Foundation of California State University, Monterey Bay

Transcription

1 Foundation of California State University, Monterey Bay Annual Report For the Years Ended Junes 30, 2017 and 2016

2 Annual Report For the Years Ended Junes 30, 2017 and 2016 Table of Contents Page Independent Auditors Report 1 3 Management s Discussion and Analysis 4 10 Financial Statements for the Years ended Junes 30, 2017 and 2016 Statements of Net Position 12 Statements of Revenues, Expenses and Changes in Net Position 13 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)

3

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 opinion. 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 June 30, 2017 and 2016, 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 10 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 32 through 40 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 relates 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

5

6 Management s Discussion and Analysis June 30, 2017 and 2016 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, 2017 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 Total operating revenues increased by 94.7 percent or $21 thousand from $22 thousand to $43 thousand. Total operating expenses decreased by 15.7 percent or $55 thousand from $351 thousand to $296 thousand. Scholarship expenses decreased by 16.7 percent or $41 thousand from $246 thousand to $205 thousand. Gifts and donations, noncapital, increased by 11.8 percent or $63 thousand from $539 thousand to $603 thousand. Realized and unrealized gains and losses on investments increased by $2.1 million or percent from a $492 thousand loss to a $1.6 million gain. Additions to permanent endowments decreased by 58.8 percent or $1.1 million from $1.8 million to $754 thousand. 4

7 Management s Discussion and Analysis June 30, 2017 and 2016 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 12 through 15) 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 2016/17, net position increased by $2.9 million or 14.1 percent over 2015/16. This increase is due to additions to permanent endowments and favorable market returns. Net Position increased by $1.4 million or 7.5 percent in 2015/16 as a result of additions to permanent endowments that were offset by poor market returns. The accompanying audited financial statements as of and for the years ended June 30, 2017 and 2016 are reported in accordance with standards and requirements of the GASB as are the following schedules. 5

8 Management s Discussion and Analysis June 30, 2017 and 2016 Assets Table 1: Condensed Summary of Net Position as of June 30, 2017, 2016, and Assets Current assets $ 677,183 $ 455,412 $ 509,225 Noncurrent assets: Endowment investments 22,838,274 20,216,033 18,648,360 Other noncurrent assets 29,454 6,037 11,730 Total Assets 23,544,911 20,677,482 19,169,315 Liabilities Current liabilities 39,179 82,949 5,142 Total Liabilities 39,179 82,949 5,142 Net Position Restricted for: Nonexpendable endowments 13,590,960 12,716,806 10,846,783 Expendable 9,909,110 7,872,197 8,312,925 Unrestricted 5,662 5,530 4,465 Total Net Position $ 23,505,732 $ 20,594,533 $ 19,164,173 Current assets, or assets that can normally be converted to cash in less than one year, consist of Cash and cash equivalents, Receivables, and Prepaid expenses and other assets. In 2016/17, Receivables increased by $210 thousand or percent to $252 thousand from $42 thousand due to a significant contribution received through the Corporation. Receivables increased in 2015/16 from $4 thousand to $42 thousand for a percent or $38 thousand change due to increases in contributions that were received through the Corporation. Noncurrent assets consist of Restricted cash and cash equivalents, and Endowment investments. Restricted cash and cash equivalents consist of cash and money market balances associated with endowments. In 2016/17, Restricted cash and cash equivalents increased by $23 thousand or percent from $6 thousand to $29 thousand as a result of an endowment contribution received just before June 30, 2017 being invested in July Restricted cash and cash equivalents increased in 2015/16 from $2 thousand to $6 thousand for a percent or $4 thousand change as a result of cash received and not invested in the month of June

