WESTERN INTERSTATE COMMISSION
FOR HIGHER EDUCATION
Boulder, Colorado
FINANCIAL STATEMENTS
June 30, 2010
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR’S REPORT ...........................................................................................1
BASIC FINANCIAL STATEMENTS
Balance Sheet ............................................................................................................................3
Statement of Revenues, Expenses and Changes in Fund Net Assets .......................................4
Statement of Cash Flows ............................................................................................................5
Notes to Consolidated Financial Statements ..............................................................................7
SUPPLEMENTAL INFORMATION
Combining Balance Sheet ........................................................................................................17
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets ...................18
Combining Statement of Functional Expenses .........................................................................19
Schedule of Expenditures of Federal Awards ...........................................................................21
Notes to Schedule of Expenditures of Federal Awards .............................................................22
Independent Auditor’s Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards ........................................23
Independent Auditor’s Report on Compliance with Requirements
Applicable to Each Major Program and on Internal Control
Over Compliance in Accordance with OMB Circular A-133 ................................................25
Schedule of Findings and Questioned Costs ............................................................................27
Summary of Schedule of Prior Audit Findings ..........................................................................29
A1
Independent Auditor’s Report
To the Commission
Western Interstate Commission
for Higher Education
Boulder, Colorado
We have audited the accompanying basic financial statements of Western Interstate Commission
for Higher Education (the Commission) as of and for the year ended June 30, 2010, as listed in the
table of contents. These financial statements are the responsibility of the Commission’s
management. Our responsibility is to express an opinion on these financial statements based on
our audit.
We did not audit the financial statements of State Higher Education Policy Center, LLC, a blended
component unit, which statements reflect total assets of $4,669,816 as of June 30, 2010 and total
revenues of $4,031 for the year then ended. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to the amounts
included for State Higher Education Policy Center, LLC, is based solely on the report of the other
auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The financial statements of the blended
component unit, The State Higher Education Policy Center, LLC, were not audited in accordance
with Government Auditing Standards. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit and the report
of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of Western Interstate
Commission for Higher Education as of June 30, 2010, and the changes in financial position and its
cash flows for the year then ended in conformity with accounting principles generally accepted in
the United States of America.
1
h
Western Interstate Commission for Higher Education has not presented management’s discussion
and analysis that the Governmental Accounting Standards Board has determined is necessary to
supplement, although not required to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated
October 19, 2010 on our consideration of Western Interstate Commission for Higher Education’s
internal control over financial reporting and our tests of its compliance with certain provisions of
laws, regulations, contracts and grants. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and
not to provide an opinion on the internal control over financial reporting or on compliance. That
report is an integral part of an audit performed in accordance with Government Auditing Standards
and should be read in conjunction with this report in considering the results of our audit.
Our audit was performed for the purpose of forming an opinion on the basic financial statements of
Western Interstate Commission for Higher Education taken as a whole. The accompanying
supplemental information is presented for the purposes of additional analysis and is not a required
part of the basic financial statements. The schedule of expenditures of federal awards is presented
for purposes of additional analysis as required by U.S. Office of Management and Budget Circular
A-133, Audits of States, Local Governments, and Nonprofit Organizations, and is not a required
part of the basic financial statements. Such information has been subjected to the auditing
procedures applied by us and the other auditors in the audit of the basic financial statements and,
in our opinion, based on our report and the report of the other auditors, is fairly stated, in all
material respects, in relation to the basic financial statements taken as a whole.
a1
Broomfield, Colorado
October 19, 2010
2
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
BALANCE SHEET
June 30, 2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Cash and cash equivalents - restricted
Accounts receivables
Other assets
CAPITAL ASSETS
Property and equipment - at cost, less accumulated
depreciation of $1,101,983
$
4,104,640
1,310,704
378,756
23,202
4,377,453
10,194,755
TOTAL ASSETS
LIABILITIES AND NET ASSETS
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities
Refundable advances - grants and contracts
Deferred dues and fees revenue
NONCURRENT LIABILITIES
Due within one year
Due in more than one year
480,984
2,262,244
TOTAL LIABILITIES
5,176,933
NET ASSETS
Invested in capital assets, net of related debt
Restricted for minority interest in subsidiary
Unrestricted
2,108,333
1,196,051
1,713,438
TOTAL NET ASSETS
5,017,822
528,420
1,240,210
665,075
$ 10,194,755
TOTAL LIABILITIES AND NET ASSETS
The accompanying notes are an integral part of the financial statements.
