University of Missouri KWMU-FM Radio

Transcription

1 KWMU-FM Radio Financial Statements as of and for the Years Ended June 30, 2017 and 2016, Supplemental Schedule for the Year Ended June 30, 2017, and Independent Auditors Report

2 TABLE OF CONTENTS Page Management s Discussion and Analysis 1 Independent Auditors Report 5 Basic Financial Statements as of and for the Years Ended June 30, 2017 and 2016: Statements of Net Position 7 Statements of Revenues, Expenses and Changes in Net Position 8 Statements of Cash Flows 9 Notes to Basic Financial Statements 10 Supplemental Information for the Year Ended June 30, 2017: Supplemental Schedule of Non-Federal Financial Support 29

3 MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) This Management s Discussion and Analysis ( MD&A ) of KWMU-FM Radio ( Station ) and Friends of KWMU, Inc. ( Friends ) provides an overview of the Station s financial performance for the fiscal years ended June 30, 2017 and Please read it in conjunction with the basic financial statements for the period and the Annual Financial Report ( AFR ) to the Corporation for Public Broadcasting ( CPB ). OVERVIEW OF THE OPERATIONS The Station is a unit of the St. Louis campus of the University of Missouri ( University ) and it broadcasts under a FCC license issued to the Curators of the University of Missouri. The University provides on-going, line item funding as well as indirect institutional support to the Station. The University s indirect institutional support to the Station is significant to the Station s financial activities and is fully described in the AFR required by CPB. The University is classified by the IRS as an instrumentality of the State of Missouri and is chartered under Missouri state law. The Station s financial activities are managed under policies and procedures of the University and are subject to control and internal audit by the University. The University and the Station both receive annual external audits. For the Station, the external audit is a condition of annual grant funding from CPB. CPB is a private, nonprofit corporation created by Congress in 1967 to promote public media (television, radio and on-line) for the American people. KWMU-FM ACCOUNTING AND FINANCIAL REPORTING This report includes three financial statements: the Statements of Net Position, the Statements of Revenues, Expenses and Changes in Net Position, and the Statements of Cash Flows. The basic financial statements of the Station are prepared in accordance with generally accepted accounting principles in the United States of America as prescribed by the Governmental Accounting Standards Board ( GASB ). The notes to the basic financial statements provide required disclosures and other information that are essential to fully understand the material data provided in the statements. They present information about the Station s accounting policies, significant account balances and activities, material risks, obligations, commitments, contingencies and subsequent events, if any. The Station s annual basic financial statements and reports to CPB are available to the public on the Station s website and also along with personal inspection of the Station s FCC public file during business hours at its offices at 3651 Olive Street, St. Louis, MO STATEMENTS OF NET POSITION THE STATION The Statements of Net Position present the financial position of the Station as of June 30, 2017 and 2016, including all assets, deferred outflow of resources, liabilities and deferred inflow of resources of the Station segregated into current and non-current components. The net position presents the current financial condition of the Station. Assets and liabilities are generally measured using current values, with certain exceptions, such as capital assets, which are stated at cost less accumulated depreciation. 1

4 MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) A summary of the Station s assets, deferred outflow of resources, liabilities, deferred inflow of resources and net position at June 30, 2017 and 2016, follows: Fiscal Year Fiscal Year Assets and Deferred Outflow of Resources Current Assets $ 4,121,521 $ 11,278,394 Non-Current Assets 7,369, ,203 Total Assets 11,490,821 12,189,597 Deferred Outflow of Resources 261, ,645 Total Assets and Deferred Outflow of Resources $ 11,752,226 $ 12,778,242 Liabilities and Net Position Current Liabilities $ 558,794 $ 513,809 Non-Current Liabilities 1,280,484 1,557,458 Total Liabilities 1,839,278 2,071,267 Net Position Invested in Capital Assets, Net of Related Debt 6,861, ,216 Restricted Nonexpendable - Endowment 507, ,662 Restricted Expendable - Capital 69,307 6,643,509 Unrestricted 2,474,341 3,337,588 Total Net Position 9,912,948 10,706,975 Total Liabilities, Deferred Inflow of Resources and Net Position $ 11,752,226 $ 12,778,242 Fiscal Year 2017 Compared to Fiscal Year 2016 Total assets decreased $698,776, or 5.7%, to $11,490,821, primarily resulting from a decrease in cash, investments, and pledges receivable during the year. Total liabilities decreased by a net $231,989, or 11.2%, to $1,839,278, primarily due to an decrease in pension liability due to favorable market conditions. The pension obligation will be satisfied by the University through indirect support of the Station. Net Position reflects a decrease of $794,027. This decrease was budgeted and related to the increase in labor costs with the merger of the Station and St. Louis Beacon in fiscal Management is implementing a strategic plan for investment of resources which will achieve financial stability. STATEMENTS OF NET POSITION FRIENDS Cash increased to $42,593 at June 30, 2017 from $23,041 at June 30, 2016 due to contributed support during the fiscal year. 2

