student tuition and fees (net of scholarship allowances of $0) $ Grants and contracts, noncapital: Federal State Local Nongovernmental Sales and services of educational activities Sales and services of auxiliary enterprises (net of scholarship allowances of $0) 17,060 Other operating revenues 4,990 Total operating revenues 22,050 Expenses: Operating expenses: Instruction Research Public service Academic support 439 Student services 6,403 Institutional support 98,520 Operation and maintenance of plant Student grants and scholarships 245,500 Auxiliary enterprise expenses Depreciation and amortization Total operating expenses 350,862 Operating income (loss) (328,812) Nonoperating revenues (expenses): State appropriations, noncapital Federal financial aid grants, noncapital State financial aid grants, noncapital Local financial aid grants, noncapital Nongovernmental and other financial aid grants, noncapital Other federal nonoperating grants, noncapital Gifts, noncapital 455,870 Investment income (loss), net Endowment income (loss), net 146,594 Interest expense Other nonoperating revenues (expenses) (673,315) Net nonoperating revenues (expenses) (70,851) Income (loss) before other revenues (expenses) (399,663) State appropriations, capital Grants and gifts, capital Additions (reductions) to permanent endowments 1,830,023 Increase (decrease) in net position 1,430,360 Net position: Net position at beginning of year, as previously reported 19,164,173 Restatements Net position at beginning of year, as restated 19,164,173 Net position at end of year $ 20,594,533 See accompanying independent auditors' report. 36

39 Other Information June 30, 2016 (for inclusion in the California State University) 1 Restricted cash and cash equivalents at June 30, 2016: Portion of restricted cash and cash equivalents related to endowments $ 6,037 All other restricted cash and cash equivalents Total restricted cash and cash equivalents $ 6, Composition of investments at June 30, 2016: Current Unrestricted Current Restricted Total Current Noncurrent Unrestricted Noncurrent Restricted Total Noncurrent Total State of California Surplus Money Investment Fund (SMIF) $ State of California Local Agency Investment Fund (LAIF) Corporate bonds Certificates of deposit Mutual funds 19,216,033 19,216,033 19,216,033 Money Market funds 1,000,000 1,000,000 1,000,000 Repurchase agreements Commercial paper Asset backed securities Mortgage backed securities Municipal bonds U.S. agency securities U.S. treasury securities Equity securities Exchange traded funds (ETFs) Alternative investments: Private equity (including limited partnerships) Hedge funds Managed futures Real estate investments (including REITs) Commodities Derivatives Other alternative investment types Other external investment pools (excluding SWIFT) Other major investments: Total investments 20,216,033 20,216,033 20,216,033 Less endowment investments (enter as negative number) (20,216,033) (20,216,033) (20,216,033) Total investments 2 Investments held by the University under contractual agreements at June 30, 2016: Portion of investments in note 2.1 held by the University under contractual agreements at June 30, 20CY : 2 Restricted current investments at June 30, 2016 related to: Amount Add description $ Total restricted current investments at June 30, 2016 $ 2 Restricted noncurrent investments at June 30, 2016 related to: Amount Endowment investment $ 20,216,033 Total restricted noncurrent investments at June 30, 2016 $ 20,216,033 See accompanying independent auditors' report. 37

40 Other Information June 30, 2016 (for inclusion in the California State University) 2.5 Fair value hierarchy in investments at June 30, 2016: Fair Value Measurements Using Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Net Asset Value (NAV) State of California Surplus Money Investment Fund (SMIF) $ State of California Local Agency Investment Fund (LAIF) Corporate bonds Certificates of deposit Mutual funds 19,216,033 19,216,033 Money Market funds 1,000,000 1,000,000 Repurchase agreements Commercial paper Asset backed securities Mortgage backed securities Municipal bonds U.S. agency securities U.S. treasury securities Equity securities Exchange traded funds (ETFs) Alternative investments: Private equity (including limited partnerships) Hedge funds Managed futures Real estate investments (including REITs) Commodities Derivatives Other alternative investment types Other external investment pools (excluding SWIFT) Other major investments: Total investments 20,216,033 20,216,033 See accompanying independent auditors' report. 38

41 Other Information June 30, 2016 (for inclusion in the California State University) 3 Composition of capital assets at June 30, 2016: Balance Transfers of Balance Prior period June 30, 2015 Completed Balance June 30, 2015 Adjustments Reclassifications (restated) Additions Reductions CWIP June 30, 2016 Nondepreciable/nonamortizable capital assets: Land and land improvements $ Works of art and historical treasures Construction work in progress (CWIP) Intangible assets: Rights and easements Patents, copyrights and trademarks Internally generated intangible assets in progress Licenses and permits Other intangible assets: Total intangible assets Total nondepreciable/nonamortizable capital assets Depreciable/amortizable capital assets: Buildings and building improvements Improvements, other than buildings Infrastructure Leasehold improvements Personal property: Equipment Library books and materials Intangible assets: Software and websites Rights and easements Patents, copyright and trademarks Licenses and permits Other intangible assets: Total intangible assets Total depreciable/amortizable capital assets Total capital assets Less accumulated depreciation/amortization: Buildings and building improvements Improvements, other than buildings Infrastructure Leasehold improvements Personal property: Equipment Library books and materials Intangible assets: Software and websites Rights and easements Patents, copyright and trademarks Licenses and permits Other intangible assets: Add description Add description Add description Add description Add description Total intangible assets Total accumulated depreciation/amortization Total capital assets, net $ See accompanying independent auditors' report. 39