3
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS
Year Ended June 30, 2010
OPERATING REVENUE
Student exchange support fees
Grants and contracts
From member states:
WICHE operations
Mental health program support
Institutional dues and fees
Registration fees and other income
$ 14,270,379
3,170,723
1,886,719
159,000
440,001
336,546
Total operating revenue
20,263,368
OPERATING EXPENSES
Program services
Supporting services
19,551,002
694,774
Total operating expenses
20,245,776
17,592
OPERATING INCOME
NONOPERATING REVENUES (EXPENSES)
Investment return
Interest expense
17,564
(141,200)
Total nonoperating revenues (expenses)
(123,636)
(106,044)
CHANGE IN NET ASSETS
4,903,870
NET ASSETS, BEGINNING OF YEAR
219,996
MINORITY CONTRIBUTIONS TO EQUITY
$
NET ASSETS, END OF YEAR
5,017,822
The accompanying notes are an integral part of the financial statements.
4
WESTERN INTERSTATE COMMISSION FOR HIGHER LEARNING
STATEMENT OF CASH FLOWS
Year Ended June 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received for member dues
Cash received for grants and contracts
Cash received from states for student exchange
Cash received for other operating revenues
Cash payments to employees for services
Cash paid to vendors
Cash payments to schools for student exchange
$
2,045,719
2,661,878
14,136,435
776,547
(3,155,862)
(2,571,559)
(14,373,846)
Net cash used by operating activities
(480,688)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Cash contributions from SHEPC minority shareholder
219,996
Net cash provided by noncapital financing activities
219,996
CASH FLOW FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Principal payments on long-term debt
Interest payments on long-term debt
Purchase of capital assets
Proceeds from sale of capital assets
(262,299)
(56,925)
(54,208)
2,348
Net cash used by capital and related financing activities
(371,084)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
17,564
Net cash provided by investing activities
17,564
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS
(614,212)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
6,029,556
CASH AND CASH EQUIVALENTS,
END OF YEAR
$
5,415,344
The accompanying notes are an integral part of the financial statements.
5
WESTERN INTERSTATE COMMISSION FOR HIGHER LEARNING
STATEMENT OF CASH FLOWS
Year Ended June 30, 2010
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED
BY OPERATING ACTIVITIES
Operating Income
Adjustments to operating income to net cash
provided by operating activities:
Depreciation
(Gain) on disposal of capital assets
Changes in assets and liabilities related to operations:
Accounts receivable
Other assets
Accounts payable and accrued liabilities
Compensated absences
Refundable advances - grants and contracts
Deferred dues and fees revenue
Net cash used by operating activities
NONCASH CAPITAL FINANCING ACTIVITIES
Imputed interest expense on SHEPC note payable
$
17,592
184,502
(1,771)
40,269
15,777
(66,180)
12,181
(549,114)
(133,944)
$
(480,688)
$
84,275
The accompanying notes are an integral part of the financial statements.
6
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Definition of Reporting Entity
The Western Interstate Commission for Higher Education (WICHE) is a regional agency
established by interstate compact to help its members and affiliate states to work together to meet
the work force needs of those states and the education needs of their residents. WICHE
encourages cooperation and the sharing of resources among states, institutions, and with related
private and public enterprises.
WICHE follows the Governmental Accounting Standards Board (GASB) accounting
pronouncements which provide guidance for determining which governmental activities,
organizations and functions should be included within the financial reporting entity. GASB
pronouncements set forth the financial accountability of a governmental organization's governing
body as the basic criterion for including a possible component governmental organization in a
primary government's legal entity. Financial accountability includes, but is not limited to,
appointment of a voting majority of the organization's governing body, ability to impose its will on
the organization, a potential for the organization to provide specific financial benefits or burdens
and fiscal dependency.
Blended Component Unit – The State Higher Education Policy Center, LLC (SHEPC) has been
designated as a blended component unit and included in WICHE’s financial statements because it
primarily benefits WICHE. SHEPC is a non-profit instrumentality of WICHE and owns a building
that houses the offices of WICHE and two other non-profit entities.
WICHE is not financially accountable for any other organization, nor is WICHE a component unit of
any other primary governmental entity.
The accounting policies of WICHE conform to generally accepted accounting principles as
applicable to governmental units accounted for as a proprietary enterprise fund. The enterprise
fund is used since WICHE’s powers are related to those operated in a manner similar to a private
organization.
WICHE has elected to follow Governmental Accounting Standards Board pronouncements.
Therefore, all applicable pronouncements of the Financial Accounting Standards Board issued on
or before November 30, 1989 that are not in conflict with GASB pronouncements are applied.
The more significant accounting policies of WICHE are described as follows:
Basis of Accounting
WICHE’s records are maintained on the accrual basis of accounting. Revenue is recognized when
earned and expenses are recognized when the liability is incurred. Depreciation is computed and
recorded as an operating expense. Expenditures for capital assets are shown as increases in
assets.
