ADMINISTRATIVE OFFICERS
As of June 30, 2004
Board of Control
David J. Brule, Sr., Chair
Rodger A. Kershner, Vice Chair
Kathryn Clark
Russell A. Gronevelt
Michael C. Henricksen
Norman A. Rautiola
Ruth A. Reck
Claude A. Verbal
Executive and Board Officers
Dr. Glenn D. Mroz
President
Dr. Warren K. Wray
Provost and Senior Vice
President for Academic Affairs
Ellen S. Horsch
Vice President
for Administration
Dr. Dale R. Tahtinen
Vice President for Governmental
Relations and Secretary to
the Board of Control
Dr. David D. Reed
Vice President
for Research
Daniel D. Greenlee, CPA
Chief Financial Officer and
Treasurer of the Board of Control
Dr. Les P. Cook
Vice Provost and
Dean of Student Affairs
LETTER FROM THE PRESIDENT
The year of 2004 was remarkable for many Michigan universities and was a particularly good one for Michigan Technological University. The latest US News & World Report
rankings again placed Michigan Tech in the top tier among
national universities (60th among 126 schools ranked). In addition, three of the university's undergraduate engineering programs ranked among the top 25 in the nation! Environmental
engineering ranked 16th, materials science and engineering
was 18th and mechanical engineering ranked 25th. Among
Michigan universities, Michigan Technological University is
ranked third, on the nationally ranked scale.
This year was also a year of transition for Michigan Tech.
We changed presidents and reorganized our administration to
streamline our efforts so that we may live within our budget for
both this year and into the future. Marketing and recruiting
teams have been working over the past several months to
develop the strategies and the tactics to pursue aggressive
enrollment goals that enhance our strategic plan. As the recruiting season begins, we also begin to implement the tactics
of our plan even as we continue to refine it. An e-commerce plan is being implemented to improve our business practices
and save money and will also reduce our ecologic foot-print.
We are presented with continuing challenges from the economic environment present in the State of Michigan. Our
state appropriations have declined significantly within the past two years, and there are signs that the economic contraction is not complete yet. As a result, we continue to review processes, consolidating functions and streamlining operations
where possible, but only when it will not impact our service to students or reduce the emphasis on educational excellence.
We must not sacrifice long-term goals and strategies, due to short-term budget pressures.
As we move forward, a key to change in our University is to understand what should never change. We should never
change our core values and what we stand for, but we will continually change our processes and practices. We will always keep our vision on the goal of making Michigan Technological University a rigorous, supportive, globally aware
learning community for motivated adventurous students and faculty who will create the future, just as generations of board
members, employees, alumni and friends have done before us.
Sincerely,
Glenn Mroz
President
Michigan Technological University
Annual Financial Report
TABLE OF CONTENTS
University Statistics ...................................................................................................................................................... 1
Management’s Discussion and Analysis....................................................................................................................... 3
Independent Auditors’ Report..................................................................................................................................... 12
Statements of Net Assets ............................................................................................................................................ 14
Statements of Revenues, Expenses, and Changes in Net Assets................................................................................. 16
Statements of Cash Flows........................................................................................................................................... 18
Notes to the Financial Statements............................................................................................................................... 20
UNIVERSITY MISSION
We prepare students to create the future.
UNIVERSITY VISION
Michigan Tech will be a national university of choice.
Michigan Tech will be a nationally prominent and internationally recognized technological university which bridges technology and business and will meet the needs of a global and technologically rich society through excellence in undergraduate and graduate education, scholarship, and research.
UNIVERSITY GUIDING PRINCIPLES
•
•
•
•
•
•
•
The success of our students will always be the most important measure of the success of the institution.
Everyone’s contribution to our success is needed, and will be valued and rewarded.
Through collaborative efforts we will serve the people of Michigan, the nation, and the world.
Hallmarks of this university will be the creativity and leadership of our graduates, the relevance and benefits of our
research, and the values we place on ethics, sustainability, diversity, and quality of life.
MTU’s faculty will emphasize scholarship, research, and inspirational teaching.
Our faculty should be read and respected by leaders of science, industry, government, policy groups, and business.
Engineering, science and technology, and the business of technology will remain the focus of our university. We
recognize that success in this focus requires vital programs that contribute to the cultural development, social skills,
and well-rounded education of our students.
Michigan Technological University
Annual Financial Report
University Statistics
UNIVERSITY STATISTICS
Introduction
At Michigan Tech, we prepare students to create the future.
Engineering, the sciences, communication, business, environmental studies, computing, and technology are all offered with guidance from faculty who are experts in their fields. Research is performed across all disciplines, even at the
undergraduate level, and occurs both within the many labs on campus and outdoors in our incredible setting. After you
close your books, you can enjoy virtually any recreational activity close to campus, including our Mt. Ripley Ski Hill (with
night skiing), cross-country ski trails, Portage Lake Golf Course, jogging/walking trails, streams and lakes for fishing, and
woods for hiking. Each year, Winter Carnival features huge snow statues, special events, and NCAA Division I men's ice
hockey for our Huskies. We also celebrate Homecoming with a hobo theme, sunshine with Spring Fling, diversity with the
Parade of Nations, and autumn's beauty with K-Day.
Admissions
The following table shows the average American College Testing (ACT) scores for entering University freshmen. The
United States average in 2002-2003 was 20.8.
Average ACT Scores for
Incoming Freshmen, Fall
1999
2000
2001
2002
2003
25.21
25.26
25.31
25.46
25.36
1
Michigan Technological University
Annual Financial Report
University Statistics
The following table shows that 3,985 students were admitted (accepted) during the summer and fall of 2003.
Accepted Students
Summer and Fall Terms
1999
2000
2001
Freshman
2,541
2,938
2,785
Transfer Students
363
370
387
Graduate Students
606
621
625
Total
3,510
3,929
3,797
2003
2,861
322
802
3,985
Enrolled Students
Summer and Fall Terms
Enrollment
Admission is open to all students on a
competitive basis. During the fall 2003 semester, Michigan residents accounted for
approximately 69% of the University's enrollment.
Enrollments at the University have remained fairly stable over the last five years.
From fall 2002 to fall 2003, the University saw
no significant change in total full-time enrollment. Over that same period, freshman applications increased by 4.2%, transfer applications decreased by 17.7%, enrolled freshmen
decreased by 0.3%, and enrolled transfer
students decreased by 15.8%.
2002
2,716
372
738
3,826
New freshmen
New transfer students
Graduate students
Total
1999
1,155
246
213
1,614
2000
1,275
242
218
1,735
2001
1,200
234
185
1,619
2002
1,190
215
206
1,611
2003
1,187
181
223
1,591
2002
4,704
1,253
668
6,625
2003
4,531
1,341
693
6,565
Enrollment by Residency*
Fall 1999 to Fall 2003
Resident
Non-resident
International
Total
1999
4,607
1,182
532
6,321
2000
4,632
1,134
570
6,336
2001
4,766
1,187
657
6,610
*Includes Distance Learning
Retention
The following table shows the latest retention and graduation rates for
freshmen entering the University. The level and changes in retention and
graduation rates reflect the diversity of the entering students.
Retention rate is the first year-retention for baccalaureate degree seeking
students based on the prior year entering class. Graduation rate is the federal
“Student Right to Know” graduation rate for baccalaureate degree-seeking students based on the entering class from six years prior.
1999
2000
2001
2002
2003
Fall
Retention
Rate
77.7
79.9
76.1
77.9
81.1
Fall
Graduation
Rate
66.9
64.8
64.7
65.0
60.9
Degrees Awarded
The University awards four levels of degrees, including associate, baccalaureate, master’s and doctoral/professional
degrees. Listed below is a five-year history of degrees awarded.
Associate
Bachelor
Masters
Doctorate
Total
1999
2000
2001
2002
2003
71
63
50
35
38
986 1,129 1,074
996
975
121
159
145
182
163
33
42
21
42
38
1,211 1,393 1,290 1,255 1,214
2
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION AND ANALYSIS
This discussion and analysis section of the Michigan Technological University (the "University") annual financial report
provides an overview of our financial activities during the fiscal years ended June 30, 2004 and 2003. University management has prepared the financial statements and the related footnote disclosures along with this discussion and analysis. Responsibility for the completeness and fairness of this information rests with the University management.
Using the Annual Report
The University’s financial report includes three financial statements: the Statements of Net Assets; the Statements of
Revenues, Expenses and Changes in Net Assets; and the Statements of Cash Flows. These financial statements are prepared in accordance with Government Accounting Standards Board (GASB) principles, which establish standards for external financial reporting for public colleges and universities and require that financial statements be presented on a consolidated basis to focus on the University as a whole.
Information is presented in thousands unless otherwise indicated.
Reporting Entity
The financial statements report information about the University as a whole using accounting methods similar to those
used by private-sector companies. The University's supporting organization, the Michigan Tech Fund (MTF) is an independent nonprofit corporation formed for the exclusive benefit of the University. In May 2002, the Governmental Accounting Standards Board (GASB) issued Statement No. 39—“Determining Whether Certain Organizations are Component
Units.” Under this recent GASB pronouncement, the MTF is a component unit of the University.
Financial Highlights
Tuition and state appropriations are the primary sources of funding for the University's academic programs. Collectively, net tuition and state appropriations increased by $922 thousand in 2004.
The University recognized a $9.4 million net income in fiscal year 2004. The primary reason for the net income was
the nonrecurring $8.0 million capital appropriation from the State of Michigan for the Integrated Learning Center.
During fiscal year 2004, the cash balance increased by $20.8 million. All of this cash increase is from new unspent
bond proceeds. These proceeds are restricted for the Wadsworth Hall renovation.
