ASSOCIATED STUDENTS OF CALIFORNIA STATE UNIVERSITY, CHICO Chico, California FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION WITH INDEPENDENT AUDITORS REPORT June 30, 2013 With Comparative Totals as of June 30, 2012
TABLE OF CONTENTS June 30, 2013 and 2012 Page Number Independent Auditors Report 1 FINANCIAL SECTION Statements of Financial Position 4 Statements of Functional Activities and Changes in Net Assets 5 Statements of Cash Flows 6 Notes to the Financial Statements 7 SUPPLEMENTARY INFORMATION SECTION Schedules of Activities of the Auxiliary Activities Fund 20 Schedules of Activity Fee Program Operations 21 Schedules of Student Union Operating Fund Operations 22 Schedules of Source of Funding and Expenses for Sponsored Programs 23 Schedule of Investments and Savings 24 Schedules of Net Position (CSU Format) 25 Schedules of Revenues, Expenses and Changes in Net Position (CSU Format) 26 Schedule of Supplemental Information (CSU Format) 27
INDEPENDENT AUDITORS REPORT To the Board of Directors Chico, California We have audited the accompanying statement of financial position of the California State University, Chico (the Organization), a not-for-profit corporation, and a component unit of the California State University, Chico, as of June 30, 2013; the related statements of functional activities and changes in net assets; cash flows for the year then ended; and the related notes to the financial statements. The prior-year summarized comparative information has been derived from the Organization s 2012 financial statements; and, in our report dated September 17, 2012, we expressed an unmodified opinion on those financial statements. 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 an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are 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 auditors 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 Organization 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 Organization 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 Organization as of June 30, 2013, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1
INDEPENDENT AUDITORS REPORT Continued Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis as required by the California State University Chancellor s Office and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole. September 19, 2013 Chico, California 2
FINANCIAL SECTION
STATEMENTS OF FINANCIAL POSITION Student General Board Auxiliary Sponsored Campus Union (Activity Fee) Plant Designated Activities Programs Programs Operating Total All Funds June 30 Fund Fund Fund Fund Fund Fund Fund 2013 2012 ASSETS Cash on hand and in banks $ 160,842 $ - $ 140 $ 621,139 $ - $ 19,886 $ 81,322 $ 883,329 $ 599,810 Cash in Local Agency Investment Fund 1,893,436-828 3,624,242-117,415 3,454,798 9,090,719 8,417,268 Total Cash and Cash Equivalents 2,054,278-968 4,245,381-137,301 3,536,120 9,974,048 9,017,078 Accounts and other receivables - net 37,110 - - 1,394,740 72-7,692 1,439,614 1,102,917 Sponsored programs receivable - - - - 45,940 - - 45,940 122,523 Interfund receivables (payables) 172,954 - - (967,318) (44,900) - 839,264 - - Inventories - - - 1,373,356 - - - 1,373,356 1,793,798 Prepaid expenses 10,595-20 51,881 - - 39,641 102,137 68,060 Buildings and equipment - net of accumulated depreciation - 21,167-1,034,206 - - 691,291 1,746,664 1,824,296 Long-term deposits 9,441 - - 34,653 - - 39,285 83,379 55,521 Total Assets $ 2,284,378 $ 21,167 $ 988 $ 7,166,899 $ 1,112 $ 137,301 $ 5,153,293 $ 14,765,138 $ 13,984,193 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable $ 56,402 $ - $ - $ 421,128 $ 1,112 $ - $ 192,557 $ 671,199 $ 920,256 Accrued expenses 107,693 - - 864,914 - - 328,721 1,301,328 1,265,509 Deferred revenue 34,316 - - 178,776 - - 51,184 264,276 325,065 Deposits held for others - - - - - 137,301-137,301 132,842 Postretirement benefit obligation 232,711 - - 561,575 - - 419,318 1,213,604 1,127,537 Total Liabilities 431,122 - - 2,026,393 1,112 137,301 991,780 3,587,708 3,771,209 NET ASSETS Unrestricted 1,853,256 21,167 988 5,140,506 - - 4,161,513 11,177,430 10,212,984 Total Liabilities and Net Assets $ 2,284,378 $ 21,167 $ 988 $ 7,166,899 $ 1,112 $ 137,301 $ 5,153,293 $ 14,765,138 $ 13,984,193 The accompanying notes are an integral part of these financial statements. 4
STATEMENTS OF FUNCTIONAL ACTIVITIES AND CHANGES IN NET ASSETS Student General Board Auxiliary Sponsored Campus Union (Activity Fee) Plant Designated Activities Programs Programs Operating Total All Funds Years Ended June 30 Fund Fund Fund Fund Fund Fund Fund 2013 2012 UNRESTRICTED NET ASSETS REVENUES AND OTHER SUPPORT Wildcat store, dining service, and other sales $ - $ - $ - $ 16,848,545 $ - $ - $ - $ 16,848,545 $ 17,947,811 Student activity fees 1,968,514 - - - - - - 1,968,514 1,860,940 Return of student union surplus fees - - - - - - 4,057,824 4,057,824 3,818,239 Student programs 90,261 - - - - - 255,708 345,969 381,586 Sponsored and campus program receipts - - - - 543,307 173,434-716,741 746,453 Contract services 691,005 - - - - - - 691,005 703,956 Interest income 10,790 - - 18,975 - - 11,593 41,358 43,718 Gifts 4,564 - - - - - - 4,564 6,408 Other income 120,201-157 477,415 - - 389,744 987,517 740,926 Total Revenues and Other Support 2,885,335-157 17,344,935 543,307 173,434 4,714,869 25,662,037 26,250,037 EXPENSES Program services: Campus and student programs 1,115,758 - - - 543,307 173,434 229,637 2,062,136 2,014,933 Community programs 369,454 - - - - - - 369,454 365,500 Auxiliary