7
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash Equivalents
Cash equivalents consist of highly-liquid investments with original maturity dates of 90 days or less.
Accounts Receivable
Accounts receivable are from contract/grant receivables and related project fees which generally
require payment within thirty days from the invoice date. Accounts receivable are stated at the
invoice amount. Interest is not charged on past due accounts.
Payments of accounts receivable are applied to the specific invoices identified on the client’s
remittance advice or, if unspecified, to the earliest unpaid invoices.
Capital Assets
Furniture and equipment are stated at cost and are depreciated on the straight-line method with
lives ranging from two and a half to ten years. Property is depreciated on the straight-line method
over thirty-nine years. SHEPC capitalizes all property and equipment purchases greater than
$1,000. WICHE capitalizes all property and equipment purchases greater than $2,000.
Expenditures for maintenance and repairs are charged to the appropriate expense accounts as
incurred. Expenditures for renewals or betterments, which materially extend the useful lives of
assets or increase their productivity, are capitalized at cost. The costs and related allowances for
depreciation of assets retired or otherwise disposed of are eliminated from the accounts. The
resulting gains or losses are included in the determination of change in net assets.
Income Taxes
WICHE is a non-profit public agency and is exempt from federal and state income taxes under
Section 501(c)(3) of the Internal Revenue Code; it is not classified as a private foundation by the
Internal Revenue Service. SHEPC is taxed as a partnership for federal and state income tax
purposes and, thus, no income tax expense has been recorded in the financial statements.
Taxable income or loss of SHEPC is passed through to the members and reported on their tax
returns. The SHEPC’s net income or loss is allocated among the members in accordance with the
regulations applicable to SHEPC.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
Dues and Fees
Membership dues are recognized in the membership period. Revenue from meeting registration
fees are recognized as services are performed. Cash received in advance of the revenue
recognition period is recorded as deferred dues and fees revenue.
8
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Student Exchange Support Fees
Revenue is recognized on student exchange fees when the cash received from the member states
to support interstate exchange students is disbursed to participating schools.
Operating Revenues and Expenses
WICHE distinguishes between operating revenues and expenses and nonoperating items in the
Statements of Revenues, Expenses and Changes in Fund Net Assets. Operating revenues and
expenses generally result from providing services in connection with WICHE’s purpose of providing
education services. All revenues and expenses not meeting this definition are reported as
nonoperating revenues and expenses or capital contributions.
Revenue is recognized on all grants and contracts as allowable reimbursable expenses are
incurred. Cash received in excess of allowable expenses is recorded as deferred revenue or
refundable advances and allowable expenses incurred in excess of cash received are recorded as
receivables. Program cash is deposited into and disbursed from a single checking account with
accountability maintained through the use of departmental accounting.
Expense Allocation
The costs of providing various programs and other activities have been summarized on a functional
basis in the Statement of Revenues, Expenses and Changes in Fund Net Assets. Accordingly,
certain costs have been allocated among the programs and supporting services benefited.
Net Assets
Included in unrestricted net assets are Board designations. The Board has designated $579,350
for future program activity and $746,471 for contingencies. When an expenditure is incurred for
purposes for which both restricted and unrestricted net assets are available, WICHE considers
restricted funds to have been spent first.
Compensated Absences
Staff working at least .25 FTE earn between 7.5 hours and 13.75 hours of vacation leave with pay
each month prorated by FTE and adjusted for length of service. A maximum of 225 hours of
vacation leave can be carried over each month. Staff working at least .25 FTE earn 7.5 hours of
sick leave with pay each month also prorated by FTE. A maximum of 900 hours of sick leave can
be accumulated. Earned hours in excess of the maximums of vacation or sick leave are forfeit.
Unused vacation leave is paid upon termination. A portion of unused sick leave (30% to 50%
dependent upon quantity of hours) may be converted to a balance that terminated staff can use for
medical expenses. To qualify, terminated staff must have at least five years of continuous service
and the sum of their age at termination plus service years must equal or exceed seventy. WICHE
provides eleven days each year of paid holiday and two or three days of paid personal business
leave plus some hours for a few assorted events including jury duty, funerals and voting.
9
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 2 – CASH AND INVESTMENTS
Cash and investments are reflected on the June 30, 2010 statement of net assets as follows:
Unrestricted
Restricted
Cash for refundable advances
Debt service reserve
$
4,104,640
Total
$
5,415,344
Deposits with financial institutions
Investments
$
354,584
5,060,760
Total
$
5,415,344
1,240,210
70,494
Cash and investments as of June 30, 2010 consist of the following:
Cash Deposits
The Colorado Public Deposit Protection Act (PDPA) requires that all units of local government and
entities like WICHE deposit cash in eligible public depositories. Eligibility is determined by state
regulators. Amounts on deposit in excess of federal insurance levels must be collateralized. The
eligible collateral is determined by the PDPA. PDPA allows the institution to create a single
collateral pool for all public funds. The pool for all the uninsured public deposits as a group is to be
maintained by another institution or held in trust. The market value of the collateral must be at
least equal to the aggregate uninsured deposits.