The University strengthened its unrestricted net assets by $137 thousand during the fiscal year ended June 30, 2004.
The profit generated by auxiliary activities offset the loss generated by academic and administrative functions.
Condensed Statements of Net Assets
The Statements of Net Assets include all assets and liabilities. The University’s net assets (the difference between
assets and liabilities) is one indicator of the University’s financial health. These changes also need to be considered with
non-financial facts such as enrollment levels and condition of the facilities.
The University’s current assets of $61.4 million covered
Net Assets
the current liabilities of $21.1 million. The current ratio
increased to 2.92 in fiscal year 2004 from 2.58 in fiscal year
2003. This ratio increase was due to the unspent bond proceeds (current assets) for the Wadsworth Hall renovation
(long term liability). As construction proceeds, the current ratio
will drop. In fact, if we adjusted the fiscal year 2004 current
ratio for the Wadsworth Hall renovation, the current ration
would drop to 2.13.
180,000
160,000
140,000
(in thousands)
120,000
100,000
80,000
60,000
40,000
20,000
-
(20,000)
Invested in Capital Assets
Restricted
2004
3
2003
Unrestricted
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
Condensed Statements of Net Assets
As of June 30
2004
2003
$ 61,427
$ 40,346
11,554
191,697
$ 264,678
10,948
165,762
$ 217,056
Liabilities
Current liabilities
Noncurrent liabilities
Total liabilities
$ 21,069
52,619
$ 73,688
$ 15,620
19,853
$ 35,473
Net assets
Invested in capital assets, net of related debt
Restricted for expendable purposes
Unrestricted
Total net assets
$ 168,770
13,291
8,929
$ 190,990
$ 154,050
18,741
8,792
$ 181,583
Assets
Current assets
Noncurrent assets
Other
Capital assets, net
Total assets
Capital and Debt Activities
Capital and Debt Activities
As of June 30
One of the critical factors in continuing the quality of the
University’s academic programs, research programs, and Project
2004
2003
residential life is the development and renewal of its capital Wadsworth Hall renovation
$ 11,161
$
ILC
(Phase
I)
17,543
2,132
assets. The University continues to implement its long-range
capital plan to modernize its complement of older facilities Other projects
ATDC
208
balanced with new construction. At June 30, 2003 construcHigh voltage
458
tion-in-progress consisted only of small unrelated projects. At
Life Safety
812
June 30, 2004, construction-in-progress consists of work beSmall
projects
272
276
ing done on several major projects.
Total
$ 28,976
$
3,886
On October 7, 2003 the University’s Board of Control approved the $31.3 million renovation of Wadsworth Hall. This
project will be completed in three phases, the first of which will be completed in August, 2004. The University issued $32.8
million of General Revenue Bonds to facilitate this project.
The University is in Phase I of the $35.0 million Integrated Learning Center (ILC) building. The University has already
provided $10.0 million and the State Building Authority (SBA) will provide up to $25.0 million.
Construction was recently completed on the Advanced Technology Design Complex (ATDC).
Life safety improvements for all of the University residence halls are now complete.
Cost of Construction and Sources of Financing
Current Projects
Wads
ILC
Other
Total
Estimated cost of construction
Less: costs incurred through June 30, 2004
$ 31,300
(11,161)
$ 35,000
(17,543)
$ 465
(272)
$ 66,765
(28,976)
Estimated cost to complete
$ 20,139
$ 17,457
$ 193
$ 37,789
$
20,139
$ 17,457
-
$193
$ 17,457
20,332
$ 20,139
$ 17,457
$ 193
$ 37,789
Expected sources of financing to complete
State Building Authority funds
University funds and other sources
Estimated financing
4
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
University liabilities increased by $38.2 million to $73.7 million at June 30, 2004. Long-term debt of $50.3 million, consisting of bonds payable and capitalized lease obligations, is the largest liability at June 30, 2004. The Wadsworth Hall
renovation bonds are rated "AAA" by Standard and Poor’s and "A1" by Moody’s. The University’s previously issued bonds
have been rated "AAA" by both Fitch IBCA and Standard & Poor's rating agencies. This is the highest achievable rating
based on the scale used in university bond ratings. The University's capacity to meet its financial commitment on its obligations is looked upon as extremely strong based upon this bond rating.
Net Assets
Net Assets Summary
As of June 30
The University’s net assets consist of capital assets
net of related debt, expendable restricted net assets
2004
2003
and unrestricted net assets.
$ 168,770
$ 154,050
Invested in capital assets
Net assets invested in capital assets represent the
Restricted - expendable
University's capital assets net of accumulated depreciaGifts and sponsored programs
$ 1,387
$ 1,083
tion and outstanding principal balances of debt attributCapital projects and debt service
(1,303)
4,986
able to the acquisition, construction or improvement of
Student loans
13,207
12,672
those assets. The $14.7 million increase reflects the
Total restricted net assets
$ 13,291
$ 18,741
receipt of gifts and capital appropriations.
Unrestricted
Expendable restricted net assets represent assets
Capital projects and repairs
$
213
$ 1,148
whose use is restricted by a party independent of the
Auxiliary activities
7,774
5,397
University. This includes restrictions related to gifts,
Designated funds
8,216
11,606
research contracts, grants, and the Perkins loan proUncommitted
(7,274)
(9,359)
gram.
Total unrestricted net assets
$ 8,929
$ 8,792
Unrestricted net assets represent net assets of the Total net assets
$ 190,990
$ 181,583
University that have not been restricted by parties independent of the University. This includes funds that the Board of Control and management have designated for specific
purposes, such as research incentives of $2.8 and $2.6 million for fiscal years 2004 and 2003, respectively. It also includes amounts that have been contractually committed for goods and services that have not been received by fiscal year
end.
Discrete Component Unit’s Net Asset Categories
Permanently restricted net assets are held in perpetuity, the income from which supports scholarships and fellowships, faculty chairs, and other University programs.
Unrestricted Net Assets
As of June 30
2004
Deficiencies for all donor-restricted endowment funds for
which fair value of assets is less than donor-stipulated level
Undesignated
$
$
(577)
2,299
1,722
2003
$
$
(1,730)
2,443
713
Temporarily Restricted Net Assets
As of June 30
Capital projects and equipment
Departmental support
Remainder interests in split-interest agreements
Net appreciation on donor-restricted endowment funds
5
2004
7,163
16,685
2,470
15,467
$ 41,785
$
2003
9,846
15,282
1,851
9,638
$ 36,617
$
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
Summary of Revenues, Expenses,
and Changes in Net Assets
Year ended June 30
Condensed Statements of
Revenues, Expenses, and Changes
in Net Assets
The Statements of Revenues, Expenses and
Changes in Net Assets presents the revenues earned
and expenses incurred during the year. In accordance
with GASB reporting principles, activities are reported
as either operating or nonoperating. GASB 35 classifies state appropriations and gifts as nonoperating
revenues, which will result in operating deficits.
One of the University’s greatest financial strengths
is the diverse streams of revenues that supplement its
student tuition and fees, including voluntary private
support from individuals, foundations and corporations,
along with government and other sponsored programs,
and state appropriations. In order to supplement student tuition, the University continues to aggressively
seek funding from all possible sources consistent with
its mission. It also prudently manages the financial resources realized from these efforts to fund its operating
activities.
Tuition and Fees Revenue
The University strives to provide students with the
opportunity to obtain a quality education at an affordable cost. The fiscal year 2004 increase in net tuition
and fees, of $4.8 million, is a significant reason for an
increase in operating revenues. Despite anticipated reductions in state appropriations, for 2005, the University
is holding its tuition increase at 2.3%, which is below
the state’s 2.8% cap.
2004
Operating revenues
Tuition and fees, net
Grants and contracts
Educational activities
Auxiliary activities
Total operating revenues
$
Operating expenses
Operating loss
Nonoperating revenues and
expenses
State appropriations, operating
State appropriations, capital
Gifts
Other nonoperating revenues
and expenses
Net nonoperating revenues
Net increase (decrease) in
net assets
Net Assets
Beginning of year
End of year
39,293
30,456
5,257
21,024
96,030
2003
$
34,498
28,644
5,113
19,665
87,920
152,312
(56,282)
151,558
(63,638)
47,591
8,033
10,638
53,308
541
9,652
(573)
65,689
(1,292)
62,209
9,407
(1,429)
181,583
$ 190,990
183,012
$ 181,583
2004 Revenues
Auxiliary activities
19%
Nonoperating Revenues
50%
State appropriations
23%
Educational activities
2%
Grants and contracts
13%
Student tuition and
fees,net
16%
6
Gifts and other, net
27%
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
Grants and Contracts Revenue
The University receives revenues for sponsored programs from government and private
sources, which normally provide for the direct
and indirect costs of performing these sponsored activities.
Grants and Contracts Revenue
State and Local Sources
5%
Private Sources
35%
Federal Sources
60%
Non-Operating Revenues
Grants and Contracts Revenue
Year ended June 30
2004
2003
Federal sources
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Interior
Department of Transportation
Environmental Protection Agency
National Aeronautics Space Administration
National Science Foundation
Other federal sources
Total federal sources
$ 1,470
305
2,506
3,907
3,999
421
642
18
460
4,047
427
18,202
$ 1,038
202
1,393
3,794
3,284
564
316
35
468
4,373
413
15,880
Non-federal sources
State and local
Private
Total non-federal sources
Total all sources
1,498
10,756
12,254
$ 30,456
2,288
10,476
12,764
$ 28,644
Appropriations
The University’s largest source of nonoperating revenue is the State of Michigan appropriation. There is no direct
connection between the amount of tuition revenues collected by the University and the amount of state funds appropriated
in any given year.