activities - cost of sales - - - 9,297,284 - - - 9,297,284 10,186,266 Auxiliary activities - operating costs - - - 5,830,800 - - - 5,830,800 6,257,787 Facility operations - - - - - - 2,340,550 2,340,550 2,329,812 Total Program Services 1,485,212 - - 15,128,084 543,307 173,434 2,570,187 19,900,224 21,154,298 Supporting services: Contract services and operational support costs 1,162,505 - - 525,855 - - 586,894 2,275,254 2,396,493 Facility support costs - - - 1,176,950 - - 1,001,201 2,178,151 2,484,566 Depreciation expense 12,749 - - 173,387 - - 149,217 335,353 355,267 Total Support Services 1,175,254 - - 1,876,192 - - 1,737,312 4,788,758 5,236,326 Total Expenses 2,660,466 - - 17,004,276 543,307 173,434 4,307,499 24,688,982 26,390,624 Increase (Decrease) in Unrestricted Net Assets Before Transfers 224,869-157 340,659 - - 407,370 973,055 (140,587) TRANSFERS Plant fund transfer 10,333 (10,333) - - - - - - - OTHER Pension changes other than net periodic benefit cost (1,636) - - (3,960) - - (3,013) (8,609) (8,609) Increase (Decrease) in Unrestricted Net Assets 233,566 (10,333) 157 336,699 - - 404,357 964,446 (149,196) Unrestricted Net Assets - Beginning of Year 1,619,690 31,500 831 4,803,807 - - 3,757,156 10,212,984 10,362,180 Unrestricted Net Assets - End of Year $ 1,853,256 $ 21,167 $ 988 $ 5,140,506 $ - $ - $ 4,161,513 $ 11,177,430 $ 10,212,984 The accompanying notes are an integral part of these financial statements. 5
STATEMENTS OF CASH FLOWS Student General Board Auxiliary Sponsored Campus Union (Activity Fee) Plant Designated Activities Programs Programs Operating Total All Funds Years Ended June 30 Fund Fund Fund Fund Fund Fund Fund 2013 2012 Cash and Equivalents - Beginning of Year $ 1,829,860 $ - $ 831 $ 3,986,910 $ - $ 132,842 $ 3,066,635 $ 9,017,078 $ 8,094,060 CASH FLOWS FROM OPERATING ACTIVITIES Increase (Decrease) in net assets - net of transfers 233,566 (10,333) 157 336,699 - - 404,357 964,446 (149,196) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation - 12,749-173,387 - - 149,217 335,353 355,267 (Gain) Loss on sale or disposal of equipment - - - 1,961 - - (400) 1,561 (36,384) Decline in market value of inventory - - - 71,334 - - - 71,334 227,319 Increase (Decrease) due to noncash current assets: Receivables - net 4,842 - - (341,910) 76,511-443 (260,114) 362,916 Interfund receivables (payables) 514 - - 2,692 (68,822) - 65,616 - - Inventories - - - 349,108 - - - 349,108 230,756 Prepaid expenses (4,445) - (20) (1,255) - - (28,357) (34,077) (15,842) Long-term deposits (4,259) - - (13,464) - - (10,135) (27,858) 175,344 Increase (Decrease) due to noncash liabilities: Accounts payable (20,741) - - (215,913) (7,689) - (4,714) (249,057) 261,834 Accrued expenses 1,984 - - (6,282) - - 40,117 35,819 (71,296) Deferred revenue (2,568) - - (67,045) - - 8,824 (60,789) (10,793) Deposits held for others - - - - - 4,459-4,459 (465,497) Postretirement benefit obligation 15,525 - - 40,909 - - 29,633 86,067 94,599 Net Cash Provided by Operating Activities 224,418 2,416 137 330,221-4,459 654,601 1,216,252 959,027 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment - (2,416) - (75,390) - - (185,516) (263,322) (83,509) Proceeds from sale of equipment - - - 3,640 - - 400 4,040 47,500 Net Cash Used by Investing Activities - (2,416) - (71,750) - - (185,116) (259,282) (36,009) Increase in Cash and Equivalents 224,418-137 258,471-4,459 469,485 956,970 923,018 Cash and Equivalents - End of Year $ 2,054,278 $ - $ 968 $ 4,245,381 $ - $ 137,301 $ 3,536,120 $ 9,974,048 $ 9,017,078 The accompanying notes are an integral part of these financial statements. 6
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities The (the Organization), a not-for-profit organization of the students at (CSU, Chico), operates various auxiliary enterprises, including a student store (Wildcat Store) and campus dining services; receives student union and activity fees to support student-related programs; and acquires assets for the benefit of the student body and the campus community. The Organization also administers sponsored and campus programs for the benefit of the student body and the campus community. The accompanying financial statements combine the accounts and the results of operations of the General Fund, Plant Fund, Board Designated Fund, Auxiliary Activities Fund, Student Union Operating Fund, Campus Programs Fund, and Sponsored Programs Fund in accordance with reporting instructions received from the Office of the Chancellor of the California State University. Basis of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting and, accordingly, reflect all significant receivables, payables, and other liabilities. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles includes the use of estimates that affect the financial statements. Accordingly, actual results could differ from those estimates. Comparative Financial Information The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended June 30, 2012, from which the summarized information was derived. Fund Accounting The accounts of the Organization are maintained in accordance with the principles of fund accounting. Under fund accounting, resources for various purposes are classified for accounting and reporting purposes into funds established according to their nature and purpose. Separate accounts are maintained for each fund. In accordance with Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) 958-210-45, Not-For-Profit Balance Sheet Presentation, net assets are classified as unrestricted, temporarily restricted, or permanently restricted based on the absence or existence and type of donor-imposed restrictions. The funds are organized into seven categories as follows: 1. General (Activity Fee) Fund: This fund is used to account for activity fee funds and all financial resources except those required to be accounted for in another fund. 2. Plant Fund: This fund is used to account for acquisition of physical properties and funds expended and invested in physical properties for the General Fund. 7