The State Commissioners for banks and financial services are required by statute to monitor the
naming of eligible depositories and reporting of the uninsured deposits and assets maintained in
the collateral pools.
Investments
The types of investments which are authorized to be made by WICHE include direct investments in
U.S. Government securities and the Colorado Surplus Asset Fund trust (CSAFE), a money market
fund for governmental entities. WICHE’s investment policies also specify that maturities of all
deposits and investments up to $750,000 will be no longer than 10 years, and maturities of all
deposits and investments above $750,000 will be no longer than one year. The investment
policies of WICHE are more restrictive than those specified by state statute. Colorado statutes
specify investment instruments meeting defined rating and risk criteria.
10
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 2 – CASH AND INVESTMENTS (CONTINUED)
As of June, 30, 2010, WICHE had the following investments carried at fair value:
Colorado Surplus Asset Fund Trust
$
5,060,760
As of June 30, 2010, WICHE had invested $5,060,760 in the Colorado Surplus Asset Fund trust,
an investment vehicle established for local government and entities like WICHE in Colorado to pool
surplus funds. The State Securities Commissioner administers and enforces all State statutes
governing the Trust. The Trust operates similarly to a money market fund and each share is equal
in value to $1.00. On February 2, 2010 S&P removed CSAFE from credit watch with negative
implications, and assigned a rating of ‘AAAm’, the highest assigned to principal stability
government investment pools.
Concentration of Credit Risk
WICHE does not have a policy that addresses specific limitations on the amount that can be
invested in any one issuer. As of June 30, 2010, 100% of WICHE’s investments are concentrated
in CSAFE.
NOTE 3 – CONCENTRATIONS
For the year ended June 30, 2010, 40% of the WICHE’s revenues were from three States’ student
exchange fees. Accounts receivable dues from one State accounted for 23% of total accounts
receivable at June 30, 2010.
NOTE 4 – EMPLOYEE BENEFITS
WICHE has a matching defined-contribution pension plan covering substantially all employees.
WICHE contributes an amount equal to two times the amount contributed by employees up to a
maximum contribution of 10% of each employee’s salary. Employees contributed $174,687 to the
pension plan for the year ending June 30, 2010. The following amounts were paid by WICHE for
employee benefits for the year ended June 30, 2010:
Defined contribution pension plan
Sick leave conversion benefit
Health and dental benefits
Injury, disability, life, and unemployment Insurance
FICA and Medicare
Vacation and other
$
214,205
2,949
297,156
40,470
169,851
60,583
Total employee benefits
$
785,214
11
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 5 – SICK LEAVE CONVERSION BENEFITS
During the fiscal year ended June 30, 2001, WICHE adopted a sick leave conversion benefit plan
allowing employees to convert part of their unused sick time while employed to a fund they can use
to pay medical expenses incurred after retirement. WICHE funds the plan on a pay-as-you-go
basis as benefits are paid to employees. WICHE has estimated a liability for the plan of $208,169,
which has been included in the liability for accrued vacation and sick leave payable.
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
2010
Capital assets, not being depreciated:
Land
Capital assets, being depreciated:
Buildings
Furniture and equipment - WICHE
Furniture and equipment - SHEPC
Total capital assets, being depreciated
Less accumulated depreciation
Total capital assets, being depreciated, net
Capital assets, net
Balance at
July 1,
2009
Balance at
June 30,
Increases Decreases
2010
$
$
900,000
-
$
-
$
900,000
3,590,899
871,867
99,383
4,562,149
54,208
54,208
36,921
36,921
3,590,899
889,154
99,383
4,579,436
953,825
184,502
36,344
1,101,983
(130,294)
577
3,477,453
$ (130,294) $
577
$ 4,377,453
3,608,324
$ 4,508,324
12
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 7 – NONCURRENT LIABILITIES
Long-term debt at June 30, 2010 consisted of the following:
Colorado Education and Cultural Facilities Authority Loan, payable
in semiannual payments of principal and interest, interest at 6%
per annum. Maturity date June 1, 2015.
$
490,000
Ford Foundation note, collateralized by Deed of Trust, payable by
SHEPC in quarterly principal and interest payments of $53,906
through March 31, 2016; followed by a final payment of $1,070,345
plus any accrued interest, due on June 30, 2016, interest at 1% per
annum, maturity date of June 30, 2016, less discount for imputed
interest on Ford Foundation note of $433,072 for below market interest
loan (discount is based on imputed interest rate of 4.52%).
