Missouri Western State University A Component Unit of the State of Missouri

Transcription

1 Accountants Report and Financial Statements (Including Reports Required Under OMB-133) June 30, 2005 and 2004

2 June 30, 2005 and 2004 Contents Management s Introduction... 1 Independent Accountants Report on Financial Statements and Supplementary Information... 4 Management s Discussion and Analysis... 6 Financial Statements Statements of Net Assets Statements of Financial Position Missouri Western State College Foundation, Inc Statements of Revenues, Expenses and Changes in Net Assets Statements of Activities Missouri Western State College Foundation, Inc Statements of Cash Flows Notes to Financial Statements Supplementary Information Schedule of Expenditures of Federal Awards Independent Accountants Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Independent Accountants Report on Compliance and Internal Control Over Compliance with Requirements Applicable to Major Federal Awards Programs Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Independent Accountants Report on Supplementary Information Supplementary Information Required for Revenue Bonds Revenue and Expenditures Schedule Changes in Reserve Fund Balances Insurance Coverage Occupancy Statistics... 56

3 Management s Introduction Years Ended June 30, 2005 and 2004 Overview Missouri Western State University (the University) is a four-year public institution providing a blend of traditional liberal arts and professional degree programs. The University offers student-centered, high quality instruction that focuses on experience-based learning, community service, and state-ofthe-art technology. Western is located in St. Joseph, Missouri and is committed to the educational, economic, cultural and social development of the region it serves. The University is a component unit of the State of Missouri and is authorized under Missouri statute to offer associate and baccalaureate degrees as well as certificate programs. Professional programs, programs for transfer students, continuing education opportunities and self-enrichment courses are also offered. Missouri Western State University has an enrollment of approximately 5,000 students. The University has on-campus student housing that can accommodate approximately 20% of the student body. The predecessor to Missouri Western State University, St. Joseph Junior College, was organized in 1915 as an integral part of the city public school system. An independent junior college district involving eleven school districts was organized in Also in 1965, the Missouri State Legislature enacted legislation creating Missouri Western State College, which, when combined with St. Joseph Junior College, constituted a four year state college. In 1969, the College moved to the present campus, which now comprises 744 acres. The College became a fully funded state institution on July 1, University designation for Western became official on August 28, The legislation (SB 98) that gave Western university designation specifically indicates that Western has a statewide mission in the area of applied learning. Missouri Western State University invests its resources, including student fees and state appropriations, efficiently and effectively to serve the needs of students, our region and the State of Missouri. Among the public four-year colleges and universities in the State, we invest the highest proportion of our total budget in instruction and in other activities that specifically support students. We work with students to connect the theory of the classroom with its applications beyond the classroom in the community, the region and well beyond. We serve students who are typically first generation college students and who demonstrate financial need at a level substantially above the average for students in Missouri. We produce student outcomes that, in the aggregate, compare well with other colleges and universities in Missouri. Strategic Planning Western began preliminary strategic planning in 2000 and its formal strategic planning process in April Planning involved hundreds of individuals on campus and in the community, who contributed to shaping the plan. A Five Year Strategic Plan, completed in December 2001, was approved by the Board of Governors, and implementation began in January The plan includes a statement of vision, mission, values, and a set of goals and objectives for seven strategic areas. Western has published annual progress reports on the implementation of the plan in 2003, 2004 and

4 Management s Introduction Years Ended June 30, 2005 and 2004 Outstanding accomplishments, to date, in the several strategic areas include the following: Completed a comprehensive enrollment management plan that includes recruitment and retention components. Developed the recruitment component, consulting with Noel-Levitz. Implemented a comprehensive new student orientation program. Completed an institution-wide assessment of credit bearing applied learning activities. In the past year, 88% of academic departments were involved in collaborative faculty-student research projects, and 82% provided internships and practicum opportunities for students. Opened the Office of Grants and Sponsored Programs and expanded Continuing Education, creating the Western Institute and its four Centers for Applied Research. Reorganized Academic and Student Affairs and the Alumni Association and Foundation. Implemented the Western League for Excellence. Continued facilities expansion in building the Fulkerson Center, Living/Learning Residence Hall, and the Residential Commons Building. Installed the Banner Finance, Financial Aid, Student and Luminis modules as part of replacing the existing administrative software and hardware systems with an integrated, technologically current, web-based system. Enhanced network services. Marketed the Western Advantage, focusing on Western s quality processes and outcomes in applied learning, service to the region and student engagement. Academic Quality Improvement Program (AQIP) Western completed its last institutional accreditation through the North Central Association (NCA) in Western s next scheduled re-affirmation of accreditation is In 1999, NCA s Commission on Institutions of Higher Education (now the Higher Learning Commission) initiated AQIP, focusing on quality improvement principles and processes, as an alternative accreditation process for institutions already accredited by the Commission. Already launched into quality improvement through its strategic planning and implementation process, Western applied to AQIP in April 2003 and was accepted in June The first four-year public institution in Missouri to participate in AQIP, Western joined a group of approximately 70 institutions. Currently, 141 institutions are participating in the AQIP alternative accreditation. Participation in AQIP allows Western to shape the direction of institutional accreditation, to gauge the success of its integration of AQIP into its strategic planning implementation and to demonstrate that it meets accreditation standards and expectations. Western expects reaffirmation of accreditation in to be the natural outcome of its commitment to continuous quality improvement through its strategic planning initiatives. 2

5 Management s Introduction Years Ended June 30, 2005 and 2004 Future Directions The University will complete its present five-year strategic planning initiative in two years. Preliminary work on the next plan should begin in fiscal year While some of the existing plan s focuses (there are seven of them) may well be extended into the next plan, now that Western is officially a university, it is likely to include new focal areas including focuses on graduate education and on applied research. Either connected with these or independent of them might also be overt attention to economic development through public/private partnerships or other relationships. Continuing focus is likely to be placed on enrollment management, student engagement, applied learning, community outreach, and image and advancement in one form or another. As a new university, Western will continue to see undergraduate education as its primary role. However, the new university designation brings with it additional opportunities and responsibilities. Western is ready to embrace these opportunities and to meet these responsibilities as an emerging institution.

6 Independent Accountants Report on Financial Statements and Supplementary Information Board of Governors Missouri Western State University Saint Joseph, Missouri We have audited the accompanying basic financial statements of Missouri Western State University (formerly Missouri Western State College) and Missouri Western State College Foundation, Inc., its discretely presented component unit, collectively a component unit of the state of Missouri, as of and for the years ended June 30, 2005 and 2004, as listed in the table of contents. These financial statements are the responsibility of the University s management. Our responsibility is to express opinions on these financial statements based on our audits. We did not audit the financial statements of Missouri Western College Foundation, Inc., the discretely presented component unit. Those financial statements were audited by other accountants whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for Missouri Western State College Foundation, Inc., is based solely on the report of other accountants. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of Missouri Western State College Foundation, Inc., which comprises the financial statements of the discretely presented component unit, were not audited in Accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other accountants provide a reasonable basis for our opinions. In our opinion, based on our audits and the report of other accountants, the financial statements referred to above present fairly, in all material respects, the respective financial position of Missouri Western State University and Missouri Western State College Foundation, Inc., its discretely presented component unit, as of June 30, 2005 and 2004, and the respective changes in financial position and cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. Twelve Wyandotte Plaza 120 West 12 th Street, Suite 1200 Kansas City, MO Fax bkd.com Beyond Your Numbers A member of Moores Rowland International

7 Board of Governors Missouri Western State University Page 2 In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2005, on our consideration of the University s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The accompanying management s discussion and analysis as listed in the table of contents is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the University s basic financial statements. The accompanying supplementary information, including the schedule of expenditures of federal awards required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Kansas City, Missouri September 30,