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 3. Board Designated Fund: This fund is used to account for all amounts specifically allocated by the Board of Directors to certain programs. These funds have been used for Board of Director approved programs, which primarily benefit students. 4. Auxiliary Activities Fund: This fund is used to account for the operations of ongoing revenue-producing activities. Included in this fund are the operations of the Wildcat Store and Dining Services. 5. Sponsored Programs Fund: This fund reflects the activity of sponsored grants and contracts for instruction, research, and community service programs. These programs are funded by external agencies. 6. Campus Programs Fund: This fund accounts for all restricted funds except for Sponsored Program Funds. It includes resources administered by the Organization on behalf of campus organizations (agency accounts). 7. Student Union Operating Fund: This fund accounts for the programs and operations of the Bell Memorial Union and the Wildcat Recreation Center buildings. Cash and Cash Equivalents The Organization considers cash and cash equivalents to include cash on hand and commercial checking and savings accounts, time certificates of deposit, and other short-term deposits in the Local Agency Investment Fund (LAIF). At times, such investments may be in excess of the Federal Deposit Insurance Corporation insurance limits of $250,000. The Organization secured a contract for deposit of monies with Tri Counties Bank whereby all deposits will be subject to the security provided to local public agencies. The Organization has a significant concentration of cash invested in LAIF. The LAIF pool is managed by the State of California Treasurer s Office with oversight provided by the Local Investment Advisory Board (LIAB). Fair Value Measurements The Organization accounts for certain assets and liabilities in accordance with FASB ASC 820, Fair Value Measurements and Disclosures. The Organization measures some assets for fair value on a recurring basis as described in note 2. The Organization may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are adjusted for the lower of cost or market, such as an inventory valuation. The Organization adjusted a portion of the Wildcat Store inventory in accordance with the lower of cost or market method as of June 30, 2013 and 2012. The Organization classifies its fair value assets and liabilities into a hierarchy of three levels based on the markets in which they are traded and the reliability of the assumptions used to determine fair value. The asset or liability measurement level within the hierarchy is based on the lowest level of any assumption that is significant to the measurement. 8
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 Valuations within the hierarchy levels are based upon the following: Level 1: Level 2: Level 3: Quoted market prices for identical instruments traded in active exchange markets. Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and modelbased valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data. Model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect an organization s estimates of assumptions that market participants would use on pricing an asset or liability. Valuation techniques include management judgment and estimation which may be significant. Accounts Receivable Financial instruments that potentially subject the Organization to credit risk are primarily related-party receivables and amounts due from vendors and publishers for Wildcat Store transactions. Based on the past payment history, the Organization writes off all balances over 12 months. At June 30, 2013 and 2012, the allowance for doubtful accounts balance was $1,594 and $5,742, respectively. Interfund Receivables and Payables The Organization records direct interfund receivables and payables as they occur. Inventories The Wildcat Store inventory is stated at the lower of cost or market as determined by the retail method applied on a first-in, first-out basis. Food and supplies inventories are stated at the lower of cost or market on a first-in, first-out basis. Building and Equipment Building and equipment are stated at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Planned major maintenance is accounted for using the direct expense method. Expenditures for new construction, major renewals and replacements, and equipment costing over $2,500 are capitalized. Deposits Held for Others The Organization administers funds for certain student and related organizations. The deposits held for others represent the amounts of funds held for student and related organizations. The Organization receives revenue for administering these funds. Revenue Recognition Revenue is recognized on the accrual basis of accounting. Student Union fees are recognized as revenue when they are transferred from CSU, Chico. Sponsored programs revenue from grants and contracts is recognized as funds are expended. Grants and Contracts Grants and contracts are received from federal and state governmental agencies and various other organizations. The Organization receives an administration fee for indirect overhead costs and recognizes this fee as income over the life of the grant or contract as a percentage of total expenditures or salaries and wages as specified in the grant or contract. 9