1,779,120
2,269,120
474,108
2,743,228
(480,984)
Compensated absences
Less current portion
Long-term portion
$
2,262,244
In accordance with APB Opinion No. 21, an interest rate on below market interest loans is imputed
and included in imputed interest revenue in the year the loan is issued. The discount represents
the cumulative amount of net revenue that has been recognized due to below market interest
loans. Each year, as the interest expense is recognized, the discount amount decreases.
The Colorado Education and Cultural Facilities Authority issued bonds for $800,000 and loaned the
proceeds to WICHE. In repayment of the loan, WICHE is to make payments sufficient in time and
amount to pay when due the principal redemption price and interest on the bonds. WICHE is also
required to pay issuer’s annual fees and all costs and expenses incurred by the issuer in regard to
the bonds. WICHE has restricted cash of $70,494 in debt service reserves as of June 30, 2010.
The Ford Foundation note is guaranteed by WICHE.
Scheduled principal and interest repayments on the notes are as follows:
Year Ended June 30:
Principal
2011
2012
2013
2014
2015
Thereafter
$
Total
$ 2,269,120
13
269,229
276,179
278,148
285,137
372,146
788,281
Interest
$
50,795
44,346
37,575
30,787
23,679
10,707
$ 197,889
Total
$
320,024
320,525
315,723
315,924
395,825
798,988
$ 2,467,009
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 7 – NONCURRENT LIABILITIES (CONTINUED)
The changes in WICHE’s long-term obligations, are as follows:
Balance
July 1,
2009
Additions
Colorado Education and Cultural
Facilities Loan
$ 560,000 $
Ford Foundation note
2,404,491
Less discount for imputed
interest on below market
interest loan
(517,347)
233,705
Compensated absences
461,927
Total long-term liabilities
$ 2,909,071 $ 233,705
Reductions
$
$
70,000
192,299
$
Balance
June 30,
2010
Due
Within
One Year
490,000
2,212,192
$ 75,000
194,229
(84,275)
(433,072)
(84,094)
221,524
474,108
295,849
399,548 $ 2,743,228 $ 480,984
NOTE 8 – RELATED PARTIES
WICHE is a 58% member of SHEPC, a Colorado LLC. WICHE entered into a license agreement
with SHEPC that grants WICHE a license to occupy and use the building owned by SHEPC. The
commencement date for the agreement was June 10, 2005. SHEPC is responsible for the utilities
and insurance on the building. The license agreement may be terminated by WICHE with 30 days
written notice.
The operating agreement of SHEPC calls for annual contributions to SHEPC by the members for
the operating expenses of the building owned by SHEPC. The building houses the offices of
WICHE and two other not-for-profit entities. WICHE moved into office space in the building in June
2005.
As a part of the license agreement and operating agreements above, WICHE guaranteed the
$3,000,000 loan of SHEPC with the Ford Foundation.
During the year 2010, WICHE contributed $303,807 to SHEPC as part of its member requirement
to fund SHEPC, which has been eliminated.
NOTE 9 – FUNCTIONAL EXPENSES
Functional expenses are shown on a combining basis. Only 58% of the SHEPC expenses relate
to WICHE. Rent expense for each program is shown as an allocation of the SHEPC expenses
representing the office space used for each program. As funds paid to SHEPC are considered
equity contributions, the Management and General rent expense is used as an offset.
14
WESTERN INTERSTATE COMMISSION FOR HIGH EDUCATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2010
NOTE 10 – RISK MANAGEMENT
WICHE is exposed to various risks of loss related to premises liability, torts, thefts of, damage to, or
destruction of assets, injury to staff and acts of God. WICHE purchases commercial liability
insurance for directors and officers and employment practices (one million combined aggregate
limit), general liability (one million per occurrence, two million general aggregate), workers
compensation (one hundred thousand per accident) and travel accident (four hundred thousand
per accident, one million seven hundred thousand aggregate), employee dishonesty (five hundred
thousand limit) and property coverage on a replacement cost basis. Settled claims have not
exceeded coverage in any of the past three years.
This information is an integral part of the accompanying financial statements.
