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ANNUAL
Financial Report
For the Years Ended June 30, 2012 and 2011
A MEMBER OF THE MINNESOTA STATE COLLEGES AND UNIVERSITIES SYSTEM
SOUTHWEST MINNESOTA STATE UNIVERSITY
A MEMBER OF THE
MINNESOTA STATE COLLEGES AND UNIVERSITIES SYSTEM
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2012 and 2011
Prepared by:
Southwest Minnesota State University
1501 State Street
Marshall, Minnesota 56258
Upon request, this publication is available in alternate formats by calling one of the following:
General number (651) 201-1800
Toll free: 1-888-667-2848
For TTY communication, contact Minnesota Relay Service at 7-1-1 or 1-800-627-3529.
SOUTHWEST MINNESOTA STATE UNIVERSITY
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2012 and 2011
TABLE OF CONTENTS
INTRODUCTION
Page
Transmittal Letter .................................................................................................................................... 4
Organizational Chart ................................................................................................................................ 7
FINANCIAL SECTION
Independent Auditors’ Report ................................................................................................................ 10
Management’s Discussion and Analysis ............................................................................................... 12
Basic Financial Statements
Statements of Net Assets ................................................................................................................ 18
Southwest Minnesota State University Foundation – Statements of Financial Position ................. 19
Statements of Revenues, Expenses, and Changes in Net Assets ..................................................... 20
Southwest Minnesota State University Foundation – Statements of Activities .............................. 21
Statements of Cash Flows ............................................................................................................... 22
Notes to the Financial Statements ................................................................................................... 24
REQUIRED SUPPLEMENTARY INFORMATION SECTION
Schedule of Funding Progress for Net Other Postemployment Benefits ............................................... 49
SUPPLEMENTARY SECTION
Report on Internal Control Over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards .................................................................... 52
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2
INTRODUCTION
3
4
5
6
Organizational Chart
MnSCU Board of
Trustees
Chancellor
Steven J. Rosenstone
Interim President
Ron Wood
Athletic
Director
Chris Hmielewski
SMSU
Foundation
Affirmative
Action Officer
Deb Almer
Associate VP for
Student Affairs and
Dean of Students
Scott Crowell
Provost/Vice President
for Academic &
Student Affairs
Beth Weatherby
7
VP for Finance
Administration
Debra Kerkaert
VP for
Advancement
Vacant
The financial activity of the Southwest Minnesota State University is included in this report. The
University is one of 31 colleges and universities included in the Minnesota State Colleges and Universities
Annual Financial Report which is issued separately.
The University’s portion of the Revenue Fund is also included in this report. The Revenue Fund
activity is included both in the Minnesota State Colleges and Universities Annual Financial Report and
in a separately issued Revenue Fund Annual Financial Report.
All financial activity of Minnesota State Colleges and Universities is included in the state of Minnesota
Comprehensive Annual Financial Report.
8
FINANCIAL SECTION
9
10
11
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provides an overview of the financial position and activities of Southwest
Minnesota State University, a member of the Minnesota State Colleges and Universities system at June 30, 2012 and
2011, and for the years then ended. This discussion has been prepared by management and should be read in
conjunction with the financial statements and accompanying footnotes, which follow this section.
Southwest Minnesota State University (SMSU) is one of 31 colleges and universities comprising Minnesota State
Colleges and Universities. The Minnesota State Colleges and Universities system is governed by a 15 member
Board of Trustees appointed by the Governor. Twelve trustees serve six-year terms, eight representing each of
Minnesota’s congressional districts and four serving at-large. Three student trustees, one from a state university,
one from a community college and one from a technical college, serve two-year terms. The Board of Trustees
selects the Chancellor and has broad policy responsibility for system planning, academic programs, fiscal
management, personnel, admissions requirements, tuition and fees.
The University is a comprehensive public institution of higher learning with a fall 2012 enrollment of 6,824 students
including 423 graduate students. SMSU’s full year 2011/2012 equivalent enrollment is 3,681 students. The
University has approximately 430 full and part-time employees.