9 Management s Discussion and Analysis June 30, 2017 and 2016 In 2016/17, Endowment investments increased from $20.2 million to $22.8 million for an increase of $2.6 million or 13.0 percent. The change in endowments is a result of $754 thousand in contributions to permanent endowments, $210 thousand to quasi and term endowments, $939 thousand in investment income, $1.6 million in realized and unrealized net gains, and offset by $890 thousand in endowment distributions, scholarship expenses, and bank fees. 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 was 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. Liabilities Current liabilities, amounts owed within one year, consist of Accounts payable, Payable to Corporation, and Due to University. Payable to Corporation in 2016/17 increased to $24 thousand from $6 thousand for an $18 thousand or percent increase. This is primarily due to deposits received by the Foundation for the Corporation in June 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. In 2016/17, Due to University decreased by 81.7 percent or $63 thousand from $77 thousand to $14 thousand due to more timely invoicing by the University. Due to University increased in 2015/16 to $77 thousand from $4 thousand for a $73 thousand or 1,968.1 percent change. The change was due to an increase of awards to the Undergraduate Research Opportunities Center (UROC), Imagine College and RISE programs. Results of Operations In fiscal year 2016/17, the Foundation s net position increased by 14.1 percent or $2.9 million mostly as a result of $1.3 million in contributions to the endowments, $939 thousand in investment income, $1.6 million of investment appreciation, and offset by $968 thousand in overall expenses. 7

10 Management s Discussion and Analysis June 30, 2017 and 2016 Table 2: Condensed Summary of Changes in Net Position for Years Ended June 30, 2017, 2016, and Operating Revenues Sales and services of auxiliary enterprises $ 37,063 $ 17,060 $ 16,569 Other operating revenues 5,863 4,990 3,685 Total Operating Revenues 42,926 22,050 20,254 Operating Expenses Salaries and benefits ,496 Scholarships 204, , ,440 Other operating expenses 91, , ,344 Total Operating Expenses 295, , ,280 Operating Loss (252,983) (328,812) (260,026) Nonoperating Revenues (Expenses) Gifts and donations, noncapital 602, , ,054 Endowment distribution to Corporation (672,022) (693,315) (541,411) Other nonoperating revenues 2,479,670 83,338 (279,054) Total Nonoperating Revenues (Expenses) 2,410,229 (70,851) (544,411) Other Changes in Net Position Additions to permanent endowments 753,953 1,830,023 1,089,920 Total Other Changes in Net Position 753,953 1,830,023 1,089,920 Increase in Net Position 2,911,199 1,430, ,483 Net Position Net position beginning of year 20,594,533 19,164,173 18,878,690 Net position end of year $ 23,505,732 $ 20,594,533 $ 19,164,173 8

11 Management s Discussion and Analysis June 30, 2017 and 2016 Operating revenues consist of Sales and services of auxiliary enterprises and Other operating revenues. In 2016/17, Sales and services of auxiliary enterprises increased $20 thousand or percent to $37 thousand from $17 thousand. The increase is due to improving event and merchandise sales by the Alumni Association. In 2015/16, Sales and services of auxiliary enterprises increased $4 hundred to $17 thousand for an increase of 3.0 percent due to the same activities. Operating expenses consist of Salaries and benefits, Supplies and services, Travel, Scholarships, Insurance, and Other operating expenses. Scholarships decreased from $246 thousand in 2015/16 to $205 thousand in 2016/17. This 16.7 percent or $41 thousand decrease is a result of fewer scholarship recipients in the Imagine College and RISE programs. In 2015/16, Scholarships increased from $167 thousand in 2014/15 to $246 thousand in 2015/16. This 46.6 percent or $78 thousand increase was a result of additional scholarship recipients in those same programs. Other operating expenses decreased in 2016/17 by 12.9 percent or $14 thousand from $105 thousand to $91 thousand. This is mainly due to the Alumni Association having fewer mixers and events and spending less on promotional items. In 2015/16, other operating expenses decreased by 4.1 percent or $4 thousand from $109 thousand to $105 thousand due to less spending in community outreach and hospitality. Nonoperating revenues (expenses) consist of Gifts and donations - noncapital, Endowment distribution to Corporation, Contribution from auxiliary, University Support, noncapital, Investment income, and Realized and unrealized gains and losses on investments. In 2016/17, Gifts and donations, noncapital increased to $603 thousand from $539 thousand for an 11.8 percent change or $63 thousand increase. The net increase is primarily the result of increased contributions to two large programs offset with a decrease in another. 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 was primarily the result of contributions made to the UROC program of $320 thousand and a decrease in support to the Imagine College term endowment of $100 thousand. 9