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 Endowment An endowment of $736,789 and $710,935 is held on behalf of the Organization by the University Foundation, at June 30, 2013 and 2012, respectively. The endowment allows for principal withdrawal upon approval by the Board of Directors. However, the intent of the endowment is to allow it to grow to a principal balance of $1 million, which would be held in perpetuity. The earnings would then be used to support student programs and services. Shipping and Handling Costs Shipping and handling costs are included in cost of sales. Income Taxes The Organization is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. The Organization has been classified as an organization that is not a private foundation under Section 509(a)(2). The Organization has not entered into any activities that would jeopardize its tax-exempt status. Income from certain activities not directly related to the Organization s taxexempt purpose is subject to taxation as unrelated business income. However, expenses associated with the unrelated business income exceed the income or are insignificant. Accordingly, no provision for income taxes is required. The Organization files exempt organization returns in the U.S. federal and California jurisdictions. The federal returns for tax years 2008 and beyond, and the California returns for tax years 2007 and beyond, remain subject to examination by the taxing authorities. The Organization accounts for income taxes in accordance with FASB ASC 740, Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in the Organization s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740, Income Taxes, also provides guidance on derecognition and measurement of a tax position taken or expected to be taken in a tax return. Based on this analysis, a liability is recorded if uncertain tax benefits have been received. The Organization s practice is to recognize interest and penalties, if any, related to uncertain tax positions in the tax expense. There were no uncertain tax positions identified or related interest and penalties recorded as of June 30, 2013, and the Organization does not expect this to change significantly over the next 12 months. Reclassifications Certain balances in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements. These reclassifications have not had any impact on net assets. Subsequent Events Management has evaluated subsequent events through September 19, 2013, the date which the report was available to be issued. 10
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 2. FAIR VALUE MEASUREMENTS The following is a schedule of the Organization s assets at fair value, by level within the fair value hierarchy. Level 1 Level 2 Level 3 June 30, 2013 Local Agency Investment Fund $ - $ 9,090,719 $ - June 30, 2012 Local Agency Investment Fund $ - $ 8,417,268 $ - The fair value of the LAIF pool at June 30, 2013, was 100.03% of the carrying value and is deemed to not represent a material difference. The LAIF pool includes structured notes and asset-backed securities representing 1.96% of the total portfolio, which is subject to market risk as interest rates fluctuate. 3. INVENTORIES Inventories consisted of the following: 2013 2012 Wildcat Store inventory $ 1,290,607 $ 1,745,719 Food and supplies 82,749 48,079 Total Inventories $ 1,373,356 $ 1,793,798 The Organization reduced a portion of the Wildcat Store textbook inventory to its estimated lower of cost or market value. The statement of functional activities for the Auxiliary Activities Fund reflects expense for the years ended June 30, 2013 and 2012, totaling $71,334 and $227,319, respectively. The estimated market value was obtained by comparing textbook prices to other retailers and is considered a Level 2 valuation method. As market values continue to fluctuate, actual values may differ from this estimate. 11
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 4. BUILDINGS AND EQUIPMENT - NET Buildings and equipment consisted of the following: 2013 2012 Building improvements $ 2,338,311 $ 2,256,094 Equipment and furnishings 3,579,415 3,554,275 Vehicles 377,125 350,092 Subtotal 6,294,851 6,160,461 Less: Accumulated depreciation 4,548,187 4,336,165 Buildings and Equipment - Net $ 1,746,664 $ 1,824,296 Depreciation expense charged to operations for the years ended June 30, 2013 and 2012, amounted to $335,353 and $355,267, respectively. The Organization entered into a contract for services, which included a provision to receive equipment. Amounts include donated equipment received in 2011 in the amount of $161,772, and the related deferred revenue, which will be recognized over the four-year life of the contract. 