Southwest Minnesota State University offers a portfolio of broad and diverse educational opportunities, ranging
from programs guided by our liberal arts tradition, complimented with a purposeful selection of professional and
graduate programs that align with the needs, resources and expertise of the region. The University offers 50
undergraduate degree programs, 16 pre-professional programs, 4 Master’s degree programs, and numerous licensure
and specialist degree programs. The University is accredited by The Higher Learning Commission of the North
Central Association of Colleges and Schools; the National Association of Schools of Music; the Minnesota Board of
Teaching; the American Chemical Society; the Council on Social Work Education; and National Association of
Concurrent Enrollment Programs. SMSU received a 10 year accreditation from the HLC in August 2004.
The 215 acre campus, built primarily in the late 1960’s and early 1970’s, offers unique architecture. It consists of 26
accessible buildings with the core academic buildings being interconnected. A new student and conference center
complex was completed in 2005 after a fire destroyed the Food Service East building in 2002. The library had a
major renovation completed in 2005 and the SMSU Foundation completed construction of modern residential
apartments in 2007. In 2007, the renovation of several labs on campus and the construction of new softball and
football practice fields were completed. Construction is complete on a $16 million Regional Event Center and the
facility was opened in August 2008. The demolition of an old residence hall in 2007 paved the way for construction
of a new residence hall designed to meet current student expectations. This project was complete in time for fall
2009 student occupancy. Culinology and hospitality management labs and science labs underwent a $9 million
renovation that was completed in summer 2011. Infrastructure upgrades involving duct banks and elevators were
completed this past year as well as improvements to lighting and windows in Founders Hall. These projects totaled
approximately $1.2 million.
FINANCIAL HIGHLIGHTS
Southwest Minnesota State University’s 2012 state appropriation decreased by $1.5 million from the amount
received in 2011 and appropriations had decreased by $2.2 million over the prior two years from 2009 to 2011.
Undergraduate tuition rate increases of 4-5 percent each fiscal year have been necessary to supplement the lagging
state appropriation but are unable to make up for the decreases in state appropriations therefore creating the need to
also reduce expenses.. During fiscal years 2011 and 2010, federal aid was received through the American Recovery
and Reinvestment Act of 2009 to mitigate 2 percent of the 5 percent tuition rate increase. However, in 2012,
without the benefit of the American Recovery and Reinvestment Act, federal aid decreased by 26 percent and
students now had to pay the 2 percent tuition increase previously covered by the federal funding.
12
Student FYE
State appropriation
State appropriation per student
FY12
3,681
$ 14,120,324
$
3,836
Change
(2.2)%
(9.83)%
(7.81)%
FY11
3,764
$ 15,660,289
$
4,161
Change
(1.5)%
(2.45)%
(0.9)%
FY10
3,822
$ 16,053,559
$
4,200
Assets totaled $99.8 million in fiscal year 2012 compared to $100.6 million in fiscal year 2011 and $101.1 million in
fiscal year 2010. Net assets, which represent the residual interest in the University’s assets after liabilities are
deducted, totaled $67.0 million in fiscal year 2012 compared to $67.2 million in fiscal year 2011 and $65.8 million
in fiscal year 2010. As of June 30, 2012, net assets is comprised of capital assets, net of related debt of $58.2
million, restricted assets of $1.4 million, and unrestricted assets of $7.4 million.
Operating revenues decreased $0.7 million from fiscal year 2011 to fiscal year 2012 and increased $1.0 million from
fiscal year 2010 to fiscal year 2011. The increase in fiscal year 2011 is a result of tuition increases and an increase
in housing rates and occupancy. There were also increases in housing rates in fiscal year 2012, however student
FYE and occupancy rates decreased.
Total operating expenses, excluding depreciation, decreased $3.1 million from fiscal year 2011 to fiscal year 2012.
The reduced operating expenditures were the result of budget cuts and concerted efforts to reduce expenditures by a
close examination of class schedules and class sizes.