12 Management s Discussion and Analysis June 30, 2017 and 2016 In 2016/17, the Foundation earned $939 thousand in dividends and interest income on investments as a result of an expanding endowment portfolio. This was an increase of $300 thousand or 47.0 percent from the $639 thousand earned in 2015/16. In 2015/16, investment income decreased 28.1 percent or $249 thousand from $888 thousand to $639 thousand. In 2016/17, the Foundation recognized $1.6 million in realized and unrealized gains, a $2.1 million or percent improvement over the $492 thousand in losses in 2015/16, and was a result of favorable market conditions. In 2015/16, the Foundation recognized a $492 thousand loss or a change of $628 thousand or 56.1 percent improvement from a $1.1 million loss in 2014/15. Other Changes in Net Position In 2016/17, additions to permanent endowments totaled $754 thousand. Contributions included gifts for the creation of three new endowments and contributions towards existing funds. In 2015/16, additions to permanent endowments of $1.8 million were made including the creation of four new endowed funds and contributions towards existing funds. Currently Known Facts, Decisions and Conditions The Foundation s management believes the following will impact future reporting periods: Market Conditions Endowment investments account for 97.0 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

13 Financial Statements For the Years Ended June 30, 2017 and

14 Statements of Net Position June 30, 2017 and Assets Current Assets: Cash and cash equivalents $ 424,912 $ 413,678 Receivables: Corporation 251,717 41,734 Prepaid expenses and other assets Total Current Assets 677, ,412 Noncurrent Assets: Restricted cash and cash equivalents 29,454 6,037 Endowment investments 22,838,274 20,216,033 Total Noncurrent Assets 22,867,728 20,222,070 Total Assets 23,544,911 20,677,482 Liabilities Current Liabilities: Accounts payable 1, Payable to Corporation 24,075 5,643 Due to University 14,000 76,500 Total Current Liabilities 39,179 82,949 Total Liabilities 39,179 82,949 Net Position Net Position: Restricted for: Nonexpendable - endowments 13,590,960 12,716,806 Expendable: Scholarships 5,240,673 3,825,823 Other 4,668,437 4,046,374 Unrestricted 5,662 5,530 Total Net Position $ 23,505,732 $ 20,594,533 The accompanying notes are an integral part of these financial statements. 12

15 Statements of Revenues, Expenses and Changes in Net Position Years Ended Junes 30, 2017 and Operating Revenues: Sales and services of auxiliary enterprises $ 37,063 $ 17,060 Other operating revenues 5,863 4,990 Total Operating Revenues 42,926 22,050 Operating Expenses: Salaries and benefits Supplies and services 1,707 6,945 Travel 1,274 1,458 Scholarships 204, ,500 Insurance 50,000 50,000 Other operating expenses 38,428 46,502 Total Operating Expenses 295, ,862 Operating Loss (252,983) (328,812) Nonoperating Revenues (Expenses): Gifts and donations, noncapital 602, ,126 Endowment distribution to Corporation (672,022) (693,315) Contribution from Corporation 26,514 20,000 University Support, noncapital (100,000) (83,256) Investment income 938, ,702 Realized and unrealized gains and (losses) on investments 1,614,352 (492,108) Net Nonoperating Revenues (Expenses) 2,410,229 (70,851) Other Changes in Net Position: Additions to permanent endowments 753,953 1,830,023 Net Other Changes in Net Position 753,953 1,830,023 Increase in Net Position 2,911,199 1,430,360 Net Position: Net position - beginning of year 20,594,533 19,164,173 Net position - end of year $ 23,505,732 $ 20,594,533 The accompanying notes are an integral part of these financial statements. 13