5. POSTRETIREMENT BENEFIT OBLIGATION The Organization sponsors a defined benefit postretirement plan that covers both salaried and nonsalaried career employees. The postretirement plan provides an extension of medical and dental benefits provided after an employee retires. The postretirement plan is contributory with retiree contributions adjusted annually. To be eligible for the postretirement plan, the employees have a vesting period to 10 years of credited service and attainment of age 60 with the Organization. The accumulated postretirement benefit obligation is a standardized measure of the present value of postretirement benefits estimated to be payable in the future as a result of employee service to date. The postretirement benefit obligation at June 30, 2013, was computed based on an actuarial valuation performed as of July 1, 2011, with estimates for costs and amortization through June 30, 2013, including consideration of the 2011 postretirement plan amendment. As of the June 30, 2011, plan amendment, the postretirement plan provides a monthly fixed participant benefit of $200. Retirees previously enrolled in the postretirement plan will continue to receive benefits of $200 or $400 for a participant or a participant and spouse, respectively. The postretirement plan will be funded on the pay-as-you-go basis. 12
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 The following table sets forth the changes in the postretirement benefit obligation and the funded status of the postretirement plan: 2013 2012 CHANGE IN POSTRETIREMENT BENEFIT OBLIGATION Postretirement Benefit Obligation - Beginning of Year $ 1,127,537 $ 1,032,938 Service cost 67,881 67,881 Interest cost 55,028 55,028 Benefits paid (36,842) (28,310) Postretirement Benefit Obligation - End of Year $ 1,213,604 $ 1,127,537 FUNDED STATUS Postretirement Benefit Obligation - End of Year $ 1,213,604 $ 1,127,537 Unamortized prior service cost 377,522 419,469 Unrecognized net actuarial loss (503,345) (536,683) Items Not Yet Recognized as a Component of Net Periodic Benefit Cost (125,823) (117,214) Accrued Benefit Cost $ 1,087,781 $ 1,010,323 Funded Status - End of Year $ (1,213,604) $ (1,127,537) The components of net periodic benefit cost are as follows: 2013 2012 NET PERIODIC BENEFIT COST Service cost $ 67,881 $ 67,881 Interest cost 55,028 55,028 Amortization of prior service costs (41,947) (41,947) Amortization of net actuarial loss 33,338 33,338 Net Periodic Benefit Cost $ 114,300 $ 114,300 The expected amortization to be recognized next year is as follows: Amounts included in net assets that are expected to be recognized as net periodic benefit cost during fiscal year ending June 30, 2014: Amortization of prior service cost $ (41,947) Amortization of net actuarial loss 33,338 Total Amortization Expected to be Included in Net Periodic Benefit Cost - June 30, 2014 $ (8,609) 13
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 The expected benefits to be paid over the next eight years are as follows: Years Ending 2014 $ 45,637 2015 56,824 2016 61,200 2017 64,747 2018 72,171 2019-2021 288,093 Total $ 588,672 The assumptions used to determine the postretirement benefit obligation are as follows: 2013 2012 WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE THE BENEFIT OBLIGATION Discount rate 5.40% 5.40% Health care cost trend rate assumed for next year 7.00% 7.30% Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.50% 5.50% Years until the rate reaches the ultimate trend rate 5 years 6 years 14
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 6. NET ASSET RESERVES The Board of Directors of the Organization, under guidelines established by the Chancellor s Office, developed reserve policies for net assets. Future increases in net assets will also be reserved by these policies. Net asset reserves at June 30, 2013, are as follows: General (Activity Fee) Fund Plant Fund Board Designated Fund Auxiliary Activities Fund Student Union Operating Fund Total Investments in plant and equipment $ - $ 21,167 $ - $ 1,034,206 $ 691,291 $ 1,746,664 Reserve for facilities upgrade - - - 925,000-925,000 Reserve for working capital 200,000 - - 339,641 1,382,426 1,922,067 Investment in inventory - - - 1,404,461-1,404,461 Contingency reserve 112,131 - - 93,063 82,946 288,140 Capital replacement reserve 22,080 - - 150,000 250,000 422,080 Reserve for allocated funds - - 988 - - 988 Copier reserve 51,519 - - - - 51,519 Total Net Asset Reserves 385,730 21,167 988 3,946,371 2,406,663 6,760,919 Available for general purposes 1,467,526 - - 1,194,135 1,754,850 4,416,511 Total Net Assets $ 1,853,256 $ 21,167 $ 988 $ 5,140,506 $ 4,161,513 $ 11,177,430 15
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 7. STUDENT UNION FEES Construction of the Bell Memorial Union (BMU) was authorized by a student vote in 1964, and the original building was completed in 1969. Legal title to the building is retained by the California State University Trustees (the Trustees). Of the $1,500,000 in original building construction costs, $1,100,000 was financed with the original debt fully repaid in 2006. In spring 1996, a referendum was approved by the students at CSU, Chico, to increase the Student Union fee for funding to expand and remodel the BMU. Additionally, the Organization s Board of Directors approved a project to provide space in the remodeled Student Union for the Wildcat Store. Construction of the projects began in December 1998 with final completion in July 2001 for a total of $33,433,639 in building construction and financing costs. Of the total costs, $23,370,000 was financed by the issuance of revenue bonds. In August 2007, the revenue bonds were refinanced with system-wide revenue bonds in the amount of $18,525,000, which bear interest at an average coupon rate of 5.0%. The systemwide revenue bonds are payable in annual principal and interest installments of approximately $1,421,000 until the entire debt is repaid in 2029. This refinancing