8 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Management s Discussion and Analysis This discussion and analysis of Missouri Western State University (the University) financial statements provides a comparative overview of the University s financial performance during the years ended June 30, 2005, 2004 and Since the Management s Discussion and Analysis is designed to focus on current activities, resulting change and current known facts, please read it in conjunction with the University s basic financial statements and the footnotes. Financial Highlights Comparative Analysis of Fiscal Years 2005 and 2004 A review of the University s net assets at June 30, 2005 reflects an increase of $2.7 million or 7.5% to $38.2 million. Operating revenues for the year ended June 30, 2005 increased by $0.8 to $26.9 million, which includes tuition and fees of $14.0 million; federal and state grants and contracts of $7.2 million; auxiliary revenues of $5.0 million; and other revenues of $.7 million. Operating expenses increased by $3.5 million to $47.0 million, resulting in an operating loss of $20.1 million. This operating loss of $20.1 million and net non-operating revenue of $22.8 million resulted in an increase in net assets of $2.7 million and included depreciation expense of $3.3 million. Comparative Analysis of Fiscal Years 2004 and 2003 A review of the University s net assets at June 30, 2004 reflects an increase of $2.9 million or 8.9% to $35.6 million. Operating revenues for the year ended June 30, 2004 increased by $.5 to $26.1 million, which includes tuition and fees of $13.6 million; federal and state grants and contracts of $7.0 million; auxiliary revenues of $4.6 million; and other revenues of $0.9 million. Operating expenses increased by $.1 million to $43.5 million, resulting in an operating loss of $17.4 million. This operating loss of $17.4 million and net non-operating revenue of $20.3 million resulted in an increase in net assets of $2.9 million and included depreciation expense of $3.3 million. Net Assets The Statements of Net Assets present the financial position of the University at the end of the fiscal year and includes all assets and liabilities of the University. Assets and liabilities are generally measured using current values, with certain exceptions, such as, capital assets which are stated at cost less accumulated depreciation, and long-term debt, which is stated at cost. A summary of the University s assets, liabilities and net assets at June 30, 2005, 2004 and 2003 is as follows: 6

9 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Net Assets as of June 30 (In millions) Current Assets $ 26.2 $ 34.3 $ 13.6 Noncurrent Assets Capital assets, net of depreciation Other Total assets $ 82.6 $ 79.4 $ 56.0 Current Liabilities $ 6.8 $ 5.5 $ 4.3 Noncurrent Liabilities Total liabilities $ 44.4 $ 43.8 $ 23.4 Net Assets Invested in capital assets, net of related debt $ 20.4 $ 19.3 $ 20.5 Restricted Unrestricted Total net assets $ 38.2 $ 35.6 $ 32.6 Comparative Analysis of Fiscal Years 2005 and 2004 Current assets decreased 23.6% from $34.3 million to $26.2 million. This decrease is due primarily to the use of bond proceeds from the 2003 housing system revenue bonds, which decreased cash and cash equivalents and restricted investments. Capital assets, net of accumulated depreciation, increased 26.5% from $42.7 million to $54 million. This increase is primarily due to the capitalization of the student commons building, training and development center, and construction in progress on the new living learning residential hall. Current liabilities increased 21.8% from $5.5 million to $6.7 million. This is primarily due to an increase in the accounts payable to suppliers as a result of the construction activity related to the housing system construction projects. 7

10 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Comparative Analysis of Fiscal Years 2004 and 2003 Current assets increased 152.2% from $13.6 million to $34.3 million. This increase is due primarily to bond proceeds received from the housing system revenue bonds, as well as an increase in unrestricted cash and cash equivalents resulting from the University s efforts to control costs by carefully controlling personnel, operating and capital expenditures. Capital assets, net of accumulated depreciation, increased 7.8% from $39.6 million to $42.7 million. This increase is primarily due to an increase in construction in progress related to the training and development center and housing system projects. Current liabilities increased 27.9% from $4.3 million to $5.5 million. This is primarily due to an increase in the accounts payable to suppliers as a result of the construction activity related to the housing system construction projects. Capital Assets, Net June 30, 2005 (In millions) Cost Accumulated Depreciation Net Capital Assets Land $ 0.3 $ 0.0 $ 0.3 Land improvements Buildings and improvements Furniture, fixtures and equipment Library books Construction in progress $ 98.4 $ 44.4 $ 54.0 As of June 30, 2005, the University had recorded $98.4 million in gross capital assets and $44.4 million in accumulated depreciation that resulted in $54.0 million in net capital assets. In recent years, the University has made significant investments in capital assets. During 2005, the University completed the construction of the student commons building and renovations to existing residential halls. The construction of the new living learning residential hall will be completed in The estimated cost of these projects is $17.1 million and is being funded by revenue bond proceeds. In addition, the University completed construction of a new training and development center (Fulkerson Center) during 2005 at a cost of $2.2 million. 8

11 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 The University is replacing its existing administrative computing software and hardware system with an integrated, technologically current, web-based system. The financial information module was successfully implemented during The student and financial aid modules were implemented during This project will cost $3.5 million and is expected to be completed during During 2004, the University issued the Auxiliary System Refunding and Improvement Revenue Bonds, Series 2003 for $26.5 million. As stated above, $17.2 is being used for the construction and renovation of Auxiliary facilities. The remaining $9.40 million consists of a debt service reserve of $1.7 million, current refunding of existing debt of $6.0 million, and financing costs of $1.7 million. The University made all regularly scheduled revenue bond payments. Analysis of Net Assets June 30 (In millions) Invested in capital assets, net of related debt $ 20.4 $ 19.3 $ 20.5 Restricted Unrestricted Total $ 38.2 $ 35.5 $ 32.6 Comparative Analysis of Fiscal Years 2005 and 2004 Net assets grew by 7.6% or $2.7 million from fiscal year 2004 to fiscal year The net assets are comprised of unrestricted - $14.9 million; restricted for loans and other $2.2 million; and restricted for debt service - $.7 million; invested in capital assets, net of related debt $20.4. The increase in the unrestricted net assets of $1.6 million from 2004 to 2005 resulted from a slight increase in enrollment, restructuring of the tuition rates, increase return on investments, and the University s efforts to control costs by carefully controlling personnel, operating and capital expenditures. Comparative Analysis of Fiscal Years 2004 and 2003 Net assets grew by 8.9% or $2.9 million from fiscal year 2003 to fiscal year The net assets are comprised of unrestricted - $13.3 million; restricted loans and other $2.1 million; and restricted for debt service - $.8million; invested in capital assets, net of related debt $

12 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 The increase in the unrestricted net assets of $ $3.8 million from 2003 to 2004 resulted from increase in student fees as well as the University s efforts to control costs by carefully controlling personnel, operating and capital expenditures. The following is a graphic illustration of net assets at June 30, Net Assets % Unrestricted Restricted 53% 8% Invested in capital assets, net of related debt Analysis of Unrestricted Net Assets Year Ended June 30 (In millions) Operating Fund Unrestricted Funds $ 7.1 $ 5.8 $ 4.7 Designated Funds Auxiliary Fund Unrestricted Funds Designated Funds Plant Fund Unrestricted Funds Total $ $

13 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Operating Results The Statements of revenue, expenses and changes in net assets present the University s results of operations. The statements distinguish revenues and expenses between operating and non-operating categories, and provide a view of the University s operating margin. Comparative summary statements of revenue, expenses and changes in net assets for the years ended June 30, 2005, 2004 and 2003 are as follows: Operating Results Year Ended June 30 (In millions) Operating Revenue Tuition and fees $ 14.0 $ 13.6 $ 12.8 Federal grants and contracts State grants and contracts Auxiliary enterprises Other Total operating revenues Operating Expenses Operating Loss (20.1) (17.4) (17.8) Nonoperating Revenues (Expenses) State appropriations Federal grants Contributions Interest income Loss on disposal of capital assets 0.0 (0.2) 0.0 Interest on capital asset related debt (0.8) (0.8) (0.9) Net nonoperating revenues Increase in Net Assets Net Assets, Beginning of Year Net Assets, End of Year $ 38.2 $ 35.5 $

14 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Tuition and fees and auxiliary enterprises revenue are reported only to the extent billed to students. Student financial assistance provided by federal and state sources is reported as federal and state grants and contract revenues rather than as tuition and fees or auxiliary revenues. In FY2005, total operating revenues increased 3.1% from $26.1 to $26.9 million. This fluctuation resulted from a slight increase in enrollment and restructuring of the tuition rates, and an increase in room and board rates. In FY2004, total operating revenues increased 1.95% from $25.6 million to $26.1 million. This fluctuation was primarily due to an increase in tuition and fees. Tuition rates were increased 8.1% over fiscal year However, the University experienced a slight drop in enrollment and residential hall usage that impacted tuition and fees and our auxiliary enterprises revenues negatively. In FY2004, Certain departmental operating budgets were trimmed, a 1/3 encumbrance was placed on all operating expense budgets and replacement hiring was delayed in anticipation of withholding of appropriations during the year due to concerns over continuing state revenue shortfalls. This resulted in operating expenses that were held essentially flat from The 1/3 encumbrance was removed in 2005 as state revenue rebounded slightly as shown below. In FY2003, state revenue shortfalls resulted in cuts to the core appropriation for Missouri Western of $2.1 million. An additional withholding of $.6 million also occurred during the fiscal year resulting in State funding of $18.5 million. The fiscal year 2004 State appropriation reflected an additional core cut of $1.2 million. However, equity funding in the amount of $1.5 million was added resulting in a total State appropriation of $19.5 million or $1.0 million more than FY2003. In FY2005 the University s state appropriation increased by $.6 million to $20.1 million. Non-operating revenues for contributions increased in FY2005 and were primarily from the Missouri Western State University Foundation from a previous capital campaign. for construction of the Fulkerson Center. 12