USING THE FINANCIAL STATEMENTS
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 applicable generally accepted accounting principles (GAAP) as established by the
Governmental Accounting Standards Board (GASB) through authoritative pronouncements.
STATEMENTS OF NET ASSETS
The statements of net assets present the financial position of the University at the end of the fiscal year and include
all assets and liabilities of the University as measured using the accrual basis of accounting. The difference between
total assets and total liabilities (net assets) is one indicator of the current financial condition of the University, while
the change in net assets is an indicator of whether the overall financial condition has improved or worsened during
the year. Capital assets are stated at historical cost less an allowance for depreciation, with current year depreciation
reflected as a period expense on the statements of revenues, expenses and changes in net assets. A summary of the
University’s assets, liabilities and net assets as of June 30, 2012, 2011 and 2010 respectively, is as follows:
(In Thousands)
2012
$ 18,181
3,583
Current assets
Restricted assets
Noncurrent assets:
Student loans receivable, net
Capital assets, net
Total assets
2011
$ 17,064
3,425
2010
$ 15,257
5,360
820
77,258
99,842
858
79,258
100,605
880
79,664
101,161
Current liabilities
Noncurrent liabilities
Total liabilities
6,602
26,247
32,849
6,526
26,831
33,357
8,704
26,634
35,338
$ 66,993
$ 67,248
$ 65,823
Net assets
13
Current assets consist primarily of cash, cash equivalents and investments totaling $16.3, $15.4 and $13.7 million at
June 30, 2012, 2011 and 2010, respectively. This represents approximately 4.8 months of operating expenses
(excluding depreciation) compared to 4.2 months at June 30, 2011 and 3.8 months at June 30, 2010.
Current liabilities consist primarily of accounts payable, salaries and related benefits payable. Included are
restricted accounts payable for capital projects of $601 thousand at June 30, 2012, $279 thousand at June 30, 2011
and $2.3 million at June 30, 2010. Faculty contracts paid over twelve months on a nine month school year account
for the majority of the salaries payable.
Net assets represent the residual interest in the University’s assets after liabilities are deducted.
The University’s net assets as of June 30, 2012, 2011 and 2010, respectively, are summarized as follows:
(In Thousands)
Net Assets
2012
Invested in capital assets, net of related debt
$ 58,223
Restricted
1,409
Unrestricted
7,361
Total net assets
$ 66,993
2011
$ 59,038
1,447
6,763
$ 67,248
2010
$ 59,465
1,646
4,712
$ 65,823
Invested in capital assets, net of related debt represents the University’s capital assets net of accumulated
depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement
of those assets.
Restricted net assets include primarily funds for capital projects, donations received for specific purposes, bond
covenants, debt service, and faculty contracts.
Unrestricted net assets may be designated for specific purposes by action of management, the System Office or the
Board of Trustees.
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the University’s academic programs and residential life is the
development and renewal of its capital assets. The University continues to implement its long-range plan to
modernize its complement of older facilities, balanced with new construction. Capital assets as of June 30, 2012,
totaled $77.3 million, net of accumulated depreciation of $57.2 million.
Capital outlays totaled $1.8 million, $3.1 million and $10.4 million in fiscal years 2012, 2011 and 2010,
respectively. Capital appropriations of $1.2 million, $1.9 million and $7.0 million were received in fiscal years
2012, 2011 and 2010, respectively. During fiscal year 2012, improvements were completed to duct banks, elevators,
and Founders Hall lighting and windows. Projects in progress at year end include campus wide lighting
improvements, Founders Hall roof project and pool filter upgrade.
Bonds and notes are also issued for construction and renovations projects. Additional information on capital and
debt activities can be found in the notes 6 and 8 to the financial statements.
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
The statements of revenues, expenses and changes in net assets present the University’s results of operations for the
year. When reviewing the full statements, users should note that certain revenue streams relied upon for operations
are recorded as nonoperating revenues, including state appropriations, federal, state and private grants, and
investment income.