16 Statements of Cash Flows Years Ended Junes 30, 2017 and Cash Flows from Operating Activities: Receipts from sales and services of auxiliary enterprises $ 37,063 $ 17,219 Payments to vendors (295,611) (228,985) Payments/Receipts from Corporation, net (191,551) 4,588 Payments to University (62,500) (2,156) Other receipts 5,863 4,990 Other payments (554) (46,502) Net Cash Used in Operating Activities (507,290) (250,846) Cash Flows from Noncapital Financing Activities: Gifts and donations 602, ,063 Additions to permanent endowments 753,953 1,830,023 Endowment distribution to Corporation (672,022) (673,315) Contributions to University, noncapital (100,000) (83,256) Contributions from Corporation 26,514 - Net Cash Provided by Noncapital Financing Activities 611,026 1,589,515 Cash Flows from Investing Activities: Proceeds from sale of investments 888,395 1,923,481 Purchase of investments (1,905,056) (3,983,262) Investment income received 947, ,702 Net Cash Used in Investing Activities (69,085) (1,421,079) Net Increase (Decrease) in Cash 34,651 (82,410) Cash and Cash Equivalents - Beginning of year 419, ,125 Cash and Cash Equivalents - End of Year $ 454,366 $ 419,715 The accompanying notes are an integral part of these financial statements 14

17 Statements of Cash Flows (Continued) Years Ended Junes 30, 2017 and Reconciliation of Cash and Cash Equivalents to Statements of Net Position: Cash and cash equivalents $ 424,912 $ 413,678 Restricted cash and cash equivalents 29,454 6,037 Cash and Cash Equivalents - End of Year $ 454,366 $ 419,715 Reconciliation of Operating Loss to Net Cash Used by Operating Activities: Operating loss $ (252,983) $ (328,812) Change in assets and liabilities: Receivables (209,983) 159 Prepaid expenses and other assets (554) - Accounts payable Payable to Corporation 18,432 4,588 Due to University (62,500) 72,801 Net Cash Used in Operating Activities $ (507,290) $ (250,846) Supplemental Schedule of Noncash Financing and Investing Activities: Contributions of investments $ 7,571 $ 1,592,646 Increase (decrease) in fair value of investments $ 1,614,352 $ (492,108) The accompanying notes are an integral part of these financial statements 15

18 Notes to Financial Statements Junes 30, 2017 and 2016 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. 16

19 Notes to Financial Statements Junes 30, 2017 and 2016 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). 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 were no pledge receivables or an allowance for doubtful accounts as of June 30, 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 2017/18 academic year, resulting in $662 thousand. For the 2016/17 academic year, the hybrid spending policy was used in the calculation and the resulting payout was $693 thousand. Endowment reserves (accumulated net appreciation) on true endowments totaling $4.2 million as of June 30, 2017, were included in restricted-expendable net position. 17

20 Notes to Financial Statements Junes 30, 2017 and 2016 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. 18

21 Notes to Financial Statements Junes 30, 2017 and 2016 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 to 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, 2017, the application of valuation techniques applied to the Foundation s financial statements has been consistent. 19