5 MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION THE STATION The Statements of Revenues, Expenses and Changes in Net Position present the Station s results of operations. The Statements distinguish revenues and expenses between operating and non-operating categories. Fiscal Year Fiscal Year Operating Revenues: Membership Contributions and Contributed Support $ 4,604,583 $ 4,235,205 Community Service Grants from CPB 520, ,321 Underwriting Support 1,799,344 1,572,927 Special Events & Other Operating Revenue 355, ,997 Total Operating Revenues 7,279,790 6,770,450 Operating Expenses: Program Services Broadcasting 482, ,207 Programming and Production 5,510,298 5,492,511 Program Information 389, ,633 Total Program Services 6,382,390 6,290,351 Support Services - Management and General 750, ,618 Depreciation Expense 76,225 78,516 Fundraising and Membership Development 2,454,912 2,259,532 Total Support Services 3,281,937 3,084,666 Total Operating Expenses 9,664,327 9,375,017 Operating Loss Before Non-operating Revenues (Expenses) (2,384,537) (2,604,567) Non-Operating Revenues (Expenses): Capital Campaign - 5,822 Support to the University of Missouri (23,997) (17,798) Indirect Institutional Support from the University of Missouri 1,244,481 1,254,314 Net Pension (44,351) (64,898) Other Grants 61, ,935 Other In-Kind Non-Operating Revenue 10,350 7,199 Investment Income 70,986 49,739 Interest on Note Receivable 271, ,623 Contributed Support from Friends of KWMU - 120,000 Total Non-Operating Revenues (Expenses) 1,590,510 1,743,936 Decrease in Net Position (794,027) (860,631) Net Position, Beginning of Year 10,706,975 11,567,606 Net Position, End of Year $ 9,912,948 $ 10,706,975 3

6 MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) Fiscal Year 2017 Compared to Fiscal Year 2016 Total Operating Revenues increased by a net of $509,340, or 7.5%, from fiscal year This was primarily driven by an increase in membership contributions and contributed support as well as an increase in underwriting income. Total Non-Operating Revenues for fiscal year 2017 decreased $153,426, or 8.8%, from fiscal year This was primarily driven by a decrease in payments from Friends of KWMU. Operating expenses increased $289,310, or 3.1%, over fiscal year Program services increased $92,039, or 1.5%, over fiscal year Support services increased $197,271, or 6.4%, over fiscal year Program services expense comprised 66.0% and 67.1% of total operating expense in 2017 and 2016, respectively. Support services expense comprised 34.0% and 32.9% of total operating expense in 2017 and 2016, respectively. STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FRIENDS Operating revenues of Friends of KWMU in 2016 decreased by $9,218, from $32,052 in 2016 to $22,834 in Friends provided support of $0 and $120,000 for the Station during the years ended June 30, 2017 and 2016, respectively. ECONOMIC OUTLOOK The economic outlook for the Station is dependent on various influences of the Station s funding sources. Corporation for Public Broadcasting: The CPB has requested a $445 million advance appropriation for fiscal year 2020, which is the same amount provided by Congress for FY2018 and FY2019. As a result, the Station expects the Community Service Grant from CPB to remain relatively flat. The Station recognizes the economic and political environment in which the CPB seeks funding, and the possibility of decreases in CPB funding beyond 2017, and is planning for increased community support. CPB recognizes the evolving state of public media toward quick and easy access to contemporaneous and historical content across various platforms such as on-air, online, podcasts, and mobile phone screens. The merger between the Station and St. Louis Beacon, a digital news producer, enhanced both newsroom coverage and distribution of content across multiple platforms. University of Missouri support: Station management expects University funding to decrease in coming years because of pressure to constrain cost growth in higher education. The University, however, views the Station as a significant asset as evidenced by Administration s support of the building at Grand Center, and the acquisition of St. Louis Beacon in recent years. The University also collaborates with The Nine Network (KETC), in managing and supporting the Public Media Commons, a shared innovative multi-media community event venue. Special event funding: The Station will continue to view events as a way to increase community awareness of the rich educational value of public media. While events are not a significant source of funding when costs are considered, they are an invaluable source of new listeners/viewers of public content. Private Donations: Development continues to be a strong source of Station funding and has been experiencing significant growth. Management expects continued stable growth in this area of support. Investment Income: The Station s investments are managed by the University. Investment income is dependent upon market conditions of relatively low earnings rates. 4