14
Summarized statements for the years ended June 30, 2012, 2011 and 2010, respectively, follow:
(In Thousands)
Operating revenue:
2012
Tuition, auxiliary and sales, net
$ 15,793
Restricted student payments, net
5,639
Other revenue
47
Total operating revenue
21,479
$
2011
16,219
5,808
126
22,153
$
2010
15,861
5,135
165
21,161
Nonoperating revenue:
State appropriations
Capital appropriations
Federal grants
State grants
Private and capital grants
Interest income
Other nonoperating revenues
Total nonoperating revenue
Total revenues
14,120
1,172
5,044
1,933
969
124
328
23,690
45,169
15,660
1,943
6,828
1,655
1,105
151
262
27,604
49,757
16,053
7,026
5,830
2,186
1,681
97
158
33,031
54,192
Operating expense:
Salaries and benefits
Supplies and services
Depreciation
Financial aid, net
Other
Total operating expenses
28,864
9,286
3,780
321
2,205
44,456
30,977
9,688
3,565
769
2,323
47,322
30,914
9,593
3,213
872
2,409
47,001
Nonoperating expense
Total expenses
968
45,424
1,010
48,332
957
47,958
Change in net assets
Net assets, beginning of year
Net assets, end of year
(255)
67,248
$ 66,993 $
1,425
65,823
67,248
6,234
59,589
65,823
$
Tuition and state appropriations are the primary sources of funding for the University’s academic programs. Tuition
rate increases, state appropriation funding and operating revenues are discussed above in the Financial Highlights
section. Federal grant revenue decreased in fiscal year 2012 because the American Recovery and Reinvestment Act
of 2009 which provided funding in fiscal years 2010 and 2011 ended. The Federal Government also made changes
to Federal Financial Aid programs creating a reduction of federal grant revenue with the ending of the additional
Pell program as well as the ACG and SMART grants. In fiscal years 2011 and 2010, federal grants revenue
increased from additional Pell grants and $1.1 million and $864 thousand from the American Recovery and
Reinvestment Act of 2009, respectively.
Revenue by Source (In Thousands)
Tuition, Fees and Sales, Net
Restricted Student Payments, Net
2012
State Appropriations
2011
Federal and State Grants
2010
Capital Appropriations
Other Revenue
-
5,000
10,000
15,000
The University is relying to a greater extent on student tuition as a revenue source.
15
20,000
FOUNDATION
The Southwest Minnesota State University Foundation is a component unit of Southwest Minnesota State University
and includes the University’s Alumni Association and Mustang Booster Club (athletics) in its assets. As such, the
separately audited financial statements for the Foundation are included, but shown separately from those of the
University in compliance with the requirements of GASB Statement No. 39. The Foundation contributed $614,697,
$670,649, and $729,901 to SMSU scholarships for the years ended June 30, 2012, 2011 and 2010, respectively.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking toward the future, Southwest Minnesota State University is exploring new directions and revisiting others
to assist the University in its commitment to position itself for a strong financial future and continued academic
excellence. The economic conditions for Minnesota and the rest of the nation have continued and are projected to
continue to recover slowly. The University will endure challenges from decreasing state appropriations, competition
for students, maintaining a reasonable tuition rate structure, limited outside resources, and changing demographics
within our traditional recruitment territory.
During fiscal year 2012, Southwest Minnesota State University continued to work diligently to reduce expenditures
and look toward ways to conserve funds knowing that the next biennium would be a difficult two years of reduced
appropriations, limited tuition increases, and unknown salary compensation packages. A comprehensive review of
existing instructional programs was completed in 2011 and is being used to review programs on an annual basis.
This process will assist in identifying programs poised for growth and those that are not.
The diminished financial resources of the Revenue Fund, particularly Residential Life, continue to be of concern.
The debt service and depreciation added from the building of Sweetland Hall in 2008-2009 along with occupancy
issues have burdened the financial resources of the Revenue Fund. With the enrollment management changes taking
place this next year and the concentrated effort on recruitment, a larger freshman class will help to improve the
overall situation of Residential Life. However, the lower-than-expected freshmen class of fiscal year 2012,
combined with long-term debt service commitments, translates into long-range challenges for Revenue Fund. The
administration is committed to do all that is necessary to make this a prospering operation but realizes that it will
take time and a concerted effort.