The State’s fiscal year begins on October 1, 2003 and ends on September 30, 2004. The appropriations to the University from the state were $47.6 million for operations and $8.0 million for capital. A decrease in state tax revenues continued to put pressure on the state budget, resulting in a mid-year rescission of state appropriations. The 2004 state appropriations for operating purposes decreased by $5.7 million or 10.7% percent.
Investment Income
Investment Income (Loss)
Year ended June 30
The University had no investments as of June 30, 2004
and 2003. The University realized a net loss of $588 from
the sale of investments in the fiscal year ended June 30,
2003. The calculation of realized losses is independent of
the calculation of the unrealized losses, or net decrease in
the fair value of investments. Beginning in fiscal year 2005,
we will reinvest assets in the equities market.
2004
Investment income (loss)
Interest
Dividends
Net decrease in the fair value
of investments
Investment income (loss)
$
Investment expenses
Net investment income (loss)
7
$
346
6
2003
$
344
136
352
(588)
(108)
(13)
(13)
339
$
(121)
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
Operating and Non-Operating Expenses:
In addition to their functional classification, it is also informative to review operating expenses by their natural classification. A comparative summary of the University’s expenses by functional classification follows for the years ended
June 30, 2004 and 2003:
Operating and Nonoperating Expenses
Year ended June 30
2004
Operating expenses
Instruction
Research
Public service
Academic support
Student services
Institutional support
Student financial support
Operation and maintenance of plant
Depreciation
Sales and services of departmental activities
Student residents
Total operating expenses
2003
$ 50,157
27,701
4,510
10,611
5,894
16,520
1,877
4,037
10,519
11,821
8,665
152,312
Nonoperating expenses
Interest
Other
Total nonoperating expenses
$
506
406
912
Total expenses
52,986
21,533
5,055
10,377
5,970
15,934
1,399
8,033
10,812
11,017
8,442
151,558
290
881
1,171
$ 153,224
$
152,729
The University and its discrete component unit’s operating expenses by natural classification were as follows:
2004
2003
Primary
Component
Primary
Component
Institution
Unit
Institution
Unit
Salaries
Faculty
$
28,093
$
$
30,189
$
Staff
34,533
1,386
32,982
1,255
Students
10,191
9,898
Total salaries
72,817
1,386
73,069
1,255
Benefits
24,672
488
26,300
471
Compensation & benefits
97,489
1,874
99,369
1,726
Supplies and other services
19,208
800
17,990
792
Professional fees
9,088
162
8,187
230
Travel
4,254
191
4,481
298
Scholarships and fellowships
5,306
4,986
Utilities
6,448
5,733
Depreciation
10,519
35
10,812
41
Total operating expenses
$
152,312
8
$
3,062
$
151,558
$
3,087
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
Expenses by Function
Expenses by Natural Classification
Auxiliary activities
0%
Utilities
5%
Student financial
support
4%
Student financial
support
1%
Operations &
Maintenance of Plant
3%
Depreciation
Nonoperating expenses
8%
1%
Depreciation
8%
Nonoperating expenses
1%
Instruction
39%
Institutional support
12%
Supplies and services
13%
Student services
4%
Compensation and
benefits
69%
Academic support
8%
Condensed Statements of Cash Flows
Another way to assess the financial health of an institution is to look at its Statement of Cash Flows. Its primary purpose is to provide relevant information about the cash receipts and cash payments of an entity during a period. The
Statements of Cash Flows also help users assess:
•
•
•
an entity’s ability to generate future net cash flows
its ability to meet its obligations as they come due
its needs for external financing.
Public service
3%
Research
21%
Condensed Statements of Cash Flows
Year ended June 30
Cash provided by (used in)
Operating activities
Noncapital financing
activities
Capital and related financing
activities
Investing activities
Net increase in cash
Cash - beginning of the Year
2004
2003
$ (46,594)
$ (50,371)
54,691
59,950
12,384
352
20,833
971
7,044
17,594
22,654
5,060
Cash - end of the Year
$ 43,487
$ 22,654
The Statements of Cash Flows present information related to cash inflows and outflows summarized by operat2004 Cash Flows
ing, noncapital financing, capital and related financing, and
investing activities.
Investing Activities
Cash received from operating activities consists primarily of student tuition and fees, sponsored program
Capital and Related Financing
grants and contracts, and auxiliary revenues. Significant
Activities
sources of cash provided by noncapital financing activities
include state appropriations and private gifts used to fund
Noncapital Financing Activities
operating activities. Cash provided by capital and related
financing activities is restricted and therefore unavailable
for operating activities. Cash provided by investing activiOperating Activities
ties includes investment income and the purchase or liquidation of investments.
(60)
(40)
(20)
0
20
40
Millio
Cash and cash equivalents increased $20.8 million in
2004, as compared to an increase of $17.6 million in 2003. The 2004 net cash inflow is entirely from the 2004 bond issue
(capital financing activities). The 2003 net cash inflow was primarily from the liquidation of our investments (investing activities).
Major sources of funds included in operating activities during the fiscal years ended June 30, 2004 and 2003 are student tuition and fees ($38.4 and $35.4 million, respectively), and grants and contracts ($30.3 and $30.4 million, respectively). The largest payments in operating activities were compensation to employees ($96.7 and $98.9 million, respectively) and to suppliers ($32.0 and $30.9 million, respectively).
9
Michigan Technological University
Annual Financial Report
Management’s Discussion and Analysis
Cash used in capital and related financing activities during fiscal years 2004 and 2003 was primarily for the acquisition
of capital assets and the payment of its debt service.
Economic Factors Impacting Future Periods
As a labor-intensive organization, the University faces
competitive pressures related to attracting and retaining faculty and staff. The University also faces the challenge of funding post-employment benefit plans.
Academic and administrative reallocation and assessment programs continue across the University. These efforts
are geared to assessing our performance related to our strategic plan, rethinking the way we do business, and freeing up
resources to support change. The University’s ongoing efforts
toward revenue diversification and cost containment will enable the University to provide the necessary resources to
support its high level of excellence.
A crucial element to the University’s future continues to
be our relationship with the State of Michigan. State appropriation is the University’s largest source of funding. State revenues have fallen significantly over the last few years, which impacted the University’s state appropriation – both in absolute dollars and on a per student basis.
We continue to work to manage tuition to make it competitive while providing an outstanding college education for our
students. Despite reductions in state appropriations, for 2005, the University is holding its tuition increase at 2.3%, which
is below the state’s 2.8% cap.
10
Michigan Technological University
Annual Financial Report
This page intentionally left blank
11
INDEPENDENT AUDITORS’ REPORT
September 2, 2004
Board of Control
Michigan Technological University
Houghton, Michigan
We have audited the accompanying financial statements of the business-type activities and the
discretely presented component unit of Michigan Technological University, a component unit of
the State of Michigan, as of June 30, 2004 and 2003 and for the years then ended, which
collectively comprise the University’s basic financial statements, as listed in the table of
contents. These financial statements are the responsibility of the University's management. Our
responsibility is to express an opinion on these financial statements based on our audits. We did
not audit the financial statements of the Michigan Tech Fund, a discretely presented component
unit. Those financial statements were audited by other auditors whose reports thereon have been
furnished to us, and our opinion, insofar as it relates to the amounts included for the Michigan
Tech Fund, is based solely on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The financial statements of the Michigan
Tech Fund were not audited in accordance with Government Auditing Standards. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the financial statements
referred to above present fairly, in all material respects, the respective financial position of the
business-type activities and the discretely presented component unit of Michigan Technological
University as of June 30, 2004 and 2003, and the respective changes in financial position and
cash flows, where applicable, thereof for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
12
As described in Note 1 to the financial statements, during fiscal 2004 the University adopted the
provisions of Governmental Accounting Standards Board (“GASB”) Statement No. 39,
Determining Whether Certain Organizations are Component Units, which amends GASB
Statement No. 14, The Financial Reporting Entity. Adoption of this pronouncement results in
the University including in its financial statements, the financial statements of the Michigan Tech
Fund as a discretely presented component unit. The University’s 2003 financial statements have
been restated to reflect this change in accounting principle.
In accordance with Government Auditing Standards, we have also issued our report dated
September 2, 2004 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 grants. That report is an integral part of an audit performed in accordance with Government
Auditing Standards and should be read in conjunction with this report in considering the results
of our audits.
The Management's Discussion and Analysis presented on pages 1 through 10 is not a required
part of the basic financial statements but is supplemental information required by the
Governmental Accounting Standards Board. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of this required supplemental information. However, we did not audit the
information and express no opinion on it.
13
Michigan Technological University
Annual Financial Report
Statements of Net Assets
STATEMENTS OF NET ASSETS
June 30, 2004
(in thousands)
Primary
Institution
Assets
Current assets
Cash and cash equivalents
Short term investments
Accounts receivable, net
Other assets
Total current assets
Noncurrent assets
Student loans receivable, net of allowance
Other assets
Capital assets, net of accumulated depreciation
Total noncurrent assets
Total assets
Liabilities
Current liabilities
Accounts payable
Other accrued liabilities
Deferred revenue
Current portion of long-term debt
Current portion of noncurrent liabilities
Total current liabilities
Noncurrent liabilities
Funds held for others
Insurance and benefit reserves
Other liabilities
Long-term debt, net of current portion
Total noncurrent liabilities
Total liabilities
$
$
$
Net assets
Invested in capital assets, net of related debt
Restricted for
Nonexpendable purposes
Expendable purposes
Unrestricted
Total net assets
Total liabilities and net assets
$
43,487
16,263
1,677
61,427
11,554
191,697
203,251
264,678
8,603
6,904
2,489
675
2,398
21,069
$
$
$
7,155
60,835
10,114
34
78,138
6,585
266
6,851
84,989
196
14
163
373
586
1,685
50,348
52,619
73,688
2,110
2,110
2,483
168,770
253
13,291
8,929
190,990
39,000
41,785
1,468
82,506
264,678
The accompanying notes are an integral part of these financial statements.