15
SUPPLEMENTAL INFORMATION
16
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
COMBINING BALANCE SHEET
June 30, 2010
ASSETS
WICHE
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Cash - restricted
Accounts receivable
Other assets
Investment in SHEPC
CAPITAL ASSETS
Property and equipment - at cost, less
accumulated depreciation of $1,101,983
$
$
7,179,345
577,474
705
3,430
-
$
4,088,207
289,246
$
TOTAL ASSETS
3,527,166
1,310,704
378,051
19,772
1,654,406
SHEPC
Eliminating
Entries
$
4,669,816
Combining
Balance
$
(1,654,406)
-
4,104,640
1,310,704
378,756
23,202
-
4,377,453
$ (1,654,406) $ 10,194,755
LIABILITIES AND NET ASSETS
LIABILITIES
Accounts payable and accrued liabilities
$
Refundable advances - grants and contracts
Deferred dues and fees revenue
NONCURRENT LIABILITIES
Due within one year
Due in more than one year
488,181
1,240,210
665,075
$
40,239
-
$
-
$
528,420
1,240,210
665,075
370,849
593,259
110,135
1,668,985
-
480,984
2,262,244
TOTAL LIABILITIES
3,357,574
1,819,359
-
5,176,933
NET ASSETS
Invested in capital assets, net of related debt
Restricted for minority interest
Unrestricted
(200,754)
4,022,525
2,309,087
541,370
1,196,051
(2,850,457)
2,108,333
1,196,051
1,713,438
TOTAL NET ASSETS
3,821,771
2,850,457
(1,654,406)
5,017,822
TOTAL LIABILITIES AND NET ASSETS
$
7,179,345
17
$
4,669,816
$ (1,654,406) $ 10,194,755
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
COMBINING STATEMENT OF REVENUES, EXPENSES, AND
CHANGES IN FUND NET ASSETS
Year Ended June 30, 2010
WICHE
OPERATING REVENUES
Student exchange support fees
Grants and contracts
From member states:
WICHE operations
Mental health program support
Institutional dues and fees
Registration fees and other income
Total operating revenues
OPERATING EXPENSES
Program services
Supporting services
Total operating expenses
OPERATING INCOME (LOSS)
$ 14,270,379
3,170,723
SHEPC
$
-
Eliminating
Entries
$
Combining
Balance
-
$ 14,270,379
3,170,723
1,886,719
159,000
440,001
333,296
3,250
-
1,886,719
159,000
440,001
336,546
20,260,118
3,250
-
20,263,368
19,551,002
353,268
341,506
-
19,551,002
694,774
19,904,270
341,506
-
20,245,776
355,848
(338,256)
-
17,592
16,783
(258,589)
(33,600)
(275,406)
781
(107,600)
(106,819)
258,589
258,589
17,564
(141,200)
(123,636)
80,442
(445,075)
258,589
(106,044)
NONOPERATING REVENUES (EXPENSES)
Investment return
Equity in net loss of subsidiary
Interest expense
Total nonoperating revenues/expenses
CHANGE IN NET ASSETS
NET ASSETS, BEGINNING OF YEAR
3,741,329
-
CONTRIBUTIONS TO EQUITY
NET ASSETS, END OF YEAR
$ 3,821,771
18
2,771,729
(1,609,188)
4,903,870
523,803
(303,807)
219,996
$ 2,850,457
$ (1,654,406) $ 5,017,822
WESTERN INTERSTATE COMMISSION FOR HIGHER LEARNING
COMBINING SCHEDULE OF FUNCTIONAL EXPENSES
Year Ended June 30, 2010
Student
Exchange
Salaries
Employee benefits
Consulting
Subcontracts
Travel
Printing and duplicating
Office rent
Computer/network expense
Telephone and postage
Supplies and expense
Marketing
Depreciation
SHEPC building expenses
Payments to participating schools
Credits for internal services charged
to WICHE programs
Credits for internal services charged
to non-WICHE programs
General and administrative allocation
TOTAL FUNCTIONAL EXPENSES
$
174,793
58,734
14,252
4,968
18,150
14,919
4,641
2,110
292,567
Program Services
Policy
Other
Compact for
Analysis and
Programs
Faculty
Research
and Services
Diversity
$
14,369,256
$
368,588
120,858
46,804
42,553
38,013
7,652
38,788
33,444
8,198
10,222
715,120
$
18,442
7,901
40,030
64,577
2,001
600
5
133,556
-
4,590
-
-
-
226
-
-
269
52,527
$ 14,661,823
19
389,346
127,142
128,700
215,605
133,129
7,604
53,798
42,855
7,722
13,244
1,119,145
$
1,171,941
1,054
33,645
$
754,635
10,684
$
144,240
Mental
Health
$
521,816
167,654
130,662
327,297
191,857
20,961
61,494
52,209
18,709
11,050
1,503,709
Program Services
Educational
Innovation
SelfTelecomand
supporting
munications Technology
Services
$
349,720
118,583
15,417
231,001
194,111
1,862
38,158
37,131
14,132
12,140
7,692
$ 1,019,947
$
$
18,572
7,565
84,638
7,185
2,174
1,380
1,015
1,843
124,372
-
-
-
-
4,272
-
(11,588)
40,140
10,491
(55,683)
163,793
$ 1,611,819
$ 1,052,771
$
134,863
$
120,358
35,780
155
247
17,825
26,100
13,723
22,821
54,480
291,489
(272,579)
-
$
18,910
20
Total
Program
Services
$
1,961,635
644,217
406,221
856,486
643,279
43,294
232,388
208,638
68,145
73,430
7,692
54,480
5,199,905
Supporting
Services
Management
and
General
$
14,373,846
-
(65,948)
311,280
$ 19,551,002
426,348 $ 2,387,983
140,997
785,214
51,555
457,776
856,486
94,745
738,024
5,374
48,668
(228,120)
4,268
29,154
237,792
9,808
77,953
43,131
116,561
7,692
25,608
80,088
341,506
341,506
940,106
6,140,011
-
(268,081)
(245,332)
$
Total
Expenses
694,774
14,373,846
(268,081)
(65,948)
65,948
$20,245,776
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2010
Federal
CFDA
Number
U.S. Department of Education:
Office of Vocational and Adult Education
State Scholars Initiative
84.051
Expenditures
$
Total U.S. Department of Education
188,415
188,415