22 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Foundation is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Foundations s tax-exempt purpose is subject to taxation as unrelated business income. No liability for income taxes has been recorded since the amount is not expected to be significant. In addition, the Foundation qualifies for the charitable contribution deduction under Section 170(b)(1)(A)(iv) and has been classified as an organization that is not a private foundation under Section 509(a)(1). The Foundation follows accounting standards generally accepted in the United States of America, which requires, among other things, the recognition and measurement of tax positions based on a "more likely than not" (likelihood greater than 50%) approach. As of June 30, 2017, management has considered its tax positions and believes that the Organization did not maintain any tax positions that did not meet the "more likely than not" threshold. The Organization does not expect any material changes through June 30, However, tax returns remain subject to examination by the Internal Revenue Service for fiscal years ending on or after June 30, 2014, and by the California Franchise Tax Board for fiscal years ending on or after June 30, Recent Pronouncements In February 2015, GASB issued Statement No. 72, Fair Value Measurement and Application, which addresses accounting and financial reporting disclosures related to fair value measurements. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. Management implemented GASB Statement No. 72 for the Corporation s June 30, 2016 financial statements. Implementation of this statement resulted in additional fair value measurement disclosures. See Note 4 to Financial Statements for further discussion. In June 2015, GASB issued 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. The provisions of Statement No. 73 are effective for fiscal years beginning after June 15, As the Corporation does not have a defined benefit pension plan, implementation of this Statement did not have any impact on the Corporation s financial statements. In June 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which establishes financial reporting standards for state and local governmental OPEB plans defined benefit OPEB plans and defined contribution OPEB plans that are administered through trusts or equivalent arrangements. The provisions of Statement No. 74 are effective for fiscal years beginning after June 15, The Corporation is not an OPEB plan therefore this statement is not applicable to the Corporation. 20

23 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other Than Pensions. Statement No. 75 establishes new accounting and financial reporting requirements for governments whose employees are provided with OPEB, as well as for certain nonemployer governments that have a legal obligation to provide financial support for OPEB provided to the employees of other entities. The provisions of Statement No. 75 are effective for fiscal years beginning after June 15, Management has not yet determined the impact of this Statement on its financial statements. In June 2015, GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to identify in the context of the current governmental financial reporting environment the hierarchy of generally accepted accounting principles. The GAAP hierarchy consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. The provisions of Statement No. 76 are effective for fiscal years beginning after June 15, Implementation of this statement did not have a material impact on the Corporation s financial statements. In August 2015, GASB issued Statement No. 77, Tax Abatement Disclosures. Statement No. 77 requires disclosure of tax abatement information about (1) a reporting government s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the reporting government s tax revenues. The provisions of Statement No. 77 are effective for fiscal years beginning after December 15, Implementation of this statement did not have a material impact on the Corporation s financial statements. In December 2015, GASB issued Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. The provisions of Statement No. 78 are effective for fiscal years beginning after December 15, Implementation of this statement did not have a material impact on the Corporation s financial statements. As the Corporation does not have a defined benefit pension plan, implementation of this Statement did not have any impact on the Corporation s financial statements. In December 2015, GASB issued Statement No. 79, Certain External Investment Pools and Pool Participants. Statement No. 79 addresses accounting and financial reporting for certain external investment pools and pool participants. The provisions of Statement No. 79 are effective for reporting periods beginning after June 15, Implementation of this statement did not have a material impact on the Corporation s financial statements. 21

24 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In January 2016, GASB issued Statement No. 80, Blending Requirements for Certain Component Units an amendment of GASB Statement No. 14. Statement No. 80 amends the blending requirements established in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as amended. The provisions of Statement No. 80 are effective for fiscal years beginning after June 15, Implementation of this statement did not have a material impact on the Corporation s financial statements. In March 2016, GASB issued Statement No. 81, Irrevocable Split-Interest Agreements. Statement No. 81 requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. The Statement also provides additional recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The provisions of Statement No. 81 are effective for fiscal years beginning after December 15, Implementation of this statement did not have a material impact on the Corporation s financial statements. In March 2016, GASB issued Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73. The provisions of Statement No. 82 are effective for fiscal years beginning after June 15, As the Corporation does not have a defined benefit pension plan, implementation of this Statement did not have any impact on the Corporation s financial statements. In November 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. Statement No. 83 establishes criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. This Statement requires that recognition occur when the liability is both incurred and reasonably estimable. The provisions of Statement No. 83 are effective for fiscal years beginning after June 15, Management has not yet determined the impact of this Statement on its financial statements. In January 2017, GASB issued Statement No. 84, Fiduciary Activities. Statement No. 84 establishes criteria for identifying fiduciary activities of all state and local governments. Activities meeting the criteria should be reported in a fiduciary fund in the basic financial statements. This Statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an event has occurred that compels the entity to disburse fiduciary resources. The provisions of Statement No. 84 are effective for fiscal years beginning after December 15, Management has not yet determined the impact of this Statement on its financial statements. 22