42 Other Information June 30, 2016 (for inclusion in the California State University) 3 Detail of depreciation and amortization expense for the year ended June 30, 2016: Depreciation and amortization expense related to capital assets $ Amortization expense related to other assets Total depreciation and amortization $ 4 Long-term liabilities activity schedule: Accrued compensated absences Claims liability for losses and loss adjustment expenses Balance Balance Prior period June 30, 2015 Balance Current Long-term June 30, 2015 adjustments Reclassifications (restated) Additions Reductions June 30, 2016 portion portion $ Capitalized lease obligations: Gross balance Unamortized premium / (discount) on capitalized lease obligations Total capitalized lease obligations Long-term debt obligations: Auxiliary revenue bonds Commercial paper Notes payable related to SRB Others: (list by type) Total long-term debt obligations Unamortized bond premium / (discount) Total long-term debt obligations, net Total long-term liabilities $ 5 Future minimum lease payments - capitalized lease obligations: Capitalized lease obligations related to SRB All other capitalized lease obligations Total capitalized lease obligations Principal and Principal and Principal and Principal Only Interest Only Interest Principal Only Interest Only Interest Principal Only Interest Only Interest Year ending June 30: Total minimum lease payments Less amounts representing interest Present value of future minimum lease payments Unamortized net premium (discount) Total capitalized lease obligations Less: current portion Capitalized lease obligation, net of current portion $ See accompanying independent auditors' report. 40

43 Other Information June 30, 2016 (for inclusion in the California State University) 6 Long-term debt obligation schedule All other long-term Auxiliary revenue bonds debt obligations Total long-term debt obligations Principal and Principal and Principal and Principal Only Interest Only Interest Principal Only Interest Only Interest Principal Only Interest Only Interest Year ending June 30: 2017 $ Total minimum payments Less amounts representing interest Present value of future minimum payments Unamortized net premium (discount) Total long-term debt obligations Less: current portion Long-term debt obligations, net of current portion $ 7 Calculation of net position 7.1 Calculation of net position - net investment in capital assets Capital assets, net of accumulated depreciation $ Capitalized lease obligations, current portion Capitalized lease obligations, net of current portion Long-term debt obligations, current portion Long-term debt obligations, net of current portion Portion of outstanding debt that is unspent at year-end Other adjustments: (please list) Net position - net investment in capital asset $ 7.2 Calculation of net position - restricted for nonexpendable - endowments Portion of restricted cash and cash equivalents related to endowments $ 6,037 Endowment investments 20,216,033 Other adjustments: (please list) Less: Expendable quasi term endowment (FMV) (4,783,628) Less: Expendable appreciation (dividends and gains) of true endowments (2,721,636) Net position - Restricted for nonexpendable - endowments per SNP $ 12,716,806 See accompanying independent auditors' report. 41

44 Other Information June 30, 2016 (for inclusion in the California State University) 8 Transactions with related entities Amount Payments to University for salaries of University personnel working on contracts, grants, and other programs $ 2,723 Payments to University for other than salaries of University personnel 2,241 Payments received from University for services, space, and programs Gifts-in-kind to the University from discretely presented component units Gifts (cash or assets) to the University from discretely presented component units 82,681 Accounts (payable to) University (enter as negative number) Other amounts (payable to) University (enter as negative number) (76,500) Accounts receivable from University Other amounts receivable from University 9 Other postemployment benefits obligation (OPEB) Annual required contribution (ARC) $ Contributions during the year Increase (decrease) in net OPEB obligation (NOO) Other adjustments NOO - beginning of year NOO - end of year $ 10 Pollution remediation liabilities under GASB Statement No. 49: Description Amount Add description $ Total pollution remediation liabilities $ Less: current portion Pollution remediation liabilities, net of current portion See accompanying independent auditors' report. 42

45 Other Information June 30, 2016 (for inclusion in the California State University) 11 The nature and amount of the prior period adjustment(s) recorded to beginning net position Net Position Class Amount Dr. (Cr.) Net position as of June 30, 2015, as previously reported $ 19,164,173 Prior period adjustments: 1 (list description of each adjustment) 2 (list description of each adjustment) 3 (list description of each adjustment) 4 (list description of each adjustment) 5 (list description of each adjustment) 6 (list description of each adjustment) 7 (list description of each adjustment) 8 (list description of each adjustment) 9 (list description of each adjustment) 10 (list description of each adjustment) Net position as of June 30, 2015, as restated $ 19,164,173 Provide a detailed breakdown of the journal entries (at the financial statement line item level) booked to record each prior period adjustment: Debit Credit Net position class: 1 (breakdown of adjusting journal entry) $ Net position class: 2 (breakdown of adjusting journal entry) Net position class: 3 (breakdown of adjusting journal entry) Net position class: 4 (breakdown of adjusting journal entry) Net position class: 5 (breakdown of adjusting journal entry) Net position class: 6 (breakdown of adjusting journal entry) Net position class: 7 (breakdown of adjusting journal entry) Net position class: 8 (breakdown of adjusting journal entry) Net position class: 9 (breakdown of adjusting journal entry) Net position class: 10 (breakdown of adjusting journal entry) See accompanying independent auditors' report. 43

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