UNCW Financial & Budget Update
Presentation to the Board of Trustees Business Affairs Committee
January 22, 2015
Page 2
UNCW Financial & Budget Update
• FY 2014 Audited Financial Statements
• Budget Update: FY15 and FY16
• Potential Debt Refunding • Standard & Poor’s Credit Rating Review
Page 3
FY 2014 AUDITED STATEMENTS
Page 4
FY 2014 Financial Highlights
• State Auditor issued unqualified opinion
• No management letter comments or findings
• No material weaknesses in internal control over financial reporting
• Continued growth in net position, $18.8 million
Page 5
2014 Change in Net Position
in (000's)
Operating Income (Loss)
Operating Revenues
Operating Expense
Total Operating Loss
Nonoperating Revenues
Income Before Other Revenues
Other Revenues
Change in Net Position
Net Position July 1
Change in Net Position (above)
Net Position June 30
Net Position Adjustment
Restated Net Position June 30
Change in Net Position (%)
*Restated
FY 2012*
FY 2013*
FY 2014
$145,653
252,024
(106,371)
$154,041
267,913
(113,872)
$158,088
273,028
(114,940)
110,638
122,887
124,474
4,267
9,015
9,534
24,445
28,712
19,207
28,222
9,256
18,790
370,984
28,712
399,696
(1,559)
398,137
398,137
28,222
426,359
426,359
18,790
445,149
426,359
445,149
7.32%
7.09%
4.41%
Page 6
Net Position Increased $18.8 million
2014 Net Position $445,149
($ Thousands)
Restricted Nonexpendable $45,850 (10%)
Invested in Capital Assets
$260,492 (58%)
Unrestricted $100,722 (23%)
Restricted Expendable
$38,085 (9%)
Page 7
Unrestricted Net Position
Increased $17.6 million
Unrestricted Net Position
Unrestricted Trust
Overhead
Housing
Union
Food Service
Parking
Auxiliary Operations
Rec Ctr/Intramurals
ITSD Communications
Ed & Tech Fees
Endowment
Athletics
Other
Total
* Restated
FY13*
FY14 24,364,679
2,637,044
9,710,320
15,066,414
3,717,953
1,984,379
4,177,657
3,283,614
1,794,360
1,602,820
12,195,530
769,547
1,782,710
$ 83,087,026
25,173,387
2,101,851
16,370,638
15,866,663
4,227,255
2,640,666
4,733,156
3,854,790
1,751,404
2,880,274
14,959,494
212,373
5,950,244
$ 100,722,195
Page 8
Diverse Revenue Sources
2014 Revenue by Source $303,309
($ Thousands)
Non‐Federal Grants & Contracts $2,111 1%
Other Revenues $6,636 2%
Noncapital Gifts, Net $3,339 1%
Investment Income $10,843 4%
Capital/Noncapital Grants $25,533 8%
Sales & Services, Net $3,905 1%
Education Sales & Service
$4,397 1%
Athletics, Net $2,413 1%
Parking, Net $3,150 1%
Dining, Net $12,744 5%
Student Tuition & Fees, Net
$96,421 32%
Residential Life, Net
$21,361 7%
Additions to Endowments $3,937 1%
Capital Appropriations $3,147 1%
State Appropriations $97,602 32%
Federal Grants & Contracts $5,770 2%
Page 9
Total Expenses by Nature
2014 Expense by Nature $284,519
($ Thousands)
Supplies and Materials $19,864 (7%)
Services $50,936 (18%)
Scholarships and Fellowships $18,327 (6%)
Salaries and Benefits $159,922 (56%)
Utilities $7,783 (3%)
Depreciation $16,195 (6%)
Interest $11,482 (4%)
Other $10 (<0%)
Page 10
Operating Expenses by Function
2014 Expense by Function $273,028
($ Thousands)
Institutional Support Student Services $22,914 (8%)
$11,175 (4%)
Academic Support $18,248 (7%)
Facilities $25,685 (9%)
Public Service $3,340 (1%)
Student Financial Aid $17,159 (6%)
Research $9,621 (4%)
Auxiliary Enterprises $51,828 (19%)
Instruction $96,863 (36%)
Depreciation $16,195 (6%)
Page 11
Debt Summary 2005-14
$300
$250
254.2
249.1
244.1
233.4
237.3
$200
$ Millions
197.8
$150
145.0
140.7
2007
2008
$100
96.6
$50
67.5
$0
2005
2006
2009
Year
2010
2011
2012
2013
2014
Page 12
Financial Statement Audit Report
• Office of State Auditor financial statement audit link:
http://www.ncauditor.net/EpsWeb/Reports/Financial/FIN‐2014‐6060.pdf
• Distributed to external constituents and posted to UNCW Controller’s webpage: http://www.uncw.edu/controller/financial_reports.html
Page 13
BUDGET UPDATE: FY15 AND FY16
Page 14
FY 2014-15 Projected SCH’s
SCH's
RTI
SCH's
U/G ‐ Res
U/G ‐ NRes
FY 14‐15 Bgt Fall 2014 Spring 2015
270,092 141,005 129,725
49,905 28,308 26,043
Grad ‐ Res
14,002 7,424 6,830
Grad ‐ NRes
2,547 1,380 1,270
Total 336,546 178,117 163,868
Total Difference to FY 14‐15
Budget
270,730 638
54,351 4,446
14,254 252
2,650 103
341,985 5,439
Page 14
DE
SCH's
U/G ‐ Res
U/G ‐ NRes
Grad ‐ Res
Grad ‐ NRes
Total
Grand Total
22,891
1,723
4,049
169
28,832
Fall + SS2
14,084
857
2,763
185
17,889
Spring + SS1
18,014
1,559
2,721
43
22,337
365,378 196,006 186,205
DE – includes RN to BSN Academic Partnerships SCHs
32,098
2,416
5,484
228
40,226
9,207
693
1,435
59
11,394
382,211 16,833
Page 15
FY 2014-15 Projected Tuition Revenue
(Regular Term + Distance Education)
Dollars
Regular Term
FY 14‐15 Projected
Total Tuition
FY 14‐15 Fall Revenue
Variance
FY 14‐15 Budget Revenues
Resident Students
$39,323,005
$21,422,291
$41,131,660 $1,808,655
Non‐Resident Students
$31,364,149
$16,659,567
$32,205,128
Totals
$70,687,154
$38,081,858
$73,336,788 $2,649,634
$3,212,534
$1,907,107
$3,786,080
$573,546
Non‐Resident Students
$1,074,078
$569,685
$1,141,272
$67,194
Totals
$4,286,612
$2,476,792
$4,927,352
$640,740
$74,973,766
$40,558,650
$1,661,591
$593,548
$1,661,591
$0
$69,347
$37,275
$69,347
$0
$1,730,938
$630,823
$1,730,938
$0
Distance Education Resident Students
Grand Totals
RN to BSN AP
Resident Students
Non‐Resident Students
Totals
$840,979
$78,264,140 $3,290,374
Page 16
FY 2014-15 Budget (SL 2014-100, Senate Bill 744)
•
•
•
FY 2014‐15 Base Budget (Appropriations)
Non Res Undergrad Tuition Increase and Reduction
Reductions:
–
–
–
–
–
Management Flexibility reductions (UNC System: $10.3M)
Additional Management Flexibility Reductions (UNC System $2M)
Instructional Efficiencies (UNC System $5.3M)
Administrative Efficiencies (UNC System $5M)
Program Consolidations (UNC System $1.9M)
• Increases:
–
–
–
Enrollment Growth EPA Salary Increases (UNC System $5M)
SPA Salary Increases • Revised FY 2014‐15 Budget (Appropriations)
$98,419,971
($3,296,888)
($1,108,826)
($441,759)
($86,325)
($259,913)
($227,653)
($93,176)
$7,054,294
$5,974,618
$245,837
$833,839
$101,068,551
Page 17
FY 2015-16 and FY 2016-17
Enrollment Growth
Budget Planning
Page 18
Enrollment Growth Budget Planning
• Formula Driven to Develop “Appropriations” Request
• Modeling potential changes in Student Credit Hours (SCHs)
• Undergraduate
• Graduate
• Distance Education
• Assessing impact of 11.7% undergraduate non‐resident increase on recruiting new students and retention of current non‐resident students
• “Continuous Growth” Enrollment
• Looks at 5‐year enrollment history
• Adjustments based on market trends
(less OAP)
Requirements
Tuition
Appropriation
# Faculty
FY 15‐16
$5,786,952
$2,711,317
$3,075,635
29.43
FY 16‐17
$1,542,127
$645,245
$896,882
7.77
Total ‐ both Years
$7,329,079
$3,356,562
$3,972,517
37.2
Page 19
FY 2015-16 Enrollment Growth Budget
Planning – Academic Partnerships (OAP)
RN to BSN SCHs
Estimate
2014‐2015
Total
% change from prior year
OAP Enrollment Change
Budget 2014‐2015
12,355
Difference
to Budget
5,346
7,099
317%
Projection 2015‐2016
Projection 2016‐2017
21,058
25,700
70%
22%
Requirement
Tuition
Appropriation
# Faculty
2015‐2016 $9,616,161
$2,190,067
$7,426,094
50.99
2016‐2017
$3,452,680
$649,367
$2,803,313
18.31
Total
$13,068,841
$2,839,434
$10,229,407
69.30
Page 20
Summary Enrollment Growth
RTI + DE + OAP
Continued Growth
Requirement
Tuition
Appropriation
15‐16 RTI $4,646,216
$1,609,989
$3,036,227
24.26
15‐16 DE
$1,140,736
$1,101,328
$39,408
5.17
Total
$5,786,952
$2,711,317
$3,075,635
29.43
OAP
$9,616,161
$2,190,067
$7,426,094
50.99
$15,403,113
$4,901,384
$10,501,729
80.42
Requirement
Tuition
Appropriation
16‐17 RTI $987,929
$403,729
$584,200
5.16
16‐17 DE
$554,198
$241,516
$312,682
2.61
Total
$1,542,127
$645,245
$896,882
7.77
OAP
$3,452,680
$649,367
$2,803,313
18.31
Grand Total
(UNC‐GA Submission)
$4,994,807
$1,294,612
$3,700,195
26.08
Grand Total
(UNC‐GA Submission)
Continued Growth
# Faculty
# Faculty
Page 21
Campus Initiated Tuition and Fee
Budget Planning
FY 2015-16 and FY 2016-17
• Tuition and Fee Committee recommendations submitted and presented to the Cabinet on October 30th
• Detailed presentation and recommendations to UNCW’s BOT at November workshop and quarterly meeting
Page 22
BOT Approved Tuition Increase
FY 2015-16
Current Rate Proposed
Increase
% Increase
Undergraduate Students
In‐State
$4,026.00
Out‐State
$18,053.75
$162.00
$0.00
4.02%
0.0%
Graduate Students
In‐State
Out‐State
$4,162.73
$16,098.18
$166.50
$322.00
4.0%
2.0%
MSA Students
In‐State
Out‐State
$4,972.28
$16,640.26
$166.50
$322.00
3.35%
1.94%
MBA Students
In‐State
Out‐State
$4,744.58
$16,640.26
$166.50
$322.00
3.51%
1.94%
Page 23
BOT Approved Tuition Increase
FY 2016-17
Proposed FY 15‐16 Rate
Undergraduate Students
In‐State
$4,188.00
Out‐State
$18,053.75
Proposed
Increase
$167.50
$270.80
4.00%
1.50%
Graduate Students
In‐State
Out‐State
$4,329.23
$16,420.18
$119.00
$247.00
2.75%
1.50%
MSA Students
In‐State
Out‐State
$5,138.78
$16,962.26
$119.00
$247.00
2.32%
1.46%
MBA Students
In‐State
Out‐State
$4,911.08
$16,962.26
$119.00
$247.00
2.42%
1.46%
% Increase
Page 24
BOT Approved Fee Increase
FY 2015-16 & 2016-17
Current Fee
FY 2014‐15
Increase
Athletics
$654.55
Health Services
$28.00
Proposed FY 15‐16
$682.55
Increase
$42.00
Proposed FY 16‐17
$724.55
$190.50
$0
$190.50
$0
$190.50
Student Activities**
$644.15
$13.00
$657.15
$8.00
$665.15
Educational & Technology
$398.50
$51.96
$450.46
$42.50
$492.96
$1,907.70
$92.96
$2,000.66
$92.50
$2,093.16
Total
4.9%
4.6%
** Student Activities: Student Support, Media, SGA, Union, Campus Recreation, Postal, Athletic Facilities, Cultural Events, ID/Debit Card, Leadership, Commencement, Green Fee (NEW)
Page 25
POTENTIAL DEBT REFUNDING
Page 26
Municipal Advisor
• Request for Proposal
 Sent to 29 firms and publicly posted
 Received 8 responses and interviewed 4 firms
• RBC Capital Markets engaged in August 2014
 Ranks #1 in terms of higher education issues managed
 Experience with UNCC, UNCG and UNCCH  Competitive pricing ($0.60‐$0.80/bond)
Page 27
COPs Refunding Opportunity
Issue
Par Outstanding @ 6/30/2014 Call Date
Project
($ in millions)
COPs Series 2005
COPs Series 2006
Seahawk Village
Seahawk Landing
TOTAL
$27.36 $37.36 $64.72
6/1/2015
6/1/2016
Potential Refunding Results*
($ in millions)
Cash Flow Savings
Approximately
$10.86
NPV of Cash Flow Savings
Approximately
$8.03
* Source: RBC Capital Markets, January 7, 2015.