15 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 The following are graphic illustrations of revenues by source for the year ended June 30, Operating Revenues 7% 19% 20% 3% 51% Tuition and Fees Federal Grants State Grants Auxiliary Enterprise Other Revenues Non Operating Revenues 3% 9% 3% 85% State Appropriations Federal Grants Contributions Interest Income 13

16 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Operating Expenses Year Ended June 30 (In millions) Compensation $ 30.5 $ 28.5 $ 28.5 Scholarships Supplies and other services Depreciation Utilities Total $ 47.0 $ 43.5 $ 43.4 Missouri Western State University elected to use the natural classification for operating expenses, as did all state public higher institutions in the State of Missouri. Prior to 2002, the University reported using functional classification of expenses (i.e., reporting expenses for instruction, research, public service, academic support, students services, institutional support, operation and maintenance and scholarships). During 2005, 2004 and 2003, tuition fee waivers are reported as a reduction in revenue rather than scholarships and amounted to approximately $2.9, $2.5, and $2.3 million, respectively. In addition, Federal Pell Grants and Federal Education Opportunity Grants outlays are recorded as a reduction in tuition and fees revenue and amounted to approximately $4.9, $4.8, and $4.6 million respectively. Comparative Analysis of Fiscal Years 2005 and 2004 In 2005 the University s operating expenses increased by $3.5 million, of which 2.0 million was an increase in compensation costs. This resulted from two factors. First, The University experienced an 11.6% increase in fringe benefits, primarily from health insurance and retirement costs. Second, an increase in salaries and wages of 6.4% resulted from the University s efforts to bring the salaries of the faculty and staff to levels that are equitable to their peers at other institutions and reflective of the job market. The increase in supplies and other services of $1.5 was primarily due to increases in technology costs of $0.7 million (SCT Banner training), professional services of $0.2 million, and the University s transfer of $0.2 million to the Institute for Industrial and Applied Life Sciences, a separate not-forprofit organization promoting life in sciences in the region. 14

17 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Comparative Analysis of Fiscal Years 2004 and 2003 From 2003 to 2004 there were no significant changes in the use of operating expenses. It should be noted that compensation costs remained flat from fiscal year 2003 to 2004 reflecting the University s effort to control personnel costs. The following is a graphic illustration of operating expenses for the fiscal year ended June 30, Operating Expenses Compensation 23% 2% 7% 3% 65% Scholarships Supplies and other services Depreciation Utilities Analysis of Educational and General Operating Expenses by Functional Classification June 30, 2005 (In millions) Unrestricted Restricted Total Instruction $ 19.9 $ 1.5 $ 21.4 Research and public service Academic support Student services Institutional support Operation and maintenance Scholarships Total $ 41.0 $ 7.7 $

18 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 The following is a graphic illustration of educational and general operating expenses at June 30, 2005: Operating Expenses by Function 17% Instruction Research & Public Service 8% 45% Academic Support Student Services 8% 13% 7% 2% Institutional Support Operation and Maintenance Scholarships Western continues to invest a high proportion of its total expenditures in instruction and other activities that specifically support students. Instruction, Research, Public Service, Student Services, Scholarships, and Academic Support combined represent 83.6% of total educational and general expenses. Institutional support (8.2%) and Operation and Maintenance (8.2%) make up the remainder. Included in the Analysis of Educational and General Operating Expenses by Function is $1.7 million in capital expenditures in excess of $1,

19 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Cash Flows The Statement of Cash Flows provides a view of the sources and uses of the University s cash resources. Comparative summary statements of cash flow for the years ended June 30, 2005, 2004 and 2003 are as follows: Cash Flows Year Ended June 30 (In millions) Cash Provided by (Used in) Operating activities $ (16.1) $ (13.3) $ (14.5) Noncapital financing activities Capital and related financing activities (14.1) 11.9 (2.5) Investing activities 2.0 (12.6) 0.2 Change in Cash and Cash Equivalents (7.1) Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year $ 10.5 $ 17.6 $ 11.1 Comparative Analysis of Fiscal Years 2005 and 2004 Cash and cash equivalents at June 30, 2005 were $10.5 million, which decreased $7.1 million from The decrease in cash and cash equivalents for 2005 of $7.1 million is attributable to the use of revenue bond proceeds for the construction of the student commons building and living learning residential hall. During 2005, cash used in operating activities amounted to $(16.1) million, which resulted from receipts from tuition and fees, grants and contracts and auxiliary enterprise charges less payments to employees and suppliers. Cash provided by non-capital financing activities, primarily state appropriations, was $21.1 million. Cash used for capital and related financing activities was $(14.1) million, which consisted of revenue from private funds of $1.9 million, purchases of capital assets ($14.7) million and payment of debt service ($1.3) million. 17

20 Management s Discussion and Analysis Years Ended June 30, 2005 and 2004 Comparative Analysis of Fiscal Years 2004 and 2003 Cash and cash equivalents at June 30, 2004 were $17.6 million, which increased $6.5 million from The increase in cash and cash equivalents for 2004 of $6.5 million is attributable to the University s efforts to control personnel, operating and capital costs and revenue bond proceeds used for the construction of a student commons building and a new residential hall. During 2004, cash used in operating activities amounted to $(13.3) million, which resulted from receipts from tuition and fees, grants and contracts and auxiliary enterprise charges less payments to employees and suppliers. Cash provided by non-capital financing activities, primarily state appropriations, was $20.5 million. Cash used for capital and related financing activities was $11.9 million, which consisted of revenue bond proceeds (net of bond costs) $25.7 million, purchases of capital assets ($5.9) million, and payment of debt service ($7.9) million. Missouri Western State College Foundation, Inc. Missouri Western State College Foundation, Inc. is a not-for-profit organization incorporated in the State of Missouri on December 19, The Foundation s principal activity is to obtain contributions, which include cash and other assets, for the support and assistance of Missouri Western State University and its faculty and students. A copy of the Foundations annual financial report can be obtained by sending a written request to the Missouri Western State College Foundation, 4525 Downs Drive, St. Joseph, Mo The University has included financial information of the Missouri Western State College Foundation, Inc. in this report as required by the Governmental Accounting Standards Board Statement No. 39, Determining whether Certain Organizations are Component Units. GASBS #39 requires reporting, as discretely presented component units, organizations that raise and hold economic resources for the direct benefit of the University. Acknowledgements The University s financial statements are the responsibility of the University s management. The timely preparation of the University s financial statements was made possible by the dedicated service of the Accounting Office personnel and others who have our sincere appreciation. 18

21 Statements of Net Assets June 30, 2005 and 2004 Assets Current Assets Cash and cash equivalents $ 9,516,729 $ 15,524,627 Restricted cash and cash equivalents 1,000,000 2,083,482 Short-term investments 7,628,778 Restricted investments 4,664,181 13,662,812 Accounts receivable, net of allowance of $588,000 in 2005 and $522,000 in ,890,709 2,533,713 Loans to students, net 386, ,000 Prepaid expenses 122, ,616 Total current assets 26,208,657 34,333,250 Noncurrent Assets Loans to students, net 1,615,342 1,560,472 Capital assets, net 54,013,276 42,679,478 Deferred bond issue costs 752, ,932 Total noncurrent assets 56,381,408 45,018,882 Total assets $ 82,590,065 $ 79,352,132 See Notes to Financial Statements

22 Liabilities Current Liabilities Accounts payable and accrued liabilities $ 4,414,673 $ 3,248,295 Accrued compensated absences 577, ,535 Deferred revenue 335, ,141 Interest payable 425, ,378 Long-term debt - current portion 974, ,015 Total current liabilities 6,728,256 5,468,364 Non-current Liabilities Accrued compensated absences 456, ,722 Long-term debt, net of unamortized loss on bond refunding and discount on bond issuance 37,168,846 38,137,027 Total non-current liabilities 37,625,757 38,307,749 Total liabilities $ 44,354,013 $ 43,776,113 Net Assets Invested in capital assets, net of related debt $ 20,400,034 $ 19,284,716 Restricted, expendable for Scholarships, fellowships and other 70, ,206 Loans 2,101,342 2,030,514 Debt service 746, ,568 Unrestricted 14,917,392 13,239,015 Total net assets $ 38,236,052 $ 35,576,019 19