14
Discrete
Component
Unit
$
84,989
Michigan Technological University
Annual Financial Report
Statements of Net Assets
STATEMENTS OF NET ASSETS
June 30, 2003
(in thousands)
Primary
Institution
Assets
Current assets
Cash and cash equivalents
Short term investments
Accounts receivable, net
Other assets
Total current assets
Noncurrent assets
Student loans receivable, net of allowance
Other assets
Capital assets, net of accumulated depreciation
Total noncurrent assets
Total assets
Liabilities
Current liabilities
Accounts payable
Other accrued liabilities
Deferred revenue
Current portion of long-term debt
Current portion of noncurrent liabilities
Total current liabilities
Noncurrent liabilities
Funds held for others
Insurance and benefit reserves
Other liabilities
Long-term debt, net of current portion
Total noncurrent liabilities
Total liabilities
$
$
$
Net assets
Invested in capital assets, net of related debt
Restricted for
Nonexpendable purposes
Expendable purposes
Unrestricted
Total net assets
Total liabilities and net assets
$
22,654
16,141
1,551
40,346
10,948
165,762
176,710
217,056
2,216
6,137
4,686
603
1,978
15,620
$
$
$
8,549
50,118
11,476
28
70,171
6,778
227
7,005
77,176
273
12
92
377
538
2,118
17,197
19,853
35,473
1,439
13
1,452
1,829
154,050
202
18,741
8,792
181,583
38,018
36,617
510
75,347
217,056
The accompanying notes are an integral part of these financial statements.
15
Discrete
Component
Unit
$
77,176
Michigan Technological University
Annual Financial Report
Statements of Cash Flows
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
For the year ended June 30, 2004
(in thousands)
Primary
Institution
Revenues
Operating revenues
Student tuition and fees (net of scholarship
allowances of $16,387)
Gifts and contributions
Federal grants and contracts
State and local grants and contracts
Nongovernmental grants and contracts
Educational activities
Sales and services of departmental activities
Student resident fees
Other operating revenues
Total operating revenues
$
Expenses
Operating expenses
Compensation and benefits
Supplies and services
Student financial support
Depreciation
Total operating expenses
Operating (loss) revenue
Nonoperating revenues (expenses)
State appropriations
Gifts
Investment income (net of investment expense)
Interest on capital asset - related debt
Payments to Michigan Tech University
Other nonoperating expenses
Net nonoperating revenues before capital gifts
Capital appropriations
Capital grants and gifts
Additions to permanent endowments
Total nonoperating revenues
Net increase in net assets
Net assets
Beginning of year
End of year
$
39,293
18,202
1,498
10,756
5,257
7,665
13,359
96,030
$
8,259
251
8,510
97,489
38,998
5,306
10,519
152,312
(56,282)
1,874
1,153
35
3,062
5,448
47,591
5,949
339
(506)
(406)
52,967
8,617
(1)
(8,320)
296
8,033
4,689
65,689
9,407
1,415
1,711
7,159
181,583
190,990
The accompanying notes are an integral part of these financial statements.
16
Discrete
Component
Unit
$
75,347
82,506
Michigan Technological University
Annual Financial Report
Statements of Cash Flows
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
For the year ended June 30, 2003
(in thousands)
Primary
Institution
Revenues
Operating revenues
Student tuition and fees (net of scholarship
allowances of $16,954)
Gifts and contributions
Federal grants and contracts
State and local grants and contracts
Nongovernmental grants and contracts
Educational activities
Sales and services of departmental activities
Student resident fees
Other operating revenues
Total operating revenues
$
Expenses
Operating expenses
Compensation and benefits
Supplies and services
Student financial support
Depreciation
Total operating expenses
Operating (loss) revenue
Nonoperating revenues (expenses)
State appropriations
Gifts
Investment (loss) income-net of investment expense
Interest on capital asset - related debt
Payments to Michigan Tech University
Other nonoperating expenses
Net nonoperating revenues (expenses) before
capital gifts
Capital appropriations
Capital grants and gifts
Additions to permanent endowments
Total nonoperating revenues
Net decrease in net assets
Net assets
Beginning of year
End of year
$
34,498
15,880
2,288
10,476
5,113
6,962
12,703
87,920
$
11,680
176
11,856
99,369
36,391
4,986
10,812
151,558
(63,638)
1,726
1,320
41
3,087
8,769
53,308
6,459
(121)
(290)
(881)
2,011
(2)
(15,586)
-
58,475
(13,577)
541
3,193
62,209
(1,429)
727
(12,850)
(4,081)
183,012
181,583
The accompanying notes are an integral part of these financial statements.
17
Discrete
Component
Unit
$
79,428
75,347
Michigan Technological University
Annual Financial Report
Statements of Cash Flows
STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 2004 and 2003
(in thousands)
2004
Cash flows from operating activities
Student tuition and fees
Grants and contracts
Payments to employees
Payments for benefits
Payments to suppliers
Payments for utilities
Payments for financial aid
Loans issued to students
Collection of loans to students
Sales and services of departmental activities
Sales and services of educational activities
Student resident fees
Other payments
Net cash used in operating activities
$
38,434
30,269
(72,612)
(24,133)
(31,955)
(6,494)
(5,307)
(2,927)
2,322
7,682
4,828
13,399
(100)
(46,594)
2003
$
35,385
30,375
(72,868)
(25,984)
(30,936)
(5,873)
(4,991)
(2,712)
2,509
6,837
5,217
12,693
(23)
(50,371)
Cash flows from noncapital financing activities
State appropriations
Gifts and grants for other than capital purposes
William D. Ford direct lending cash received
William D. Ford direct lending cash disbursed
Net cash provided by noncapital financing activities
48,665
5,949
16,370
(16,293)
54,691
53,860
6,459
13,536
(13,905)
59,950
Cash flows from capital and related financing activities
Capital appropriations
Capital grants and gifts received
Proceeds from sale of capital assets
Purchases of capital assets
Proceeds on issuance of debt
Principal paid on capital debt and leases
Interest paid on capital debt and leases
Net cash provided by capital and related financing activities
6,150
4,597
24
(31,149)
33,866
(643)
(461)
12,384
896
2,869
33
(8,682)
6,562
(439)
(268)
971
Cash flows from investing activities
Proceeds from sales of maturities of investments
Income on investments
Net cash provided by investing activities
Net increase in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
$
The accompanying notes are an integral part of these financial statements.
18
352
352
6,577
467
7,044
20,833
22,654
43,487
17,594
5,060
22,654
$
Michigan Technological University
Annual Financial Report
Statements of Cash Flows
STATEMENTS OF CASH FLOWS
(Continued)
2004
Reconciliation of net operating loss to net cash used
in operating activities
Operating loss
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation expense
Changes in operating assets and liabilities:
Receivables, net
Other assets
Student loans
Accounts payable
Other accrued liabilities
Deferred revenue
Current portion of long-term liabilities
Funds held for others
Long-term liabilities
Net cash used in operating activities
Supplemental disclosures of cash flow information
Acquisition of equipment through capital leases
$
2003
(56,282)
$
(63,638)
10,519
10,812
$
732
(126)
(606)
593
767
(2,226)
420
48
(433)
(46,594)
$
712
222
(203)
(995)
(718)
1,824
(178)
48
1,743
(50,371)
$
-
$
1,338
The accompanying notes are an integral part of these financial statements.
19
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
(1) Basis of Presentation and Summary of Significant Accounting Policies and
Financial Statements
Reporting Entity
Michigan Technological University (the "University") is an institution of higher education and is considered to be a
component unit of the State of Michigan because its Board of Control is appointed by the Governor of the State of Michigan. Accordingly, the University is included in the State’s financial statements as a discrete component unit. Transactions
with the State of Michigan relate primarily to appropriations for operations, grants from various state agencies, State Building Authority (SBA) revenues and payments to the State retirement program for University employees.
As required by Governmental Accounting Standards Board (GASB) No. 39 (see discussion of adoption of this accounting standard below) the University’s basic financial statements include the financial statements of both the University
and its component unit, the Michigan Tech Fund (the “Fund”), which is a legally separate tax-exempt component unit of
the University. The Fund acts primarily as a fund-raising organization to supplement the resources that are available to
the University in support of its programs. The Fund’s Board of Directors includes members of the University’s Board of
Control, certain officers of the University and other community representatives elected by the Fund Board. Although the
University does not necessarily control the timing or amount of receipts from the Fund, the majority of resources, or income earned thereon, the Fund holds and invests are restricted by the donors to the activities of the University. Because
these restricted resources held by the Fund can be used only by, or for the benefit of, the University, the Fund is considered a component unit of the University. The Fund financial statements are reported in a separate column to emphasize
that a) it is legally separate from the University and b) its assets are not necessarily available to satisfy all liabilities of the
University. However, the Fund’s financial activities are summarized with those of the University in the notes to the financial statements.
Basis of Presentation
The accompanying financial statements have been prepared using the economic resource measurement focus and
the accrual basis of accounting with the exception that certain investment income and interest earned on the Federal Perkins student loan program are recorded only when received.
