Minnesota State University Moorhead

Report
Minnesota State Colleges and
Universities
Board of Trustees Meeting
November 8, 2005
Table of Contents
• Audit Results, Reports Issued and New Standards
Implemented, Including Component Units
• Management Recommendations
• Required Communication
• Financial Statement Highlights
• Questions and Open Discussion
Audit Results – Reports Issued
• Independent Auditors’ Report on Financial Statements (System Wide)
– Unqualified Opinion.
• Reasonable assurances on statements, which are responsibility of
management
• Report References Other Campus Auditors for 2005 and 2004.
• Statistical sampling used on most accounts – ranging from 25 to 100.
• Independent Auditors’ report on Financial Statements (Revenue Bond)
– Unqualified Opinion.
• Report on Internal Control Over Financial Reporting and on
Compliance Based Upon the Audit Performed in Accordance With
Government Auditing Standards – no findings or material weaknesses,
except for revenue fund debt service reserves were not deposit by
March 1, 2005, the required date.
New Standards
• GASB 40 – Deposit and Investment Risk
Disclosures. Requires additional disclosure
about credit quality and risks in MnSCU’s cash
and investment portfolio. Covers
– Credit risk
– Concentration risk
– Interest rate risk
– Foreign currency risk
Component Units
• As required by GASB Statement 39.
• Includes University Foundations that are “Significant”.
Includes Southwest, Winona, Metropolitan State, Mankato,
Bemidji, Moorhead, Century, Fergus Area and St. Cloud.
• Total Assets at June 30, 2005 totaled $130,758,000.
• Total Revenues recognized for the year ended June 30,
2005 totaled $26,529,000.
• Shown as separate statement in the consolidated MnSCU
report to allow the financial statement readers to
distinguish between MnSCU and the Foundations.
Management Recommendations
• System Access and Security – Continue to review applicable system
access rights at campus level to reduce incompatibilities.
• Financial Reporting Process and Structure – Continue to implement
financial management and audit assurance plan and train and pass
down responsibilities to campus level.
• Accounting Disciplines – Explore interim financial reporting to assist
in year end work load, given the inherent limitations of the current
system.
• Compensated Absences – Review calculation tools to more accurately
calculate liability at year end.
• GASB Statement 40 – Develop and implement policies and
procedures to address requirements of the statement.
• Computer Processing Environment/Information Protection Plan –
continue to implement OLA recommendations for security concerns
(consistency and adequacy of security, system privileges, wireless
networks, data warehouse security.)
Management Recommendations
• New Accounting Pronouncements –
– GASB 45 – Post Employment Benefits – effective June
30, 2008.
– GASB 40 – Deposit and Investment Risk Disclosures –
effective June 30, 2005.
– GASB 42 – Impairment of Capital Assets and for
Insurance recoveries – effective June 30, 2006.
– GASB 46 – Net Asset restrictions – effective June 30,
2006.
– GASB 47 – Accounting for Termination Benefits –
effective June 30, 2006.
Required Communication
•
•
•
•
•
•
•
•
•
OUR RESPONSIBILITY UNDER GENERALLY ACCEPTED AUDITING
STANDARDS AND GOVERNMENT AUDITING STANDARDS – reasonable but not
absolute assurance that financial statements are free of material misstatement. Sampling
used in testing. No opinion on internal controls.
SIGNIFICANT ACCOUNTING POLICIES – Note 1 to the Financial Statements
ACCOUNTING ESTIMATES - the most sensitive estimates were:
Depreciation, Allowance for uncollectible A/R, Scholarship Allowances (Direct Method
– a change from 2004, which was restated as well), Workers Compensation Claims,
Compensated Absences - reasonable and consistent, recalculations required for 2005.
AUDIT ADJUSTMENTS - adjustments for compensated absences.
DISAGREEMENTS WITH MANAGEMENT - none
CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS – campus
auditors via weekly conference calls.
ISSUES DISCUSSED PRIOR TO RETENTION OF INDEPENDENT AUDITORS
- normal
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT – compensated
absences required recalculation and additional testing
Financial Statement Highlights - Revenues
• Operating Revenue up 8.6% to $817,022,000.
• Tuition up 13.6%, Fees up 2.5%, sales up 2.8%,
room and board up 6.6%.
• Scholarship allowance up 6.5% to $156,312,000 –
restated for 2004 as a result of change in
calculation method, which allocated more
scholarship aid to tuition and fees, less to students.