23 Assets Missouri Western State University Missouri Western State College Foundation, Inc. Statements of Financial Position June 30, 2005 and (Restated See Note 8) Current Assets Cash $ 477,635 $ 326,527 Pledges receivable current portion 239, ,975 Pledges receivable gifts-in-kind 110, ,090 Accrued interest receivable 78,928 77,037 Total current assets 906, ,629 Investments Investments 13,352,285 14,296,997 Cash surrender value of life insurance 403, ,421 Total investments 13,756,027 14,677,418 Equipment Equipment, at cost 45, ,834 Less accumulated depreciation 38, ,132 Total equipment 7,033 15,702 Other Assets Pledges receivable trusts 1,690,084 1,672,366 Charitable remainder trust 38,656 39,956 Pledges receivable long-term 14,921 Total other assets 1,728,740 1,727,243 Total assets $ 16,398,066 $ 17,284,992 See Notes to Financial Statements

24 Liabilities and Net Assets (Restated See Note 8) Current Liabilities Accounts payable $ 423,929 $ 1,556,360 Agency liability 49,820 70,722 Charitable trust, payable current term 3,700 Deferred revenue 355, ,388 Total current liabilities 833,185 1,967,470 Long-term Liabilities Charitable trust, payable long-term 5,839 Total liabilities 839,024 1,967,470 Net Assets Unrestricted General operating 3,449,671 3,188,866 Board designated 515, ,232 Total unrestricted 3,964,738 3,706,098 Temporarily restricted 4,127,563 4,371,959 Permanently restricted 7,466,741 7,239,465 Total net assets 15,559,042 15,317,522 Total liabilities and net assets $ 16,398,066 $ 17,284,992 20

25 Statements of Revenues, Expenses and Changes in Net Assets Years Ended June 30, 2005 and Operating Revenues Tuition and fees, net $ 14,004,270 $ 13,607,272 Federal grants and contracts 5,392,034 5,300,380 State grants and contracts 1,760,419 1,599,707 Interest on student loans receivable 33,618 50,844 Sales and services of educational activities 268, ,644 Auxiliary enterprises, net 5,007,527 4,611,488 Other operating revenues 406, ,802 Total operating revenues 26,873,154 26,113,137 Operating Expenses Salaries and wages 24,040,543 22,669,065 Fringe benefits 6,516,772 5,838,918 Supplies and other services 10,944,261 9,420,783 Scholarships and fellowships 848,158 1,092,721 Depreciation 3,338,758 3,256,076 Utilities 1,268,624 1,223,424 Total operating expenses 46,957,116 43,500,987 Operating Loss (20,083,962) (17,387,850) Nonoperating Revenues State appropriations 20,143,134 19,482,162 Federal grants 558, ,005 Increase in net assets after state appropriations and federal grants 617,871 2,913,317 Contributions 493, ,621 Interest income 697, ,979 Loss on disposal of capital assets (1,523) (226,016) Interest on capital asset-related debt (804,202) (759,039) Income before Other Revenues 1,003,139 2,461,862 Capital Gifts 1,656, ,139 Increase in Net Assets 2,660,033 2,940,001 Net Assets, Beginning of Year 35,576,019 32,636,018 Net Assets, End of Year $ 38,236,052 $ 35,576,019 See Notes to Financial Statements 21

26 Missouri Western State College Foundation, Inc. Statement of Activities Year Ended June 30, 2005 Unrestricted Temporarily Restricted Permanently Restricted Total Revenues, Gains and Other Support Contributions $ 269,102 $ 398,296 $ 203,151 $ 870,549 In-kind contributions 110, ,638 Investment income 671, ,945 5,174 1,175,382 Other income 602, ,827 19, ,543 Satisfaction of program restrictions 1,360,945 (1,360,945) Change donors designation 819 (819) Total revenues, gains and other support 3,015,413 (186,577) 227,276 3,056,112 Expenses Scholarships 295, ,653 Allocations to the University 1,947,781 1,947,781 Office operations 165, ,331 Agent fees 42,878 42,878 Uncollectible pledges 136, ,136 Total expenses 2,587,779 2,587,779 Other Expenses Unrealized losses on investments (168,994) (57,819) (226,813) Change in Net Assets 258,640 (244,396) 227, ,520 Net Assets, Beginning of Year, As Restated 3,706,098 4,371,959 7,239,465 15,317,522 Net Assets, End of Year $ 3,964,738 $ 4,127,563 $ 7,466,741 $ 15,559, See Notes to Financial Statements

27 Missouri Western State College Missouri Western State College Foundation, Inc. Statement of Activities Year Ended June 30, 2004 (Restated See Note 8) Unrestricted Temporarily Restricted Permanently Restricted Total Revenues, Gains and Other Support Contributions $ 192,929 $ 275,761 $ 41,697 $ 510,387 In-kind contributions 131, ,590 Investment income 680,588 24, ,044 Other income 464, , ,483 Satisfaction of program restrictions 2,412,685 (2,412,685) Change donors designations (1,332,595) 1,300,993 31,602 Total revenues, gains and other support 2,549,503 (400,568) 73,569 2,222,504 Expenses Scholarships 326, ,958 Allocations to the University 2,430,847 2,430,847 Office operations 148, ,906 Agent fees 44,551 44,551 Uncollectible pledges 52,005 52,005 Total expenses 3,003,267 3,003,267 Other Revenues Unrealized gains 593, ,993 Change in Net Assets 140,229 (400,568) 73,569 (186,770) Net Assets, Beginning of Year, as Previously Reported 3,522,352 5,062,147 7,165,896 15,750,395 Adjustment Applicable to Prior Year (See Note 8) 43,517 (289,620) (246,103) Net Assets, Beginning of Year, As Restated 3,565,869 4,772,527 7,165,896 15,504, Net Assets, End of Year $ 3,706,098 $ 4,371,959 $ 7,239,465 $ 15,317,522 See Notes to Financial Statements

28 Statements of Cash Flows Years Ended June 30, 2005 and Operating Activities Tuition and fees $ 13,195,190 $ 13,718,343 Grants and contracts 7,191,390 7,031,173 Payments to suppliers (11,054,176) (9,840,910) Payments to employees (30,208,802) (28,649,258) Loans issued to students (438,893) (536,172) Collection of loans issued to students 383, ,266 Sales and services of auxiliary enterprises 4,989,840 4,592,735 Other payments (163,701) (138,817) Net cash used in operating activities (16,106,129) (13,316,640) Noncapital Financing Activities State appropriations 20,143,134 19,482,162 Federal grants 558, ,005 Contributions 444, ,621 Net cash provided by noncapital financing activities 21,146,412 20,558,788 Capital and Related Financing Activities Proceeds from bond issuance 26,404,986 Bond issuance costs paid (712,517) Capital gifts received 1,943,267 25,271 Purchase of capital assets (14,673,748) (5,917,597) Principal paid on long-term debt (602,405) (7,331,253) Interest paid on long-term debt (807,626) (566,061) Net cash provided by (used in) capital and related financing activities (14,140,512) 11,902,829 Investing Activities Purchase of investments (10,628,778) (13,662,812) Proceeds from sale of investments 11,998, ,856 Investment income 638, ,013 Net cash provided by (used in) investing activities 2,008,849 (12,640,943) Increase (Decrease) in Cash and Cash Equivalents (7,091,380) 6,504,034 Cash and Cash Equivalents, Beginning of Year 17,608,109 11,104,075 Cash and Cash Equivalents, End of Year $ 10,516,729 $ 17,608,109 Reconciliation of Cash and Cash Equivalents to the Statements of Net Assets Cash and cash equivalents $ 9,516,729 $ 15,524,627 Restricted cash and cash equivalents 1,000,000 2,083,482 Total cash and cash equivalents $ 10,516,729 $ 17,608,109 (Continued) See Notes to Financial Statements 24