Page 28
COPs Refunding Opportunity
• Purpose of refunding is to lower interest expense over the remaining life of the bonds
• Required Approval
 UNCW BOT
 UNCW Corporation Board
 UNC BOG  Targeting April 2015
• Underwriter RFP process underway
Page 29
STANDARD & POOR’S CREDIT REVIEW
Page 30
Standard & Poor’s Rating
A‐ rating with a stable outlook on Certificates of Participation (COPs) affirmed Dec 29, 2014
Strengths
•
Solid COPs debt service coverage (DSC) ratio
•
Strong occupancy rates and demand for university housing
•
Favorable university demand trends
•
History of state support
Challenges
•
Below median financial resources in terms of unrestricted net assets
•
Above‐average total debt burden
•
Relatively small endowment compared to peers
Certificates of Participation
Moody's
S&P
Aaa
AAA
Aa1
AA+
Aa2
AA
Aa3
AA‐
A1
A+
A2
A
A3
A‐
Baa1
BBB+
Baa2
BBB
Baa3
BBB‐
Non Investment Grade
Page 31
Questions, Observations, Comments
University of North Carolina
Wilmington
2014 Financial Report
FINANCIAL REPORT 2014
UNIVERSITY OF NORTH CAROLINA WILMINGTON
T ABLE OF C ONTENTS 1 Letter of Transmittal 3 Management’s Discussion and Analysis 15 Independent Auditor’s Report 19 Statement of Net Position 21 Statement of Revenues, Expenses, and Changes in Net Position 22 Statement of Cash Flows 24 Notes to Financial Statements 44 The Board of Trustees and University Officers 45 Supplemental Information 2014 University of North Carolina Wilmington Financial Report 0 A Letter of Transmittal To: Chancellor William A. Sederburg and the Board of Trustees of the University of North Carolina Wilmington I am pleased to present the 2014 Financial Report for the University of North Carolina Wilmington (University or UNCW). This report contains the Statement of Net Position; the Statement of Revenues, Expenses, and Changes in Net Position; and the Statement of Cash Flows. Supplemental information includes the letter of transmittal, the management discussion and analysis, footnotes, a listing of the University’s Board of Trustees, University’s officers and deans, and other information. Each statement is explained in further detail in the management discussion and analysis. I believe that the information within this financial report is accurate in all respects and fairly presents the University’s financial position. I believe that our system of internal controls is sound and sufficient to disclose any material deficiencies to the auditors and the audit committee. Each basic financial statement is prepared in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB). The financial reports include the University financial statement as well as four blended component units including the Donald R. Watson Foundation, Inc., the UNCW Corporation, the UNCW Corporation II, and the UNCW Research Foundation. Although legally separate, these component units are reported as if they were part of the University based on the nature and significance of each entity’s relationship to the University. The University’s total net position increased $18.8 million. Unrestricted net position increased $17.6 million. A significant portion of this increase was the result of strong performance by housing and residence life operations. An $11.5 million decrease in capital assets was a result of significantly less spending on large capital projects and increased depreciation on newly capitalized buildings, including the Center for Marine Science MARBIONC facility (MARBIONC). UNCW celebrated the grand opening of MARBIONC at the CREST Millennial Campus (Campus for Research, Entrepreneurship, Service, and Teaching) in November 2013. The CREST Campus enhances the research, teaching, and service missions of UNCW with a focus on Marine Biotechnology. The state‐of‐the‐art MARBIONC Building is an interdisciplinary research facility that offers multi‐functional laboratories and specialized research equipment designed to catalyze university‐industry partnerships and promote economic development through translational research. The University marked another opening in September 2013 with the UNCW Center for Innovation and Entrepreneurship (CIE) ribbon cutting ceremony. CIE supports the development of new businesses and serves as a catalyst for economic development in southeastern North Carolina. CIE has entered into an exciting partnership with the Wireless Research Center of North Carolina in Wake Forest to further support research and commercialization of local technology‐based startups. The University of North Carolina Wilmington continues its record of national recognition for reputation, performance, and value with numerous rankings that recognize the University as a top‐tier educational institution. Princeton Review named UNCW one of the “Best in the Southeast” for the eleventh consecutive year. Colleges of Distinction recognized UNCW as a top public university, and Washington Monthly listed UNCW on its “Best‐Bang‐for‐Your‐Buck” list. Kiplinger’s Personal Finance named UNCW on its list of 100 “Best Values” among public universities. U.S. News & World Report recognized UNCW as one of the best overall universities in the South with a top ten ranking as one of the best public institutions in the South, making UNCW among a very select group of universities that has sustained a rank in the top 10 over the last 16 years. Finally, U.S. News & World Report recognized UNCW on its list of “Best Online Programs for Veterans.” 1 2014 University of North Carolina Wilmington Financial Report UNCW received formal recognition for its quality with the reaffirmation of the University’s Level V accreditation in December 2013 from the Southern Association of Colleges and Schools Commission on Colleges to award bachelor’s, master’s, and doctoral degrees. This is a tangible sign of UNCW’s high quality, innovative spirit and deep commitment to its students and the community. As part of the accreditation process, the University launched an innovative Quality Enhancement Plan, ETEAL: Experiencing Transformative Education through Applied Learning, with the goal of impacting student experience through applied learning in the areas of critical thinking, thoughtful expression, and inquiry to prepare students for productive careers after graduation. Strides in the area of innovation continue to be a focus of the University. The University was recognized by IdeaScale, a leading software provider, as a winner of its Innovation Awards in the Efficiency Expert category. UNCW was recognized for maximizing its potential as a year‐round education provider as well as enacting numerous changes such as incentivizing faculty and students to participate in a non‐traditional classroom model and course opportunities that reach non‐traditional students. UNCW continues to expand its programs to meet the needs of today’s students by providing flexible course delivery methods. The School of Nursing and Watson College of Education expanded on‐line courses to Registered Nurses seeking Bachelor of Science degrees and teachers pursuing Masters of Education with specialization in Elementary Education. The College of Health and Human Services’ Public Health Studies Program was approved as a standalone baccalaureate program. Finally, the College also announced plans to offer a part‐time Master of Social Work designed for working professionals beginning in the fall of 2014. Philanthropic donations and gift commitments to UNCW exceeded $11.3 million during the fiscal year 2014, a 19% increase over the previous year. UNCW was honored to receive one of the largest gifts in its history, a $2.5 million endowment gift from the family of the late Bill and Barbara Dobo. The portfolio of endowments increased 15% during the year, after receiving additions of $4.1 million, earning $9.7 million after fees and paying out $2.3 million towards scholarships and university programs. Its valuation at June 30, 2014 was $85.3 million. The performance of these invested endowment gifts reflect an annual return of 14.6%, which easily exceeds the fund's primary return objective of 6.6%. The endowment fund has also been successful in achieving its long‐term return objective over the three, five, and ten year time horizons. The ten year annualized return of 8.8% ranks in the top quartile of the BNY Mellon Endowment and Foundation Universe and, more importantly, exceeds the return objective of the fund by 2.0%.
UNCW’s sustained improved financial resources, enrollment growth and favorable operating performance resulted in a revised outlook from Moody’s Investor Service from “stable” to “positive,” with an affirmation of the University’s existing A1 rating. This rating is a reflection of UNCW’s effective resource management and leadership in higher education financial management. While the University of North Carolina Wilmington continues to face uncertainty with regard to the level of continued state funding, the University remains committed to its mission of teaching excellence, a strong academic and applied learning experience for all students and meaningful engagement in the region and state through research and service. Sincerely, Rick N. Whitfield, Ed.D. Vice Chancellor for Business Affairs 2014 University of North Carolina Wilmington Financial Report 2
Management’s Discussion and Analysis Financial Analysis The University of North Carolina Wilmington (University) provides the following Management’s Discussion and Analysis (MD&A) as an overview of the financial activities for the fiscal year ended June 30, 2014. The MD&A identifies significant transactions that have financial impact and highlights favorable and unfavorable trends. Comparative data for the previous year is presented to provide a better understanding of the financial information. Using the Financial Statements The University’s financial report includes three basic comprehensive financial statements that depict the financial activity and fiscal condition of the University for the current year: the Statement of Net Position; the Statement of Revenues, Expenses, and Changes in Net Position; and the Statement of Cash Flows. These financial statements are prepared in accordance with Government Accounting Standards Board (GASB) principles. The accrual basis of accounting has been used to prepare the statements. This method of accounting requires that revenues and assets be recognized when the service is provided. Expenses and liabilities are recognized when others provide services, regardless of when cash is exchanged. The Statement of Net Position includes all University assets and liabilities. The University’s net position (the monetary difference between total assets and total liabilities) is one indicator of the University’s financial viability. Over time, changes in net position provide information on the improvement or erosion of the University’s financial condition when considered with non‐financial facts such as enrollment levels and the condition of facilities. The Statement of Revenues, Expenses, and Changes in Net Position presents the revenues earned and expenses incurred during the fiscal year. Financial activities are reported as either operating or nonoperating. GASB Statement No. 35 classifies state appropriations and gifts as nonoperating revenues. With state appropriations and gifts being classified as nonoperating revenues, most public institutions will report an operating deficit. As of July 1, 2013, the University blended the component units, UNCW Corporation II (Corporation II) and UNCW Research Foundation (Research Foundation), which were previously reported as related parties. The University's net position increased $135,907 as a result of this change. An important factor to consider when evaluating the financial viability of the University is the ability to meet financial obligations as they mature. The Statement of Cash Flows presents information that allows the reader to evaluate the University’s ability to meet its financial obligations on a current basis. Financial Highlights For the fiscal year ended June 30, 2014, the North Carolina General Assembly (General Assembly) imposed a permanent budget reduction of $218 thousand, however, the University did receive state appropriations funding for enrollment growth of $4.8 million, operations funding for new buildings of $347 thousand, and need‐based student financial aid of $800 thousand as part of the campus‐initiated tuition increases. In addition, the University received funding of $200 thousand for a predictive analytics request as part of the President’s Strategic Initiatives Allocation from the General Assembly and the Board of Governors five year strategic plan (2013‐2018). The University‐led predictive analytics project includes design and construction of a predictive model that supports strategic planning and management activities in a scalable form adaptable for use by other UNC campuses. Subsequent to receiving the predictive analytics funding the State called for a one‐time reversion of expenditures for the entire UNC system. The University reversion allotment of $1.3 million included the predictive analytics funding of $200 thousand. 3 2014 University of North Carolina Wilmington Financial Report State Appropriations & State Aid, Tuition & Fees and State Appropriations & State Aid per FTE 2005‐2014
$10,000
8,867 8,160 7,018 $ Millions
$9,000
8,080 100
7,852 100.7
7,929 97.4
96.9
7,405 91.8
97.6 96.4
96.9
93.0
92.2
91.3 86.5
80
7,522 7,445 $8,000
$7,000
80.6
$6,000
77.3
5,998 71.6
60
66.9
64.6
$5,000
66.5
62.8
53.3
$4,000
55.3
$3,000
40
$2,000
2005
2006
2007
2008
State Appropriations & State Aid
2009
2010
Tuition & Fees
2011
2012
2013
2014
State Appropriations & State Aid/FTE
While tuition and fee revenue has continued to rise over the last ten years, state appropriations and state aid have held relatively steady the last five years. With student enrollment steadily increasing each year, state appropriation and state aid per student full‐time equivalent have decreased as appropriations have not increased at the same rate. During the fiscal year ended June 30, 2014, the State did not appropriate salary increases for University employees but did allocate five days of bonus leave that had to be taken by June 30, 2014. The University’s endowment fund investment rate of return of 14.6% exceeded the fund’s primary return objective of 6.6% for the fiscal year ended June 30, 2014. The endowment has been successful in achieving its long‐term objective with a ten year annualized return of 8.8% and an annualized return since inception of 7.8%. Both returns surpass the long‐term objective of 4.5% plus inflation. This ten year annualized return ranks in the top quartile of the BNY Mellon Endowment and Foundation Universe and, more importantly, exceeds the return objective of the endowment by 2.0%. Endowment investments total net position increased 15% during 2013‐14 to $85.3 million at June 30, 2014. The endowment received additions of $4.1 million, primarily from new gifts of $3.9 million. The endowment’s net earnings, after investment expenses and administrative fees, approximated $9.7 million. Scholarships and university programs received $2.3 million from those earnings. 2014 University of North Carolina Wilmington Financial Report 4
Market Value Endowment Assets 2005‐2014
90
85.3 80
70
73.8 $ Millions
60
62.8 65.9 55.4 50
52.0 49.9 47.9 40
40.2 30
33.5 20
10
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Year
During this fiscal year, the endowment purchased real estate property from The Foundation of UNCW, Inc. for $2.0 million with unrestricted quasi endowment funds. The property is used for student parking for the University. Construction in progress decreased $30.4 million when the Center for Marine Science MARBIONC facility (MARBIONC) received a certificate of occupancy and was put into service in November 2013. Statement of Net Position The Statement of Net Position presents the assets (current and noncurrent), deferred outflows, liabilities (current and noncurrent), deferred inflows, and net position (total assets plus deferred outflows minus total liabilities and deferred inflows) of the University. This statement provides a fiscal snapshot of the University’s financial position as of June 30, 2014. The data provides readers of this statement information on assets available to continue operations; amounts due to vendors, investors, and lending institutions; and the assets available for expenditure by the University. 5 2014 University of North Carolina Wilmington Financial Report Condensed Statement of Net Position
June 30, as Indicated
%
Change
2014
2013
(Restated)
Change
$ 119,562,617
98,916,624
488,086,725
$ 103,188,733
92,076,524
499,581,996
$ 16,373,884
6,840,100
(11,495,271)
Total Assets
706,565,966
694,847,253
11,718,713
1.7%
Deferred Outflows of Resources
Deferred Loss on Refunding
2,174,373
2,369,732
(195,359)
‐8.2%
Liabilities
Current Liabilities
Noncurrent Liabilities
19,368,069
244,223,266
18,023,465
252,835,335
1,344,604
(8,612,069)
7.5%
‐3.4%
Total Liabilities
263,591,335
270,858,800
(7,267,465)
‐2.7%
Deferred Inflows of Resources
Deferred Gain on Refunding
‐
‐
‐
Net Position
Net Investment in Capital Assets
Restricted Nonexpendable
Restricted Expendable