25 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In March 2017, GASB issued Statement No. 85, Omnibus Statement No. 85 addresses practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). The provisions of Statement No. 85 are effective for fiscal years beginning after June 15, Management has not yet determined the impact of this Statement on its financial statements. In May 2017, GASB issued Statement No. 86, Certain Debt Extinguishment Issues. Statement No. 86 is meant to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources resources other than the proceeds of refunding debt are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The provisions of Statement No. 86 are effective for fiscal years beginning after June 15, Management has not yet determined the impact of this Statement on its financial statements. Additionally, in June 2017, GASB issued Statement No. 87, Leases. Statement No. 87 increases the usefulness of entities financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. The provisions of Statement No. 87 are effective for fiscal years beginning after December 15, Management has not yet determined the impact of this Statement on its financial statements. Subsequent Events Events subsequent to June 30, 2017 have been evaluated through September 12, 2017, 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. 23

26 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 2. DEPOSITS (continued) At June 30, 2017, the Foundation s checking, deposit and money market accounts were insured by the FDIC up to $250,000. At June 30, 2017, the Foundation had $203,405 in uninsured cash deposits. NOTE 3. INVESTMENTS Investments comprised the following at June 30, 2017 and 2016: Mutual Funds: Equity Funds $ 12,900,232 $ 11,181,610 Bond Funds 5,588,556 5,023,303 Other Funds 3,316,331 3,011,120 Alternative Funds: ASB Real Estate 1,033,155 - Total* $ 22,838,274 $ 19,216,033 *Total excludes Money Market fund balance of $1,079 and $1,190 at June 30, 2017 and 2016, respectively. Investment Fair Values The Foundation categorizes its fair values measurements within the fair value hierarchy established by generally accepted accounting principles. At June 30, 2017 and 2016, the Foundation s mutual funds were valued using quoted market prices in active markets and are all classified within Level 1 of the fair value hierarchy. At June 30, 2017, the Foundation s alternative fund was valued by the administrator of the fund using net book value to value the investments and is classified within Level 3 of the fair value hierarchy. For the year ended June 30, 2017, the table below sets forth a summary of changes in the fair value of the Foundation s Level 3 investment: Balance - beginning of year $ - Purchases 1,000,000 Reinvested dividends 33,306 Unrealized gains relating to instruments held at the reporting date 12,691 Fees (12,842) Balance - end of year $ 1,033,155 24

27 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 3. INVESTMENTS (Continued) 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. 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 other 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 NCREIF ODCE, 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). 25

28 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 3. INVESTMENTS (Continued) 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 $12,900,232 or 56.5 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. 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 the 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. 26

29 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 3. INVESTMENTS (Continued) The credit ratings of the Foundation s fixed income securities held in investments and money market funds at June 30, 2017, are as follows: Fair Value Rating Bond Mutual Funds: Met West Total Return Bond I $ 2,458,320 (1) Dodge & Cox Income 2,461,410 (2) JP Morgan Emerging ETF 668,827 (3) Money Market Fund: Schwab Government Money Fund 1,079 Not Rated Total $ 5,589,636 (1) Credit ratings range from AAA to below CCC with 94% at rating of BBB or above. (2) Credit ratings range from AAA to below B with 89% at a Baa rating or above. (3) Credit ratings range from AA to below B with 50% 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. 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, 2017 or

30 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 3. INVESTMENTS (Continued) 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, 2017, were as follows: Weighted Average Maturity (Years) Fair Value Bond Mutual Funds: Met West Total Return Bond I $ 2,458, Dodge & Cox Income 2,461, JP Morgan Emerging ETF 668, Money Market Fund: Schwab Government Money Fund 1, Total $ 5,589,636 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. 28