7 INDEPENDENT AUDITORS REPORT To the Board of Curators University of Missouri St. Louis, MO We have audited the accompanying financial statements of the University of Missouri KWMU-FM Radio (the Station ), as of and for the years ended June 30, 2017 and 2016, and the related notes to the financial statements, as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Station, as of June 30, 2017 and 2016, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the financial statements present only the Station and do not purport to, and do not present fairly the financial position of the University of Missouri, as of June 30, 2017 and 2016, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. 5

8 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management s discussion and analysis and yearly comparison information on pages 1-4 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the Station s basic financial statements. The Supplemental Schedule of Non-Federal Financial Support for the year ended June 30, 2017, required by the Public Telecommunication Financing Act of 1978, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The Supplemental Schedule of Non-Federal Financial Support is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audits of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. January 9, 2018 St. Louis, Missouri Certified Public Accountants 6

9 STATEMENTS OF NET POSITION As of June 30, 2017 and ASSETS AND DEFERRED OUTFLOW OF RESOURCES University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit Current Assets: Cash and Cash Equivalents $ 288,092 $ 42,593 $ 332,982 $ 23,041 Short-Term Investments 2,310,897-2,417,609 Accounts Receivable, Net 235, ,212 - Grants Receivable 7,000-10,456 - Pledges Receivable, Net 1,228,615-1,368,035 - Prepaid Lease Expense ,106 - Prepaid Expense 51,501-40,812 - Note Receivable - - 6,697,182 - Total Current Assets 4,121,521 42,593 11,278,394 23,041 Non-Current Assets: Long-Term Investments - Restricted 507, ,662 - Pledges Receivable, Net ,325 - Capital Assets, Depreciable, Net 6,861, ,216 - Total Non-Current Assets 7,369, ,203 - Deferred Outflow of Resources 261, ,645 - Total Assets and Deferred Outflow of Resources $ 11,752,226 $ 42,593 $ 12,778,242 $ 23,041 LIABILITIES, DEFERRED INFLOW OF RESOURCES AND NET POSITION Current Liabilities: Accounts Payable and Other Accrued Expenses $ 176,625 $ - $ 144,509 $ - Accrued Vacation 176, ,335 - Unearned Revenue 106, ,965 - Unexpended Grants 100, Total Current Liabilities 558, ,809 - Noncurrent Liabilities: Accrued Vacation 82,088-76,172 - Pension Liability 1,198,396 1,481,286 Total Noncurrent Liabilities 1,280,484-1,557,458 - Deferred Inflow of Resources Total Liabilities and Deferred Inflow of Resources 1,839,278-2,071,267 - Net Position: Invested in Capital Assets 6,861, ,216 - Restricted Nonexpendable - Endowment 507, ,662 - Restricted Expendable - Capital 69,307-6,643,509 - Unrestricted 2,474,341 42,593 3,337,588 23,041 Total Net Position 9,912,948 42,593 10,706,975 23,041 Total Liabilities, Deferred Inflow of Resources and Net Position $ 11,752,226 $ 42,593 $ 12,778,242 $ 23,041 The notes to basic financial statements are an integral part of these statements. 7

10 STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION For The Years Ended June 30, 2017 and University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit Operating Revenues: Membership Contributions and Contributed Support 4,604,583 $ 22,834 4,235,205 $ 32,052 Community Service Grants from Corporation for Public Broadcasting 520, ,321 - Underwriting Support 1,799,344-1,572,927 - Special Events & Other Operating Revenue 355, ,997 - Total Operating Revenues 7,279,790 22,834 6,770,450 32,052 Operating Expenses: Program Services - Broadcasting 482, ,207 - Programming and Production - Local 5,510,298-5,492,511 - Program Information 389, ,633 - Total Program Services 6,382,390-6,290,351 - Supporting Services - Management and General 750,800 3, ,618 3,282 Depreciation Expense 76,225-78,516 - Fundraising and Membership Development 2,454,912-2,259,532 - Total Supporting Services 3,281,937 3,282 3,084,666 3,282 Total Operating Expenses 9,664,327 3,282 9,375,017 3,282 Operating Income (Loss) Before Nonoperating Revenues (Expenses) (2,384,537) 19,552 (2,604,567) 28,770 Nonoperating Revenues (Expenses): Capital Campaign, Net - - 5,822 - Support to the University of Missouri (23,997) - (17,798) - Indirect Institutional Support from University of Missouri 1,244,481-1,254,314 - Net Pension (44,351) - (64,898) - Other Grants 61, ,935 - Other In-Kind Nonoperating Revenue 10,350-7,199 - Investment Income 70,986-49, Interest on Note Receivable 271, ,623 - Payments to (from) Friends of KWMU ,000 (120,000) Total Nonoperating Revenues (Expenses) 1,590,510-1,743,936 (119,985) Increase (Decrease) in Net Position (794,027) 19,552 (860,631) (91,215) Net Position, Beginning of Year 10,706,975 23,041 11,567, ,256 Net Position, End of Year $ 9,912,948 $ 42,593 $ 10,706,975 $ 23,041 The notes to basic financial statements are an integral part of these statements. 8