The University is concentrating efforts on new programs, including a RN to BSN program which will begin Fall
2013, positioning existing programs for growth, and strategically focusing admissions efforts on identified groups of
potential students. We are committed to building upon current efforts to enhance the University’s academic
reputation, reduce operating costs, strengthen internal controls and effectively manage financial risks. The
University has renewed its focus on retention of students and has opened the Office of Student Success (OSS) that is
focused on advancing a shared sense of responsibility for student learning and a commitment to enhancing the
student experience and supporting the success of its students. By doing so, we feel Southwest Minnesota State
University will continue to maintain a sound financial position.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Southwest Minnesota State University’s finances
for all those with an interest in the University’s finances. Questions concerning any of the information provided in
this report or requests for additional financial information should be addressed to:
Chief Financial Officer
Southwest Minnesota State University
1501 State Street
Marshall, MN 56258
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SOUTHWEST MINNESOTA STATE UNIVERSITY
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2012 AND 2011
(IN THOUSANDS)
Assets
Current Assets
Cash and cash equivalents
Investments
Grants receivable
Accounts receivable, net
Prepaid expense
Student loans, net
Other assets
Total current assets
Current Restricted Assets
Cash and cash equivalents
Total current restricted assets
Noncurrent Restricted Assets
Other assets
Total noncurrent restricted assets
Total restricted assets
Noncurrent Assets
Student loans, net
Capital assets, net
Total noncurrent assets
2012
$
Total Assets
Liabilities
Current Liabilities
Salaries and benefits payable
Accounts payable
Unearned revenue
Payable from restricted assets
Interest payable
Funds held for others
Current portion of long-term debt
Other compensation benefits
Other liabilities
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Capital contributions payable
Total noncurrent liabilities
Total Liabilities
Net Assets
Invested in capital assets, net of related debt
Restricted expendable, other
Unrestricted
Total Net Assets
$
The notes are an integral part of the financial statements.
18
15,844
496
186
871
587
168
29
18,181
2011
$
14,926
494
95
701
639
189
20
17,064
3,580
3,580
3,422
3,422
3
3
3,583
3
3
3,425
820
77,258
78,078
858
79,258
80,116
99,842
100,605
2,227
817
523
601
171
97
1,583
548
35
6,602
3,200
565
407
279
180
56
1,270
534
35
6,526
21,084
4,178
985
26,247
32,849
22,038
3,797
996
26,831
33,357
58,223
1,409
7,361
66,993
59,038
1,447
6,763
67,248
$
SOUTHWEST MINNESOTA STATE UNIVERSITY FOUNDATION
STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Assets
Current Assets
Cash and cash equivalents
Investments
Pledges and contributions receivable, net
Other receivables
Accrued interest and investment income
Prepaid assets
Inventory for resale
Total current assets
Noncurrent Assets
Long-term pledges receivable
Artwork collection
Restricted investments
Property and equipment, net
Other assets
Total noncurrent assets
Total Assets
$
$
Liabilities and Net Assets
Current Liabilities
Accounts payable
Interest payable
Unearned revenue
Current portion of long-term debt
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Total Liabilities
Net Assets
Unrestricted
Temporarily restricted
Permanently restricted
Total Net Assets
$
Total Liabilities and Net Assets
$
The notes are an integral part of the financial statements
19
69
5,329
543
21
19
4
25
6,010
221
290
2,881
6,713
158
10,263
16,273
145
5
392
783
1,325
2011
$
$
$
17
4,443
629
11
17
7
26
5,150
480
290
2,726
7,008
183
10,687
15,837
64
3
603
515
1,185
5,190
6,515
6,052
7,237
605
5,998
3,155
9,758
690
4,910
3,000
8,600
16,273
$
15,837
SOUTHWEST MINNESOTA STATE UNIVERSITY
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Operating Revenues
Tuition, net
Fees, net
Sales, net
Restricted student payments, net
Other income
Total operating revenues
$
Operating Expenses
Salaries and benefits
Purchased services
Supplies
Repairs and maintenance
Depreciation
Financial aid, net
Other expense
Total operating expenses
Operating loss
12,740
1,650
1,403
5,639
47
21,479
2011
$
13,167
1,560
1,492
5,808
126
22,153
28,864
6,230
2,332
724
3,780
321
2,205
44,456
(22,977)
30,977
6,652
2,169
867
3,565
769
2,323
47,322
(25,169)
Nonoperating Revenues (Expenses)
Appropriations
Federal grants
State grants
Private grants
Interest income
Interest expense
Grants to other organizations
Total nonoperating revenues (expenses)
14,120
5,044
1,933
896
124
(968)
21,149
15,660
6,828
1,655
1,053
151
(1,005)
(5)
24,337
Loss Before Other Revenues, Expenses, Gains, or Losses
(1,828)
(832)
Capital appropriations
Capital grants
Donated assets and supplies
Gain on disposal of capital assets
Change in net assets
1,172
73
326
2
(255)
Total Net Assets, Beginning of Year
Total Net Assets, End of Year
$
The notes are an integral part of the financial statements.