decentralized the Student Union fees so they can be used for operations in the year collected. The decentralized bonds do not require reserves. The system-wide revenue bonds are not a liability of the State of California, but are a special obligation of the Trustees payable from and secured by the mandatory Student Body Center fee. In spring 2005, a referendum was approved by the students at CSU, Chico, to increase the Student Union fee by $175 per semester beginning when the Wildcat Recreation Center (the WREC) opened. This fee was approved to provide debt service for the construction costs and operating expenses for the WREC. Construction began in July 2007 with completion in August 2009. Construction costs for the WREC were approximately $68,665,000. Funds for construction were provided by the sale of system-wide revenue bonds in the amount of $66,425,000, interest earned during construction and capitalized interest earnings of $562,000, net bond premium of $930,000, and student fees of $748,000. These bonds are not a liability of the State of California, but are a special obligation of the Trustees payable from and secured by the mandatory Student Body Center fee. The students at CSU, Chico, voted to require that students pay Student Union fees to service the above described debt, through the mandatory Student Body Center fee, and to operate the Student Union and the WREC. Student Union fees totaled $11,645,187 and $11,018,811 for the years ended June 30, 2013 and 2012, respectively. CSU, Chico, collects Student Union fees and transfers to the Trustees the amount necessary to fund the annual debt service requirement. The remaining student fees are available for transfer to the Organization after the reserve requirements of the Chancellor s Office Executive Order No. 994 have been met and any outstanding liabilities to CSU, Chico, have been paid. The Auxiliary Activities Fund reimburses the Student Union for the space it occupies in proportion to the Trustees annual debt service. 16
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 CSU, Chico, and the Chancellor s Office held reserves at June 30, 2013, as follows: Revenue fund reserve $ 13,218,092 Repair and replacement reserve 2,373,475 Total Reserves Held by CSU, Chico, and Chancellor's Office $ 15,591,567 8. RETIREMENT PLANS The Organization participates in the California Public Employees Retirement System (CalPERS). Annually, CalPERS determines the required employer contribution rate for each participating agency. The required contribution rate for the Organization was 13.493% and 13.373% for years ended June 30, 2013 and 2012, respectively. To participate in the CalPERS plan, employees hired prior to 2013 are required to contribute 7.000% of their earnings. Employees hired on January 1, 2013, or later are required to contribute 6.250% of their earnings. The Board of Directors agreed to contribute 2.000% of the employees required contribution bringing the total employer contribution rate to 15.493%. Expense recognized for the CalPERS plan amounted to $670,472 and $698,908 for the years ended June 30, 2013 and 2012, respectively. The Organization also sponsors two 401(k) profit sharing plans with one plan servicing exempt employees and one plan servicing non-exempt employees. The plans cover substantially all employees who attained the age of 21 and completed a minimum of 1,000 hours of service per year. Employees may direct contributions from earnings into the 401(k) profit sharing plans. Employer contributions into the plans are at the discretion of the Board of Directors; there were no contributions in 2013 and 2012. Administrative expenses recognized for the 401(k) profit sharing plans amounted to $44,381 and $38,125 for the years ended June 30, 2013 and 2012, respectively. 9. RELATED-PARTY TRANSACTIONS Campus Food Service Agreement Under contract with CSU, Chico, the Organization provides residential dining services, in the state-owned residence halls, for the students of the six campus residence halls. The contract for the 2012-13 fiscal year was negotiated and signed by both parties on July 11, 2012. The contract for 2013-14 was negotiated and signed by both parties on May 24, 2013. The contracts, for both years, provide for reimbursement of all operational costs plus a fixed fee of $425,000. Operating Lease and Facility Use Agreements The Organization operates as an auxiliary organization to CSU, Chico, under an operating lease agreement negotiated every five years. An operating lease agreement, ending June 30, 2014, was negotiated and signed by both parties on November 16, 2009, whereby $300,000 plus 2.25% of Wildcat Store and dining service cash operations net sales are payable at the end of each fiscal year. As required by the operating lease agreement, CSU, Chico, directs the operating lease payments to the CSU, Chico Research Foundation (the Research Foundation). 17
NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 and 2012 The Organization uses certain CSU, Chico, facilities under lease agreements requiring rental payments or space trade. These facilities include the BMU (nominal), Residence Dining, certain warehouse space, and Creekside Coffee. CSU, Chico, provides facilities for the Child Development Laboratory at no cost. Business, Financial, and Information Technology Services The Organization, by contract, provides business and financial services as well as information technology services to the Research Foundation. The following is a schedule of transactions with related parties: 2013 2012 TRANSACTIONS WITH CSU, CHICO Payments to University for salaries of University personnel working on contracts, grants, and other programs $ - $ 7,358 Payments to University for other than salaries of University personnel $ 1,157,553 $ 1,380,020 Payments received from University for services, space, and programs $ 11,024,345 $ 10,125,912 Gifts-in-kind to the University from Auxiliary Organizations $ - $ - Gifts (cash or assets) to the University from recognized Auxiliary Organization $ 207,659 $ 38,184 Accounts payable to University $ (114,449) $ (85,221) Other amounts payable to University $ - $ (832) Accounts receivable from University $ 55,625 $ 97,025 Other amounts receivable from University $ 502,281 $ 230,265 TRANSACTIONS WITH THE RESEARCH FOUNDATON Revenue for business, financial, and information technology services $ 691,005 $ 685,156 Accounts receivable from (payable to) Research Foundation $ (46,593) $ (33,837) Accounts payable to Research Foundation for operating lease and facility use agreements with CSU, Chico $ (533,180) $ (562,285) 18
SUPPLEMENTARY INFORMATION SECTION
SCHEDULES OF ACTIVITIES OF THE AUXILIARY ACTIVITIES FUND Dining Services Cash Residence Combined Total Years Ended June 30 Wildcat Store Operations Dining Halls Total 2013 2012 Sales $ 9,503,414 $ 3,545,270 $ 3,799,861 $ 7,345,131 $ 16,848,545 $ 17,947,811 Cost of sales 6,698,200 1,377,685 1,221,399 2,599,084 9,297,284 10,186,266 Gross Profit 2,805,214 2,167,585 2,578,462 4,746,047 7,551,261 7,761,545 OPERATING EXPENSES Salaries and wages 995,305 926,664 1,257,277 2,183,941 3,179,246 3,482,886 Employee benefits 308,071 278,014 561,923 839,937 1,148,008 1,161,697 Adminstrative, accounting, and professional 254,579 130,617 140,659 271,276 525,855 575,691 Utilities 36,938 128,735-128,735 165,673 172,564 Telephone 35,010 12,012 3,847 15,859 50,869 56,054 Depreciation 86,762 83,615 3,010 86,625 173,387 192,916 Travel and meetings 5,413 592 1,881 2,473 7,886 9,488 Repairs and maintenance 93,653 214,147 22,533 236,680 330,333 363,571 Operating supplies 40,001 142,579 120,411 262,990 302,991 276,808 Rent 416,083 185,798-185,798 601,881 786,662 Contributions to CSU, Chico 388,041 145,139-145,139 533,180 562,285 Postage and freight 1,279 - - - 1,279 1,307 Insurance 28,652 26,718 23,693 50,411 79,063 82,719 Advertising 26,395 14,359 708 15,067 41,462 65,565 Wildcat and credit card charges 175,986 79,169 4,001 83,170 259,156 267,618 Other 82,388 82,955 13,519 96,474 178,862 229,177 Total Operating Expenses 2,974,556 2,451,113 2,153,462 4,604,575 7,579,131 8,287,008 Income (Loss) From Operations (169,342) (283,528) 425,000 141,472 (27,870) (525,463) Other income 453,184 114,540-114,540 567,724 526,156 Other expenses (118,167) (9,694) - (9,694) (127,861) (144,901) Decline in market value of inventory (71,334) - - - (71,334) (227,319) Pension changes other than net periodic benefit cost (1,463) (2,497) - (2,497) (3,960) (3,960) Net Income (Loss) $ 92,878 $ (181,179) $ 425,000 $ 243,821 $ 336,699 $ (375,487) 20
SCHEDULES OF ACTIVITY FEE PROGRAM OPERATIONS Years Ended June 30 2013 2012 REVENUES ACTIVITY FEES $ 1,968,514 $ 1,860,940 PROGRAMS Campus programs 495,190 536,752 Student programs - - Community programs 98,253 91,240 Government affairs 5,386 5,231 Interest income 10,532 10,726 Administrative 46,480 34,410 Total Programs 655,841 678,359 Total Revenues 2,624,355 2,539,299 EXPENSES PROGRAMS Campus programs 1,287,543 1,244,258 Student programs 105,652 108,037 Community programs 369,454 365,500 Government affairs 209,531 209,628 Administrative 427,306 465,953 Total Expenses 2,399,486 2,393,376 Excess Revenues From Operations 224,869 145,923 Pension changes other than net periodic benefit cost (1,636) (1,636) Excess Revenues $ 223,233 $ 144,287 21
SCHEDULES OF STUDENT UNION OPERATING FUND OPERATIONS California State University Chico Years Ended June 30 2013 2012 REVENUES RETURN OF SURPLUS REVENUE FUNDS $ 4,057,824 $ 3,818,239 REVENUE FROM NONCOMMERCIAL OPERATIONS Recreation programming 255,708 291,958 Interest income 11,593 13,395 Other income 389,744 361,947 Reimbursements 937,167 1,129,083 Total Revenue From Noncommercial Operations 1,594,212 1,796,383 Total Revenues 5,652,036 5,614,622 EXPENSES Salaries and wages 2,145,162 2,259,951 Employee benefits 888,652 958,459 Operating expenses: Travel 71,418 62,958 Insurance 63,295 64,671 Supplies 198,721 200,295 Communications 42,176 43,403 Printing and advertising 19,471 17,627 Depreciation 149,217 146,654 Accounting and other professional services 586,894 616,088 Repairs and maintenance 223,236 248,731 Program expenses 229,637 229,015 Utilities 515,949 565,354 Other miscellaneous 110,838 116,497 Total Expenses 5,244,666 5,529,703 Excess Revenues From Operations 407,370 84,919 Pension changes other than net periodic benefit cost (3,013) (3,013) Excess Revenues $ 404,357 $ 81,906 Classification in this schedule is in accordance with the Chancellor s Office instructions and is not the same as in the statement of activities. Various custodial and utility reimbursements from the other Associated Students areas and the related Student Union operating expenses are reflected above. The reimbursement is offset against the expense on the basic financial statements. 22