Unrestricted
260,491,504
45,850,210
38,085,095
100,722,195
272,003,692
43,670,715
27,596,752
83,087,026
(11,512,188)
2,179,495
10,488,343
17,635,169
$ 445,149,004
$ 426,358,185
Assets
Current Assets
Noncurrent Assets
Capital Assets, Net
Total Net Position
$ 18,790,819
15.9%
7.4%
‐2.3%
0.0%
‐4.2%
5.0%
38.0%
21.2%
4.4%
On June 30, 2014, total University assets were $706.6 million. The largest asset categories were the University’s cash and cash equivalents of $129.7 million, endowment investments of $80.2 million, and capital assets, net, of $488.1 million. Carryforwards of $9.6 million were the largest driver in the 15.9% increase in current assets. The Office of Housing and Residence Life’s increase to unrestricted net position of $6.7 million was the biggest contributor to the $17.6 million change in unrestricted net position. The $11.5 million decrease in capital assets, net, and net investment in capital assets, was the result of increased depreciation on newly capitalized buildings, including MARBIONC, and significantly less spending on large capital projects. 2014 University of North Carolina Wilmington Financial Report 6
Statement of Revenues, Expenses, and Changes in Net Position Changes in total net position as presented on the Statement of Net Position section are based on the activity reported in the Statement of Revenues, Expenses, and Changes in Net Position. The purpose of this statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, both operating and nonoperating, as well as any other revenues, expenses, gains and losses received or expended by the University. Operating revenues are received for providing goods and services to the various customers and constituencies of the University. Operating expenses are used to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the University. Nonoperating revenues are revenues received for which goods and services are not provided; e.g., state appropriations, noncapital gifts and grants, and investment income. Nonoperating expenses include interest and fees on debt, loss on sale of assets, and other miscellaneous expenses; i.e., expenses not involved in the normal operations of the University. 7 2014 University of North Carolina Wilmington Financial Report Condensed Statement of Revenues, Expenses, and Changes in Net Position
For Year Ended June 30, as Indicated
2013
(Restated)
2014
Operating Revenues
Student Tuition and Fees, Net
Sales and Service, Net
Grants and Contracts
Other Operating Revenues
$
96,421,397
47,969,874
7,880,202
5,816,180
$
93,042,367
44,252,719
10,503,238
6,242,816
Change
$
%
Change
3,379,030
3,717,155
(2,623,036)
(426,636)
3.6%
8.4%
‐25.0%
‐6.8%
Total Operating Revenues
158,087,653
154,041,140
4,046,513
2.6%
Operating Expenses
Salaries and Benefits
Supplies and Materials
Services
Scholarships and Fellowships
Utilities
Depreciation
159,921,608
19,863,947
50,936,497
18,327,034
7,783,473
16,194,951
156,785,894
21,320,365
50,215,453
17,661,241
7,344,665
14,585,939
3,135,714
(1,456,418)
721,044
665,793
438,808
1,609,012
2.0%
‐6.8%
1.4%
3.8%
6.0%
11.0%
Total Operating Expenses
273,027,510
267,913,557
5,113,953
1.9%
Operating Loss
(114,939,857)
(113,872,417)
(1,067,440)
0.9%
97,601,950
26,698,543
10,842,857
(11,482,010)
822,120
(9,157)
96,878,528
27,501,468
8,560,744
(10,889,530)
621,946
213,938
723,422
(802,925)
2,282,113
(592,480)
200,174
(223,095)
0.7%
‐2.9%
26.7%
5.4%
32.2%
‐104.3%
3,146,783
2,173,028
3,936,562
17,457,010
1,749,544
3,146,783
(15,283,982)
2,187,018
100.0%
‐87.6%
125.0%
133,730,676
142,093,648
(8,362,972)
‐5.9%
18,790,819
28,221,231
(9,430,412)
‐33.4%
426,358,185
398,136,954
28,221,231
7.1%
18,790,819
4.4%
(3,714,822)
5,715,590
‐1.2%
2.1%
(9,430,412)
‐33.4%
Nonoperating Revenues (Expenses)
State Appropriation
Noncapital Gifts and Grants
Investment Income, Net
Interest and Fees on Debt
Federal Interest Subsidy on Debt
Other Nonoperating (Expenses) Revenues
Other Revenues
Capital Appropriations
Capital Grants
Additions to Endowments
Total Net Nonoperating and Other Revenues Increase in Net Position
Net Position ‐ Beginning of Year
Net Position ‐ End of Year
$
Reconciliation of Change in Net Position
Total Revenues
Less: Total Expenses
Increase in Net Position
445,149,004
$
303,309,496
284,518,677
$
18,790,819
426,358,185
$
307,024,318
278,803,087
$
28,221,231
$
Student tuition and fees of $96.4 million and sales and services from auxiliary enterprises of $48.0 million accounted for 91.3% of the University’s operating revenues. Sales and Service increased 8.4% due to increased auxiliary enterprise revenue primarily from the areas of residential life, dining, and parking. 2014 University of North Carolina Wilmington Financial Report 8
Grants and contracts revenue decreased 25.0% to $7.9 million due to the federal government’s delay in funding new federal awards in conjunction with the expiration of several large federal awards. Grants & Contracts Revenue 2005‐2014
(Includes Noncapital Grants ‐ State Passthrough for 2009 ‐ 2014)
45
40
State Passthrough
Grants & Contracts
35
10.0
9.9
8.0
32.2
$ Millions
30
9.0
30.4
8.5
7.7
28.7
25
25.8
24.1
20
21.4
21.8
2006
2007
23.5
23.2
20.5
15
10
5
2005
2008
2009
2010
2011
2012
2013
2014
Year
The University received $3.1 million in state capital appropriations for repair and renovations during the fiscal year. Capital grant revenue decreased 87.6% after funding was utilized from the federal NIST grant for the building of MARBIONC and state capital aid was expended for the completion of the Teaching Lab building. The 26.7% increase in investment income, net, is primarily due to investment earnings of $10.2 million generated in 2014 as compared to $8.0 million in 2013. This increase was a result of a 14.6% return on investment versus 12.9% in the previous year. 2014 Revenue by Source $303,309
($ Thousands)
Capital Appropriations $3,147 (1%)
Sales & Services, Net $47,970 (16%)
Capital/Noncapital Grants
$25,533 (8%)
State Appropriations $97,602 (32%)
Investment Income $10,843 (4%)
Other $22,929 (8%)
Other Revenues $6,636 (2%)
Federal Grants & Contracts
$5,770 (2%)
Additions to Endowments $3,937 (1%)
9 Noncapital Gifts, Net $3,339 (1%)
Non‐Federal Grants & Contracts $2,111 (1%)
Student Tuition & Fees, Net $96,421 (32%)
2014 University of North Carolina Wilmington Financial Report The decrease of $1.5 million in supplies and materials expenses comes after a 16.4% increase in 2013 for new buildings. Occupancy in new buildings, such as MARBIONC, contributed to the increase of 6.0% in utilities expense. The 11.0% increase in depreciation expense reflects the full year depreciation of assets acquired in 2013, including the Teaching Lab building and Student Recreation Center expansion, as well as MARBIONC, which was capitalized in 2014. 2014 Expense by Nature $284,519
($ Thousands)
Supplies and Materials $19,864 (7%)
Services $50,936 (18%)
Scholarships and Fellowships $18,327 (6%)
Salaries and Benefits $159,922 (56%)
Utilities $7,783 (3%)
Depreciation $16,195 (6%)
Interest $11,482 (4%)
Other $10 (<0%)
Statement of Cash Flows The Statement of Cash Flows provides information about cash receipts and cash payments during the year. The Statement of Cash Flows also helps users assess the University’s: 
Ability to generate future net cash flows 
Ability to meet its obligations as they come due 
Need for external financing Condensed Statement of Cash Flows
For Year Ended June 30, as Indicated
2013
(Restated)
2014
Cash Provided (Used) by:
Operating Activities
Noncapital Financing Activities
Capital Financing Activities
Investing Activities
$
Net Change In Cash
Cash Beginning of Year
Cash Ending of Year
$
(93,315,115)
126,341,817
(18,905,410)
1,094,517
$
(99,397,122)
122,935,017
(35,799,240)
(1,099,597)
$
Change
%
Change
6,082,007
3,406,800
16,893,830
2,194,114
‐6.1%
2.8%
‐47.2%
‐199.5%
15,215,809
(13,360,942)
28,576,751
‐213.9%
114,499,295
127,860,237
(13,360,942)
‐10.4%
15,215,809
13.3%
129,715,104
$
114,499,295
$
2014 University of North Carolina Wilmington Financial Report 10
Operating Activities Major cash sources were student tuition and fees of $97.4 million, sales and services of $47.9 million, and contracts and grants of $8.1 million. Major cash uses were compensation to employees of $159.8 million, of which $87.2 million was related to instruction, payments to vendors and suppliers for goods and services of $75.8 million, and disbursements to students for scholarships and awards of $18.3 million. Instruction Expense 2005‐2014
100
95.3
90
83.2
80
87.8
87.0
2011
2012
84.5
96.9
$ Millions
79.9
70
72.5
63.3
60
58.1
50
40
2005
2006
2007
2008
2009
2010
Year
2013
2014
Noncapital Financial Activities The major cash inflow was state appropriations of $97.6 million. While GASB standards require this revenue to be classified as nonoperating, these funds are essentially used to maintain operations. Other noncapital inflows included gifts and grants received of $30.1 million. Capital Financing Activities Cash provided included capital appropriations of $3.1 million and capital grants of $2.0 million. Cash used was primarily for the acquisition of capital assets of $7.2 million and the repayment of principal and interest on capital debt of $18.0 million. 11 2014 University of North Carolina Wilmington Financial Report Investing Activities Cash provided included sales and maturities of investments of $2.6 million and investment income of $8.2 million. Cash used reflects the purchase of investments and related fees of $9.8 million. Capital Assets and Debt Administration Capital Assets The University had $488.1 million invested in capital assets at June 30, 2014, as reported in the table below. This represents a decrease of $11.5 million from 2013. Capital Assets Net of Depreciation
June 30, as Indicated
2013
(Restated)
2014
Land
Art, Literature and Artifacts
Construction In Progress
Buildings, Net
Machinery and Equipment, Net
Infrastructure, Net
Total Capital Assets
Change
$
9,263,459
1,681,375
1,634,724
431,781,485
15,072,265
28,653,417
$
9,263,459
1,673,320
30,512,848
413,804,348
15,956,896
28,371,125
$
0
8,055
(28,878,124)
17,977,137
(884,631)
282,292
$
488,086,725
$
499,581,996
$
(11,495,271)
The net increase in buildings represents the completion and subsequent occupancy of the MARBIONC facility. Construction in Progress decreased as a result of the addition of the aforementioned building. Debt As of June 30, 2014, the University’s $237.3 million in long‐term debt included outstanding revenue bonds payable of $106.0 million, certificates of participation payable of $123.6 million, and notes payable of $7.7 million. Debt Analysis 2005‐2014
$300
$250
254.2
249.1
233.4
244.1
237.3
$200
$ Millions
197.8
$150
145.0
140.7
2007
2008
$100
96.6
$50
67.5
$0
2005
2006
2009
2010
2011
2012
2013
2014
Year
There have been no significant changes in credit ratings or debt limitations that will affect future financing for the University. 2014 University of North Carolina Wilmington Financial Report 12
Economic Forecast For fiscal year 2014‐2015, the General Assembly approved funding for enrollment growth of $6.0 million. Permanent reductions to state appropriations as approved by the General Assembly constitute $1.1 million, or 1.2% of appropriations. The General Assembly provided a flat $1,000 salary increase for SPA employees and a total of $246 thousand for all EPA employees in fiscal year 2015. The University is planning to use the EPA allocation plus other university resources to match the $1,000 SPA salary increase for faculty and non‐faculty EPA employees. In addition, the General Assembly authorized five additional days of bonus leave which are eligible to be rolled over if unused at year end. Freshman Fall Enrollment & SAT Scores 2004‐2013
1,215
1,135
SAT Score
6,061
5,471
5,517
5,402 5,449 5,098 6,160
1,155
5,033
5,377
1,195
1,175
6,000
4,000
10,838
10,339
9,759
9,283 9,311 8,740 8,066
8,820
8,700
8,000
5,217
Numbers of Pesons
10,000
11,184
12,000
1,939
2,053
1,980
1,992
1,949 1,920 1,987
1,943
1,897
2,000
2,073 1,115
0
1,095
1,075
2004
2005
2006
Number of Applicants
2007
2008
2009
Number Accepted
2010
2011
2012
Number Enrolled
2013
SAT Scores
The University continues to face reductions to state appropriations, limited tuition increases, marginal performance funding, and reductions in federal funding. Efforts continue to protect the core academic and instruction service levels to our students with an emphasis on administrative efficiencies and cost elimination. A new forward‐looking Unified Budget Planning process was implemented in fiscal year 2014 to strategically evaluate and plan core objectives and resource allocation across campus. A second guaranteed energy savings performance contract is under review. This is a continuation of the University’s efforts to provide additional funding to further reduce energy consumption and related energy costs. Federal funding for research and sponsored programs has either flattened or diminished given the results of the Sequester and delays in federal budget negotiations. While proposal submission is at an all‐time high, this revenue source is projected to remain flat over the next few years after a long period of sustained growth. This change has increased the competitiveness for federal funding and will challenge the University’s opportunities for growth. Funding for indirect cost recoveries follow each direct dollar of research and sponsored programs support. Likewise, indirect costs are negatively impacted and thereby reduce the investments made and support provided to the research enterprise. As the nation ends its fifth year of economic expansion following the Great Recession, the rate of growth has been slow and is forecasted to continue at this pace. While deals on the federal budget and debt ceiling have removed some economic uncertainty, the U.S. Federal Reserve Bank has begun a slow process to normalize monetary policy and taper quantitative easing. Over the past year, both the U.S. and North Carolina unemployment rates have fallen. Despite moderate economic growth, North Carolina’s state budget remains tight with further pressure placed on public universities to limit in‐state tuition increases and reduce operating budgets. 13 2014 University of North Carolina Wilmington Financial Report Student Headcount and FTE 2005‐2014 13,110
2014
12,880
2013
12,332
2012
Year
12,060
2010
11,742
2009
11,021
2006
10,767
2005
8,000
9,000
10,000
12,924
12,643
12,180
11,255
2007
13,071
FTE
11,358
2008
13,733
13,145
12,220
2011
13,937
Headcount
12,098
11,839
11,574
11,000
12,000
13,000
14,000
The University is well positioned to continue to attract, retain and matriculate well‐educated students by offering an excellent academic learning experience supported by quality teaching, research and service. The University is focused on enhancing and developing diverse revenue sources including distance education offerings, new academic programs, innovation and entrepreneurial activities, and auxiliary services to supplement continued contracting levels of state funding. The University will continue to emphasize prudent resource allocation, cost containment measures, implementation of efficiency initiatives and continuous assessment of processes to efficiently and effectively meet the University’s mission, goals and objectives. Contacting the University’s Financial Management This financial report is designed to provide our students, citizens, investors, and creditors with a general overview of the University’s finances and demonstrate accountability of all funds. Additional financial information may be obtained by accessing the Controller’s Office web page http://www.uncw.edu/controller/financial_reports.html or contacting the Controller’s Office at (910) 962‐3144. 2014 University of North Carolina Wilmington Financial Report 14
STATE OF NORTH CAROLINA
Office of the State Auditor
2 S. Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699-0601
Telephone: (919) 807-7500
Fax: (919) 807-7647
Internet
http://www.ncauditor.net
Beth A. Wood, CPA
State Auditor
INDEPENDENT AUDITOR’S REPORT
Board of Trustees
University of North Carolina Wilmington
Wilmington, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the University of North Carolina
Wilmington, a constituent institution of the multi-campus University of North Carolina
System, which is a component unit of the State of North Carolina, as of and for the year ended
June 30, 2014, and the related notes to the financial statements, which collectively comprise
the University’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We did not audit the financial statements of the Donald R. Watson Foundation, Inc., the
UNCW Corporation, the UNCW Corporation II, or the UNCW Research Foundation, which
collectively represent 19 percent, less than 1 percent, and 2 percent, respectively, of the assets,
net position, and revenues of the University. Those statements were audited by other auditors,
whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts
included for the blended component units, is based solely on the reports 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 from material misstatement. The financial
statements of the blended component units were not audited in accordance with Government
Auditing Standards.