In accordance with GASB Statement No. 20, “Accounting and Financial Reporting for Proprietary Funds and Other
Governmental Entities that Use Proprietary Accounting,” the University follows all applicable GASB pronouncements. In
addition, the University applies all applicable Financial Accounting Standards Board (FASB) Statements and Interpretation, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins of the Committee on Accounting
Procedures issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The University has elected not to apply FASB pronouncements issued after November 30, 1989.
In applying these accounting pronouncements, the University follows the guidance for special purpose governments
engaged only in “business type” activities rather than issuing financial statement that focus on accountability of individual
funds.
Information is presented in thousands unless otherwise indicated.
20
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Summary of Significant Accounting Policies and Financial Statements
Effective for the fiscal year ended June 30, 2004, the University adopted the provisions of the GASB issued Statement
No. 39—“Determining Whether Certain Organizations are Component Units.” This statement broadens the definition of
component units to require blended or discrete presentation of virtually all material organizations affiliated with public colleges and universities. Generally, it requires reporting, as a discretely presented component unit, an organization that
raises and holds economic resources for the direct benefit of a government unit. Under the GASB No. 39 criteria, the
Michigan Tech Fund is an affiliated organization that meets the criteria for discrete component unit presentation.
The Fund’s financial statements are prepared in accordance with the accounting standards established by the FASB
and, accordingly, a reporting model different from that of the University is used.
Cash and Cash Equivalents
The University considers all highly liquid investments (including restricted assets) with a maturity of three months or
less when purchased to be cash equivalents.
Inventories
Inventories included in other assets are recorded at the lower of cost or market determined on a first-in, first-out basis.
Investments
The University policy is to record investments at fair value.
The Fund reports investments at fair value, and realized and unrealized gains and losses are reflected in the statement of activities. Gifts of securities are recorded at their fair value based on the mean of the high and low quoted price of
stock transactions at the date of the gift.
Except for investments that are not readily marketable or where donors specifically provide otherwise, investments
are maintained by a custodial institution responsible for consummating investment transactions at the request of the Fund
to facilitate cash flow requirements. The Fund employs an asset allocation investment policy and uses the services of an
investment consulting firm to facilitate the implementation of this policy. Asset allocations are reviewed monthly and rebalanced quarterly, when necessary. The Fund's Investment and Finance Committee of the Board of Trustees oversees investment activity and makes decisions concerning any changes in investments or asset allocation adjustments. Each
month, the Fund allocates and credits investment earnings (including realized and unrealized gains and losses) on permanently restricted, temporarily restricted, and unrestricted assets to departmental funds based on an average of each
fund's beginning and ending monthly balances.
Split-Interest Agreements to the Fund
Life income trusts, pooled income funds, unitrusts, and certain other investments are maintained by a separate trust
company. Trustee functions include management of the investments, distributions to donors, complying with tax filing requirements, and providing periodic statements of activity to the Fund. Refer to Note 8 for further details.
21
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Capital Assets
The University uses a $2,500 capitalization threshold, with an estimated useful life in excess of two years. Physical
properties are stated at cost when purchased. Other acquisitions are stated at appraised value on date of receipt. Repair
and maintenance and equipment replacement reserves have been established to provide for significant repair and maintenance costs to residence halls and certain other facilities.
Depreciation is provided for physical properties on a straight-line basis over the estimated useful life of the property,
as follows:
Classification
Land improvements and infrastructure
Buildings
Computer equipment
Equipment
Library books
Life
20 years
40 years
5 years
7 years
5 years
The capital assets of the Fund consist of office equipment, computers, software, and furniture. Capital assets are recorded at cost at the date of acquisition and are depreciated on a straight-line basis over estimated useful lives of three to
seven years. At the time of disposal, capital assets are removed from the records and any gain or loss is recognized in the
statement of activities.
Gifts-in-Kind to the Fund
The Fund records land, buildings, equipment, and art properties at estimated fair value at the date of the gift based
upon appraised values. The responsibility for having an appraisal completed for the gifted property rests with the donor. In
most cases, the Fund serves as an agent for the receipt of property and equipment and immediately transfers these gifts
to the University. The Fund has a policy to list for sale any gifts-in-kind received and not subject to immediate transfer to
the University.
Contributions and Pledges Receivable to the Fund
Contributions received and unconditional promises to give to the fund are recognized at their fair values as revenues
in the periods received. Unconditional promises to give that are expected to be collected within one year are recorded at
their net realizable values. Unconditional promises to give that are expected to be collected in future years are recorded at
the present value of their estimated future cash flows.
Revenue Recognition
Revenues are recognized when earned and expenses are recognized when the service is provided or when materials
are received. Restricted grant revenue is recognized only to the extent expended. Operating revenues of the University
consist of tuition and fees, grants and contracts, sales and services of educational activities, and auxiliary enterprise revenues. Transactions related to capital and financing activities, noncapital financing activities, investing activities and State
appropriations are components of nonoperating revenue. Restricted and unrestricted resources are allocated to the appropriate departments within the University which are responsible for adhering to any donor restrictions.
State appropriation revenue is recognized in the period for which it is appropriated.
22
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Classification of Revenues
The University has classified its revenues as either operating or nonoperating revenues according to the following criteria:
Operating Revenues—Operating revenues of the Primary Institution include activities that have the characteristics of
exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances; (2) sales and
services of auxiliary enterprises; (3) most federal, state and local grants and contracts and federal appropriations; and (4)
interest on institutional student loans. Operating revenues of the Discrete Component Unit consist of gifts, grants, and
fundraising activities in support of Foundation and University programs.
Nonoperating Revenues—Nonoperating revenues include activities that have the characteristics of nonexchange
transactions, such as gifts and contributions, state appropriations, investment income, and other revenue sources that are
defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds
and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 35.
Classification of Expenses
The University has classified its expenses as either operating or nonoperating expenses according to the following criteria:
Operating Expenses—Operating expenses include activities that have the characteristics of exchange transactions,
such as (1) employee salaries, benefits, and related expenses; (2) scholarships and fellowships, net of scholarship discounts and allowances; (3) utilities, supplies, and other services; (4) professional fees; and (5) depreciation expenses related to University property, plant, and equipment.
Nonoperating expenses—Nonoperating expenses include activities that have the characteristics of nonexchange
transactions, such as interest on capital asset-related debt and other expenses that are defined as nonoperating expenses by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities
That Use Proprietary Fund Accounting, and GASB No. 35.
Scholarship Allowances and Student Financial Aid
Financial aid to students is reported in the financial statements under the alternative method as prescribed by the National Association of College and University Business Officers (NACUBO). Certain aid (loans, funds provided to students
as awarded by third parties and Federal Direct Lending) is accounted for as third party payments (credited to the student’s
accounts as if the student made the payment.) All other aid is reflected in the financial statements as operating expenses
or scholarship allowances, which reduce revenues. The amount reported as operating expense represents the portion of
aid that was provided to the student in the form of cash. Scholarship allowances represent the portion of aid provided to
the student in the form of reduced tuition. Under the alternative method, these amounts are computed on a total university
basis by allocating the cash payments to students, excluding payments for services, on the ratio of all aid to the aid not
considered to be third party aid.
Income Taxes
The University is classified as a political subdivision of the State of Michigan under Internal Revenue Code Section
115(A) and is therefore exempt from Federal Income Taxes. Certain activities of the University, to the extent profitable,
may be subject to taxation as unrelated business income under Internal Revenue Code Sections 511 to 514.
The Fund is exempt from federal income taxes under Internal Revenue Code section 501(c)(3).
23
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Net Assets
The University’s net assets are classified as follows:
•
•
•
•
Invested in capital assets, net of related debt—Capital assets, net of accumulated depreciation and outstanding
principal balances of debt attributable to the acquisition, construction or improvement of those assets.
Restricted for nonexpendable purposes—Net assets from contributions and other inflows of assets that represent
permanent endowments. Their use is limited by donor imposed stipulations that neither expire by the passage of
time nor can be fulfilled or otherwise removed by the Fund.
Restricted for expendable purposes—Net assets whose use is subject to externally imposed stipulations that can
be fulfilled by actions of the University or Fund pursuant to those stipulations or that expire by the passage of time.
Unrestricted—Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be
designated for specific purposes by action of the University’s Board of Control or may otherwise be limited by contractual agreements with outside parties.
Reclassifications
Certain amounts in the 2003 financial statements have been reclassified to conform to the 2004 financial statement
presentation.
(2) Cash and Investments
Authorizations
The University investment policies are governed and authorized by University Bylaws and the Board of Control.
The University utilizes the "pooled cash" method of accounting for substantially all of its cash and cash equivalents.
Investment policies for cash and cash equivalents, as set forth by the Board of Control, authorize the University to invest,
with limitations, in commercial paper rated within the two highest classifications of prime as established by at least one of
the standard rating services. Investments may also be made in securities of the U.S. Treasury and Federal agencies, and
in time savings accounts.
University policies regarding investments and marketable securities as set forth by the Board of Control, authorize the
University to invest in U.S. Treasury Obligations; commercial paper rated within the two highest classifications of prime as
established by at least one of the standard rating services; or Federal agency securities certificates of deposit issued by
FDIC insured banks; or an NCUA credit union member; or Eurodollar time deposits in Tier 1, 2, or 3 banks.
Except for Fund investments that are not readily marketable or where donors specifically provide otherwise, investments are maintained by a custodial institution responsible for consummating investment transactions at the request of
the Fund to facilitate cash flow requirements. The Fund employs an asset allocation investment policy and uses the services of an investment consulting firm to facilitate the implementation of this policy. Asset allocations are reviewed
monthly and rebalanced quarterly, when necessary. The Fund’s Investment and Finance Committee of the Board of Trustees oversees investment activity and makes decisions concerning any changes in investments or asset allocation adjustments. Each month, the Fund allocates and credits investment earnings (including realized and unrealized gains and
losses) on permanently restricted, temporarily restricted, and unrestricted assets to departmental funds based on an average of each fund’s beginning and ending monthly balances.