11 STATEMENTS OF CASH FLOWS For The Years Ended June 30, 2017 and 2016 University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit Cash Flows from Operating Activities: Membership Contributions and Contributed Support $ 4,929,328 $ 22,834 $ 4,950,520 $ 32,052 Corporation for Public Broadcasting Grant 620, ,575 - Underwriting Income 1,802,211-1,530,826 - Payments to Suppliers and Employees (8,350,130) (3,282) (7,991,270) (3,282) Other Receipts 355, ,997 - Net Cash Provided by (Used in) Operating Activities (642,728) 19,552 (582,352) 28,770 Cash Flows from Capital and Related Financing Activities: Capital Campaign - - 5,822 - Other grants 64,595-93,878 - Payments for Prepaid Lease 130,106-67,354 - Financing Activities 194, ,054 - Cash Flows from Noncapital Financing Activities: Payments and Contributions to University of Missouri & Other Sources (23,997) - (17,798) - Payments to/from Friends of KWMU ,000 (270,000) Net Cash Provided by (Used in) Non-Capital Financing Activities (23,997) - 252,202 (270,000) Cash Flows from Investing Activities: Sale of Investments, Net 69,559-44,945 - Purchase of capital assets (8,484) Investment Income 70,986-49, Payments on Note Receivable - - (439,866) - Interest on Note Receivable 295, ,623 - Net Cash Provided by (Used in) Investing Activities 427,134 - (59,559) 15 Net Increase (Decrease) in Cash and Cash Equivalents (44,890) 19,552 (222,655) (241,215) Cash and Cash Equivalents, Beginning of Year 332,982 23, , ,256 Cash and Cash Equivalents, End of Year $ 288,092 $ 42,593 $ 332,982 $ 23,041 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Operating Income (Loss) $ (2,384,537) $ 19,552 $ (2,604,567) $ 28,770 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities - Depreciation Expense 76,225-78,516 - Indirect Institutional Support from the University 1,244,481-1,254,314 - Other In-Kind Nonoperating Revenue 10,350-7,199 - Changes in Assets and Liabilities: Accounts, Grants and Pledges Receivable, Net 370, ,772 - Prepaid Expense (10,689) - 39,681 - Accounts Payable and Other Accrued Expenses 32,116 - (19,504) - Accrued Vacation (38,286) - 23,541 - Unexpended Grants and Unearned Revenue 57,071-21,696 - Net Cash Provided by (Used in) Operating Activities $ (642,728) $ 19,552 $ (582,352) $ 28,770 Noncash Activity: Administrative Support from the University of Missouri $ 1,244,481 $ - $ 1,254,314 $ - Change in pension liability expected to be provided from the University (44,351) - (64,898) - Non-Cash Contributions of Services and Other Assets 10,350-7,199 - Acquisition of building through sale leaseback transaction 6,674, The notes to basic financial statements are an integral part of these statements