• Grant Revenue: Federal flat at $166M, State up
10.3% , private grants down 7.2% to $12,717,000.
Revenues - 2003 through 2005
$700,000,000
$600,000,000
$500,000,000
$592,802,000
$559,631,000
$449,917,000
$546,444,000
$501,492,000
$444,872,000
$400,000,000
$300,000,000
$200,000,000
$100,000,000
$165,993,000
$161,352,000
$86,364,000
$75,421,000
$50,875,000
$46,454,000
$64,793,000
$71,720,000
$61,526,000
$30,845,000
$165,928,000
$76,736,000
$66,367,000
$36,952,000
$28,690,000
$2003
2004
2005
Operating Appropriations
Tuition, Auxiliary and Sales, Net
Federal Grants
State and Private Grants
Restricted Student Payments, Net
Other
Capital Appropriations
2005 Revenues - $1,422,609,000
Donated Assets
Capital Appropriations 1,687,000
$36,952,000
0%
3%
Investment Income
$7,787,000
1%
T uition, Auxiliary and Sales, Net
$501,492,000
35%
Operating Appropriations
$546,444,000
38%
Other
$19,216,000
1%
State and Private Grants
$76,736,000
5%
Restricted Student Payments, Net
$66,367,000
5%
Federal Grants
$165,928,000
12%
2004 Revenues - $1,399,380,000
Capital Appropriations
$64,793,000
5%
Investment Income
$4,152,000
0%
T uition, Auxiliary and Sales, Net
$444,872,000
32%
Operating Appropriations
$559,631,000
39%
Restricted Student Payments, Net
$61,526,000
4%
Other
$24,642,000
State and Private Grants
2%
$71,720,000
5%
Federal Grants
$165,993,000
12%
Financial Statement Overview – Expenses
• Operating Expenses increased 4.66% to
$1,377,466,000
• Salaries up 3.5% to $954,071,000
• Expenses increasing in 2005 include: Purchased
Services (+6.7%), Supplies (+6.1%), Depreciation
(+3.5%), and Other (+38.5)
• Expenses decreasing in 2005 include: Repairs and
Maintenance (-8.0%) and Financial Aid (-10.4%)
Expenses - 2003 through 2005
$1,200,000,000
$1,000,000,000
$954,071,000
$922,014,000
$895,635,000
$800,000,000
$600,000,000
$400,000,000
$151,049,000
$147,363,000
$157,280,000
$200,000,000
$0
2003
Salaries
Purchased Services
2004
Supplies
Repairs and Maintenance
2005
Depreciation
Financial Aid
Other
Interest
2005 Expenses - $1,396,495,000
Salaries
$954,071,000
68%
Purchased Services
$157,280,000
11%
Supplies
$77,567,000
6%
Interest
$9,934,000
1%
Repairs and Maintenance
$31,691,000
2%
Depreciation
Financial Aid
Other
$70,109,000
$22,440,000
$73,403,000
5%
2%
5%
2004 Expenses - $1,336,156,000
Salaries,
$922,014,000 ,
69%
Purchased Services,
$147,363,000 ,
11%
Supplies,
$73,116,000 ,
5%
Repairs and M aintenance,
$34,466,000 ,
3%
Other, Financial Aid,
Interest,
$57,022,000
,$25,038,000 ,
$9,384,000 ,
2%
4%
1%
Depreciation,
$67,753,000 ,
5%
Financial Statement Overview - Statement of
Revenues, Expenses & Changes in Net Assets
• State Operating Appropriation down 2.4 % to $546,444,000, a decline
of $13,187,000
• Capital Appropriation $36,952,000, compared to $64,793,000 in 2004
• Other non-operating trends:
• Investment income increased from $3,975,000 in 2004 to $7,188,000
in 2005.
• Interest expense increased from $9,384,000 in 2004 to $9,934,000 in
2005.
• Insurance proceeds declined from $2,848,000 in 2004 to $ 0 in 2005
due to Southwest Minnesota State Fire being finalized
• Grants to Other Organizations decreased from $9,272,000 in 2004 to
$7,493,000 in 2005.