29 Statements of Cash Flows Years Ended June 30, 2005 and Reconciliation of Net Operating Revenues (Expenses) to Net Cash Used in Operating Activities Operating loss $ (20,083,962) $ (17,387,850) Depreciation expense 3,338,758 3,256,076 Amortization expense 61,032 21,370 Changes in operating assets and liabilities Receivables, net (536,282) (21,230) Loans to students (55,870) (29,906) Prepaid expenses 21,356 (29,716) Accounts payable and accrued liabilities 1,166, ,804 Deferred revenue (276,325) 204,248 Accrued compensated absences 258,786 (162,436) Net Cash Used in Operating Activities $ (16,106,129) $ (13,316,640) See Notes to Financial Statements 25

30 Notes to Financial Statements June 30, 2005 and 2004 Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations and Reporting Entity Missouri Western State University (the University) is a public, state-supported institution providing a blend of traditional liberal arts and sciences and career-oriented degree programs. The University is a component unit of the State of Missouri. The University is authorized under Missouri statute to offer associate and baccalaureate degrees as well as certificate programs. Professional programs, programs for transfer students, continuing education opportunities and self-enrichment courses are also offered. Missouri Western State University has an enrollment of approximately 5,000 students. The University has on-campus student housing that can accommodate approximately 20% of the student body. The predecessor to Missouri Western State College, St. Joseph Junior College, was organized in 1915 as an integral part of the city public school system. An independent junior college district involving eleven school districts was organized in Also in 1965, the Missouri State Legislature enacted legislation creating Missouri Western State College, which, when combined with St. Joseph Junior College, constituted a four year state college. In 1969, the College moved to the present campus, which now comprises 744 acres. The College became a fully funded state institution on July 1, Effective August 28, 2005, the Missouri Western State College changed its name to Missouri Western State University. Major federally funded student financial aid programs in which the University participates include the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work Study, Federal Family Education Loan and Federal Perkins Loan programs. The University extends unsecured credit to students. Missouri Western State College Foundation, Inc. (the Foundation) is a legally separate, tax-exempt component unit of the University. The Foundation s primary function is to raise and hold funds to support the University and its programs. The board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of the Foundation s resources and related income are restricted by donors for the benefit of the University. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University s financial statements. Complete financial statements of the Foundation may be obtained from its Administrative Office at the following address: 4525 Downs Drive, MC111, St. Joseph, Missouri

31 Notes to Financial Statements June 30, 2005 and 2004 The Foundation is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation s statements in the University s financial reporting entity for these differences. See Note 8 for discussions regarding the Foundation s accounting policies and other disclosures. Basis of Accounting and Presentation The financial statements of the University have been prepared on the accrual basis of accounting. Revenues, expenses, gains, losses, assets and liabilities from exchange and exchange-like transactions are recognized when the exchange transaction takes place, while those from government-mandated nonexchange transactions (principally federal and state grants and state appropriations) are recognized when all applicable eligibility requirements are met. Internal activity and balances are eliminated in preparation of the financial statements unless they relate to services provided and used internally. Operating revenues and expenses include exchange transactions and program-specific, government-mandated nonexchange transactions. Government-mandated nonexchange transactions that are not program specific (such as state appropriations), investment income and interest on capital asset-related debt are included in nonoperating revenues and expenses. The University first applies restricted net assets when an expense or outlay is incurred for purposes for which both restricted and unrestricted net assets are available. The University prepares its financial statements as a business-type activity in conformity with applicable pronouncements of the Governmental Accounting Standards Board (GASB). The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements that were issued after November 30, 1989, unless the FASB pronouncement conflicts with or contradicts a GASB pronouncement. The University has elected not to apply FASB pronouncements issued after the applicable date. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and other changes in net assets during the reporting period. Actual results could differ from those estimates. Cash Equivalents The University considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2005 and 2004, cash equivalents consisted primarily of certificates of deposit and short-term U.S. agency obligations. 27

32 Notes to Financial Statements June 30, 2005 and 2004 Investments Investments in equity and debt securities are carried at fair value. Fair value is determined using quoted market prices. Investments in non-negotiable certificates of deposit are carried at cost. Restricted Cash and Investments Restricted cash and investments include restricted funds to be used for future capital projects in accordance with the Series 2003 Bond issuance, along with other required debt service funds. Accounts Receivable Accounts receivable consists of tuition and fee charges to students, charges for auxiliary enterprise services provided to students and other receivables. Accounts receivable is recorded net of estimated uncollectible amounts. Deferred Bond Issue Costs Bond issue costs incurred on the revenue bond issues have been deferred and are being amortized over the life of the bonds using the straight-line method. Total amortization for the years ended June 30, 2005 and 2004 was $32,643 and $21,370, respectively. Loans to Students The University makes loans to students under various federal and other loan programs. Such loans receivable are recorded net of estimated uncollectible amounts. The allowance for uncollectible loans netted against loans to students was $210,000 at June 30, 2005 and 2004, respectively. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair value at the date of donation if acquired by gift. Depreciation is computed using the straight-line method over the estimated useful life of each asset. The following estimated useful lives are being used by the University: Land improvements Buildings and improvements Furniture, fixtures and equipment Library materials 15 years years 3 10 years 10 years 28

33 Notes to Financial Statements June 30, 2005 and 2004 The University capitalizes interest costs as a component of construction in progress, based on interest costs of borrowing specifically for the project, net of interest earned on investments acquired with the proceeds of the borrowing. Total interest capitalized was: Total interest expense incurred on borrowings for project $ 1,146,877 $ 663,236 Interest income from investment of proceeds of borrowings for project 215,448 77,680 Net interest cost capitalized $ 931,429 $ 585,556 Interest capitalized 931, ,556 Interest charged to expense 804, ,039 Total interest incurred $ 1,735,631 $ 1,344,595 Compensated Absences University policies permit most employees to accumulate vacation benefits that may be realized as paid time off or as a cash payment upon termination. Expense and the related liability are recognized as vacation benefits are earned whether the employee is expected to realize the benefit as time off or in cash. Sick leave benefits expected to be realized as paid time off are recognized as expense when the time off occurs and no liability is accrued for such benefits that employees have earned but not yet realized. Compensated absence liabilities are computed using the regular pay and termination pay rates in effect at the statement of net assets date. Deferred Revenue Deferred revenue represents unearned student fees as of June 30, 2005 and Deferred Loss on Bond Refunding During 2004, the University issued Auxiliary System Refunding and Improvement Revenue Bonds, which resulted in a current refunding of the University s 1993 Series Bonds. This current refunding resulted in the recognition of an accounting loss, which is being amortized over the remaining life of the defeased 1993 bonds. The University s remaining unamortized loss of this defeasance was $326,471 and $354,860 at June 30, 2005 and 2004, respectively. See Note 4 for further discussion. 29

34 Notes to Financial Statements June 30, 2005 and 2004 Net Assets Net assets of the University are classified in three components. Net assets invested in capital assets, net of related debt, consist of capital assets net of accumulated depreciation and reduced by the outstanding balances of borrowings used to finance the purchase or construction of those assets. Restricted expendable net assets are noncapital assets that must be used for a particular purpose as specified by creditors, grantors or donors external to the University, including amounts deposited with trustees as required by bond indentures, reduced by the outstanding balances of any related borrowings. Unrestricted net assets are remaining assets less remaining liabilities that do not meet the definition of invested in capital assets, net of related debt or restricted expendable. Classification of Revenues The University has classified its revenues as either operating or nonoperating revenues according to the following criteria: Operating revenues - Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises and (3) interest on student loans. Nonoperating revenues - Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Government Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and interest income. Scholarship Discounts and Allowances Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship allowances in the statement of revenues, expenses and changes in net assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students behalf. Certain governmental grants, such as Pell grants, and other federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded a scholarship allowance. The scholarship allowances on tuition and fees for the years ended June 30, 2005 and 2004 were $7,762,022 and $7,269,094, respectively. The scholarship allowances on housing for the years ended June 30, 2005 and 2004 were $250,900 and $269,722, respectively. 30