U.S. Department of Health and Human Services
Bridges to the Professorate
SD Survey
Rural Health Research
NIMH Challenge Grant - AARA
93.880
93.243
93.155
93.701
144,241
33,905
9,446
349,637
Total U.S. Department of Health and Human Services
U.S. Department of Labor
USDOL Portal Project
537,229
17.207
TOTAL FEDERAL AWARDS
24,999
$
21
750,643
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2010
NOTE 1 – BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards includes the federal grant activity of
Western Interstate Commission for Higher Education (WICHE) and is presented on the accrual
basis of accounting. The information in this schedule is presented in accordance with the
requirements of the OMB Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations. Therefore, some amounts presented in this schedule may differ from amounts
presented in, or used in, the preparation of the basic financial statements.
NOTE 2 – PASS-THROUGH REVENUES AND EXPENDITURES
WICHE had pass-through revenues and expenditures to subrecipients of $31,882 for the year
ending June 30, 2010.
22
A1
Independent Auditor’s Report
To the Commission
Western Interstate Commission
for Higher Education
Boulder, Colorado
We have audited the accompanying basic financial statements of Western Interstate Commission
for Higher Education (the Commission) as of and for the year ended June 30, 2010, as listed in the
table of contents. These financial statements are the responsibility of the Commission’s
management. Our responsibility is to express an opinion on these financial statements based on
our audit.
We did not audit the financial statements of State Higher Education Policy Center, LLC, a blended
component unit, which statements reflect total assets of $4,669,816 as of June 30, 2010 and total
revenues of $4,031 for the year then ended. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to the amounts
included for State Higher Education Policy Center, LLC, is based solely on the report of the other
auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The financial statements of the blended
component unit, The State Higher Education Policy Center, LLC, were not audited in accordance
with Government Auditing Standards. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit and the report
of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of Western Interstate
Commission for Higher Education as of June 30, 2010, and the changes in financial position and its
cash flows for the year then ended in conformity with accounting principles generally accepted in
the United States of America.
23
h
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Western Interstate Commission for
Higher Education's financial statements are free of material misstatement, we performed tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the determination of
financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an
opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management, the Members of
the Commission, and federal awarding agencies and pass-through entities and is not intended
to be and should not be used by anyone other than these specified parties.
a1
Broomfield, Colorado
October 19, 2010
24
A1
Independent Auditor’s Report on Compliance with Requirements
Applicable to Each Major Program and on Internal Control
Over Compliance in Accordance with OMB Circular A-133
To the Commission
Western Interstate Commission for Higher Education
Boulder, Colorado
Compliance
We have audited the compliance of Western Interstate Commission for Higher Education with the
types of compliance requirements described in the U. S. Office of Management and Budget (OMB)
Circular A-133 Compliance Supplement that are applicable to its major federal program for the year
ended June, 30, 2010. Western Interstate Commission for Higher Education's major federal
program is identified in the summary of auditor’s results section of the accompanying schedule of
findings and questioned costs. Compliance with the requirements of laws, regulations, contracts
and grants applicable to each of its major federal programs is the responsibility of Western
Interstate Commission for Higher Education’s management. Our responsibility is to express an
opinion on Western Interstate Commission for Higher Education’s compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in
the United States of America; the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and
OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance
about whether noncompliance with the types of compliance requirements referred to above that
could have a direct and material effect on a major federal program occurred. An audit includes
examining, on a test basis, evidence about Western Interstate Commission for Higher Education’s
compliance with those requirements and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion. Our audit does not provide a legal determination of Western Interstate Commission for
Higher Education’s compliance with those requirements.