24
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
In accordance with GASB Statement No. 3, deposits and investments are classified into three categories of custodial
credit risk:
Deposits
Deposits that are either insured or collateralized
with securities held by the University or by its
agent in the University's name.
Investments
Investment that are insured or registered, or
securities held by the University or by its agent
in the University's name.
Category 2
Deposits collateralized with securities held by
the pledging financial institution's trust
department or agent in the University's name.
Investments that are uninsured and
unregistered, with securities held by the counter
party's trust department or agent in the
University's name.
Category 3
Deposits that are uncollateralized (including any
bank balance that is collateralized with
securities held by pledging financial institution,
or by its trust department or agent, but not in
the University's name).
Investments that are uninsured and
unregistered, with securities held by the counter
party's trust department or agent by not held in
the University's name.
Category 1
Not Categorized
Investments in mutual funds, money markets,
and investment management funds are not
categorized because they are not evidenced by
securities that exist in physical or book entry
form.
Deposits
The University’s cash and cash equivalents as of June 30, 2004 and 2003 are $43,487 and $22,654, respectively.
2004
2003
Insured by FDIC
$
271
$
370
Uninsured but collateralized
38,571
11,991
Uninsured and uncollateralized
8,045
12,218
Total Bank Balances
$ 46,887
$ 24,579
Investments
During the fiscal year 2003, the University had pooled investments invested in a variety of mutual funds managed by
investment managers. The University liquidated their investments during 2003.
25
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Investments
As of June 30, 2004
1
Primary Institution
Total Investments
Component Unit
Marketable Securities
Equities
Mutual funds - equities
Mutual funds - bonds
Corporate bonds and notes
US government obligations
Other investments not subject to
categorization
Limited partnerships
Venture capital
Closely held stock
Total Investments
2
$
-
$
$
-
$ 896
84
1,371
-
$ 2,351
$
-
Categories
3
Not Categorized
Total
$
-
$
-
$
-
$
-
$
35,763
16,638
-
$
896
35,763
16,638
84
1,371
$
-
$
5,076
987
20
58,484
$
5,076
987
20
60,835
Investments
As of June 30, 2003
1
Primary institution
Total investments
Component unit
Marketable securities
Equities
Mutual funds - equities
Mutual funds - bonds
Corporate bonds and notes
US government obligations
Other investments not subject to
categorization
Limited partnerships
Venture capital
Closely held stock
Total investments
2
$
-
$
$
-
$ 3,067
239
2,253
-
$ 5,559
$
-
26
Categories
3
Total
Not Categorized
$
-
$
-
$
-
$
-
$
25,757
16,096
-
$
3,067
25,757
16,096
239
2,253
$
-
$
2,612
74
20
44,559
$
2,612
74
20
50,118
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
The annualized returns (losses) on investments and marketable securities, excluding the base cash pool reserve for
the year ended June 30, 2003 are as follows:
Intermediate fixed income
Equity investments
9.0%
(9.6%)
The Fund’s investment return is a net amount and is comprised of the following for the years ended June 30, 2004
and 2003:
2004
2003
Interest and dividends
$
1,552
$
1,663
Net gain (loss) on sale of
Investments
1,532
(2,064)
Real property
158
Net unrealized gain (loss) on investments
5,770
2,472
Asset-based management and administrative fees
(237)
(217)
Total investment return
$
8,617
$
2,012
(3) Accounts, State Appropriations and Student Loan Receivables
Accounts receivable are summarized as follows as of June 30. State appropriations are based on Senate Bill Number
1105.
In addition, the University has student loans receivable in the amount of $11,554 and $10,948 , net of an allowance
for uncollectible accounts of $169 at June 30, 2004 and 2003, respectively.
2004
2003
Primary institution
Student tuition and fees
State appropriations
Operating
Capital
Grants and contracts
Auxiliary activities
Other
Less allowance for doubtful accounts
Accounts receivable, net
$ 1,003
$
8,418
1,883
4,274
504
247
(66)
$ 16,263
9,492
122
5,152
532
152
(65)
$ 16,141
Component unit
Pledges receivable
Accounts receivable, net
10,114
$ 10,114
11,476
$ 11,476
27
756
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
(4) Pledges Receivable
The following shows the balance due of unconditional promises to give to the Fund at June 30, 2004 and 2003. The
pledges receivable are included in accounts receivable and other noncurrent assets on the accompanying statements of
net assets.
2004
2003
Pledges receivable in less than one year
$
10,639
$
12,003
Pledges receivable in one to five years
3,233
3,074
Pledges receivable in more than five years
432
309
Less
Allowance for uncollectible pledges
(559)
(579)
Present value discount
(625)
(104)
Total pledges receivable
$
13,120
$
14,703
(5) Capital Assets
Capital Asset Activity by Major Class of Asset
As of June 30, 2004
Beginning
Net,
Balance
Additions
Primary institution
Nondepreciable capital assets
Land
Mineral collections
Timber holdings
Construction in progress
Cost of nondepreciable capital assets
$
8,832
3,461
368
3,886
16,547
$
32
29
Ending
Balance
Disposals
$
26,844
26,905
(1,754)
(1,754)
$
8,864
3,490
368
28,976
41,698
Depreciable capital assets
Land improvements and infrastructure
Buildings
Equipment
Library books
Cost of depreciable capital assets
10,071
206,755
86,856
4,849
308,531
1,582
5,837
4,052
133
11,604
(122)
(2,390)
(2,512)
11,653
212,470
88,518
4,982
317,623
Total cost of capital assets
325,078
38,509
(4,266)
359,321
Less: accumulated depreciation
Land improvements and infrastructure
Buildings
Equipment
Library books
Accumulated depreciation
8,286
77,336
69,236
4,458
159,316
131
4,789
5,476
123
10,519
-
8,417
82,121
72,505
4,581
167,624
Capital assets, net
Component unit, capital assets, net
(4)
(2,207)
(2,211)
$ 165,762
$
227
28
$ 191,697
$
39
$
-
$
266
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Capital Asset Activity by Major Class of Asset
As of June 30, 2003
Beginning
Net,
Balance
Additions
Primary institution
Nondepreciable capital assets
Land
Mineral collections
Timber holdings
Construction in progress
Cost of nondepreciable capital assets
$
8,793
3,190
368
688
13,039
$
39
271
4,260
4,570
Ending
Balance
Disposals
$
(1,062)
(1,062)
$
8,832
3,461
368
3,886
16,547
Depreciable capital assets
Land improvements and infrastructure
Buildings
Equipment
Library books
Cost of depreciable capital assets
10,069
205,471
85,362
4,696
305,598
2
1,378
3,799
153
5,332
(94)
(2,305)
(2,399)
10,071
206,755
86,856
4,849
308,531
Total cost of capital assets
318,637
9,902
(3,461)
325,078
Less: accumulated depreciation
Land improvements and infrastructure
Buildings
Equipment
Library books
Accumulated depreciation
8,162
72,580
65,363
4,363
150,468
124
4,798
5,795
95
10,812
(42)
(1,922)
(1,964)
8,286
77,336
69,236
4,458
159,316
Capital assets, net
Component unit, capital assets, net
$ 168,169
$
760
$
(27)
$
(506)
$
165,762
$
227
(6) Line of Credit
The University has an unused line of credit arrangement with one bank under which it may borrow up to $10,000,000.
This agreement is set at a variable rate of interest, which is 1% below the Wall Street prime rate. There are no restrictive
covenants associated with this line of credit. No activity on the line of credit occurred during the 2004 and 2003 fiscal
years.
29
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
(7) Accounts Payable and other Accrued Liabilities
Accounts Payable and other Accrued Liabilities
As of June 30
Primary institution
Accounts payable
Vendors for supplies and services
Employee benefits
Construction payables
Total
Other accrued liabilities
Payroll and payroll taxes
Accrued compensated absences
Deposits payable
Total
Component unit
Accounts payable
2004
2003
$ 2,038
591
5,974
$ 8,603
$ 1,568
539
109
$ 2,216
$ 3,774
2,783
347
$ 6,904
$ 3,278
2,573
286
$ 6,137
$
$
196
273
(8) Noncurrent Liabilities
Noncurrent Liabilities
As of June 30, 2004
Beginning
Balance
Additions
Primary institution
General revenue bonds
Refunding bonds
Variable rate demand
General revenue bonds, 2003
General revenue bonds, 2004A
Total bonds payable
Bond premium
Capital leases
Total debt
$
Other liabilities
Insurance and post employment
benefits
Total
Due within one year
Total noncurrent liabilities
Component unit
Note payable
Gift annuities payable
Split-interest agreements
Total
$
1,170
10,000
4,900
16,070
1,730
17,800
$
32,850
32,850
1,016
33,866
4,096
779
21,896
$ 34,645
Ending
Balance
Reductions
$
170
170
14
459
643
$
792
$
$
25
751
780
1,556
$
$
899
899
$
1,435
$
11
157
168
$
$
30
$
180
100
280
395
675
4,083
$
$
1,000
10,000
4,900
32,850
48,750
1,002
1,271
51,023
Current
Portion
2,398
55,106
(3,073)
52,033
$
3,073
14
1,650
623
2,287
(177)
2,110
$
14
163
177
$
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Noncurrent Liabilities
As of June 30, 2003
Beginning
Balance
Additions
Primary institution
General revenue bonds
Refunding bonds
Variable rate demand
General revenue bonds
Total bonds payable
Capital leases
Total debt
$
Other liabilities
Insurance and post employment
benefits
Total
Due within one year
Total noncurrent liabilities
Component unit
Note payable
Gift annuities payable
Split-interest agreements
Total
1,335
10,000
11,335
343
11,678
$
2,531
$
4,900
4,900
1,504
6,404
Reductions
$
2,209
14,209
$
8,613
Ending
Balance
$
165
165
117
282
$
$
22
642
873
1,537
$
$
3
109
112
$
$
$
170
170
433
603
644
4,096
926
21,896
(2,581)
19,315
$
2,581
25
751
780
1,556
(104)
1,452
$
12
92
104
$
$
1,170
10,000
4,900
16,070
1,730
17,800
Current
Portion
-
$
93
93
$
1,978
$
Bonds
Outstanding Balances on University Issued Bonds
As of June 30
Total
Issued
General revenue refunding bonds, series
1993, (2.8% - 5.1%) final maturity 2008
General revenue variable rate demand bonds
series 1998, final maturity 2019
General revenue bonds, series 2003 (2% 5%) final maturity 2034
General revenue bond series 2004(A), (2.00% 4.49%) final maturity 2034
Total bonds payable
Plus: unamortized net premium
Bonds payable, net
$
Outstanding
2004
2003
3,583
$ 1,000
$ 1,170
21,000
10,000
10,000
4,900
4,900
4,900
32,850
62,333
1,016
$ 61,317
32,850
48,750
1,002
$ 47,748
16,070
$ 16,070
The principal and interest on notes and bonds are payable only from certain general revenues. The obligations are
generally callable. Premiums on bonds payable are recorded in total and amortized according to the bonds outstanding
method, which approximates the effective interest method.