20
67,248
66,993
1,943
52
190
72
1,425
$
65,823
67,248
SOUTHWEST MINNESOTA STATE UNIVERSITY FOUNDATION
STATEMENTS OF ACTIVITIES
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
Temporarily
Restricted
Unrestricted
Support and Revenue
Contributions
In-kind contributions
Investment income
Realized gains
Unrealized gains and losses
Program income
Fundraising income
Net rental income
Other income or loss
Net assets released from restrictions
Total support and revenue
$
Expenses
Program services
Program services
Scholarships
Residence hall
Regional event center and plaza
University activities
Total program services
Supporting services
Management and general
Fundraising
Total supporting services
Total expenses
329
321
22
6
(16)
163
1
688
1,306
2,820
$
2,172
33
120
22
(217)
115
64
99
(14)
(1,306)
1,088
Permanently
Restricted
$
45
110
155
2012
Total
$
2,546
354
142
28
(123)
278
65
787
(14)
4,063
2011
Total
$
2,454
370
115
217
451
184
53
798
3
4,645
448
625
611
148
467
2,299
-
-
448
625
611
148
467
2,299
306
671
605
153
373
2,108
308
406
714
3,013
-
-
308
406
714
3,013
306
470
776
2,884
Other Income/Expense
Gain on disposal of property and equipment
108
-
-
108
-
Change in Net Assets
(85)
1,088
155
1,158
1,761
Net Assets, Beginning of Year
Net Assets, End of Year
$
690
605
$
The notes are an integral part of the financial statements.
21
4,910
5,998
$
3,000
3,155
$
8,600
9,758
$
6,839
8,600
SOUTHWEST MINNESOTA STATE UNIVERSITY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Cash Flows from Operating Activities
Cash received from customers
Insurance proceeds
Cash repayment of program loans
Cash paid to suppliers for goods or services
Cash payments for employees
Financial aid disbursements
Cash payments for program loans
Net cash used in operating activities
$
21,543
410
169
(11,391)
(29,428)
(332)
(130)
(19,159)
2011
$
21,922
171
(11,912)
(30,581)
(779)
(157)
(21,336)
Cash Flows from Noncapital Financing Activities
Appropriations
Federal grants
State grants
Private grants
Agency activity
Advance from the System
Grants to other organizations
Net cash flows provided by noncapital financing activities
14,120
4,993
1,933
896
41
21,983
15,660
6,892
1,655
1,053
5
250
(5)
25,510
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation
Capital private grants
Proceeds from sale of capital assets
Insurance proceeds
Proceeds from borrowing
Proceeds from bond premium
Interest paid
Repayment of note principal
Repayment of bond principal
Net cash flows used in capital and related financing activities
(1,404)
1,015
73
16
909
1
(959)
(226)
(1,242)
(1,817)
(5,171)
1,943
52
50
23
691
379
(1,029)
(232)
(1,239)
(4,533)
267
(273)
75
69
223
(289)
96
30
Cash Flows from Investing Activities
Proceeds from sales and maturities of investments
Purchase of investments
Investment earnings
Net cash flows provided by investing activities
Net Increase (Decrease) in Cash and Cash Equivalents
1,076
Cash and Cash Equivalents, Beginning of Year
(329)
18,348
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
22
19,424
18,677
$
18,348
SOUTHWEST MINNESOTA STATE UNIVERSITY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Operating Loss
$
Adjustment to Reconcile Operating Loss to
Net Cash Flows used in Operating Activities
Depreciation
Provision for loan defaults
Loan principal repayments
Loans issued
Forgiven loans
Donated supplies
Change in assets and liabilities
Accounts receivable
Accounts payable
Salaries and benefits payable
Other compensation benefits
Capital contributions payable
Unearned revenues
Other assets and liabilities
Net reconciling items to adjust operating loss
Net cash flow used in operating activities
$
Non-Cash Investing, Capital, and Financing Activites
Capital projects on account