31 Notes to Financial Statements Junes 30, 2017 and 2016 NOTE 3. INVESTMENTS (Continued) As of June 30, 2017, the exposure to foreign currency risk of the International Equity Funds was as follows: Currency Fair Value Euro $ 1,110,948 Japanese Yen 615,186 British Pound 490,415 Korean Won 445,044 Brazilian Real 360,778 Mexican Peso 269,522 Indian Rupee 260,738 Taiwan Dollar 257,215 Swiss Franc 239,236 Russian Ruble 209,256 South African Rand 167,708 Turkish Lira 146,800 Indonesian Rupiah 117,789 Australian Dollar 114,397 Chinese Yuan 110,676 Thai Baht 108,639 Hong Kong Dollar 96,410 Malaysian Ringgit 82,742 Other Currencies 2,334,152 Total International Funds Subject to Foreign Currency Risk $ 7,537,651 Other currencies are individually less than 1% of the Foundation s international equity funds. 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. 29

32 Notes to Financial Statements Junes 30, 2017 and 2016 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. 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, 2017, are expected to be minimal. Likewise, no amounts have been paid to CSURMA/AORMA by June 30, 2017, 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 payable to the University $ 14,000 $ 76,500 Expenses for salaries of University personnel working on contracts, grants, and other programs - 2,723 Expenses for other than salaries of University personnel 61 2,241 Gifts, grants, or capital contributions to the University 199,500 82, Corporation: Foundation receivable from the Corporation $ 251,717 $ 41,734 Foundation payable to the Corporation 24,075 5,643 Expense reimbursements to Corporation 15,529 4,426 Endowment distribution to Corporation 672, ,315 Net contributions from Corporation 150, ,864 30

33 Supplemental Information 31

34 Foundation at Monterey Bay Schedule of Net Position June 30, 2017 (for inclusion in the California State University) Assets: Current assets: Cash and cash equivalents $ 424,912 Short-term investments - Accounts receivable, net 251,717 Leases receivable, current portion - Notes receivable, current portion - Pledges receivable, net - Prepaid expenses and other current assets 554 Total current assets 677,183 Noncurrent assets: Restricted cash and cash equivalents 29,454 Accounts receivable, net - Leases receivable, net of current portion - Notes receivable, net of current portion - Student loans receivable, net - Pledges receivable, net - Endowment investments 22,838,274 Other long-term investments - Capital assets, net - Other assets - Total noncurrent assets 22,867,728 Total assets 23,544,911 Deferred outflows of resources: Unamortized loss on debt refunding - Net pension liability - Others - Liabilities: Total deferred outflows of resources - Current liabilities: Accounts payable 39,179 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 39,179 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 39,179 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 13,590,960 Expendable: Scholarships and fellowships 5,240,673 Research - Loans - Capital projects - Debt service - Others 4,668,437 Unrestricted 5,662 Total net position $ 23,505,732 See accompanying independent auditors' report. 32

35 Foundation at Monterey Bay Schedule of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2017 (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) 37,063 Other operating revenues 5,863 Expenses: Total operating revenues 42,926 Operating expenses: Instruction - Research - Public service - Academic support 3,583 Student services 10,169 Institutional support 77,657 Operation and maintenance of plant - Student grants and scholarships 204,500 Auxiliary enterprise expenses - Depreciation and amortization - Total operating expenses 295,909 Operating income (loss) (252,983) 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 502,581 Investment income (loss), net 2,553,156 Endowment income (loss), net - Interest expense - Other nonoperating revenues (expenses) (645,508) Net nonoperating revenues (expenses) 2,410,229 Income (loss) before other revenues (expenses) 2,157,246 State appropriations, capital - Grants and gifts, capital - Additions (reductions) to permanent endowments 753,953 Increase (decrease) in net position 2,911,199 Net position: Net position at beginning of year, as previously reported 20,594,533 Restatements - Net position at beginning of year, as restated 20,594,533 Net position at end of year $ 23,505,732 See accompanying independent auditors' report. 33