15 2014 University of North Carolina Wilmington Financial Report
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the University’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 University’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 opinions.
Opinion
In our opinion, based on our audit and the reports of the other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of University of
North Carolina Wilmington as of June 30, 2014, and the changes in financial position and,
where applicable, cash flows thereof for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 17 to the financial statements, during the year ended June 30, 2014, the
University of North Carolina Wilmington adopted Governmental Accounting Standards Board
Statement No. 65 – Items Previously Reported as Assets and Liabilities. Our opinion is not
modified with respect to this matter.
Other Matters - Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
Management’s Discussion and Analysis be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required by
the Governmental Accounting Standards Board who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the
United States of America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Other Information
The transmittal and supplementary sections are presented for purposes of additional analysis and
are not required part of the basic financial statements. This information is the responsibility of
2014 University of North Carolina Wilmington Financial Report 16
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
management and was derived from and relates directly to the underlying accounting and other
records used to prepare the basic financial statements. The transmittal and supplementary sections
have not been subjected to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, we do not express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
November 21, 2014 on our consideration of the University’s internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters. The purpose of that report is to describe the
scope of our testing of internal control over financial reporting and compliance and the results of
that testing, and not to provide an opinion on internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the University’s internal control over financial reporting and
compliance. The report on internal control and compliance has been issued under separate cover
in the Financial Statement Audit Report of the University of North Carolina Wilmington
published by this office.
Beth A. Wood, CPA
State Auditor
Raleigh, North Carolina
November 21, 2014
17 2014 University of North Carolina Wilmington Financial Report This page intentionally left blank 2014 University of North Carolina Wilmington Financial Report
18
Statement of Net Position June 30, 2014 ASSETS
Current Assets:
Cash and Cash Equivalents Restricted Cash and Cash Equivalents
Receivables, Net (Note 4)
Inventories
Prepaid Items
Notes Receivable, Net (Note 4)
Total Current Assets
$ 100,713,018
14,401,915
3,444,957
327,022
6,941
668,764
119,562,617
Noncurrent Assets:
Restricted Cash and Cash Equivalents
Receivables, Net (Note 4)
Prepaid Items
Endowment Investments
Notes Receivable, Net (Note 4)
Capital Assets ‐ Nondepreciable (Note 5)
Capital Assets ‐ Depreciable, Net (Note 5)
Total Noncurrent Assets
14,600,171
211,572
1,195
80,159,221
3,944,465
12,579,558
475,507,167
587,003,349
Total Assets
706,565,966
DEFERRED OUTFLOWS OF RESOURCES
Deferred Loss on Refunding
2,174,373
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Liabilities (Note 6)
Due to Primary Government
Deposits Payable
Unearned Revenue
Interest Payable
Long‐Term Liabilities ‐ Current Portion (Note 7)
Total Current Liabilities
3,541,055
1,365,193
5,921
5,288,211
2,133,921
7,033,768
19,368,069
Noncurrent Liabilities:
Accounts Payable (Note 6)
Funds Held for Others
U.S. Government Grants Refundable
Long‐Term Liabilities, Net (Note 7)
Total Noncurrent Liabilities
Total Liabilities
330,000
791,607
4,325,528
238,776,131
244,223,266
263,591,335
DEFERRED INFLOWS OF RESOURCES
Deferred Gain on Refunding
0
19 2014 University of North Carolina Wilmington Financial Report
Statement of Net Position June 30, 2014 NET POSITION
Net Investment in Capital Assets
Restricted for:
Nonexpendable:
Scholarships and Fellowships
Research
Endowed Professorships
Departmental Uses
Loans
Expendable:
Scholarships and Fellowships
Research
Endowed Professorships
Departmental Uses
Loans
Capital Projects
Debt Service
Unrestricted
Total Net Position
260,491,504
20,441,827
1,827,040
10,843,466
11,864,747
873,130
13,223,393
1,178,256
6,668,731
7,782,985
648,184
8,372,658
210,888
100,722,195
$ 445,149,004
The accompanying notes to the financial statements are an integral part of this statement.
2014 University of North Carolina Wilmington Financial Report 20
Statement of Revenues, Expenses, and Changes in Net Position For the Fiscal Year Ended June 30, 2014 REVENUES
Operating Revenues:
Student Tuition and Fees, Net (Note 9)
Federal Grants and Contracts
State and Local Grants and Contracts
Nongovernmental Grants and Contracts
Sales and Services, Net (Note 9)
Interest Earnings on Loans
Other Operating Revenues
$
Total Operating Revenues
96,421,397
5,769,590
1,006,363
1,104,249
47,969,874
6,100
5,810,080
158,087,653
EXPENSES
Operating Expenses:
Salaries and Benefits
Supplies and Materials
Services
Scholarships and Fellowships
Utilities
Depreciation
159,921,608
19,863,947
50,936,497
18,327,034
7,783,473
16,194,951
Total Operating Expenses
273,027,510
Operating Loss
(114,939,857)
NONOPERATING REVENUES (EXPENSES)
State Appropriations
Noncapital Grants ‐ Student Financial Aid
Noncapital Gifts, Net (Note 9)
Investment Income (Net of Investment Expense of $207,717)
Interest and Fees on Debt
Federal Interest Subsidy on Debt
Other Nonoperating Expenses
97,601,950
23,359,488
3,339,055
10,842,857
(11,482,010)
822,120
(9,157)
Net Nonoperating Revenues
124,474,303
Income Before Other Revenues
9,534,446
Capital Appropriations
Capital Grants
Additions to Endowments
3,146,783
2,173,028
3,936,562
Increase in Net Position
18,790,819
NET POSITION
Net Position ‐ July 1, 2013, as Restated (Note 17)
Net Position ‐ June 30, 2014
$
The accompanying notes to the financial statements are an integral part of this statement.
21 426,358,185
2014 University of North Carolina Wilmington Financial Report
445,149,004
Statement of Cash Flows For the Fiscal Year Ended June 30, 2014 CASH FLOWS FROM OPERATING ACTIVITIES
Received from Customers
Payments to Employees and Fringe Benefits
Payments to Vendors and Suppliers
Payments for Scholarships and Fellowships
Loans Issued
Collection of Loans
Interest Earned on Loans
Other Receipts
$
Net Cash Used by Operating Activities
153,425,544
(159,825,499)
(75,826,051)
(18,327,034)
(700,854)
844,711
15,847
7,078,221
(93,315,115)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State Appropriations
Noncapital Grants ‐ Student Financial Aid
Noncapital Gifts
Additions to Endowments
William D. Ford Direct Lending Receipts
William D. Ford Direct Lending Disbursements
Related Activity Agency Disbursements
Other Receipts
97,601,950
23,383,942
2,803,132
3,936,562
70,229,155
(70,229,155)
(1,485,161)
101,392
Net Cash Provided by Noncapital Financing Activities
126,341,817
CASH FLOWS FROM CAPITAL FINANCING AND RELATED
FINANCING ACTIVITIES
State Capital Appropriations
Capital Grants
Proceeds from Sale of Capital Assets
Acquisition and Construction of Capital Assets
Principal Paid on Capital Debt and Leases
Interest and Fees Paid on Capital Debt and Leases
Federal Interest Subsidy on Debt Received
3,146,783
2,048,633
226,787
(7,158,822)
(6,597,179)
(11,393,732)
822,120
Net Cash Used by Capital Financing and Related Financing Activities
(18,905,410)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales and Maturities of Investments
Investment Income
Purchase of Investments and Related Fees
2,646,005
8,212,936
(9,764,424)
Net Cash Provided by Investing Activities
1,094,517
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents ‐ July 1, 2013
Cash and Cash Equivalents ‐ June 30, 2014
15,215,809
114,499,295
$
129,715,104
2014 University of North Carolina Wilmington Financial Report 22
Statement of Cash Flows For the Fiscal Year Ended June 30, 2014 RECONCILIATION OF NET OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES
Operating Loss
Adjustments to Reconcile Operating Loss to Net Cash Used
by Operating Activities:
Depreciation Expense
Allowances and Write‐Offs
Nonoperating Other Income Receivables, Net
Due from State of North Carolina Component Units
Due from University Component Units
Inventories
Prepaid Items
Notes Receivable, Net
Accounts Payable and Accrued Liabilities
Due to Primary Government
Unearned Revenue
Compensated Absences
Deposits Payable
Net Cash Used by Operating Activities
$
(114,939,857)
16,194,951
24,490
450,402
350,279
63,283
1,278,445
(16,532)
(6,941)
143,857
1,269,483
1,365,193
770,274
(268,363)
5,921
$
(93,315,115)
$
100,713,018
14,401,915
RECONCILIATION OF CASH AND CASH EQUIVALENTS
Current Assets:
Cash and Cash Equivalents
Restricted Cash and Cash Equivalents
Noncurrent Assets:
Restricted Cash and Cash Equivalents
Total Cash and Cash Equivalents ‐ June 30, 2014
14,600,171
$
129,715,104
NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES
Assets Acquired through the Assumption of a Liability
Assets Acquired through a Gift
Change in Fair Value of Investments
Loss on Disposal of Capital Assets
Amortization of Bond Premiums and Deferred Loss on Refunding
The accompanying notes to the financial statements are an integral part of this statement.
23 2014 University of North Carolina Wilmington Financial Report $
1,170,170
450,402
2,690,776
(110,549)
(206,087)
Notes to the Financial Statements June 30, 2014 N OTE 1 – S IGNIFICANT A CCOUNTING P OLICIES A.
Financial Reporting Entity ‐ The concept underlying the definition of the financial reporting entity is that elected officials are accountable to their constituents for their actions. As required by accounting principles generally accepted in the United States of America (GAAP), the financial reporting entity includes both the primary government and all of its component units. An organization other than a primary government serves as a nucleus for a reporting entity when it issues separate financial statements. The University of North Carolina Wilmington is a constituent institution of the multi‐campus University of North Carolina System, which is a component unit of the State of North Carolina and an integral part of the State’s Comprehensive Annual Financial Report. The accompanying financial statements present all funds belonging to the University and its component units. While the Board of Governors of the University of North Carolina System has ultimate responsibility, the Chancellor, the Board of Trustees, and the Board of Trustees of the Endowment Fund have delegated responsibilities for financial accountability of the University’s funds. The University’s component units are blended in the University’s financial statements. Blended Component Units ‐ Although legally separate, the Donald R. Watson Foundation, Inc. (Watson Foundation), the UNCW Corporation (Corporation), the UNCW Corporation II (Corporation II), and the UNCW Research Foundation (Research Foundation), component units of the University, are reported as if they were part of the University. The Watson Foundation was organized to support charitable, religious, scientific and educational institutions located in the State of North Carolina provided that each supported organization is tax exempt and eligible to receive charitable donations. The Watson Foundation is a public not‐for‐profit organization that reports its financial results under Financial Accounting Standards Board (FASB) Statements. The Watson Foundation is governed by a five‐member board of which three are appointed by the Board of Trustees, and two are appointed by the benefactor. Because a majority of the directors of the Watson Foundation are appointed by the members of the University of North Carolina Wilmington’s Board of Trustees and the Watson Foundation’s primary purpose is to benefit the University of North Carolina Wilmington, its financial statements have been blended with those of the University. The Corporation includes the activities of the single member entities, UNCW Corporation Housing I, LLC, and UNCW Corporation Housing II, LLC. The Corporation was organized to enhance the University of North Carolina Wilmington’s educational mission, including overseeing and assisting in the acquisition and financing of capital assets for the University. The Corporation is a public not‐for‐profit organization that reports its financial results under Governmental Accounting Standard Board (GASB) Statements. The Corporation is governed by a six‐member board of which three are delegates of the University. The remaining three positions are filled by persons external to the University’s operations and business functions and are appointed by the UNCW Chancellor to serve on the board. As the Corporation’s sole purpose is to benefit the University of North Carolina Wilmington, its financial statements have been blended with those of the University. The Corporation II includes the activities of the single member entities, UNCW Corporation Oleander One, LLC, and UNCW Corporation College Station, LLC. The Corporation II was organized to enhance the University of North Carolina Wilmington’s educational mission, including constructing or managing facilities for the University. These entities acquire real property that is used solely by the University for auxiliary support, off‐campus parking, or other agreed upon activities. The Corporation II is a public not‐for‐profit 2014 University of North Carolina Wilmington Financial Report 24
organization that reports its financial results under Governmental Accounting Standard Board (GASB) Statements. The Corporation II is governed by a seven‐member board of which four are delegates of the University. The remaining three positions are filled by persons external to the University’s operations and business functions and are appointed by the UNCW Chancellor to serve on the board. As the Corporation II’s sole purpose is to benefit the University of North Carolina Wilmington, its financial statements have been blended with those of the University. The Research Foundation includes the activities of the single member entities, UNCW Corporation Research I, LLC, MARBIONC Development Group, LLC, The CREST Millennial Campus, LLC, and the UNCW Entrepreneurship Center, LLC. The Research Foundation was organized to enhance the University of North Carolina Wilmington’s educational mission. These entities, through collaborative research relationships, pursue commercialization opportunities and the economic development of research discoveries, materials and intellectual properties for the benefit of the University. The Research Foundation is a public not‐for‐