Financial Statement Overview - Statement of
Revenues, Expenses & Changes in Net Assets
• Net Assets Increased $26,114,000 in 2005,
compared to increase of $63,224,000 in
2004 and $73,286,000 in 2003
• Net Assets decreased $11,509,000 prior to
Capital Appropriations in 2005 compared to
2004 decrease of $5,324,000
Change in Net Assets
$100,000,000
$75,000,000
$73,286,000
$63,224,000
$50,000,000
$26,114,000
$25,000,000
$0
2003
2004
Change in Net Assets
2005
Financial Statement Overview - Statement of
Net Assets
• Net Assets Restrictions increased from $71,312,000 in 2004 to
$74,766,000 in 2005 – due to increase in bond covenant restrictions
and reduction in legislative mandated restrictions – refer to Note 1 for
further details
• Invested in Capital Assets increased from $854,354,000 in 2004 to
$865,846,000 in 2005 – capital assets added $101,698,000,
depreciation deducted $70,109,000
• Unrestricted Net Assets increased $11,168,000 in 2005, to
$171,818,000 at June 30, 2005. Represents 1.5 months of 2005
operating expenses, compared to 1.4 months in 2004 Typical goal of
governments is 3-6 months, depending on philosophy, cash flow and
board policy. General Fund required reserves at June 30, 2005 is
$57,465,616 and is included above.
Cash and Investment and Net Asset Balances
$1,000,000,000
$854,354,000
$865,805,000
$794,297,000
$750,000,000
$451,770,000
$440,588,000
$372,636,000
$500,000,000
$250,000,000
$129,413,000
$99,382,000
$458,720,000
$435,970,000
$422,260,000
$171,859,000
$160,650,000
$71,312,000
$74,766,000
$0
Restricted Net Assets2003
Invested in Capital Assets, Net of Related Debt
Total Cash and Equivalents Balance
2004
2005
Unrestricted Net Assets
Unrestricted Cash and Equivalents Balance
Financial Statement Overview - Statement of
Net Assets
• Total Assets increased to $1,654,444,000 at June 30, 2005, up from
$1,620,375,000 at June 30, 2004
• Capital Assets Net of Depreciation increased from $1,025,934 at June
30, 2004 to $1,068,458,000 at June 30, 2005
• Depreciation expense of $70,109,000 recognized for FY 2005 as
compared to $67,753,000 for FY 2004
• Current Assets increased from $526,563,000 at June 30, 2004 to
$529,700,000 at June 30, 2005, a result of increases in cash and
investments (+$13,530,000), accounts receivable (+4,892,000) and
decrease in securities lending assets (-$15,103,000)
• Restricted assets declined from $29,510,000 at June 30, 2004 to
$22,750,000 at June 30, 2005, due to spend down of capital project
funds
Financial Statement Overview - Statement of
Net Assets
• Total Liabilities increased from $534,059,000 at June 30, 2004 to
$542,014,000 at June 30, 2005
• Current Liabilities decreased from $220,640,000 at June 30, 2004 to
$210,382,000 at June 30, 2005, primarily related to increases in
salaries payable and compensated absences and decreases in accounts
payable and securities lending liabilities
• Long-term liabilities increased from $313,419,000 at June 30, 2004 to
$331,632,000 at June 30, 2005 due to increases in long term bonds
payable and capital leases
• Bonds payable totaled $183,431,000 at June 30, 2005, an increase of
$5,942,000 from 2004
Statement of Net Assets - In Thousands
$1,800,000
$1,654,444
$1,620,375
$1,600,000
$1,496,513
$1,400,000
$1,200,000
$963,485
$1,000,000
$1,112,430
$1,096,214
$1,086,316
$1,053,067
$1,023,092
$800,000
$600,000
$400,000
$200,000
$473,421
$460,269
$542,014
$529,700
$331,632
$313,419
$220,640
$286,635
$186,786
$72,759
$534,059
$526,563
$40,745
$210,382
$28,530
$2003
2004
2005
Total Current Assets
Total Restricted Assets
Total Non Current Assets
Total Assets
Total Current Liabilities
Total Non Current Liabilities
Total Liabilities
Total Net Assets
Expendable Net Assets/Annual Operating Expenses
Primary Reserve Ratio
0.185
0.18
0.175
0.175
0.178
0.17
0.172
0.165
0.16
0.155
0.15
0.145
0.149
0.14
0.135
0.13
2002
2003
Primary Reserve Ratio
2004
2005
Equity/Total Assets
Equity Ratio
0.9
0.85
0.8
0.75
0.7
0.65
0.67
0.684
0.67
0.672
2004
2005
0.6
0.55
0.5
2002
2003
Equity Ratio
Expendable Net Assets/Outstanding Debt
Viability Ratio
1.5
1.248
1.289
1.25
1.184
1.149
1
0.75
0.5
0.25
0
2002
2003
2004
Viability Ratio
2005
Questions and Open Discussion

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