12 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The major policies followed by KWMU-FM Radio (the Station ) are presented below to assist the reader and to enhance the usefulness of the basic financial statements. Organization The Station is a non-profit, public radio and media unit of the University of Missouri (the University ) through its St. Louis campus in St. Louis, Missouri. The financial activity of the Station is included in the financial statements of the University. The accompanying basic financial statements were prepared based on the combination of various accounts associated with the Station and its related operations and do not present the financial position or changes in financial position or cash flows of the University. The Station is dependent upon support from the public, the Corporation for Public Broadcasting, and the University. Reporting Entity Governmental Accounting Standards Board ( GASB ) Statement No. 14, The Financial Reporting Entity, provides guidance as to the financial reporting of component units (legally separate organizations for which the Station is financially accountable). Effective July 1, 2003, the Station adopted GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. This statement amends GASB Statement No. 14 to provide additional guidance for determining whether certain organizations for which the Station is not financially accountable should be reported as component units based on the nature and significance of their relationship to the Station. The Friends of KWMU, Inc. ( Friends ), a Missouri non-profit corporation, meets the criteria set forth for discretely presented component units under GASB Statement No. 39, and its accounts are included in the Station s financial statements. Exempt from taxation under Section 501(c)(3) of the internal revenue code, the Friends follows generally accepted accounting principles ( GAAP ) under the Financial Accounting Standards Board ( FASB ). It provides financial support for the objectives, purposes, and programs of the Station and solicits funds for the benefit of and with approval of the Station. Although the Station does not control the timing, purpose, or amount of receipts from the Friends, the resources which it holds and invests are restricted to the activities of the Station. During the fiscal years ended June 30, 2017 and 2016, the Friends board approved distributions of $0 and $120,000, respectively, to the Station for unrestricted support. Separate financial statements for the Friends of KWMU, Inc. are not available. Financial Statement Presentation This is in accordance with GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 1989 FASB and AICPA Pronouncements, which incorporated into the GASB s authoritative literature certain accounting and financial reporting guidance issued on or before November 30, 1989, and which does not conflict or contradict GASB pronouncements. In addition, the Station applies all applicable FASB Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins, except those that conflict with GASB pronouncements. The Station has adopted GASB Statement No. 35, Basic Financial Statement and Management s Discussion and Analysis for Public Colleges and Universities, as amended by GASB Statements No. 37 and No. 38. GASB Statement No. 35 establishes standards for external financial reporting for public colleges and universities. The basic financial statement presentation provides a comprehensive entity-wide perspective of the Station s net position, revenues, expenses and changes in net position and cash flows replacing the fund-group perspective previously required. Basis of Accounting The Station s basic financial statements have been prepared using the economic resource focus and the accrual basis. The Station reports as a Business Type Activity, as defined by GASB Statement No. 34. Business Type Activities are those that are financed in whole or in part by funds received from external parties for goods or services. 10

13 The Station s policy for defining operating activities as reported on the Statements of Revenues, Expenses and Changes in Net Position are those that generally result from exchange transactions such as payments received for providing services and payments made for services or goods received. Membership Contributions and Contributed Support are deemed program revenue and therefore operating revenue as prescribed by the Corporation for Public Broadcasting. Certain significant revenue streams relied upon for operations are recorded as non-operating revenue as defined by GASB Statement No. 34. Non-operating revenues include revenues from activities that have the characteristics of non-exchange transactions, such as support from the University, certain grants, permanent endowment contributions, capital contributions, and investment income. Cash, Cash Equivalents and Investments The Station participated in the University s pooled cash and investment accounts for fiscal years 2017 and For fiscal years 2017 and 2016 cash and cash equivalents are held as cash by the University on behalf of the Station. For purposes of the basic financial statements for fiscal year 2017 and 2016, cash and cash equivalents consist of the University s bank deposits, repurchase agreements, money market funds, and other investments with original maturities of three months or less. Investment assets are carried at fair value based primarily on market quotations. Purchases and sales of investments are accounted for on the trade date basis. Investment settlements receivable and investment settlements payable represent investment transactions occurring on or before June 30, which settle after that date. Investment income is recorded on the accrual basis. Net unrealized gains (losses) are included in investment and endowment income in the Statement of Revenues, Expenses and Changes in Net Position. Non-marketable alternative investments and certain commingled funds are recorded based on valuations provided by the general partners of the respective partnerships. The University believes that the carrying value of these investments is a reasonable estimate of fair value. Because alternative investments are not readily marketable, the estimated value is subject to uncertainty and therefore may differ materially from the value that would have been used had a ready market for investments existed. Derivative instruments such as forward foreign currency contracts are recorded at fair value. The University enters into forward foreign currency contracts to reduce the foreign exchange rate exposure of its international investments. These contracts are marked to market, with the changes in market value being reported in investment and endowment income on the Statement of Revenues, Expenses, and Changes in Net Position. Accounts Receivable Accounts receivable are presented at the net amount. Accounts receivable consists of amounts due to the Station for underwriting contracts and other miscellaneous revenue sources. For each of the years ended June 30, 2017 and 2016, no allowance has been made for uncollectible accounts receivable based upon management s expectations regarding the collectability of the accounts and the Station s historical collection experience. Pledges Receivable The Station receives unconditional promises to give (pledges) through private donations from corporations, alumni, and various other supporters of the Station. These pledges have been recorded as pledges receivable on the Statements of Net Position and as a portion of Membership Contributions and Contributed Support on the Statements of Revenues, Expenses, and Changes in Net Position, at the present value of the estimated future cash flows. An allowance of $463,990 and $369,425 as of June 30, 2017 and 2016, respectively, was made for uncollectible pledges based upon management s expectations regarding the collectability of the pledges considering the Station s historical collection experience. Prepaid Lease Expense For the year ended June 30, 2016, the Station had expended funds relating to the lease of the facility noted below. These expended funds are recognized as expense through the lease term of the facility. Note Receivable On September 24, 2010, the University of Missouri Board of Curators agreed to enter into a lease/purchase agreement for the acquisition of a facility that was constructed as the new office of the Station and classroom space for the use of the University. The lease payments began prior to occupancy in 2012 and continue up to seven years, at which point the purchase option can first be exercised. As of June 30, 2016, the Station had made payments in the accumulated amount of $6,697,182, which was recorded as a note receivable from the University at June 30, During the year ended June 30, 2017, the purchase option was exercised and the building was purchased through the release of the note receivable plus additional consideration. Capital Assets Capital assets represent building and equipment acquired primarily for the use of the Station. Title of the building and equipment rests in the name of the University, and therefore, such assets can be transferred to or from the Station at the discretion of the University. Under the University s policy, individual assets costing $5,000 or more are capitalized at 11