In fiscal year 1998, the University issued $21 million of General Revenue Variable Rate Demand Bonds (GRVDB). Initially priced at 3.45%, the bonds are re-priced weekly. The funds have been used to complete four building projects on
campus: the Dow Environmental Sciences and Engineering building, the Rozsa Center for the Performing Arts, the Center
for Ecosystem Science, and the Harold Meese Career Center. Additionally, proceeds from the bonds were used to pay off
the balances on the University Images loan and the Harold Meese Career Center mortgage. Annual debt service require-
31
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
ments begin in 2015. The GRVDB issue is collateralized with a
Principal and Interest Amounts Due
For Fiscal Years Ending June 30
$10 million letter of credit through the Bank of America. The letter would only be used if the University is unable to make pay- Fiscal Year
Principal
Interest
Total
ments on the bonds.
2005
$
280
$ 2,022
$ 2,302
290
2,011
2,301
In fiscal year 2003, the University issued $4.9 million of 2006
2007
955
1,993
2,948
General Revenue Bonds, Series 2003 (GRB). These bonds bear
980
1,967
2,947
interest at 2% to 5% and mature at various dates from Octo- 2008
2009
1,000
1,939
2,939
ber 2004 through October 2033. The funds will be used to com3,505
9,932
13,437
plete three building projects on campus: residence hall life safety Total 5 Years
4,250
9,304
13,554
improvements, university electrical distribution system replace- 2010 to 2014
2015
to
2019
15,035
8,092
23,127
ment, and Wadsworth Hall renovation planning. The GRB issue
6,150
5,565
11,715
is collateralized with a $5 million letter of credit through XL Capi- 2020 to 2024
2025 to 2029
7,825
3,844
11,669
tal Assurance Inc. The letter would only be used if the University
2030 to 2034
9,985
1,641
11,626
is unable to make payments on the bonds.
2035 to 2039
2,000
50
2,050
On October 7, 2003 the University’s Board of Control apTotal bonds
proved the renovation of Wadsworth Hall. In conjunction with this
payable
$ 48,750
$ 38,428
$ 87,178
approval, the University issued $32.9 million of General Revenue
Bonds to facilitate this project. These bonds bear interest at 2%
to 4.49% and mature at various dates from October 2006 through October 2034.
In fiscal year 1994, the University defeased in substance the 1989 issue of General Revenue Bonds with an issue of
General Revenue Refunding Bonds valued at $3,585. These bonds bear interest at 2.80% to 5.10% and mature at various dates through 2008. As of June 30, 2004 and 2003, the defeased bonds outstanding were $930 and $1,075, respectively.
Capital and Operating Lease Obligations
The University has entered into capital lease agreements for the purchase of office equipment and telecommunications switching equipment. The capitalized cost of the equipment was $747 and the net book value of the equipment was
$310 at June 30, 2004.
Commitments and related rental expenses under operating leases with initial or remaining non-cancelable lease terms
in excess of one year as of and for the years ended June 30, 2004 and 2003 are insignificant.
Split-Interest Agreements of the Fund
Some donors enter into trust or other arrangements under which the Fund receives benefits that are shared with other
beneficiaries. These types of arrangements, known as split-interest agreements, include pooled (life) income funds, charitable remainder trusts, and charitable gift annuities. Provisions for the various donor trust agreements are as follows:
Scheduled Maturities of Capital Leases
For Fiscal Years Ending June 30
Fiscal Year
2005
2006
2007
2008
Total lease
payments
Principal
$
395
348
338
173
Interest
$
40
24
12
2
Total
$
435
372
350
175
$ 1,254
$
$ 1,332
32
78
Michigan Technological University
•
•
•
•
Annual Financial Report
Notes to the Financial Statements
Century II Pooled Income Fund: All income of the pooled fund is distributed to its participants on a pro-rata basis.
Charitable Remainder Unitrusts: Donors receive income, generally payable quarterly, at a predetermined percentage rate of their unitrust’s annual value at December 31.
Charitable Remainder Annuity Trusts: Donors receive a fixed percentage rate of income based on the initial
value of the annuity trust, generally payable quarterly.
Charitable Gift Annuities of the Fund: Donors receive a fixed percentage rate of income based on the initial
value of the gift annuity, payable quarterly. Assets received under a gift annuity contract are held as general assets
of the Fund, and the annuity liability is a general obligation of the Fund. All assets received under a gift annuity contract are pooled with other gift annuity contract funds and invested in equity and fixed income mutual funds and in
cash equivalents. Those investments are held in an account segregated from the Fund’s other investments.
Irrevocable split-interest agreements in which the Fund does not control the trust assets are recognized in the Fund’s
financial statements when it is notified of the trust’s existence. The present value of the estimated future distributions to be
received by the Fund is recorded as contribution revenue and a contribution receivable from a remainder trust. Amounts
reflected as receivable from these types of agreements were $2,894 and $2,884 at June 30, 2004 and 2003, respectively.
Irrevocable split-interest agreements in which the Fund does control the trust assets are recognized in the Fund’s financial statements when the trust is executed. The fair value of the trust assets and the present value of the expected
future payments to be made to other beneficiaries are recorded as assets and liabilities, respectively, and the difference is
recorded as contribution revenue. Amounts included in the accompanying statements of net assets at June 30, 2004 and
2003, from these types of agreements are as follows:
Assets—cash and marketable securities
Liabilities to other beneficiaries
2004
$ 4,505
2,301
2003
$ 3,822
1,531
Included with contribution revenue on the statements of revenue, expenses, and changes in net assets for the years
ended June 30, 2004 and 2003, were $506 and $82, respectively, in contributions from split-interest agreements and
$238 and ($141) from changes in the value of split-interest agreements.
The calculations of present value follow the guidelines as set forth in Section 642(c) of the Internal Revenue Code.
(9) Post-Employment Benefits
The University offers participation in one of two retirement plans for all qualified employees: the Michigan Public
School Employees' Retirement System (MPSERS) and the Teachers Insurance and Annuities Association College Retirement Equities Fund (TIAA-CREF).
MPSERS is a non-contributory defined benefit cost sharing multiple employer retirement plan through the Michigan
Public School Employees' Retirement System Plan (the "Plan"). Due to State of Michigan House Bill HB4047, University
employees hired after December 31, 1995 can no longer participate in this retirement plan, unless they were previously
enrolled in the plan at the University or one of the other six universities that are part of MPSERS.
During fiscal year 1997, the University implemented the funding policy changes finalized by MPSERS. An actuarial
valuation was prepared for MPSERS that separated the plan into two components—university members and all other
members. The valuation determined the university members’ portion of plan assets and unfunded actuarial accrued liability (UAAL). The new funding policy calls for continued contributions for active members at 6.47% of member payroll. To
fund the costs of the UAAL over the next forty years, the University will make additional contributions at a rate that will be
determined annually. The fiscal year 2004 and 2003 rate was 0.88%. The University is also required to pay a $205,171
monthly supplemental contribution for retiree health care benefits. Future contribution requirements, which depend on the
level of MPSERS covered payroll, cannot be determined. Additional pension data for MPSERS is contained in MPSERS’
comprehensive Annual Financial Report, which may be obtained by writing to the Office of Retirement Systems, 7150
Harris Dr., P.O. Box 30026, Lansing, MI 48901.
33
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
Benefit provisions and contribution requirements of MPSERS are established and may be amended by state statute.
The TIAA-CREF Plan is a defined contribution retirement plan. All employees, who work at least 3/4 time are eligible
to participate in the TIAA-CREF plan. For employees hired after December 31, 1995 employer contributions begin two
years after date of hire or age 35 whichever is sooner. Employee benefits vest immediately. Plan participants maintain
individual annuity contracts with TIAA-CREF, the plan administrator. The University contributes a specified percentage of
employee wages and has no liability beyond its own contribution.