35 Notes to Financial Statements June 30, 2005 and 2004 Income Taxes As a state institution of higher education, the income of the University is generally exempt from federal and state income taxes under Section 115(a) of the Internal Revenue Code and a similar provision of state law. However, the University is subject to federal income tax on any unrelated business taxable income. Note 2: Deposits, Investments and Investment Income Deposits Custodial credit risk is the risk that, in the event of a bank failure, an entity s deposits may not be returned to it. The University s deposit policy for custodial credit risk requires compliance with the provisions of state law. State law requires collateralization of all deposits with federal depository insurance; bonds and other obligations of the U.S. Treasury, U.S. agencies or instrumentalities or the State of Missouri; bonds of any city, county, school district or special road district of the State of Missouri; bonds of any state; or a surety bond having an aggregate value at least equal to the amount of the deposits. The University had no bank balances exposed to custodial credit risk at June 30, 2005 and Investments The University may legally invest in direct obligations of and other obligations guaranteed as to principal by the U.S. Treasury and U.S. agencies and instrumentalities and in bank repurchase agreements. It may also invest to a limited extent in corporate bonds and equity securities. At June 30, 2005 and 2004, the University had the following investments and maturities: June 30, 2005 Maturities in Years Less More Fair Value than than 10 U.S. agency obligations $ 3,664,203 $ 3,664,203 $ $ $ June 30, 2004 Maturities in Years Less More Fair Value than than 10 U.S. Treasury obligations $ 8,663,391 $ 8,663,391 $ $ $ 31

36 Notes to Financial Statements June 30, 2005 and 2004 Custodial Credit Risk Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations. The University had no investments exposed to custodial credit risk at June 30, 2005 and The University s investment policy does not currently address credit risk. Summary of Carrying Values The carrying values of deposits and investments shown above are included in the statement of net assets as follows: Carrying value Deposits $ 19,145,485 $ 22,607,530 Investments 3,664,203 8,663,391 Total as of June 30, 2005 $ 22,809,688 $ 31,270,921 Included in the following statement of net assets captions: Cash and cash equivalents $ 9,516,729 $ 15,524,627 Restricted cash and cash equivalents 1,000,000 2,083,482 Short-term investments 7,628,778 Restricted short-term investments 4,664,181 13,662,812 Investment Income $ 22,809,688 $ 31,270,921 Investment income for the years ended June 30, 2005 and 2004 consisted of: Interest income $ 697,798 $ 275,979 32

37 Notes to Financial Statements June 30, 2005 and 2004 Note 3: Capital Assets Capital assets activity for the years ended June 30, 2005 and 2004 were: June 30, 2005 Beginning Balance Additions Disposals Transfers Ending Balance Cost Land $ 323,525 $ $ $ $ 323,525 Land improvements 1,892, ,947 2,080,604 Buildings and improvements 58,395,590 2,953,429 1,501,602 62,850,621 Furniture, fixtures and equipment 14,354, ,392 (147,613) 14,938,419 Construction in progress 4,660,807 10,647,855 (1,501,602) 13,807,060 Library materials 4,252, ,457 4,406,097 83,879,859 14,712,179 (147,613) 98,406,326 Less Accumulated Depreciation Land improvements (1,452,866) (49,108) (1,501,974) Buildings and improvements (25,193,716) (1,768,277) (26,961,993) Furniture, fixtures and equipment (10,745,951) (1,432,640) 146,089 (12,032,502) Library materials (3,807,848) (88,733) (3,896,581) (41,200,381) (3,338,758) 146,089 (44,393,050) Net capital assets $ 42,679,478 $ 11,373,421 $ (1,524) $ $ 54,013,276 June 30, 2004 Beginning Balance Additions Disposals Transfers Ending Balance Cost Land $ 323,525 $ $ $ $ 323,525 Land improvements 1,892,657 1,892,657 Buildings and improvements 57,678, ,138 58,395,590 Furniture, fixtures and equipment 16,272,546 1,510,847 (3,428,753) 14,354,640 Construction in progress 487,188 4,173,619 4,660,807 Library materials 4,107, ,611 4,252,640 80,761,397 6,547,215 (3,428,753) 83,879,859 Less Accumulated Depreciation Land improvements (1,410,653) (42,213) (1,452,866) Buildings and improvements (23,464,447) (1,729,269) (25,193,716) Furniture, fixtures and equipment (12,546,825) (1,401,863) 3,202,737 (10,745,951) Library materials (3,725,117) (82,731) (3,807,848) (41,147,042) (3,256,076) 3,202,737 (41,200,381) Net capital assets $ 39,614,355 $ 3,290,258 $ (226,016) $ $ 42,679,478 33

38 Notes to Financial Statements June 30, 2005 and 2004 Note 4: Long-term Liabilities The following is a summary of long-term obligation transactions for the University for the year ended June 30, 2005 and 2004: June 30, 2005 Beginning Balance Additions Deductions Ending Balance Current Portion Bonds and capital leases Auxiliary refunding and improvement Series 2003 $ 26,535,000 $ $ (125,000) $ 26,410,000 $ 515,000 Auxiliary refunding and improvement Series ,110,000 (320,000) 11,790, ,000 Capital lease obligations 550,916 (157,405) 393, ,404 Subtotal bonds and capital leases 39,195,916 (602,405) 38,593,511 1,007,404 Deferred loss on bond refunding and discount on bond issuance (484,874) 34,890 (449,984) (32,723) Total bonds and capital leases 38,711,042 (567,515) 38,143, ,681 Other noncurrent liabilities Accrued compensated absences 775, ,918 (577,132) 1,034, ,132 Total noncurent liabilities $ 39,486,299 $ 835,918 $ (1,144,647) $ 39,177,570 $ 1,551,813 34

39 Notes to Financial Statements June 30, 2005 and 2004 June 30, 2004 Beginning Balance Additions Deductions Ending Balance Current Portion Bonds and capital leases Auxiliary refunding and improvement Series 2003 $ $ 26,535,000 $ $ 26,535,000 $ 125,000 Auxiliary refunding and improvement Series ,420,000 (310,000) 12,110, ,000 Housing System Series ,910,000 (6,910,000) Capital lease obligations 32, ,618 (111,253) 550, ,404 Subtotal bonds and capital leases 19,362,551 27,164,618 (7,331,253) 39,195, ,404 Deferred loss on bond refunding and discount on bond issuance (499,069) 14,195 (484,874) (28,389) Total bonds and capital leases 19,362,551 26,665,549 (7,317,058) 38,711, ,015 Other noncurrent liabilities Accrued compensated absences 992, ,980 (604,535) 775, ,535 Total noncurent liabilities $ 20,355,363 $ 27,052,529 $ (7,921,593) $ 39,486,299 $ 1,178,550 On December 3, 2003, the University issued $26,535,000 in Auxiliary System Refunding and Improvement Revenue Bonds with interest rates of 1.1% and 5.0% to currently refund the $6,600,000 of outstanding 1993 Series bonds. Net proceeds of approximately $17,200,000 (after the payments of underwriting fees, insurance and other costs) is being used by the University to pay for the construction of a new residence hall and to perform certain improvements to existing residence halls along with other capital projects. Additional proceeds of approximately $1,700,000 were deposited in bond reserve accounts as required by the bond purchase agreement. The current refunding of the 1993 Series bonds resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $369,055, which is being amortized over the remaining life of the 1993 Series bonds through October The total amount of amortization on this loss for the year ended June 30, 2005 and 2004 amounted to $28,389 and $14,195, respectively. 35

40 Notes to Financial Statements June 30, 2005 and 2004 Upon completion of this refunding, the University extended its debt service payments until October 1, The original maturity of the 1993 Series bonds was October 1, This extension caused the debt service payments of the University to increase approximately $3,154,000 as a result of the refunding. The University did obtain an economic gain (the difference between the present values of the old and new debt service payments) of approximately $27,000 on this refunding. Auxiliary Refunding and Improvement Bonds, Series 2003 The Board of Regents authorized the University to issue the Auxiliary Refunding and Improvement Bonds, Series 2003 (the Series 2003 Bonds) dated December 3, 2003, in the amount of $26,535,000. The Series 2003 Bonds mature on October 1 of each year beginning October 1, 2004 through October 1, 2033, in annual amounts varying from $125,000 to $1,620,000, at interest rates ranging from 1.1% to 5.0%. Interest payments are payable semiannually. The bonds are secured by the net revenues available for debt service of the University and other funds pledged to the payment of the bonds. Payments of the bond principal are also secured by an insurance policy issued by a commercial insurer. Auxiliary Refunding and Improvement Bonds, Series 1998 The Board of Regents authorized the University to issue the Auxiliary Refunding and Improvement Bonds, Series 1998 (the Series 1998 Bonds) dated December 1, 1998, in the amount of $13,685,000. The Series 1998 Bonds mature on October 1 of each year beginning October 1, 2000 through October 1, 2028, in annual amounts varying from $305,000 to $710,000, at interest rates ranging from 3.4% to 5.0%. Interest payments are payable semiannually. The bonds are secured by the net revenues available for debt service of the University and other funds pledged to the payment of the bonds. Payments of the bond principal are also secured by an insurance policy issued by a commercial insurer. Housing System Bonds - Series 1993 The Board of Regents authorized the University to issue the Housing System Bonds, Series 1993 (the Series 1993 Bonds) dated July 1, 1993, in the amount of $7,960,000. The Series 1993 Bonds were currently refunded on December 3, 2003 through the issuance of the Series 2003 Bonds, as discussed above. 36