14 cost if purchased, or at fair value on the date of the gift if donated. Depreciation of capital assets is provided on a straight-line basis over the estimated useful lives of the respective assets generally ten to forty years for buildings and improvements and five to fifteen years for transmission, antenna, tower, studio and broadcast equipment and furniture and fixtures. Expenditures for repairs and maintenance are charged to operating expenses as incurred. Deferred Revenue and Unexpended Grants Amounts reflected in the Statements of Net Position as of June 30, 2017 and 2016 represent cash the Station has received under contracts for future performance of services. Grant revenues are recognized when eligibility requirements are met. Pensions - Pension related items, including: net pension liability, deferred outflow of resources, deferred inflow of resources, net pension expense, fiduciary net assets, and additions to and deductions from fiduciary net assets have been determined on the same basis as they are reported by the University of Missouri. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The obligation of the pension will be satisfied by the University and any payments are included in the support of the Station. Likewise, net pension expense and income is reported as non-operating items. Net Position The Station s net position is classified for financial reporting in the following net position categories: Invested in Capital Assets, Net of Related Debt: Capital assets, net of accumulated depreciation and outstanding principal balances of debt, if any, attributable to the acquisition, construction, or improvement of those assets. Restricted Nonexpendable Endowment: Station net position in the University s permanent endowment funds are subject to externally imposed stipulations that the principal be maintained in perpetuity. Restricted Expendable Capital: Net position whose use by the Station is subject to externally imposed stipulations that can be fulfilled by actions of the Station pursuant to those stipulations or that expire by the passage of time. Unrestricted: Net position that is not subject to externally imposed stipulations. Unrestricted net position may be designated for specified purposes by action of the Board of Curators (the Board ) or may otherwise be limited by contractual agreements with outside parties. Underwriting Support Underwriting support consists of on-air or digital sponsorships and are recognized when the spots are aired or digitally placed. In-Kind Contributions In-kind contributions are recorded as revenue and expense in the accompanying Statements of Revenues, Expenses and Changes in Net Position. In-kind contributions consist of donated property and professional services. These donations are recorded at fair value at the time of the gift. Indirect Institutional Support Calculated in accordance with CPB financial reporting guidelines, Indirect Institutional Support from the University consists of allocated general and administrative expenses incurred on behalf of the Station. These expenses are allocated by Station management pro rata to broadcasting, program and production, program information, management and general, and fundraising and membership development cost areas. Use of Estimates The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Pronouncements Effective for fiscal year 2017, the Station adopted GASB Statement No. 77, Tax Abatement Disclosures, which intends to provide financial statement users with essential information about the nature and magnitude of the reduction in tax revenues through tax abatement programs. Adoption of this statement had no effect on the Station s financial statements. 12