SCHEDULES OF SOURCE OF FUNDING AND EXPENSES FOR SPONSORED PROGRAMS Years Ended June 30 2013 2012 SOURCE OF FUNDING (DIRECT) Federal funds $ 203,828 $ 213,111 State of California and local governments 315,060 323,919 Total Direct Sources 518,888 537,030 SOURCE OF INDIRECT COST REIMBURSEMENTS Federal government 10,127 10,613 State of California and local governments 14,292 16,407 Total Indirect Cost Reimbursements 24,419 27,020 Total Funding $ 543,307 $ 564,050 DIRECT EXPENSES Personnel services: Salaries and wages $ 300,591 $ 328,693 Employee benefits 132,318 131,683 Operating expenses 85,979 76,654 Total Direct Expenses 518,888 537,030 INDIRECT EXPENSES Personnel services: Salaries and wages 13,181 14,396 Employee benefits 7,680 8,457 Operating expenses 3,558 4,167 Total Indirect Expenses 24,419 27,020 Total Expenses $ 543,307 $ 564,050 23
SCHEDULE OF INVESTMENTS AND SAVINGS June 30, 2013 Cost Market Value Date of Purchase Maturity Date Interest Rate SHORT-TERM INVESTMENT POOLS Local Agency Investment Fund - State Pool $ 9,090,719 $ 9,090,719 Various On demand 0.30% * *Interest rates vary. Stated rate is approximate average for the year. 24
SCHEDULES OF NET POSITION (CSU FORMAT) June 30 2013 2012 ASSETS CURRENT ASSETS Cash and cash equivalents $ 883,329 $ 599,810 Short-term investments 9,090,719 8,417,268 Accounts receivable - net 1,485,554 1,225,440 Prepaid expenses and other assets 1,475,493 1,861,858 Total Current Assets 12,935,095 12,104,376 NONCURRENT ASSETS Capital assets - net 1,746,664 1,824,296 Other assets 83,379 55,521 Total Noncurrent Assets 1,830,043 1,879,817 Total Assets 14,765,138 13,984,193 LIABILITIES CURRENT LIABILITIES Accounts payable 671,199 920,256 Accrued salaries and benefits payable 429,554 347,557 Accrued compensated absences 252,625 248,501 Unearned revenue 264,276 325,065 Other liabilities 541,431 582,436 Total Current Liabilities 2,159,085 2,423,815 NONCURRENT LIABILITIES Accrued compensated absences - net of current portion 77,718 87,015 Depository accounts 137,301 132,842 Other postemployment benefits obligation 1,213,604 1,127,537 Total Noncurrent Liabilities 1,428,623 1,347,394 Total Liabilities 3,587,708 3,771,209 NET POSITION Net investment in capital assets 1,746,664 1,824,296 Unrestricted 9,430,766 8,388,688 Total Net Position $ 11,177,430 $ 10,212,984 25
SCHEDULES OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (CSU FORMAT) Years Ended June 30 2013 2012 REVENUES OPERATING REVENUES Student tuition and fees $ 6,026,338 $ 5,679,179 Grants and contracts - noncapital: Federal 213,955 223,724 State 326,352 337,326 Local 3,000 3,000 Sales and service of auxiliary enterprises 17,325,960 18,227,673 Other operating revenues 1,547,076 1,546,606 Total Operating Revenues 25,442,681 26,017,508 EXPENSES OPERATING EXPENSES Public services 369,454 365,500 Student services 2,928,117 3,131,463 Institutional support 1,689,948 1,788,699 Operation and maintenance of plant 2,159,128 2,051,021 Student grants and scholarships 202,659 91,012 Auxiliary enterprise expenditures 16,830,889 18,425,259 Depreciation and amortization 335,353 355,267 Total Operating Expenditures 24,515,548 26,208,221 Operating Income (Loss) 927,133 (190,713) NONOPERATING REVENUES (EXPENSES) Gifts - noncapital 4,564 6,408 Investment income 41,358 43,718 Other nonoperating expenses (8,609) (8,609) Net Nonoperating Revenues 37,313 41,517 Increase (Decrease) in Net Position 964,446 (149,196) Net Position - Beginning of Year 10,212,984 10,362,180 Net Position - End of Year $ 11,177,430 $ 10,212,984 26
SCHEDULE OF SUPPLEMENTAL INFORMATION (CSU FORMAT) Current Unrestricted Noncurrent Unrestricted Total COMPOSITION OF INVESTMENTS AT JUNE 30, 2013 State of California Local Agency Investment Fund $ 9,090,719 $ - $ 9,090,719 Current Unrestricted Noncurrent Unrestricted Total INVESTMENTS HELD BY THE UNIVERSITY UNDER CONTRACTUAL AGREEMENT AT JUNE 30, 2013 Portion of Investments Held by the University Under Contractual Agreements $ - $ - $ - Balance July 1, 2012 Additions Reductions Transfers Balance June 30, 2013 COMPOSITION OF CAPITAL ASSETS AT JUNE 30, 2013 NONDEPRECIABLE CAPITAL ASSETS Works of art and historical treasures $ 9,117 $ - $ - $ - $ 9,117 Total Nondepreciable Capital Assets 9,117 - - - 9,117 DEPRECIABLE CAPITAL ASSETS Buildings and building improvements 2,256,094 87,162 (4,945) - 2,338,311 Equipment 3,895,250 176,160 (123,987) - 3,947,423 Total Depreciable Capital Assets 6,151,344 263,322 (128,932) - 6,285,734 Total Cost 6,160,461 263,322 (128,932) - 6,294,851 LESS: ACCUMULATED DEPRECIATION Buildings and building improvements (1,345,165) (96,264) 4,945 - (1,436,484) Equipment (2,991,000) (239,089) 118,386 - (3,111,703) Total Accumulated Depreciation (4,336,165) (335,353) 123,331 - (4,548,187) Net Capital Assets $ 1,824,296 $ (72,031) $ (5,601) $ - $ 1,746,664 27
SCHEDULE OF SUPPLEMENTAL INFORMATION (CSU FORMAT) Detail of depreciation and amortization expense for the year ended June 30, 2013: Depreciation and Amortization Expense Related to Capital Assets $ 335,353 Long-term liabilities activity schedule: Description Balance July 1, 2012 Additions Reductions Balance June 30, 2013 Current Portion Long-Term Portion ACCRUED COMPENSATED ABSENCES $ 335,516 $ 353,575 $ (358,748) $ 330,343 $ 252,625 $ 77,718 June 30, 2013 Auxiliary Organizations FASB NET POSITION - NET INVESTMENT IN CAPITAL ASSETS Capital assets - net of accumulated depreciation $ 1,746,664 Net Position - Net Investment in Capital Assets $ 1,746,664 June 30, 2013 Amount OTHER POSTEMPLOYMENT BENEFITS OBLIGATION (OPEB) Annual Required Contribution (ARC) $ 122,909 Contributions during the year (36,842) Increase in Net OPEB Obligation (NOO) $ 86,067 NOO - Beginning of Year $ 1,127,537 NOO - End of Year $ 1,213,604 28