41 Notes to Financial Statements June 30, 2005 and 2004 The debt service requirements of the bonds payable as of June 30, 2005 are as follows: Year Ending June 30, Total to be Paid Principal Interest 2006 $ 2,543,578 $ 850,000 $ 1,693, ,551, ,000 1,671, ,547, ,000 1,647, ,549, ,000 1,619, ,552, ,000 1,587, ,754,051 5,400,000 7,354, ,257,555 6,150,000 6,107, ,955,020 7,430,000 4,525, ,204,631 8,680,000 2,524, ,634,756 6,015, ,756 $ 67,550,386 $ 38,200,000 $ 29,350,386 Management believes that the University complied with all the restrictive covenants of its bond agreements. The auxiliary system produced net operating revenues in the fiscal years ended June 30, 2005 and 2004 of approximately 168% and 160%, respectively, of each year s bond service requirements, exceeding the 110% as required by the Bond debt covenants. Additionally, the University is to establish and maintain a repair and replacement reserve fund by making annual deposits until the fund accumulates a balance of $300,000. At June 30, 2005 and 2004, the repair and replacement reserve fund had a balance of $300,000. This fund is to be used to pay the cost of unusual and extraordinary repairs and replacements to housing system facilities. Capital Lease Obligations The University is obligated under leases accounted for as capital leases. Assets under capital leases at June 30, 2005 and 2004, totaled $454,434 and $664,307, respectively, net of accumulated depreciation of $307,524 and $97,651, respectively. The following is a schedule by year of future minimum lease payments under the capital lease including imputed interest at 4.85% together with the present value of the future minimum lease payments as of June 30, 2005: Year Ending June 30, 2006 $ 173, , ,488 Total minimum lease payments 426,778 Less amount representing interest 33,267 Present value of future minimum lease payments $ 393,511 37

42 Notes to Financial Statements June 30, 2005 and 2004 Note 5: Pension and Post-Retirement Plans The University participates in the Missouri State Employees Retirement System (MOSERS), a cost-sharing, multiple-employer, defined-benefit, public employee retirement system. MOSERS is administered by an 11-member Board of Trustees. A publicly available financial report that includes the financial statements and required supplementary information is issued. This report may be obtained by writing to Post Office Box 209, Jefferson City, Missouri 65102, or calling (573) MOSERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members and beneficiaries. Benefits are established by state statute which may be changed by the Missouri legislature with concurrence of the Governor. The University was required by statute to contribute 10.64%, 9.35% and 8.81% of eligible salaries for the years ended June 30, 2005, 2004 and 2003, respectively. No employee contributions are required or permitted. Contributions, which equaled the contribution requirements for the years ended June 30, 2005, 2004 and 2003 were $2,197,362, $1,834,336 and $1,724,755, respectively. Note 6: Commitments and Contingencies Claims and Litigation The University is currently involved in various claims and pending legal actions related to matters arising from the ordinary conduct of business. The University administration believes the ultimate disposition of the actions will not have a material effect on the financial statements of the University. Government Grants The University is currently participating in numerous grants from various departments and agencies of the federal and state governments. The expenditures of grant proceeds must be for allowable and eligible purposes. Single audits and audits by the granting department or agency may result in requests for reimbursement of unused grant proceeds or disallowed expenditures. Upon notification of final approval by the granting department or agency, the grants are considered closed. Capital Projects As of June 30, 2005, the University had the following capital projects in process: Estimated Cost Outstanding Encumbrances June 30, 2005 Construction in Progress June 30, 2005 Funding Source Residential Hall 400 beds $ 15,226,618 $ 1,419,558 $ 13,807,060 Revenue Bonds 38

43 Notes to Financial Statements June 30, 2005 and 2004 Note 7: Risk Management The University is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; business interruption; errors and omissions; employee injuries and illnesses, natural disasters and employee health and accidental benefits. Commercial insurance coverage is purchased for claims arising from such matters other than those related to general liability and workers compensation. Settled claims have not exceeded this commercial coverage in any of the three preceding years. Additional coverage is provided through the State Self Insurance program, through the Risk Management Division of the Department of Administration Services, in Jefferson City. The State of Missouri self-insures the workers compensation benefits for all state employees, including University employees. Claims are administered by the Missouri Office of Administration, Risk Management Section. Note 8: Missouri Western State College Foundation, Inc. - Accounting Policies and Disclosures Investments and Investment Return Investments include marketable equity securities, debt securities, money market funds, oil royalties, gas royalties and cash equivalents. Investments in marketable equity securities, debt securities, oil royalties and gas royalties are carried at fair value with unrealized and realized gains and losses on investments reported as an increase or decrease in unrestricted, temporarily restricted or permanently restricted net assets based upon donor imposed restrictions. Money market funds and cash equivalents are carried at cost. Investment income is reported in the statement of activities as unrestricted, temporarily restricted or permanently restricted revenue based upon donor imposed restrictions. Investments at June 30 consisted of the following: Money market funds $ 861,531 $ 1,162,761 Common stock and equity mutual funds 6,764,908 7,909,307 U.S. Government obligations 2,694,721 1,691,965 Corporate obligations 2,797,493 3,415,845 Oil and gas royalties 233, ,119 Total $ 13,352,285 $ 14,296,997 39

44 Notes to Financial Statements June 30, 2005 and 2004 Total investment return is comprised of the following: Investment income $ 487,083 $ 451,352 Net realized gains 688, ,692 Net unrealized gains(losses) (226,813) 593,993 Total investment return $ 948,569 $ 1,299,037 Pledges Receivable Pledges receivable are for pledged campaign receivables that are due within one to three years. Pledge receivables are stated at the pledged amount. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management s best estimate of amounts that will not be collected. The allowance for uncollectible pledges is based on management s assessment of the collectibility of specific donors pledges and the aging of pledges receivable. All pledges or portions thereof deemed to be uncollectible are written off to the allowance for uncollectible pledges. The carrying amount of pledges receivable is reduced by the amount of the unamortized discount related to promises to give that are to be collected over a period longer than one year. Included in pledges receivable are the following unconditional promises to give: Total pledges receivable $ 318,903 $ 411,428 Less unamortized discount (1,079) Less allowance for uncollectible pledges 79,500 (37,453) Net pledges receivable 239, ,896 Less pledges receivable, current portion 239, ,975 Net pledges receivable, long-term $ 0 $ 14,921 Amount due in Less than one year $ 318,903 $ 395,428 One to five years 16,000 Interest was imputed at a rate of 7% in discounting long-term pledges to give. $ 318,903 $ 411,428 In addition, the Foundation has been notified that it is designated as a beneficiary of a number of trusts. Included herein is the present value of amounts expected to be received, which totaled $1,690,084 and $1,672,366 at June 30, 2005 and 2004, respectively. 40

45 Notes to Financial Statements June 30, 2005 and 2004 Net Assets Net assets are classified into one of three classes based on the existence or absence of donor imposed restrictions. The following is a description of each class: Unrestricted Unrestricted net assets include all net assets which are neither temporarily nor permanently restricted. Temporarily Restricted Temporarily restricted net assets include contributed net assets for which donor imposed time and purpose restrictions have not been met and the ultimate purpose of the contribution is not permanently restricted. Permanently Restricted Permanently restricted net assets include contributed net assets, which require, by donor restriction, that the corpus be invested in perpetuity and only the income be made available for program operations in accordance with donor restrictions. Nature and Amount of Temporarily Restricted and Permanently Restricted Net Assets Temporarily restricted net assets at June 30 are available for the following purposes: Endowed accounts scholarships, programmatic and departmental support $ 1,328,069 $ 1,080,292 Scholarships 896, ,776 Programmatic and departmental support 1,842,919 2,288,629 Special programs 59,887 21,262 Total $ 4,127,563 $ 4,371,959 Permanently restricted net assets are for endowments, which must be invested in perpetuity, the income from which is expendable to support various programs. Income Taxes The Foundation is a not-for-profit organization exempt from income taxes under section 501(c)(3) of the U.S. Internal Revenue Code. 41