36 Foundation at Monterey Bay Other Information June 30, 2017 (for inclusion in the California State University) 1 Noncurrent restricted cash and cash equivalents at June 30, 2017: Portion of restricted cash and cash equivalents related to endowments $ 29,454 All other restricted cash and cash equivalents Total restricted cash and cash equivalents $ 29, Composition of investments at June 30, 2017: 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 21,805,119 21,805,119 21,805,119 Money Market funds 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) 1,033,155 1,033,155 1,033,155 Commodities Derivatives Other alternative investment types Other external investment pools (excluding SWIFT) Other major investments: Total investments 22,838,274 22,838,274 22,838,274 Less endowment investments (enter as negative number) (22,838,274) (22,838,274) (22,838,274) Total investments 2 Investments held by the University under contractual agreements at June 30, 2017: Portion of investments in note 2.1 held by the University under contractual agreements at June 30, 2017 : 2 Restricted current investments at June 30, 2017 related to: Amount Add description $ Total restricted current investments at June 30, 2017 $ 2 Restricted noncurrent investments at June 30, 2017 related to: Amount Endowment investment $ 22,838,274 Total restricted noncurrent investments at June 30, 2017 $ 22,838,274 See accompanying independent auditors' report. 34

37 Foundation at Monterey Bay Other Information June 30, 2017 (for inclusion in the California State University) 2.5 Fair value hierarchy in investments at June 30, 2017: 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 21,805,119 21,805,119 Money Market funds 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) 1,033,155 1,033,155 Commodities Derivatives Other alternative investment types Other external investment pools (excluding SWIFT) Other major investments: Total investments 22,838,274 21,805,119 1,033,155 See accompanying independent auditors' report. 35

38 Foundation at Monterey Bay Other Information June 30, 2017 (for inclusion in the California State University) 3 Composition of capital assets at June 30, 2017: N/A Balance Transfers of Balance Prior period June 30, 2016 Completed Balance June 30, 2016 Adjustments Reclassifications (restated) Additions Reductions CWIP June 30, 2017 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: Add description Add description Add description Add description Add description 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: Add description Add description Add description Add description Add description 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. 36

39 Foundation at Monterey Bay Other Information June 30, 2017 (for inclusion in the California State University) 3 Detail of depreciation and amortization expense for the year ended June 30, 2017: Depreciation and amortization expense related to capital assets $ Amortization expense related to other assets Total depreciation and amortization $ 4 Long-term liabilities activity schedule: N/A Balance Balance Prior period June 30, 2016 Balance Current Long-term June 30, 2016 adjustments Reclassifications (restated) Additions Reductions June 30, 2017 portion portion Accrued compensated absences Claims liability for losses and loss adjustment expenses $ 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: N/A 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. 37

40 6 Long-term debt obligation schedule N/A Foundation at Monterey Bay Other Information June 30, 2017 (for inclusion in the California State University) 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: 2018 $ 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 $ 29,454 Endowment investments 22,838,274 Other adjustments: (please list) Less: Expendable quasi term endowment (FMV) (5,058,437) Less: Expendable appreciation (dividends and gains) of true endowments (4,218,331) Net position - Restricted for nonexpendable - endowments per SNP $ 13,590,960 See accompanying independent auditors' report. 38

41 Foundation at Monterey Bay Other Information June 30, 2017 (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 $ Payments to University for other than salaries of University personnel 61 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 199,500 Accounts (payable to) University (enter as negative number) (14,000) Other amounts (payable to) University (enter as negative number) Accounts receivable from University Other amounts receivable from University 9 Other postemployment benefits obligation (OPEB) N/A 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: N/A Description Amount Add description $ Total pollution remediation liabilities $ Less: current portion Pollution remediation liabilities, net of current portion See accompanying independent auditors' report. 39

42 Foundation at Monterey Bay Other Information June 30, 2017 (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, 2016, as previously reported $ 20,594,533 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, 2016, as restated $ 20,594,533 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. 40

43

44