profit organization that reports its financial results under Governmental Accounting Standard Board (GASB) Statements. The Research Foundation is governed by a four‐member board, all of which are delegates of the University. As the Research Foundation’s sole purpose is to benefit the University of North Carolina Wilmington, its financial statements have been blended with those of the University. Separate financial statements for the Watson Foundation, the Corporation, the Corporation II, and the Research Foundation may be obtained from the Office of Associated Entities, 601 S. College Road, Wilmington, NC 28403‐5952, or by calling (910) 962‐3139. Other related foundations and similar nonprofit corporations for which the University is not financially accountable are not part of the accompanying financial statements. Condensed combining information regarding blended component units is provided in Note 16. B. Basis of Presentation ‐ The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America as prescribed by the GASB. Pursuant to the provisions of GASB Statement No. 34, Basic Financial Statements ‐ and Management’s Discussion and Analysis ‐ for State and Local Governments, as amended by GASB Statement No. 35, Basic Financial Statements ‐ and Management’s Discussion and Analysis ‐ for Public Colleges and Universities, the full scope of the University’s activities is considered to be a single business‐type activity and accordingly, is reported within a single column in the basic financial statements. C. Basis of Accounting ‐ The financial statements of the University have been prepared using the economic resource measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred, regardless of the timing of the cash flows. Nonexchange transactions, in which the University receives (or gives) value without directly giving (or receiving) equal value in exchange, include state appropriations, certain grants, and donations. Revenues are recognized, net of estimated uncollectible amounts, as soon as all eligibility requirements imposed by the provider have been met, if probable of collection. 25 D. Cash and Cash Equivalents ‐ This classification includes undeposited receipts, petty cash, cash on deposit with private bank accounts, cash on deposit with fiscal agents, and deposits held by the State Treasurer in the Short‐Term Investment Fund (STIF). The STIF maintained by the State Treasurer has the general characteristics of a demand deposit account in that participants may deposit and withdraw cash at any time without prior notice or penalty. E. Investments ‐ Investments generally are reported at fair value, as determined by quoted market prices or estimated amounts determined by management, if quoted market prices are not available. The fair value for 2014 University of North Carolina Wilmington Financial Report investments in the UNC Investment Fund was based on amounts reported to the University by UNC Management Company, Inc. Because of the inherent uncertainty in the use of estimates, values that are based on estimates may differ from the values that would have been used had a ready market existed for the investments. The net increase (decrease) in the fair value of investments is recognized as a component of investment income. Real estate not held by a governmental external investment pool, and other asset holdings are reported at cost, if purchased, or at fair value or appraised value at date of gift, if donated. Endowment investments include the principal amount of gifts and bequests that, according to donor restrictions, must be held in perpetuity or for a specified period of time, along with any accumulated investment earnings on such amounts. Further, endowment investments also include amounts internally designated by the University for investment in an endowment capacity (i.e. quasi‐endowments), along with accumulated investment earnings on such amounts. Land and other real estate held as investments by endowments are reported at fair value, consistent with how investments are generally reported. F. Receivables ‐ Receivables consist of tuition and fees charged to students, charges for auxiliary enterprises’ sales and services, and interest receivable for student loans. Receivables also include amounts due from the federal government, state and local governments, private sources in connection with reimbursement of allowable expenditures made pursuant to contracts and grants, and pledges that are verifiable, measurable, and expected to be collected and available for expenditures for which the resource provider’s conditions have been satisfied. Receivables are recorded net of estimated uncollectible amounts. G. Inventories ‐ Inventories, consisting of expendable supplies, are valued at cost using the first‐in, first‐out method. H. Capital Assets ‐ Capital assets are stated at cost at date of acquisition or fair value at date of donation in the case of gifts. The value of assets constructed includes all material direct and indirect construction costs. Interest costs incurred are capitalized during the period of construction. The University capitalizes assets that have a value or cost of $5,000 or greater at the date of acquisition and an estimated useful life of more than one year. Depreciation is computed using the straight‐line method over the estimated useful lives of the assets, generally 15 to 50 years for general infrastructure, 10 to 50 years for buildings, and 4 to 50 years for equipment. The Randall Library Special collection is capitalized at cost or fair value at the date of donation. This collection is considered inexhaustible and is therefore not depreciated. I. Restricted Assets ‐ Certain resources are reported as restricted assets because restrictions on asset use change the nature or normal understanding of the availability of the asset. Resources that are not available for current operations and are reported as restricted include resources restricted for the acquisition or construction of capital assets, resources legally segregated for the payment of principal and interest as required by debt covenants, unspent debt proceeds, and endowment and other restricted investments. J. Noncurrent Long‐Term Liabilities ‐ Noncurrent long‐term liabilities include principal amounts of revenue bonds payable, certificates of participation, notes payable, and compensated absences that will not be paid within the next fiscal year. Revenue bonds payable are reported net of unamortized premiums. The University amortizes bond premiums over the life of the bonds using the straight‐line method. Deferred charges on refundings are amortized over the life of the old debt or new debt (whichever is shorter) using the straight‐line method, 2014 University of North Carolina Wilmington Financial Report 26
and are included as deferred outflows or deferred inflows of resources on the Statement of Net Position. Issuance costs are expensed. K. Compensated Absences ‐ The University’s policy is to record the cost of vacation leave when earned. The policy provides for a maximum accumulation of unused vacation leave of 30 days which can be carried forward each January 1 or for which an employee can be paid upon termination of employment. When classifying compensated absences into current and noncurrent, leave is considered taken using a last‐in, first‐out (LIFO) method. Also, any accumulated vacation leave in excess of 30 days at year‐end is converted to sick leave. Under this policy, the accumulated vacation leave for each employee at June 30 equals the leave carried forward at the previous December 31 plus the leave earned, less the leave taken between January 1 and June 30. In addition to the vacation leave described above, compensated absences include the accumulated unused portion of the special annual leave bonuses awarded by the North Carolina General Assembly. The bonus leave balance on December 31 is retained by employees and transferred into the next calendar year. It is not subject to the limitation on annual leave carried forward described above and is not subject to conversion to sick leave. There is no liability for unpaid accumulated sick leave because the University has no obligation to pay sick leave upon termination or retirement. However, additional service credit for retirement pension benefits is given for accumulated sick leave upon retirement. L. Net Position ‐ The University’s net position is classified as follows: Net Investment in Capital Assets ‐ This represents the University’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of Net Investment in Capital Assets. Additionally, deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of capital assets or related debt are also included in this component of net position. Restricted Net Position ‐ Nonexpendable ‐ Nonexpendable restricted net position includes endowments and similar type assets whose use is limited by donors or other outside sources, and, as a condition of the gift, the principal is to be maintained in perpetuity. Restricted Net Position ‐ Expendable ‐ Expendable restricted net position includes resources for which the University is legally or contractually obligated to spend in accordance with restrictions imposed by external parties. Unrestricted Net Position ‐ Unrestricted net position includes resources derived from student tuition and fees, sales and services, unrestricted gifts, royalties, and interest income. Restricted and unrestricted resources are tracked using a fund accounting system and are spent in accordance with established fund authorities. Fund authorities provide rules for the fund activity and are separately established for restricted and unrestricted activities. When both restricted and unrestricted funds are available for expenditure, the decision for funding is transactional based within the departmental management system in place at the University. For projects funded by tax‐exempt debt proceeds and other sources, the debt proceeds are always used first. Both restricted and unrestricted net position include consideration of deferred outflows and inflows of resources. M. 27 Scholarship Discounts ‐ Student tuition and fees revenues and certain other revenues from University charges are reported net of scholarship discounts in the accompanying Statement of Revenues, Expenses, and Changes in Net Position. The scholarship discount is the difference between the actual charge for goods 2014 University of North Carolina Wilmington Financial Report and services provided by the University and the amount that is paid by students or by third parties on the students’ behalf. Student financial assistance grants, such as Pell grants, and other federal, state, or nongovernmental programs, are recorded as nonoperating revenues in the accompanying Statement of Revenues, Expenses, and Changes in Net Position. To the extent that revenues from these programs are used to satisfy tuition, fees, and other charges, the University has recorded a scholarship discount. N. Revenue and Expense Recognition ‐ The University classifies its revenues and expenses as operating or nonoperating in the accompanying Statement of Revenues, Expenses, and Changes in Net Position. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the University’s principal ongoing operations. Operating revenues include activities that have characteristics of exchange transactions, such as (1) student tuition and fees, (2) sales and services of auxiliary enterprises, (3) certain federal, state, and local grants and contracts that are essentially contracts for services, and (4) interest earned on loans. Operating expenses are all expense transactions incurred other than those related to capital and noncapital financing or investing activities as defined by GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting. Nonoperating revenues include activities that have the characteristics of nonexchange transactions. Revenues from nonexchange transactions that represent subsidies or gifts to the University, as well as investment income, are considered nonoperating since these are investing, capital, or noncapital financing activities. Capital contributions are presented separately after nonoperating revenues and expenses. O. Internal Sales Activities ‐ Certain institutional auxiliary operations provide goods and services to University departments, as well as to its customers. These institutional auxiliary operations include activities such as copy centers, motor pool, postal services, and telecommunications. In addition, the University has other miscellaneous sales and service units that operated either on a reimbursement or charge basis. All internal sales activities to University departments from auxiliary operations and sales and service units have been eliminated in the accompanying financial statements. These eliminations are recorded by removing the revenue and expense in the auxiliary operations and sales and service units and, if significant, allocating any residual balances to those departments receiving the goods and services during the year. N OTE 2 – D EPOSITS AND I NVESTMENTS A.
Deposits – Unless specifically exempt, the University is required by North Carolina General Statute 147‐77 to deposit moneys received with the State Treasurer or with a depository institution in the name of the State Treasurer. However, the University of North Carolina Board of Governors, pursuant to G.S. 116‐36.1, may authorize the University to deposit its institutional trust funds in interest‐bearing accounts and other investments authorized by the Board of Governors, without regard to any statute or rule of law relating to the investment of funds by fiduciaries. Although specifically exempted, the University may voluntarily deposit institutional trust funds, endowment funds, special funds, revenue bond proceeds, debt service funds, and funds received for services rendered by health care professionals with the State Treasurer. Special funds consist of moneys for intercollegiate athletics and agency funds held directly by the University. At June 30, 2014, the amount shown on the Statement of Net Position as cash and cash equivalents includes $126,459,048 which represents the University’s equity position in the State Treasurer’s STIF. The STIF (a portfolio within the State Treasurer’s Investment Pool, an external investment pool that is not registered with the Securities and Exchange Commission and does not have a credit rating) had a weighted average maturity of 1.3 years as of June 30, 2014. Assets and shares of the STIF are valued at amortized cost, which approximates fair value. Deposit and investment risks associated with the State Treasurer’s Investment Pool (which includes the State Treasurer’s STIF) are included in the State of North Carolina’s Comprehensive Annual Financial Report. An electronic version of this report is available by accessing the North Carolina Office of the State Controller’s Internet home page http://www.osc.nc.gov/ and clicking on “Reports” or by calling the State Controller’s Financial Reporting Section at (919) 707‐0500. 2014 University of North Carolina Wilmington Financial Report 28
Cash on hand at June 30, 2014 was $36,214. The carrying amount of the University’s deposits not with the State Treasurer was $3,219,842 and the bank balance was $3,219,842. Custodial credit risk is the risk that in the event of a bank failure, the University’s deposits may not be returned to it. The University does not have a deposit policy for custodial credit risk. As of June 30, 2014, the University’s bank balance was exposed to custodial credit risk as follows: Uninsured and Uncollateralized
$
2,469,785
B. Investments ‐ The University is authorized by The University of North Carolina Board of Governors pursuant to G.S. 116‐36.2 and Section 600.2.4 of the Policy Manual of the University of North Carolina to invest its special funds and funds received for services rendered by health care professionals in the same manner as the State Treasurer is required to invest, as discussed below. G.S 147‐69.1(c), applicable to the State’s General Fund, and G.S. 147‐69.2, applicable to institutional trust funds, authorize the State Treasurer to invest in the following: obligations of or fully guaranteed by the United States; obligations of certain federal agencies; repurchase agreements; obligations of the State of North Carolina; certificates of deposit and other deposit accounts of specified financial institutions; prime quality commercial paper; asset‐backed securities with specified ratings, specified bills of exchange or time drafts, and corporate bonds/notes with specified ratings; general obligations of other states; general obligations of North Carolina local governments; and obligations of certain entities with specified ratings. In accordance with the bond resolutions, bond proceeds and debt service funds are invested in obligations that will by their terms mature on or before the date funds are expected to be required for expenditure or withdrawal. G.S. 116‐36(e) provides that the trustees of the Endowment Fund shall be responsible for the prudent investment of the Fund in the exercise of their sound discretion, without regard to any statute or rule of law relating to the investment of funds by fiduciaries but in compliance with any lawful condition placed by the donor upon that part of the Endowment Fund to be invested. Investments of the University’s component unit, the Watson Foundation are subject to and restricted by G.S. 36E “Uniform Prudent Management of Institutional Funds Act” (UPMIFA) and any requirements placed on them by contract or donor agreements. Investments of various funds may be pooled unless prohibited by statute or by terms of the gift or contract. The University utilizes investment pools to manage investments and distribute investment income. Investments are subject to the following risks. Interest Rate Risk: Interest rate risk is the risk the University may face should interest rate variances affect the fair value of investments. The University does not have a formal policy that addresses interest rate risk. Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy that addresses credit risk. Long‐Term Investment Pool ‐ This is an internal investment pool that is utilized for the investment of the endowment funds. Fund ownership is measured using the unit value method. Under this method, the pool uses a unit basis to determine each participating fund’s market value and to distribute the fund’s earnings. The investment strategy, including the selection of investment managers, is based on the directives of the University’s Endowment Board. 29 2014 University of North Carolina Wilmington Financial Report The following table presents the fair value of investments by type and investments subject to interest rate risk at June 30, 2014, for the Long‐Term Investment Pool. Long‐Term Investment Pool Fair
Value
Investment Type
UNC Investment Fund
Equity Mutual Funds
Investments in Real Estate
$
41,510,931
32,498,003
294,766
$
74,303,700