46 Notes to Financial Statements June 30, 2005 and 2004 Concentration of Credit Risk for Cash Held at Banks The Foundation maintains cash balances at two banks. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. Periodically, the Foundation maintains cash on deposit at these institutions exceeding the FDIC insurance limits. Change of Donor Designations The Foundation actively worked with donors during the 2004 and 2005 fiscal years to verify the intent of donors towards the use of their funds, and to clarify any restrictions established. As a result of this effort, various funds were reclassified during 2004 and 2005 to appropriately reflect the donors clarified intent. The net effect of the reclassifications are reflected within the caption Change of Donor Designation in the Statement of Activities for each year. Restatement The Foundation has consistently reflected athletic department receipts as contribution revenue. Accordingly, the campaign done in April through June of each year, for the following academic year, has been reported as time restricted revenue in the Foundation financial statements. Various changes in the membership and corporate membership programs resulted in transferring revenues coming in to the program membership revenues rather than contributions. As the memberships for the next academic year are received prior to year end, these amounts should be reflected as deferred unrestricted revenue at June 30 of each year. These memberships should be recognized in the next year under generally accepted accounting standards for non profit organizations. Accordingly, the Foundation has changed its method to comply with these standards and a restatement of $340,388 has been reflected to adjust net assets at June 30, 2004 for the deferred revenue. Of this, $94,285 affects 2004 and $246,103 relates to 2003 net assets. Reclassifications Certain amounts within these 2004 financial statements have been reclassified to conform to the presentation adopted for These reclassifications had no effect upon previously reported change in net assets. 42

47 Supplementary Information

48 Schedule of Expenditures of Federal Awards Year Ended June 30, 2005 Cluster/Program Federal Agency/ Pass-Through Entity CFDA Number Amount Expended Student Financial Aid Cluster Federal Family Education Loan Program U.S. Department of Education $ 13,291,643 Federal Supplemental Education U.S. Department of Education Opportunity Grants ,410 Federal Work-Study U.S. Department of Education ,989 Federal Perkins Loans U.S. Department of Education ,613,382 Federal Pell Grant Program U.S. Department of Education ,790,230 Total student financial aid cluster 21,309,654 Public Safety Partnership and U.S. Department of Justice Community Policing Grants ,578 Cooperative Endangered Species U.S. Department of the Interior Conservation Fund National Writing Project U.S. Department of Education A 76,807 Cancer Treatment Research U.S. Department of Health and Human Services ,123 Community Development Block Grants/ Economic Development Initiative U.S. Department of Housing and Urban Development Education and Human Resources National Science Foundation ,389 Vocation Education U.S. Department of Education ,840 Total $ 21,934,193 Notes to Schedule: 1. This schedule includes the federal awards activity of Missouri Western State University and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 2. Of the federal expenditures presented in this schedule, Missouri Western State University provided federal awards to subrecipients as follows: Program CFDA Number Subrecipient Amount Provided No awards were provided to subrecipients. 43

49 Independent Accountants Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Board of Governors Missouri Western State University St. Joseph, Missouri We have audited the financial statements of Missouri Western State University as of and for the year ended June 30, 2005, and have issued our report thereon dated September 30, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the University s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the University s ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. The reportable condition is described in the accompanying schedule of findings and questioned costs as item A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. bkd.com Twelve Wyandotte Plaza 120 West 12 th Street, Suite 1200 Kansas City, MO Fax Beyond Your Numbers 44 A member of Moores Rowland International

50 Board of Governors Missouri Western State University Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the University s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. We also noted certain additional matters that we reported to the University s management in a separate letter dated September 30, This report is intended solely for the information and use of the Board of Governors, management and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Kansas City, Missouri September 30,

51 Independent Accountants Report on Compliance and Internal Control Over Compliance with Requirements Applicable to Major Federal Awards Programs Board of Governors Missouri Western State University St. Joseph, Missouri Compliance We have audited the compliance of Missouri Western State University with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A- 133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, The University s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the University s management. Our responsibility is to express an opinion on the compliance of Missouri Western State University based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the University s compliance with those requirements. In our opinion, Missouri Western State University complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, bkd.com Twelve Wyandotte Plaza 120 West 12 th Street, Suite 1200 Kansas City, MO Fax Beyond Your Numbers 46 A member of Moores Rowland International

52 Board of Governors Missouri Western State University Page 2 Internal Control Over Compliance The management of Missouri Western State University is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the University s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the Board of Governors, management and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Kansas City, Missouri September 30,

53 Schedule of Findings and Questioned Costs Year Ended June 30, 2005 Summary of Auditor s Results 1. The opinion expressed in the independent accountants report was: Unqualified Qualified Adverse Disclaimed 2. The independent accountants report on internal control over financial reporting described: Reportable condition(s) noted considered material weakness(es)? Yes No Reportable condition(s) noted that are not considered to be a material weakness? Yes No 3. Noncompliance considered material to the financial statements was disclosed by the audit? Yes No 4. The independent accountants report on internal control over compliance with requirements applicable to major federal awards programs described: Reportable condition(s) noted considered material weakness(es)? Yes No Reportable condition(s) noted that are not considered to be a material weakness? Yes No 5. The opinion expressed in the independent accountants report on compliance with requirements applicable to major federal awards was: Unqualified Qualified Adverse Disclaimed 6. The audit disclosed findings required to be reported by OMB Circular A-133? Yes No 7. The University s major programs were: Cluster/Program CFDA Number Student Financial Aid Cluster Federal Family Education Loan Program Federal Supplemental Education Opportunity Grants Federal Work-Study Federal Perkins Loans Federal Pell Grant Program The threshold used to distinguish between Type A and Type B programs as those terms are defined in OMB Circular A-133 was $658, The University qualified as a low-risk auditee as that term is defined in OMB Circular A-133? Yes No 48

54 Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2005 Findings Required to be Reported by Government Auditing Standards Reference Number Finding Questioned Costs 05-1 Criteria or Specific Requirement Management is responsible for establishing and maintaining effective internal control over financial reporting. None Condition Several individuals involved in the revenue/cash receipts transaction cycle can perform incompatible duties. Context These individuals may perform duties including authorizing, executing and recording transactions within this major cycle. Effect Performance of these incompatible duties by the same individual exposes the University to increased risk from an internal control perspective. Such risk includes potential material misstatements in the financial statements or material misappropriations of assets due to error or fraud, if not presented or detected in a timely manner. Cause Duties in this transaction cycle are not adequately segregated and monitoring or other compensating controls are insufficient. Recommendation Management should periodically evaluate the costs versus the benefits of further segregation of duties or addition of monitoring or other compensating controls and implement those changes it deems appropriate for which benefits are determined to exceed costs. Views of Responsible Officials and Planned Corrective Actions Management concurs with the finding and recommendation. Management will perform the suggested evaluation and make changes deemed appropriate that are cost beneficial within the next year. 49

55 Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2005 Findings Required to be Reported by OMB Circular A-133 Reference Number Finding No items are reportable Questioned Costs 50

56 Summary Schedule of Prior Audit Findings Year Ended June 30, 2005 Reference Number Summary of Finding Status 04-1 Many of the duties in the revenue/cash receipts cycle can be performed by the same individuals. Duties that can be performed include authorizing, executing and recording transactions. Performance of these incompatible duties by the same individual exposes the University to increased risk from an internal control perspective. Management should evaluate the potential costs and benefits of segregating these incompatible duties and implement revised control procedures deemed to be both effective and economical Out of a population of 245 students who withdrew, dropped out or were dismissed during the year ended June 30, 2004, we tested 30 students to insure that the federal refund calculations were performed in accordance with the federal regulations. During our testing, we noted seven instances in which the University did not disburse the calculated refunds within the required 30 days after the determination of the students last day of attendance. The University should implement procedures to insure that the federal refund disbursements are made within the required timeframes. Unresolved. See similar finding listed as Resolved. No similar findings noted in current year. 51

57 Information Required for Revenue Bonds

58 Independent Accountants Report on Supplementary Information Board of Governors Missouri Western State University Saint Joseph, Missouri Our audits were made for the purpose of forming opinions on the financial statements that collectively comprise the University s basic financial statements. The nature of our audit procedures is more fully described in our report on the basic financial statements. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the procedures applied in the audits of the basic financial statements, and, accordingly, we express no opinion on it. Kansas City, Missouri September 30, 2005 Twelve Wyandotte Plaza 120 West 12 th Street, Suite 1200 Kansas City, MO Fax bkd.com Beyond Your Numbers A member of Moores Rowland International