Contributions and covered payroll under the plans (excluding participants' additional contributions) for the three years
ended June 30 are summarized as follows:
University contributions to MPSERS
MPSERS retiree health insurance
MPSERS unfunded pension costs
Payroll covered under MPSERS
University contributions to TIAA-CREF
Payroll covered under TIAA-CREF
$
2004
882
2,319
50
11,930
5,632
44,690
$
2003
885
2,372
31
12,479
5,706
45,122
$
2002
975
2,148
27
12,968
5,560
43,777
The University subsidizes a medical benefits plan for TIAA-CREF eligible University employees who have or will have
retired from October 19, 1992 through June 30, 2006. The University recognizes the cost of providing this benefit as an
expense on an annual basis.
During 1997, the Board approved a change in the TIAA-CREF eligible University employees’ benefits. The University
matches the participating employee’s 2% of salary contribution to the employee’s TIAA-CREF retirement annuity.
From 2005 to 2006, the retired employee’s contribution for health care benefits will increase from 70% to 100%. The
University’s subsidy will likewise decrease for fiscal year 2007 and beyond because retired employees will be responsible
for 100% of their health care costs. Retirees can pay for their coverage with their annuity.
Retirement Supplemental Voluntary Plan
During 2002, the University adopted the Retirement Supplemental Voluntary Plan (RSVP) to facilitate the voluntary retirement of eligible employees. The RSVP is not an early retirement program. The decision to retire is left to the discretion
of the individual employee, and remains entirely voluntary. However, if an employee decides to retire, the RSVP provides
several retirement options: a monetary option; a phased retirement option; a combination of the monetary and phased
retirement options; and a program for employment after retirement. The University recognizes the related costs in the year
the employee decides to retire. The University recognized $159 and $172 for the years ended June 30, 2004 and 2003.
Employee Severance Plan
During 2003, the University adopted the Employee Severance Plan (ESP) to facilitate the voluntary termination of eligible employees. The decision to terminate is left to the discretion of the individual employee, and remains entirely voluntary. Under this plan the employee will receive a fixed payment over the next 10 years, beginning in fiscal year 2004. The
net present value of the ESP liability was $1,731 and $1,906 for the years ended June 30, 2004 and 2003.
34
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
(10) Self Insurance
The University is essentially self-insured for medical benefits claims, unemployment compensation and workers’ compensation. Stop loss coverage has been purchased by the University for the employees’ health benefits. Liabilities for estimates of losses retained by the University under self-insurance programs have been determined and accrued on the accompanying Statement of net Assets.
Changes in the estimated liability for self-insured plans during the past two fiscal years are as follows:
Claims liability - July 1, 2002
Claims incurred, including
changes in estimates
Less: claims paid
Claims liability - June 30,
2003
Claims incurred, including
changes in estimates
Less: claims paid
Claims liability - June 30,
2004
Medical
Benefits
$
1,417
$
Unemployment
Comp
$
20
Worker's
Comp
$
511
Total
$ 1,948
9,570
(9,723)
108
(104)
88
(227)
9,766
(10,054)
1,264
24
372
1,660
9,513
(9,658)
107
(106)
81
(111)
9,701
(9,875)
1,119
$
25
$
342
$ 1,486
Liability and Property
The University participates with 11 other Michigan universities in the Michigan Universities Self-Insurance Corporation
(MUSIC). MUSIC’s purpose is to provide indemnity to members against auto, comprehensive general liability, errors and
omissions, and property losses commonly covered by insurance. MUSIC also provides risk management and loss control
services and programs.
Loss coverages are structured on a three layer basis with each member retaining a portion of its losses, MUSIC covering the second layer of losses and commercial carriers covering the third layer. Comprehensive general liability coverage is provided on a per occurrence basis; errors and omissions coverage is provided on a claims made basis.
In the event of excess assets, MUSIC will either return the surplus, credit the surplus toward future payments or provide for increased coverages. Recommended reserves for both MUSIC and each member are actuarially determined on
an annual basis. MUSIC will be self-sustaining through member payments and will purchase commercial coverage for
claims in excess of established annual limits for each line of coverage. Members may fund their respective reserves as
they deem appropriate.
Premiums are assessed annually for (1) insurance risks retained by MUSIC, (2) costs related to excess coverage and
(3) general and administrative expenses.
35
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
(11) Commitments and Contingencies
The University has internally funded reserves for certain employee benefits. Accrued liabilities are generally based on
actuarial valuations and represent the present value of unpaid expected claims, including estimates of claims incurred but
not reported.
In the normal course of business, the University is named party to various legal actions. Historically, the University
has not experienced significant losses from such actions. After taking into consideration legal counsel’s evaluation of
pending actions, management believes the resolution of these matters will not have a material adverse effect on the University’s financial position or results of operations.
Certain employees of the University are covered under the MPSERS retirement plan. As of June 30, 2004 and June
30, 2003 the unfunded portion of the related pension benefits is significant. The University’s portion of this obligation is not
determinable at June 30, 2004 and June 30, 2003. While the University has continued to pay the required monthly payments as determined by MPSERS, it is management’s position that the University is not responsible for any shortfall in the
fund as a result of changes in benefits made by MPSERS.
The University has begun construction on the $35 million Integrated Learning Center building. The State Building Authority (SBA) will provide up to $25 million. The University has already provided $10 million. The University has executed
a deed to the property to the SBA and a lease of the building from the State and the SBA. During the lease term, the SBA
will hold title to the facilities, the State will make all annual lease payments to the SBA from general fund appropriations;
and the University will pay all operating and maintenance costs of the facilities. At the expiration of the lease, the SBA has
agreed to sell the facility to the University for the sum of one dollar.
The University receives grants and other forms of reimbursement from various federal and state agencies. These activities are subject to audit by agents of the funding authority, the purpose of which is to ensure compliance with conditions
precedent to providing such funds. University administration believes there is no liability for reimbursement which may
arise as the result of audits.
(12) Functional Classification Operating Expenses
The University’s operating expenses by functional classification were as follows:
2004
Instruction
Research
Public service
Academic support
Student services
Institutional support
Student financial support
Operations and
maintenance of plant
Sales and services of
departmental activities
Student residents
Depreciation
Compensation
and Benefits
$
40,050
16,813
2,544
6,373
4,014
11,905
1,097
Supplies
and
Services
$ 7,489
9,015
1,915
4,217
1,813
4,615
107
4,621
(584)
$
5,488
4,584
-
6,330
4,081
-
97,489
$ 38,998
36
Student
Financial
Support
$
2,618
1,873
51
21
67
673
Depreciation
$
-
3
$
5,306
$
Total
$ 50,157
27,701
4,510
10,611
5,894
16,520
1,877
-
4,037
10,519
11,821
8,665
10,519
10,519
$ 152,312
Michigan Technological University
Annual Financial Report
Notes to the Financial Statements
2003
Instruction
Research
Public service
Academic support
Student services
Institutional support
Student financial support
Operations and
maintenance of plant
Sales and services of
departmental activities
Student residents
Depreciation
Compensation
and Benefits
$
44,933
13,108
2,906
6,734
3,874
12,703
698
Supplies
and
Services
$ 5,879
6,415
2,127
3,614
1,927
3,190
161
4,703
3,330
-
5,019
4,691
-
5,997
3,751
-
-
99,369
$ 36,391
$
37
Student
Financial
Support
$
2,174
2,010
22
29
169
41
540
Depreciation
$
-
1
$
4,986
$
Total
$ 52,986
21,533
5,055
10,377
5,970
15,934
1,399
-
8,033
10,812
11,017
8,442
10,812
10,812
$ 151,558
1
2
3
4
5
6
7
1. Clean Snowmobile Challenge
The Clean Snowmobile Challenge (CSC) is an annual competition sponsored by the Society of Automotive Engineers (SAE). At MTU, the CSC team is also part of the MTU Enterprise program. The MTU Clean Snowmobile
team has a mission to "Design a snowmobile with noise and emissions levels equivalent to current automobile
standards, while maintaining competitiveness in the snowmobile market place.”
2. SAE Airplane Team
The SAE Aero Design Team is an industry-sponsored, university-affiliated organization that each year designs,
builds and tests the performance of a radio-controlled airplane. The MTU team participates with teams from institutions in the US and Canada in an annual flight competition, sponsored in part by the SAE.
3. Denso Future Truck
Fifteen Colleges and Universities receive a stock SUV from a sponsor for every set of competitions. Ford sponsored Explorers for the 2003-2004 competitions. The goals are to reduce emissions, increase fuel economy and
maintain or surpass stock performance and consumer acceptability
4. SAE Formula Car
Formula SAE is an annual international competition in which students design, build and race small formula-style
race cars. It is designed to test students' knowledge, creativity and imagination while giving them real-world
hands-on experience with engineering and automotive technologies.
5. Baja Car
Michigan Tech's Mini Baja Enterprise, Blizzard Baja, competes in the annual Winter Baja off-road race hosted by
MTU. This team designs, builds, and competes with their vehicle against over 200 schools at other national
events held annually around the country.
6. Human Powered Vehicle
Senior engineering students will design build and test a new breed of human powered vehicle (HPV) to win the
American Society of Mechanical Engineers’ national HPV contest. The team of approximately 20 students will
work closely with a wide variety of industrial sponsors and partners to achieve an innovative and fast HPV.
7. Agassiz Research Vessel
Michigan Tech's location on the Keweenaw Waterway affords students, faculty, and staff access to the embayments, islands and open waters of Lake Superior. The university operates the research vessel Agassiz in support
of its mission in aquatic sciences.
Michigan Technological University
1400 Townsend Drive
Houghton, MI 49931-1295
www.mtu.edu