In our opinion, Western Interstate Commission for Higher Education complied, in all material
respects, with the requirements referred to above that are applicable to its major federal program
for the year ended June 30, 2010. However, the results of our auditing procedures disclosed an
instance of noncompliance with those requirements, which is required to be reported in accordance
with OMB Circular A-133 and which is described in the accompanying schedule of findings and
questioned costs as item 2010-1.
25
h
Internal Control Over Compliance
The management of Western Interstate Commission for Higher Education is responsible for
establishing and maintaining effective internal control over compliance with the requirements of
laws, regulations, contracts and grants applicable to federal programs. In planning and
performing our audit, we considered Western Interstate Commission for Higher Education’s
internal control over compliance with requirements that could have a direct and material effect
on a major federal program in order to determine our auditing procedures for the purpose of
expressing our opinion on compliance, but not for the purpose of expressing an opinion on the
effectiveness of internal control over compliance. Accordingly, we do not express an opinion on
the effectiveness of the entity’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type
of compliance requirement of a federal program will not be prevented, or detected and
corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance that might be deficiencies, significant deficiencies, or material
weaknesses. We did not identify any deficiencies in internal control over compliance that we
consider to be material weaknesses, as defined above. However, we identified a deficiency in
internal control over compliance that we consider to be a significant deficiency as described in
the accompanying schedule of findings and questioned costs as item 2010-1. A significant
deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in
internal control over compliance with a type of compliance requirement of a federal program that
is less severe than a material weakness in internal control over compliance, yet important
enough to merit attention by those charged with governance.
Western Interstate Commission for Higher Education's response to the findings identified in our
audit are described in the accompanying schedule of findings and questioned costs. We did not
audit Western Interstate Commission for Higher Education's response and, accordingly, we
express no opinion on it.
This report is intended solely for the information and use of management, the Members of the
Commission and federal awarding agencies and pass-through entities and is not intended to be
and should not be used by anyone other than these specified parties.
a1
Broomfield, Colorado
October 19, 2010
26
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2010
Section I—Summary of Auditor’s Results
Financial Statements
Type of auditor’s report issued:
Unqualified
Internal control over financial reporting:
•
Material weakness(es) identified?
yes
none reported
•
Significant deficiency (ies) identified
that are not considered to be
material weaknesses?
yes
none reported
yes
none reported
Noncompliance material to financial
statements noted?
Federal Awards
Internal control over major programs:
•
Material weakness(es) identified?
yes
none reported
•
Significant deficincy(ies) identified
that are not considered to be material
weakness(es)?
yes
none reported
Type of auditor’s report issued on compliance
for major program:
Unqualified
Any audit findings disclosed that are
required to be reported in accordance
with Section 510(a) of Circular A-133?
yes
no
Identification of major program:
CFDA Number(s)
93.701
Name of Federal Program or Cluster
US Department of Health and Human Services – NIMH
Challenge Grant - ARRA
Dollar threshold used to distinguish
between type A and type B programs
$300,000
yes
Auditee qualified as low-risk auditee?
27
no
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year Ended June 30, 2010
Section II—Financial Statement Findings
There were no findings required to be reported under Government Auditing Standards.
Section III—Federal Award Findings and Questioned Costs
Finding 2010-01
NIMH Challenge Grant, CFDA 93.701
Allowable Costs
Significant Deficiency, Noncompliance
Condition: Indirect costs charged were not in accordance with the grant agreement.
Specifically, the approved indirect cost rate was applied to an indirect cost base that included
certain contractual costs that were to be excluded as specified in the grant agreement.
Criteria: The grant agreement specifies an indirect cost rate of 15% of total direct costs
excluding certain contractual costs.
Questioned Costs: $2,338.
Context: We recalculated the indirect costs and noted the condition described above.
Effect: The grant was overcharged $2,338
Cause: There is not an adequate review of the indirect cost charge to ensure that the
calculation is in accordance with the grant agreement.
Recommendation: We recommend that the indirect costs be corrected in subsequent billings
and that WICHE establish procedures to review the indirect cost calculation to ensure it is in
accordance with the grant agreement.
Views of responsible officials and planned corrective actions: WICHE has corrected the indirect
cost error as of September 30, 2010 and will improve its existing procedures to ensure that
named excluded vendors in the grant agreement will be excluded from future indirect cost
recovery calculations.
28
WESTERN INTERSTATE COMMISSION FOR HIGHER EDUCATION
SUMMARY OF SCHEDULE OF PRIOR AUDIT FINDINGS
Year Ended June 30, 2009
Section II—Financial Statement Findings
There were no prior year findings reported under Government Auditing Standards.
Section III—Federal Award Findings and Questioned Costs
There were no prior year findings reported under OMB Circular A-133.
29