Total Long‐Term Investment Pool UNC Investment Fund, LLC ‐ At June 30, 2014, the University’s investments include $41,510,931 which represents the University’s equity position in the UNC Investment Fund, LLC (UNC Investment Fund). The UNC Investment Fund is an external investment pool that is not registered with the Securities and Exchange Commission, does not have a credit rating, and is not subject to any regulatory oversight. Asset and ownership interests of the UNC Investment Fund are determined on a market unit valuation basis each month. Investment risks associated with the UNC Investment Fund are included in audited financial statements of the UNC Investment Fund, LLC which may be obtained from UNC Management Company, Inc., 1400 Environ Way, Chapel Hill, NC 27517. Non‐Pooled Investments ‐ The following table presents the fair value of investments by type and investments subject to interest rate risk at June 30, 2014, for the University’s non‐pooled investments. Non‐Pooled Investments Fair
Value
Investment Type
Debt Securities
Debt Mutual Funds
$
Investment Maturities
1 to 5 Years
390,538
Other Securities
Equity Mutual Funds
Investments in Real Estate
Domestic Stocks
Other: Life Insurance
$
390,538
1,186,043
4,251,198
13,157
14,585
Total Non‐Pooled Investments
$
5,855,521
At June 30, 2014, the University’s non‐pooled investments had the following credit quality distribution for securities with credit exposure: Fair
Value
Debt Mutual Funds
$
390,538
AAA
Aaa
$ 187,148
AA
Aa
$
53,000
A
$
45,898
$
62,776
Rating Agency: Standard & Poor's
$
35,863
Unrated
$
5,853
BB/Ba
and below
BBB
Baa
2014 University of North Carolina Wilmington Financial Report 30
Total Investments ‐ The following table presents the fair value of the total investments at June 30, 2014: Fair
Value
Investment Type
Debt Securities
Debt Mutual Funds
$
Other Securities
UNC Investment Fund
Equity Mutual Funds
Investments in Real Estate
Domestic Stocks
Other: Life Insurance
390,538
41,510,931
33,684,046
4,545,964
13,157
14,585
Total Investments
$ 80,159,221
C. Reconciliation of Deposits and Investments ‐ A reconciliation of deposits and investments for the University as of June 30, 2014, is as follows: Cash on Hand
Amount of Deposits with Private Financial Institutions
Deposits in the Short‐Term Investment Fund
Long‐Term Investment Pool
Non‐Pooled Investments
$
36,214
3,219,842
126,459,048
74,303,700
5,855,521
Total Deposits and Investments
$
209,874,325
$
100,713,018
14,401,915
Deposits
Current:
Cash and Cash Equivalents
Restricted Cash and Cash Equivalents
Noncurrent:
Restricted Cash and Cash Equivalents
14,600,171
Total Deposits
129,715,104
Investments
Noncurrent:
Endowment Investments
80,159,221
Total Investments
80,159,221
Total Deposits and Investments
$
209,874,325
N OTE 3 – E NDOWMENT I NVESTMENTS Investments of the University’s endowment funds are pooled, unless required to be separately invested by the donor. If a donor has not provided specific instructions, state law permits the Board of Trustees to authorize for expenditure the net appreciation, realized and unrealized, of the investments of the endowment funds. Under the “Uniform Prudent Management of Institutional Funds Act” (UPMIFA), authorized by the North Carolina General Assembly on March 19, 2009, the Board may also appropriate expenditures from eligible nonexpendable balances if deemed prudent and necessary to meet program outcomes and for which such spending is not specifically prohibited by the donor agreements. During the year, the Board did not appropriate expenditures from eligible nonexpendable endowment funds. 31 2014 University of North Carolina Wilmington Financial Report Investment return of the University’s endowment funds is predicated on the total return concept (yield plus appreciation). Annual payouts from the University’s endowment funds are based on an adopted spending policy which limits spending to 4.5% of the average market value of the endowment over the three previous years. To the extent that the total return for the current year exceeds the payout, the excess is reinvested with principal. If current year earnings do not meet the payout requirements, the University uses accumulated income and appreciation from restricted, expendable net position endowment balances to make up the difference. At June 30, 2014, net appreciation of $28,410,205 was available in the University’s endowment funds of which $25,152,151 was classified in net position as restricted for specific purposes (e.g. scholarships and fellowships, research, professorships, departmental and other uses). The remaining portion of net appreciation available to be spent is classified as unrestricted net position. N OTE 4 – R ECEIVABLES Receivables at June 30, 2014, were as follows: Less
Allowance for Doubtful
Accounts
Gross
Receivables
Current Receivables:
Students
Accounts Intergovernmental
Pledges
Interest on Loans
Other
$
1,851,891
1,362,234
45,241
223,960
108,743
50,334
$
$
3,642,403
$
$
237,876
$
Total Notes Receivable ‐ Current
Notes Receivable ‐ Noncurrent:
Federal Loan Programs
Institutional Student Loan Programs
Total Current Receivables
Noncurrent Receivables:
Pledges
Notes Receivable:
Notes Receivable ‐ Current:
Federal Loan Programs
Institutional Student Loan Programs
Total Notes Receivable ‐ Noncurrent
186,248
Net
Receivables
$
1,665,643
1,362,234
45,241
212,762
108,743
50,334
197,446
$
3,444,957
$
26,304
$
211,572
556,362
163,336
$
50,934
$
505,428
163,336
$
719,698
$
50,934
$
668,764
$
4,342,716
36,021
$
434,272
$
3,908,444
36,021
$
4,378,737
$
434,272
$
3,944,465
11,198
2014 University of North Carolina Wilmington Financial Report 32
N OTE 5 – C APITAL A SSETS A summary of changes in the capital assets for the year ended June 30, 2014, is presented as follows: Balance
July 1, 2013
(as restated)
Capital Assets, Nondepreciable:
Land and Permanent Easements
Art, Literature, and Artifacts
Construction in Progress
$
Total Capital Assets, Nondepreciable
Capital Assets, Depreciable:
Buildings
Machinery and Equipment
General Infrastructure
Total Capital Assets, Depreciable
Less Accumulated Depreciation for:
Buildings
Machinery and Equipment
General Infrastructure
Total Accumulated Depreciation
Total Capital Assets, Depreciable, Net
$
Capital Assets, Net
9,263,459
1,673,320
30,512,848
Increases
$
Balance
June 30, 2014
Decreases
0
8,055
1,571,167
$
0
$
30,449,291
9,263,459
1,681,375
1,634,724
41,449,627
1,579,222
30,449,291
12,579,558
536,211,674
40,229,409
41,862,852
30,507,656
1,995,849
1,262,194
3,324,344
566,719,330
38,900,914
43,125,046
618,303,935
33,765,699
3,324,344
648,745,290
122,407,326
24,272,513
13,491,727
12,530,519
2,684,530
979,902
3,128,394
134,937,845
23,828,649
14,471,629
160,171,566
16,194,951
3,128,394
173,238,123
458,132,369
17,570,748
195,950
475,507,167
499,581,996
$
19,149,970
$
30,645,241
$
488,086,725
During the year ended June 30, 2014, the University incurred $11,449,993 in interest costs related to the acquisition and construction of capital assets. Of this total, $11,381,786 was charged in interest expense, and $68,207 was capitalized. N OTE 6 – A CCOUNTS P AYABLE AND A CCRUED L IABILITIES Accounts payable and accrued liabilities at June 30, 2014, were as follows: Amount
Current Accounts Payable and Accrued Liabilities
Accounts Payable
Accrued Payroll
Contract Retainage
Intergovernmental Payables
Total Current Accounts Payable and Accrued Liabilities
Noncurrent Accounts Payable
Accounts Payable
$
1,730,663
677,338
1,108,600
24,454
$
3,541,055
$
330,000
33 2014 University of North Carolina Wilmington Financial Report N OTE 7 – L ONG ‐T ERM L IABILITIES A. Changes in Long‐Term Liabilities ‐ A summary of changes in the long‐term liabilities for the year ended June 30, 2014, is presented as follows: Balance
July 1, 2013
(as restated)
$
Revenue Bonds Payable
Certificates of Participation
Plus: Unamortized Premium
Total Revenue Bonds and Certificates of Participation Payable, Net
Additions
107,382,684
124,870,000
3,789,261
$
0
$
236,041,945
Notes Payable
Compensated Absences
8,050,791
8,778,064
Total Long‐Term Liabilities
$
252,870,800
655,197
$
Balance
June 30, 2014
Reductions
655,197
$
5,001,290
1,265,000
184,631
$
102,381,394
123,605,000
3,604,630
Current
Portion
$
5,184,356
1,400,000
6,450,921
229,591,024
6,584,356
341,617
923,560
7,709,174
8,509,701
359,815
89,597
7,716,098
$
245,809,899
$
7,033,768
Additional information regarding blended component units is included in Note 16.
July 1, 2013 has been restated to blend the financial statements of the UNCW Corporation II and the UNCW Research Foundation with those of the University. Additional information regarding net position restatements is included in Note 17. B. Revenue Bonds Payable and Certificates of Participation ‐ The University was indebted for revenue bonds payable and certificates of participation for the purposes shown in the following table: Purpose
Revenue Bonds Payable
UNCW General Revenue Bonds
Construct MARBIONC Facility
Schwartz/Suites & Wagoner Renovation Projects
Refund 2003A Union
Series
Interest
Rate/
Ranges
2010
2011
2012
2.45 ‐ 5.97
3.64
2.84
Final
Maturity
Date
*
Original
Amount
of Issue
01/01/2040
03/01/2026
01/01/2028
Total UNCW General Revenue Bonds
The University of North Carolina System Pool Revenue Bonds
Refund Series J and Recreation (2005A)
Union Addition & Parking (2006A)
Refund Series 2002A & 2003A; Rec Ctr Exp (2010C)
Recreation Center Expansion (2010D)
Total The University of North Carolina System Pool
Revenue Bonds
Certificates of Participation
Student Housing‐Seahawk Village
Student Housing‐Seahawk Landing Student Housing‐Seahawk Crossing & Parking Deck
(A)
(B)
(C)
(D)
2005
2006
2008
4.0 ‐ 5.25
4.0 ‐ 5.0
3.0 ‐ 5.0
6.627 ‐ 6.727 *
4.0 ‐ 5.25
4.125 ‐ 5.0
3.75 ‐ 5.0
04/01/2019
10/01/2033
10/01/2026
10/01/2039
06/01/2036
06/01/2037
06/01/2038
Total Certificates of Participation
Total Revenue Bonds Payable and Certificates of Participation (principal only)
$
Principal
Paid Through
June 30, 2014
Principal
Outstanding
June 30, 2014
15,750,000
9,000,000
11,755,000
1,115,000
1,448,606
50,000
14,635,000
7,551,394
11,705,000
36,505,000
2,613,606
33,891,394
12,630,000
19,400,000
32,170,000
20,660,000
7,300,000
4,985,000
4,085,000
5,330,000
14,415,000
28,085,000
20,660,000
84,860,000
16,370,000
68,490,000
28,710,000
38,290,000
61,460,000
1,350,000
1,040,000
2,465,000
27,360,000
37,250,000
58,995,000
128,460,000
4,855,000
123,605,000
23,838,606
225,986,394
249,825,000
$
Plus: Unamortized Premium
3,604,630
Total Revenue Bonds Payable and Certificates of Participation, Net
$
229,591,024
(A) The University of North Carolina System Pool Revenue Bonds, Series 2005A
(B) The University of North Carolina System Pool Revenue Bonds, Series 2006A
(C) The University of North Carolina System Pool Revenue Bonds, Series 2010C
(C) The University of North Carolina System Pool Revenue Bonds, Series 2010D
* The University has elected to treat these bonds as federally taxable "Build America Bonds" for the purposes of the American Recovery and Reinvestment Act and to receive a cash subsidy from the U.S. Treasury equal to 32% of the interest payable on these bonds. For these bonds, the interest rate included is the taxable rate, which does not factor in the cash subsidy from the U.S. Treasury.
2014 University of North Carolina Wilmington Financial Report 34
C. Annual Requirements ‐ The annual requirements to pay principal and interest on the long‐term obligations at June 30, 2014, are as follows: Revenue Bonds Payable
Fiscal Year
Principal
2015
2016
2017
2018
2019
2020‐2024
2025‐2029
2030‐2034
2035‐2039
2040
Total Requirements
Interest
Annual Requirements
Certificates of Participation
Principal
Notes Payable
Interest
Principal
Interest *
$ 5,184,356
5,423,078
5,677,482
5,742,592
5,488,435
25,122,350
20,388,101
13,720,000
12,745,000
2,890,000
$ 4,960,667
4,719,865
4,471,999
4,201,235
3,923,518
16,316,076
11,557,526
7,334,757
3,192,577
119,360
$ 1,400,000
1,840,000
2,055,000
2,465,000
3,130,000
21,180,000
28,080,000
35,645,000
27,810,000
$ 5,950,901
5,892,088
5,817,801
5,733,425
5,622,663
25,551,102
19,663,640
12,093,700
3,021,494
$ 359,815
383,254
3,063,266
161,999
177,121
1,212,391
1,874,809
476,519
$ 220,587
211,048
165,519
134,023
128,271
531,542
272,271
12,401
$ 102,381,394
$ 60,797,580
$ 123,605,000
$ 89,346,814
$ 7,709,174
$ 1,675,662
*The interest rate on $3.4m of Notes Payable for UNCW Corporation II is based on Libor + 2.05%, calculated at 2.201% at
June 30, 2014. D. Notes Payable ‐ The University was indebted for notes payable for the purposes shown in the following table: Purpose
Financial
Institution
Interest
Rate/
Ranges
Final
Maturity
Date
Guaranteed Energy Savings Contract
Oleander One, LLC
College Station, LLC
BB&T
BB&T
BB&T
3.47%
2.20%
2.20%
03/01/2030
11/05/2016
11/05/2016
Total Notes Payable
Original
Amount
of Issue
Principal
Paid Through
June 30, 2014
Principal
Outstanding
June 30, 2014
$
4,542,387
1,394,730
2,638,698
$
257,852
216,024
392,765
$
4,284,535
1,178,706
2,245,933
$
8,575,815
$
866,641
$
7,709,174
35 2014 University of North Carolina Wilmington Financial Report N OTE 8 – L EASE O BLIGATIONS Operating Lease Obligations ‐ The University entered into operating leases for $1,831,104 for an aquaculture facility, land, boat slips, an IT server, and a Printing Services printer. Future minimum lease payments under noncancelable operating leases consist of the following at June 30, 2014: Fiscal Year
Amount
2015
2016
2017
2018
2019
2020‐2024
2025‐2029
2030‐2034
2035‐2039
2040‐2044
2045‐2046
Total Minimum Lease Payments
$
223,616
170,216
170,216
147,056
40,000
200,000
200,000
200,000
200,000
200,000
80,000
$
1,831,104
Rental expense for all operating leases during the year was $226,276. N OTE 9 – R EVENUES A summary of eliminations and allowances by revenue classification is presented as follows: Internal
Sales
Eliminations
Gross
Revenues
Operating Revenues:
Student Tuition and Fees
Sales and Services:
Sales and Services of Auxiliary Enterprises:
Residential Life
Dining
Physical Plant
Parking
Communications
Athletics
Printing and Duplicating
Bookstore
Postal Services
Other
Sales and Services of Education and Related Activities
Total Sales and Services
Nonoperating ‐ Noncapital Gifts
Less
Scholarship
Discounts
Less
Allowance for Uncollectibles *
Net
Revenues
$
112,870,765
$
0
$
16,439,024
$
10,344
$
96,421,397
$
25,050,681
14,491,925
3,544,617
3,296,238
3,048,339
2,433,830
1,227,512
855,804
475,978
2,907,678
$
0
$
3,680,910
1,741,085
$
8,427
7,183
$
21,361,344
12,743,657
29,037
3,149,816
2,471
2,412,680
128,338
855,804
252,049
2,637,317
3,515,580
145,088
1,334
3,045,868
21,150
1,099,174
223,534
251,764
395
18,597
4,397,361
4,397,361
$
61,729,963
$
8,135,920
$
5,567,083
$
57,086
$
47,969,874
$
3,345,039
$
0
$
0
$
5,984
$
3,339,055
2014 University of North Carolina Wilmington Financial Report 36
N OTE 10 – O PERATING E XPENSES BY F UNCTION The University’s operating expenses by functional classification are presented as follows: Salaries
and Benefits
Instruction
Research
Public Service
Academic Support
Student Services
Institutional Support
Facilities
Student Financial Aid
Auxiliary Enterprises
Depreciation
$
87,219,816
6,194,894
1,713,287
10,544,485
7,868,148
17,898,464
13,424,831
40,299
15,017,384
Supplies
and
Materials
$
3,286,238
1,123,736
189,590
4,773,086
1,121,245
1,039,366
3,279,650
Scholarships
and Fellowships
Services
$
5,051,036
6,136,262
2,252,179
1,212,574
2,919,321
2,167,236
3,950,663
3,443,328
41,998
28,812,936
$
219,839
50,630
224,058
10,526
17,845
16,000
Utilities
$
439
Depreciation
$
0
Total
$
96,862,594
9,621,439
3,339,509
18,247,667
11,174,604
22,914,351
25,684,859
17,159,311
51,828,225
16,194,951
$
273,027,510
249
130
9,858
5,537,050
17,077,014
711,122
2,235,747
16,194,951
Total Operating Expenses
$
159,921,608
$
19,863,947
$
50,936,497
$
18,327,034
$
7,783,473
$ 16,194,951