15 Effective for fiscal year 2017, the Station adopted GASB Statement No. 78, Pensions Provided through Certain Multiple- Employer Defined Benefit Pension Plans, which amends the scope of Statement No. 68, Accounting and Financial Reporting for Pensions. The scope was amended to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple employer defined benefit pension plan that is not a state or local government pension plan. Adoption of this statement had no effect on the Station s financial statements. Effective for fiscal year 2017, the Station adopted GASB Statement No. 80, Blending Requirements for Certain Component Units, which intends to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. The adoption of this statement had no effect on the Station s financial statements. Effective for fiscal year 2017, the Station adopted GASB Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73, which addresses certain issues with regard to current GASB standards on pensions. Adoption of this statement had no effect on the Station s financial statements. In June 2015, GASB issued GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which intends to improve financial reporting by state and local governmental postemployment benefit plans other than pension plans. Also, in June 2015, GASB issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which intends to improve financial reporting by requiring recognition of the entire Other Postemployment Benefits (OPEB) liability and a more comprehensive measure of OPEB expense. GASB Statement No. 74 was adopted during fiscal year 2017 resulting in additional note disclosures and required supplementary information regarding Net Postemployment Benefits Liability. The adoption of Statement No. 75 will require the Station to record a Net Postemployment Benefits Liability on its Statements of Net Position. The Station has determined adoption will have a significant impact on its financial statements and will reduce unrestricted net position when implemented during the year ending June 30, In March 2016, GASB issued GASB Statement No. 81, Irrevocable Split-Interest Agreements, which intends to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for beneficiaries of these type of agreements. The Station has not yet determined the effect that implementing GASB Statement No. 81 will have on its financial statements. In November 2016, GASB issued GASB Statement No. 83, Certain Asset Retirement Obligations, which establishes criteria for determining recognition of a liability and corresponding deferred outflows of resources for legally enforceable liabilities associated with the retirement of certain intangible capital assets. The Station has not yet determined the effect of implementing GASB Statement No. 83 will have on its financial statements. In January 2017, GASB issued GASB Statement No. 84, Fiduciary Activities, which intends to enhance consistency and comparability on how fiduciary activities are reported. The Station has not yet determined the effect of implementing GASB Statement No. 84 will have on its financial statements. In March 2017, GASB issued GASB Statement No. 85, Omnibus 2017, which intends to enhance consistency in the application of certain accounting and financial reporting requirements. The Station has not yet determined the effect of implementing GASB Statement No. 85 will have on its financial statements. In May 2017, GASB issued GASB Statement No. 86, Certain Debt Extinguishment Issues, which intends to improve the consistency in accounting and reporting for in-substance defeasance of debt. The Station has not yet determined the effect of implementing GASB Statement No. 86 will have on its financial statements. In June 2017, GASB issued GASB Statement No. 87, Leases, which requires recognition of certain lease assets and liabilities that were previously classified as operating leases. The Station has not yet determined the effect of implementing GASB Statement No. 87 will have on its financial statements. Effective for fiscal year 2016, the Station adopted GASB Statement No. 72, Fair Value Measurement and Application, which intends to improve financial reporting by requiring governments to measure certain assets and liabilities at fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. The Statement also enhances related fair 13

16 value disclosures in order to provide information on the impact of fair value measurements on a government s financial position. Adoption of GASB Statement No. 72 resulted in additional note disclosures in Note 4 to display investments by the category of measurement hierarchy. Effective for fiscal year 2016, GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, which intends to improve financial reporting by establishing as single framework for the presentation of information about pensions. Adoption of GASB Statement No. 73 had no effect on the Station s financial statements. Effective for fiscal year 2016, the Station adopted GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, which intends to improve financial reporting by reducing the variation in which governments apply financial reporting guidance. Adoption of GASB Statement No. 76 had no effect on the Station s financial statements. Effective for fiscal year 2016, the Station adopted GASB Statement No. 79, Certain External Investment Pools and Pool Participants, which intends to enhance comparability of financial statements by establishing specific criteria to determine whether a qualifying external investment pool may elect to use an amortized cost exception to fair value measurement. Adoption of GASB Statement No. 79 had no effect on the Station s financial statements. Discretely Presented Component Unit Friends of KWMU Operating Revenue Operating revenue consists of contributions to and special fundraising events provided by the Friends for the Station s benefit. 2. TRANSFER OF KMST OPERATIONS On June 30, 2017 Missouri University of Science and Technology and University of Missouri St. Louis entered into a memorandum of understanding to transfer the operations of KMST, a non-profit, non-commercial radio station operated by the University of Missouri on its campus in Rolla, Missouri to KWMU, in order to continue public radio and media service to the Rolla, Lebanon and surrounding communities, and to achieve cost reduction for the University of Missouri. Per the terms of the memorandum of understanding, membership and property and equipment were transferred to KWMU. The transfer of operations of KMST to KWMU is not expected to have a material impact on the projected operating revenues and expenses of KWMU in future fiscal years. 3. CASH AND CASH EQUIVALENTS RISKS Custodial Credit Risk Deposits The custodial credit risk for deposits is the risk that in the event of bank failure, the University s deposits may not be recovered. State law requires collateralization of all deposits with federal depository insurance, bonds and other obligations of the U.S. Treasury, U.S. Agencies and instrumentalities of 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 s cash deposits were fully insured or collateralized at June 30, 2017 and 2016, respectively. 14