N OTE 11 – P ENSION P LANS Each permanent full‐time employee, as a condition of employment, is a member of either the Teachers’ and State Employees’ Retirement System or the Optional Retirement Program. Eligible employees can elect to participate in the Optional Retirement Program at the time of employment; otherwise they are automatically enrolled in the Teachers’ and State Employees’ Retirement System. The Teachers’ and State Employees’ Retirement System (TSERS) is a cost‐sharing multiple‐employer defined benefit pension plan established by the State to provide pension benefits for employees of the State, its component units, and local boards of education. TSERS is administered by a 14‐member Board of Trustees, with the State Treasurer serving as Chairman of the Board. Benefit and contribution provisions for the TSERS are established by North Carolina General Statutes 135‐5 and 135‐8 and may be amended only by the North Carolina General Assembly. Employer and member contribution rates are set each year by the North Carolina General Assembly based on annual actuarial valuations. For the year ended June 30, 2014, these rates were set at 8.69% of covered payroll for employers and 6% of covered payroll for members. For the current fiscal year, the University had a total payroll of $128,046,912, of which $52,894,845 was covered under the TSERS. Total employer and employee contributions for pension benefits for the year were $4,596,562 and $3,173,691, respectively. Required employer contribution rates for the years ended June 30, 2013, and 2012, were 8.33% and 7.44%, respectively, while employee contributions were 6% each year. The University made 100% of its annual required contributions for the years ended June 30, 2014, 2013, and 2012, which were $4,596,562, $4,649,814, and $4,220,585, respectively. The Teachers’ and State Employees’ Retirement System’s financial information is included in the State of North Carolina’s Comprehensive Annual Financial Report. An electronic version of this report is available by accessing the North Carolina Office of the State Controller’s Internet home page http://www.osc.nc.gov/ and clicking on “Reports” or by calling the State Controller’s Financial Reporting Section at (919) 707‐0500. 37 2014 University of North Carolina Wilmington Financial Report The Optional Retirement Program (Program) is a defined contribution retirement plan that provides retirement benefits with options for payments to beneficiaries in the event of the participant’s death. Administrators and eligible faculty of the University may join the Program instead of the TSERS. The Board of Governors of The University of North Carolina is responsible for the administration of the Program and designates the companies authorized to offer investment products or the trustee responsible for the investment of contributions under the Program and approves the form and contents of the contracts and trust agreements. Participants in the Program are immediately vested in the value of employee contributions. The value of employer contributions is vested after five years of participation in the Program. Participants become eligible to receive distributions when they terminate employment or retire. Participant eligibility and contributory requirements are established by General Statute 135‐5.1. Employer and member contribution rates are set each year by the North Carolina General Assembly. For the year ended June 30, 2014, these rates were set at 6.84% of covered payroll for employers and 6% of covered payroll for members. The University assumes no liability other than its contribution. For the current fiscal year, the University had a total payroll of $128,046,912, of which $57,253,018 was covered under the Optional Retirement Program. Total employer and employee contributions for pension benefits for the year were $3,916,106 and $3,435,181, respectively. N OTE 12 – O THER P OSTEMPLOYMENT B ENEFITS A. Health Benefits ‐ The University participates in the Comprehensive Major Medical Plan (the Plan), a cost‐
sharing, multiple‐employer defined benefit health care plan that provides postemployment health insurance to eligible former employees. Eligible former employees include long‐term disability beneficiaries of the Disability Income Plan of North Carolina and retirees of the Teachers’ and State Employees’ Retirement System or the Optional Retirement Program. Coverage eligibility varies depending on years of contributory membership service in their retirement system prior to disability or retirement. The Plan’s benefit and contribution provisions are established by Chapter 135, Article 3B, of the General Statutes, and may be amended only by the North Carolina General Assembly. The Plan does not provide for automatic post‐retirement benefit increases. By General Statute, a Retiree Health Benefit Fund (the Fund) has been established as a fund in which accumulated contributions from employers and any earnings on those contributions shall be used to provide health benefits to retired and disabled employees and applicable beneficiaries. By statute, the Fund is administered by the Board of Trustees of the Teachers’ and State Employees’ Retirement System and contributions to the Fund are irrevocable. Also by law, Fund assets are dedicated to providing benefits to retired and disabled employees and applicable beneficiaries and are not subject to the claims of creditors of the employers making contributions to the Fund. Contribution rates to the Fund, which are intended to finance benefits and administrative expenses on a pay‐as‐you‐go basis, are established by the General Assembly. For the current fiscal year the University contributed 5.40% of the covered payroll under the Teachers’ and State Employees’ Retirement System and the Optional Retirement Program to the Fund. Required contribution rates for the years ended June 30, 2013, and 2012, were 5.30% and 5.0%, respectively. The University made 100% of its annual required contributions to the Plan for the years ended June 30, 2014, 2013, and 2012, which were $5,947,985, $5,809,294, and $5,322,845, respectively. The University assumes no liability for retiree health care benefits provided by the programs other than its required contribution. Additional detailed information about these programs can be located in the State of North Carolina’s Comprehensive Annual Financial Report. An electronic version of this report is available by accessing the 2014 University of North Carolina Wilmington Financial Report 38
North Carolina Office of the State Controller’s Internet home page http://www.osc.nc.gov/ and clicking on “Reports” or by calling the State Controller’s Financial Reporting Section at (919) 707‐0500. B. Disability Income ‐ The University participates in the Disability Income Plan of North Carolina (DIPNC), a cost‐sharing, multiple‐employer defined benefit plan, to provide short‐term and long‐term disability benefits to eligible members of the Teachers’ and State Employees’ Retirement System and the Optional Retirement Program. Benefit and contribution provisions are established by Chapter 135, Article 6, of the General Statutes, and may be amended only by the North Carolina General Assembly. The Plan does not provide for automatic post‐retirement benefit increases. Disability income benefits are funded by actuarially determined employer contributions that are established by the General Assembly. For the fiscal year ended June 30, 2014, the University made a statutory contribution of .44% of covered payroll under the Teachers’ and State Employees’ Retirement System and the Optional Retirement Program to the DIPNC. Required contribution rates for the years ended June 30, 2013, and 2012, were .44% and .52%, respectively. The University made 100% of its annual required contributions to the DIPNC for the years ended June 30, 2014, 2013, and 2012, which were $484,651, $482,281, and $553,576, respectively. The University assumes no liability for long‐term disability benefits under the Plan other than its contribution. Additional detailed information about the DIPNC is disclosed in the State of North Carolina’s Comprehensive Annual Financial Report. N OTE 13 – R ISK M ANAGEMENT The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These exposures to loss are handled via a combination of methods, including participation in state‐administered insurance programs, purchase of commercial insurance, and self‐retention of certain risks. There have been no significant reductions in insurance coverage from the previous year and settled claims have not exceeded coverage in any of the past three fiscal years. The risk of tort claims of up to $1,000,000 per claimant is retained under the authority of the State Tort Claims Act. In addition, the State provides excess public officers’ and employees’ liability insurance up to $10,000,000 via contract with a private insurance company. The University pays the premium, based on a composite rate, directly to the private insurer. The University is required to maintain fire and lightning coverage on all state‐owned buildings and contents through the State Property Fire Insurance Fund (Fund), an internal service fund of the State. Such coverage is provided at no cost to the University for operations supported by the State’s General Fund. Other operations not supported by the State’s General Fund are charged for the coverage. Losses covered by the Fund are subject to a $5,000 per occurrence deductible. However, some agencies have chosen a higher deductible for a reduction in premium. All state‐owned vehicles are covered by liability insurance through a private insurance company and handled by the North Carolina Department of Insurance. The liability limits for losses are $1,000,000 per claim and $10,000,000 per occurrence. The University pays premiums to the North Carolina Department of Insurance for the coverage. The University is protected for losses from employee dishonesty and computer fraud. This coverage is with a private insurance company and is handled by the North Carolina Department of Insurance. Universities are charged a premium by the private insurance company. Coverage limit is $5,000,000 per occurrence. The private insurance company pays 90% of each loss less a $75,000 deductible. 39 2014 University of North Carolina Wilmington Financial Report The University purchased other authorized coverage from private insurance companies through the North Carolina Department of Insurance, to insure select students, staff, faculty and assets of the University. University employees and retirees are provided comprehensive major medical care benefits. Coverage is funded by contributions to the State Health Plan (Plan), a discretely presented component unit of the State of North Carolina. The Plan has contracted with third parties to process claims. The North Carolina Workers’ Compensation Program provides benefits to workers injured on the job. All employees of the State and its component units are included in the program. When an employee is injured, the University’s primary responsibility is to arrange for and provide the necessary treatment for work related injury. The University is responsible for paying medical benefits and compensation in accordance with the North Carolina Workers’ Compensation Act. The University retains the risk for workers’ compensation. Term life insurance (death benefits) of $25,000 to $50,000 is provided to eligible workers. This Death Benefit Plan is administered by the State Treasurer and funded via employer contributions. The employer contribution rate was .16% for the current fiscal year. Additional details on the state‐administered risk management programs are disclosed in the State’s Comprehensive Annual Financial Report, issued by the Office of the State Controller. N OTE 14 – C OMMITMENTS AND C ONTINGENCIES A. Commitments ‐ The University has established an encumbrance system to track its outstanding commitments on construction projects and other purchases. Outstanding commitments on construction contracts were $14,911,065 and on other purchases were $1,464,061 at June 30, 2014. B. Pending Litigation and Claims ‐ The University is a party to litigation and claims in the ordinary course of its operations. Since it is not possible to predict the ultimate outcome of these matters, no provision for any liability has been made in the financial statements. University management is of the opinion that the liability, if any, for any of these matters will not have a material adverse effect on the financial position of the University. C. Other Contingent Receivables ‐ The University has received notification of other gifts and grants for which funds have not been disbursed by the resource provider and for which conditions attached to the gift or grant have not been satisfied or, in the case of permanent endowments, cannot begin to be satisfied. In accordance with accounting principles generally accepted in the United States of America, these amounts have not been recorded on the accompanying financial statements. The purpose and amount of other contingent receivables at year‐end are as follows: Purpose
Amount
Endowment Pledges
$
2,645,670
N OTE 15 – R ELATED P ARTIES Foundations ‐ There are four separately incorporated nonprofit foundations associated with the University. These foundations are the UNCW Student Aid Association, Inc., the Foundation of the University of North Carolina at Wilmington, Inc. (Foundation), the Alumni Association of the University of North Carolina at Wilmington, and the Friends of the University of North Carolina at Wilmington, Inc. 2014 University of North Carolina Wilmington Financial Report 40
The UNCW Student Aid Association, Inc. fosters and promotes the education of student athletes by obtaining donations for the scholarship program at the University. The association also raises funds for the improvement and construction of physical facilities used by the University for athletic purposes, for the University’s athletic scholarship fund, and to provide operational and supplementary support for the entire sports program. In addition, the association exists to encourage a fraternal spirit of loyalty and interest in the University by alumni, friends and benefactors. Direct support from the UNCW Student Aid Association totaled $1,002,678 for the year ended June 30, 2014. The Foundation assists the University by soliciting and receiving private gifts from individuals, corporations and other organizations. These gifts support the University by providing scholarships, fellowships, faculty salary supplements, and unrestricted funds for academic programs. In addition, the Foundation can accept and liquidate non‐cash gifts for the University and acquire property on the University’s behalf. The Foundation’s direct support to the University totaled $103,921 for the year ended June 30, 2014. In addition to this support, on October 25, 2013, the Board of Trustees for the University’s Endowment Fund (Endowment) approved the purchase of the property at 632 Saint James Drive, known as College Road Cinema, from the Foundation. The property was being held by the Foundation for the sole benefit of the University, which utilizes its parking spaces for students. The acquisition was made for the amount of the outstanding balances on the two promissory notes held by the Foundation on the property, approximating $2.0 million, and was paid in full by the Endowment using unrestricted quasi endowment funds. The Alumni Association of the University of North Carolina at Wilmington serves to connect and involve alumni, students and friends in the promotion and advancement of the University. Occasionally donations are made from this association to the University, and this support totaled $3,500 for the year ended June 30, 2014. The Friends of the University of North Carolina at Wilmington, Inc. contribute gifts to the University based on grant requests and may at a donor’s request, contribute to a UNCW academic scholarship fund. This support totaled $12,499 for the year ended June 30, 2014. All of these foundations are self‐sustaining; however, the University does support their operations through donated administrative services. The University’s financial statements do not include the assets, liabilities, net assets, or operational transactions of the foundations, except for support from each organization to the University. Separate financial statements for these foundations may be obtained from the Office of Associated Entities, 601 S. College Road, Wilmington, NC 28403‐5952, or by calling (910) 962‐3139. N OTE 16 – B LENDED C OMPONENT U NITS Condensed combining information for the University’s blended component units for the year ended June 30, 2014, is presented as follows: 41 2014 University of North Carolina Wilmington Financial Report Condensed Statement of Net Position
June 30, 2014
The Donald R. Watson Foundation, Inc.
University
ASSETS
Current Assets
Capital Assets
Other Noncurrent Assets
$
Total Assets
Deferred Outflows of Resources
LIABILITIES
Current Liabilities
Noncurrent Liabilities
119,440,094
485,081,637
97,239,258
29,815
$
The UNCW Research Foundation
The UNCW Corporation II
3,991,133
$
$
Eliminations
273,604
1,576,581
122,896,567
104,371
(123,607,816)
119,562,617
488,086,725
98,916,624
701,760,989
1,606,396
126,887,700
3,777,968
377,975
(127,845,062)
706,565,966
2,174,373
0
0
0
0
3,991,133
122,896,567
535,763
3,175,771
42,818
6,874
(4,329,737)
(123,515,325)
19,368,069
244,223,266
(127,845,062)
263,591,335
260,787,471
0
126,887,700
3,711,534
49,692
0
0
0
0
0
260,148,309
44,850,414
37,407,925
100,741,243
999,796
606,600
$ 443,147,891
$ 1,606,396
Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets
Restricted ‐ Nonexpendable
Restricted ‐ Expendable
Unrestricted
$
Total
65,217
3,005,088
707,663
19,128,092
241,659,379
Total Liabilities
Total Net Position
$
The UNCW Corporation
(4,237,246)
$
0
2,174,373
0
0
343,195
(276,761)
$
0
$ 66,434
260,491,504
45,850,210
38,085,095
100,722,195
70,570
257,713
$ 328,283
$
0
$ 445,149,004
Condensed Statement of Revenues, Expenses, & Changes in Net Position
For the Fiscal Year Ended June 30, 2014
The Donald R. Watson Foundation, Inc.
University
OPERATING REVENUES
Student Tuition and Fees, Net
Federal Grants and Contracts
State and Local Grants and Contracts
Nongovernmental Grants & Contracts
Sales & Services
Interest Earnings on Loans
Other Operating Revenues
The UNCW Research Foundation
The UNCW Corporation II
Eliminations
Total
100,968
322,227
195,917
(517,964)
96,421,397
5,769,590
1,006,363
1,104,249
47,969,874
6,100
5,810,080
157,979,341
0
6,062,967
322,227
427,032
(6,703,914)
158,087,653
256,891,178
16,194,951
89,034
100,968
54,043
383,420
(686,084)
256,832,559
16,194,951
273,086,129
89,034
100,968
54,043
383,420
(686,084)
273,027,510
Operating Income (Loss)
(115,106,788)
(89,034)
5,961,999
268,184
43,612
(6,017,830)
(114,939,857)
NONOPERATING REVENUES (EXPENSES)
State Appropriations
Noncapital Grants ‐ Student Financial Aid
Noncapital Gifts, Net
Investment Income
Interest & Fees on Debt
Federal Interest Subsidy on Debt
Other Nonoperating Expenses
97,601,950
23,359,488
3,318,052
10,552,673
(11,402,289)
822,120
(9,157)
26,733
228,623
(5,730)
61,561
5,961,999
97,601,950
23,359,488
3,339,055
10,842,857
(11,482,010)
822,120
(9,157)
124,242,837
228,623
26,733
6,017,830
124,474,303
$
Total Operating Revenues
OPERATING EXPENSES
Operating Expenses
Depreciation
Total Operating Expenses
Net Nonoperating Revenues (Expenses)
Capital Appropriations
Capital Grants
Additions to Endowments
Increase in Net Position
NET POSITION
Net Position, July 1, 2013, as Restated
Net Position, June 30, 2014
96,421,397
5,769,590
1,006,363
1,161,714
47,905,245
6,100
5,708,932
The UNCW Corporation
$
0
$
0
$
0
$
0
$
85,000
146,115
5,961,999
(5,961,999)
(79,721)
(5,961,999)
(79,721)
0
(142,465)
(6,043,485)
3,146,783
2,173,028
3,936,562
18,392,422
$
3,146,783
2,173,028
3,936,562
139,589
424,755,469
1,466,807
$ 443,147,891
$ 1,606,396
0
188,463
(122,029)
$
0
$ 66,434
70,345
0
257,938
$ 328,283
18,790,819
426,358,185
$
0
$ 445,149,004
2014 University of North Carolina Wilmington Financial Report 42
Condensed Statement of Cash Flows
June 30, 2014
The Donald R. Watson Foundation, Inc.
UNCW
Net Cash (Used) Provided by Operating Activities
Net Cash Provided by Noncapital Financial Activities
Net Cash Used by Capital and Related Financing Activities
Net Cash Provided by Investing Activities
$
(100,814,932)
126,341,817
(11,352,481)
1,067,327
$
(32,492)
(5,302)
Cash and Cash Equivalents, July 1, 2013, as Restated
114,284,136
35,117
129,525,867
7,231,345
$
(7,231,345)
15,241,731
$
$
The UNCW Research Foundation
The UNCW Corporation II
321,584
$
(20,620)
Total
$
(321,584)
27,190
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, June 30, 2014
The UNCW Corporation
$
29,815
0
$
0
$
(93,315,115)
126,341,817
(18,905,410)
1,094,517
0
(20,620)
15,215,809
2,850
177,192
114,499,295
2,850
156,572
$
129,715,104
N OTE 17 – N ET P OSITION R ESTATEMENTS As of July 1, 2013, net position as previously reported was restated as follows: Amount
July 1, 2013 Net Position as Previously Reported
$
427,227,137
Restatements:
To blend activity of the UNCW Corporation II
and the UNCW Research Foundation due to increased
significance of these entities to the University
Expense previously amortized bond issuance costs pursuant
to GASB 65 requirements
July 1, 2013 Net Position as Restated
135,907
(1,004,859)
$
426,358,185
43 2014 University of North Carolina Wilmington Financial Report The Board of Trustees and University Officers June 30, 2014 The Board of Trustees University Officers Wendy F. Murphy ‘93 Chair Britt A. Preyer Vice Chair Wilma W. Daniels Secretary Dennis P. Burgard ‘88 Michael R. Drummond ‘86 H. Carlton Fisher ‘83 Gidget Kidd ‘91 Henry L. Kitchin , Jr. C. Phillip Marion, Jr. Ronald B. McNeill Michael B. Shivar Maurice R. Smith ‘79 Tobi Pollard SGA President Gary L. Miller Chancellor Denise A. Battles Provost and Vice Chancellor for Academic Affairs Eddie Stuart Vice Chancellor for University Advancement Patricia L. Leonard Vice Chancellor for Student Affairs Charles A. Maimone Vice Chancellor for Business Affairs University Deans Office of Business Affairs Charles A. Maimone Vice Chancellor for Business Affairs Rick N. Whitfield Associate Vice Chancellor for Business Affairs Robert T. Burrus Interim Dean, Cameron School of Business Stephen J. McNamee Interim Dean, College of Arts and Sciences Charles J. Hardy Dean, College of Health and Human Services Ronald J. Vetter Interim Associate Provost for Research and Dean of Graduate School Martin H. Posey Associate Vice Chancellor and Dean of Undergraduate Studies Kenneth N. Teitelbaum Dean, Watson College of Education Sharon H. Boyd Associate Vice Chancellor for Business and Support Svcs Robert W. Fraser Associate Vice Chancellor for Facilities 2014 University of North Carolina Wilmington Financial Report 44
Supplemental Information Statement of Net Position June 30, as Indicated 2010
2011
2012
2013
(Restated)
(Restated)
2014
ASSETS
Current Assets:
Cash and Cash Equivalents
$
Restricted Cash and Cash Equivalents
65,015,830
$
65,347,125
$
74,411,120
$
82,182,448
$
100,713,018
19,004,819
24,042,407
21,871,785
16,166,802
14,401,915
4,115,903
4,586,704
3,861,541
3,852,024
3,444,957
Due from State of NC Component Units
389,000
268,287
103,154
75,681
Inventories
340,847
408,444
394,183
310,490
327,022
1,121,112
1,049,835
559,607
601,288
668,764
89,987,511
95,702,802
101,201,390
103,188,733
119,562,617
45,643,123
50,821,943
31,577,332
16,150,045
14,600,171
381,680
244,668
135,573
117,720
211,572
370,904
271,432
44,645,280
57,827,677
682,445
349,596
Receivables, Net
Prepaid Items
6,941
Notes Receivable, Net
Total Current Assets
Noncurrent Assets:
Restricted Cash and Cash Equivalents
Receivables, Net
Prepaid Items
1,195
Restricted Due to Primary Government
Endowment Investments
Other Investments
Deferred Charges
Notes Receivable, Net
Capital Assets ‐ Nondepreciable
Capital Assets ‐ Depreciable
Total Noncurrent Assets
Total Assets
60,749,814
70,350,026
80,159,221
986,786
1,180,403
5,460,449
5,318,991
3,538,509
5,653,449
5,458,733
3,944,465
42,004,392
35,348,096
66,501,850
41,449,627
12,579,558
383,631,501
412,750,594
418,198,314
458,132,369
475,507,167
523,806,560
564,113,400
586,354,841
591,658,520
587,003,349
613,794,071
659,816,202
687,556,231
694,847,253
706,565,966
0
0
0
2,369,732
2,174,373
5,113,186
9,836,745
10,837,251
4,661,785
3,541,055
DEFERRED OUTFLOWS OF RESOURCES
Deferred Loss on Refunding
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Liabilities
Deposits Payable
Due to Primary Government
1,230,190
1,178,439
1,197
5,921
1,278,984
1,365,193
Unearned Revenue
4,288,645
4,343,537
4,391,126
4,642,332
5,288,211
Interest Payable
1,924,295
2,358,805
2,087,037
2,044,448
2,133,921
8,542,776
10,217,886
6,254,632
6,674,900
7,033,768
21,099,092
27,935,412
24,850,227
18,023,465
19,368,069
6,662
330,000
Funds Held for Others
3,743,831
4,146,033
7,519,167
2,276,768
791,607
U.S. Government Grants Refundable
4,480,073
4,426,296
4,392,778
4,356,005
4,325,528
233,431,672
252,324,072
251,097,763
246,195,900
238,776,131
241,655,576
260,896,812
263,009,708
252,835,335
244,223,266
262,754,668
288,832,224
287,859,935
270,858,800
263,591,335
0
0
0
0
0
260,491,504
Long‐Term Liabilities ‐ Current Portion
Total Current Liabilities
Noncurrent Liabilities:
Accounts Payable and Accrued Liabilities
411
Long‐Term Liabilities
Total Noncurrent Liabilities
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Deferred Gain on Refunding
NET POSITION
Net Investment in Capital Assets
229,927,613
247,002,288
267,350,758
272,003,692
Restricted Nonexpendable
45,056,161
55,771,543
58,539,760
43,670,715
45,850,210
Restricted Expendable
22,801,543
15,518,651
13,841,797
27,596,752
38,085,095
Unrestricted
53,254,086
52,691,496
59,963,981
83,087,026
100,722,195
Total Net Position
45 $
351,039,403
$
370,983,978
$
399,696,296
$
426,358,185
2014 University of North Carolina Wilmington Financial Report $
445,149,004
Supplemental Information Statement of Revenues, Expenses, and Changes in Net Position For the Fiscal Year Ended June 30, as Indicated 2010
2011
2012
2013
(Restated)
(Restated)
2014
REVENUES
Operating Revenues:
Student Tuition and Fees, Net $
Federal Grants and Contracts
State and Local Grants and Contracts
Nongovernmental Grants and Contracts
Sales and Services, Net 71,613,363
$
80,606,602
$
86,526,202
$
93,042,367
$
96,421,397
15,641,403
14,570,287
12,144,343
8,496,278
5,769,590
1,377,277
1,290,821
1,035,091
1,323,221
1,006,363
1,540,777
1,232,793
791,931
683,739
1,104,249
37,764,423
39,431,360
41,194,644
44,252,719
47,969,874
Interest Earnings on Loans
91,788
69,153
73,678
41,108
6,100
Other Operating Revenues
1,679,846
2,826,885
3,886,788
6,201,708
5,810,080
129,708,877
140,027,901
145,652,677
154,041,140
158,087,653
Total Operating Revenues
EXPENSES
Operating Expenses:
145,706,677
151,677,706
150,205,408
156,785,894
159,921,608
Supplies and Materials
Salaries and Benefits
18,883,395
15,699,970
18,267,194
21,320,365
19,863,947
Services
44,058,570
48,694,722
46,134,350
50,215,453
50,936,497
Scholarships and Fellowships
15,695,692
17,177,308
16,526,443
17,661,241
18,327,034
Utilities
Depreciation
Total Operating Expenses
Operating Loss
8,667,368
7,547,034
6,770,663
7,344,665
7,783,473
13,612,147
13,811,118
14,120,071
14,585,939
16,194,951
246,623,849
254,607,858
252,024,129
267,913,557
273,027,510
(116,914,972)
(114,579,957)
(106,371,452)
(113,872,417)
(114,939,857)
NONOPERATING REVENUES (EXPENSES)
State Appropriations
State Aid ‐ Federal Recovery Funds
Noncapital Grants ‐ Student Financial Aid
90,220,051
89,349,941
7,228,518
7,536,901
91,313,397
96,878,528
97,601,950
23,359,488
21,800,790
25,079,443
22,728,974
24,323,132
Noncapital Gifts, Net 2,750,983
2,917,139
4,893,475
3,178,336
3,339,055
Investment Income, Net
4,378,042
8,710,806
2,862,924
8,560,744
10,842,857
(6,491,363)
(11,654,036)
(11,917,022)
(10,889,530)
(11,482,010)
Interest and Fees on Debt
Federal Interest Subsidy on Debt
678,693
Other Nonoperating Revenues (Expenses)
(735,635)
Net Nonoperating Revenues
Income Before Other Revenues
760,163
(46,388)
621,946
(3,443)
822,120
213,938
(9,157)
119,151,386
122,572,499
110,638,468
122,887,094
124,474,303
2,236,414
7,992,542
4,267,016
9,014,677
9,534,446
2,778,761
7,759,598
21,726,855
17,457,010
2,173,028
4,192,435
2,718,447
1,749,544
3,936,562
Capital Appropriations
3,146,783
Capital Grants
Capital Gifts
27,133
Additions to Endowments
2,085,107
Increase in Net Position
$
Net Position July 1
Change in Net Position
Net Position June 30
7,127,415
$
19,944,575
$
$
28,221,231
$
18,790,819
343,911,988
351,039,403
370,983,978
398,136,954
7,127,415
19,944,575
28,712,318
28,221,231
18,790,819
351,039,403
370,983,978
399,696,296
426,358,185
445,149,004
Net Position Adjustment
Restated Net Position June 30
28,712,318
426,358,185
(1,559,342)
$
351,039,403
$
370,983,978
$
398,136,954
$
426,358,185
2014 University of North Carolina Wilmington Financial Report $
445,149,004
46
The University of North Carolina Wilmington is committed to and will provide equality of educational and employment opportunity for all persons regardless of race, sex (such as gender, marital status, and pregnancy), age, color, national origin (including ethnicity), creed, religion, disability, sexual orientation, political affiliation, veteran status, or relationship to other University constituents – except where sex, age, or ability represent bona fide educational or occupational qualifications or where marital status is a statutorily established eligibility criterion for State funded employee benefit programs. Questions may be directed to the University’s EEO/AA Officer at 910‐962‐3160, ADA Coordinator at 910‐962‐4287, or the Title IX Coordinator at 910‐962‐3876. 2014 University of North Carolina Wilmington Financial Report
U niversity of N orth Carolina Wilmington
601 South College Road
Wilmington, NC 28403-5934