17 4. INVESTMENTS Investments The Station participates in the University s pooled investment accounts, which are stated at fair value, and holds an equity investment in the pool. The investment policies of the University are established by the Board of Curators. The policies are established to ensure that the University funds are managed in accordance with Section of the Revised Statues of Missouri and prudent investment. The University s investment securities are held in book-entry form in brokerage, custody, and safe keeping accounts in the University s name. The general investment pools, managed by the University, averaged a total return (loss) of 13.7% and (0.2)%, including unrealized gains and losses, for the years ended June 30, 2017 and 2016, respectively. At June 30, 2017 and 2016, the Station held investments, by investment type, as follows: Carrying Value Carrying Value As of as of June 30, 2017 June 30, 2016 Debt Securities $ 1,816,447 $ 2,007,553 Corporate Stocks 246, ,227 Real Estate 43,694 37,836 Absolute Return 74,688 55,204 Money Market Funds 196, ,663 Risk Parity 637, ,451 Other Cash Equivalents 91,112 73,319 Total Investments and Cash and Cash Equivalents $ 3,106,804 $ 3,221,253 Interest Rate Risk Interest rate risk is the risk that changes in interest rates over time will adversely affect their fair value of an investment. Debt securities with longer maturities are likely to be subject to more variability in their fair values as a result of future changes in interest rates. The University does not have a formal policy that addresses interest rate risk; rather, such risk is managed by each individual investment manager, as applicable. The University and Pension Trust Funds have investments in asset-backed securities, which consist primarily of mortgage-backed securities guaranteed by U.S. agencies and corporate collateralized mortgage obligations. These securities are based on cash flows from principal and interest payments on the underlying securities. An asset-backed security may have repayments that vary significantly with changes in market interest rates. At June 30, 2017 and 2016, the Station s portion of the University s debt securities matures as follows: As of June 30, 2017 Less than More than No Carrying 1 Year 1-5 Years 6-10 Years 10 Years Maturity Value U.S. Treasury Obligations $ - $ 591,024 $ - $ - $ - $ 591,024 U.S. Agency Obligations - 204, ,400 Commingled Debt Securities , ,614 Asset-Backed Securities - 594, ,497 Foreign Government Obligations , ,249 U.S. Corporate Bonds & Notes - 156, ,158 Foreign Corporate Bonds and Notes - 94, ,505 Total $ - $1,640,584 $ 18,249 $ - $ 157,614 $1,816,447 15

18 As of June 30, 2016 Less than More than No Carrying 1 Year 1-5 Years 6-10 Years 10 Years Maturity Value U.S. Treasury Obligations $ - $ - $ 188,818 $ - $ - $ 188,818 U.S. Agency Obligations - 708, ,310 Commingled Debt Securities ,832 38,832 Asset-Backed Securities - 717, ,718 Foreign Government Obligations - 51, ,207 U.S. Corporate Bonds & Notes - 179, ,156 Foreign Corporate Bonds and Notes , ,512 Total $ - $1,656,391 $ 312,330 $ - $ 38,832 $2,007,553 Credit Risk Investments An investment s credit risk is the risk that the issuer or other counterparty will not meet its obligations. For investments in debt securities, this credit risk is typically measured by the credit quality ratings provided by a nationally recognized statistical rating organization such as Moody s Investors Service (Moody s) or Standard & Poor s Ratings Group (S&P). For General Investments, the University s policy is to hold corporate bonds rated A or better by S&P. Also within General Investments, commercial paper and other short-term securities should be rated A-1/P-1 or better. Disposition of securities whose ratings have been downgraded after purchase is generally left to the discretion of the respective investment manager after consideration of individual facts and circumstances. All holdings of commercial paper and variable rate demand notes were rated A-1/P-1 or better at June 30, 2017 and All holdings of money market funds were rated AAA at June 30, 2017 and Based on investment ratings provided by Moody s or S&P, the Station s portion of the University s credit risk exposure as of June 30, 2017 and 2016, is as follows: As of June 30, 2017 U.S. U.S. Foreign U.S. Foreign Commingled Treasury Agency Government Corporate Corporate Debt Obligations Obligations Obligations Debt Debt Securities Total U.S. Treasury Obligations $ 591,024 $ - $ - $ - $ - $ - $ 591,024 US Agency Obligations - 204, ,400 Mortgage-Backed Securities - 128, ,413 Debt Securities in Commingled Funds , ,614 Aaa/AAA - 61, ,356 Aa/AA - 19,077 1, ,030-22,415 A/A - 30,620 2,010 7,403 12,283-52,316 Baa/BBB - 27,078 1,571 32,534 16,993-78,176 Less than Baa/BBB - 269,698 12,979 82,080 60, ,109 Unrated - 58,255-33,522 3,847-95,624 Total $ 591,024 $ 798,897 $ 18,249 $ 156,158 $ 94,505 $ 157,614 $ 1,816,447 16