Investment earnings on account
Amortization of bond premium/discount
$
23
(22,977)
2011
$
(25,169)
3,780
8
169
(130)
11
326
3,565
12
171
(157)
6
190
(36)
184
(973)
395
(11)
99
(4)
3,818
(19,159)
(156)
(79)
49
346
(10)
(75)
(29)
3,833
(21,336)
696
2
53
$
$
305
2
52
SOUTHWEST MINNESOTA STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
1.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation — The reporting policies of Southwest Minnesota State University, a member of the
Minnesota State Colleges and Universities system, conform to generally accepted accounting principles
(GAAP) in the United States, as prescribed by the Governmental Accounting Standards Board (GASB). The
statements of net assets; statements of revenues, expenses and changes in net assets; and statements of cash
flows include financial activities of Southwest Minnesota State University.
Financial Reporting Entity — Minnesota State Colleges and Universities is an agency of the state of Minnesota
and receives appropriations from the state legislature, substantially all of which are used to fund general
operations. Southwest Minnesota State University receives a portion of the Minnesota State Colleges and
Universities’ appropriation. The operations of most student organizations are included in the reporting entity
because the Board of Trustees has certain fiduciary responsibilities for these resources.
Discretely presented component units are legally separate organizations that raise and hold economic resources
for the direct benefit of a college or university in accordance with GASB Statement No. 39, Determining
Whether Certain Organizations are Component Units. The Southwest Minnesota State University Foundation
is considered significant to the University and is included as a discretely presented component unit and
separately identified in Note 18. Complete financial statements may be obtained from the Southwest Minnesota
State University Foundation, 1501 State Street, Marshall, MN 56258.
Basis of Accounting — The basis of accounting refers to when revenues and expenses are recognized and
reported in the financial statements. The accompanying financial statements have been prepared as a special
purpose government entity engaged in business type activities. Business type activities are those that are
financed in whole or in part by fees charged to external parties for goods or services. Accordingly, these
financial statements have been presented using the economic resources measurement focus and the accrual basis
of accounting. Revenues are recognized when earned and expenses are recognized as they are incurred.
Eliminations have been made to minimize the double counting of internal activities. Interfund receivables and
payables have been eliminated in the statements of net assets.
Minnesota State Colleges and Universities applies all applicable Financial Accounting Standards Board
statements issued prior to November 30, 1989, and GASB statements issued since that date.
Budgetary Accounting — University budgetary accounting, which is the basis for annual budgets and the
allocation of state appropriations, differs from GAAP. University budgetary accounting includes all receipts
and expenses up to the close of the books in August for the budget fiscal year. Revenues not yet received by the
close of the books are not included. The criterion for recognizing expenses is the actual disbursement, not when
the goods or services are received.
The state of Minnesota operates on a two year (biennial) budget cycle ending on June 30 of odd numbered
years. Minnesota State Colleges and Universities is governed by a 15 member board of trustees appointed by
the Governor with the advice and consent of the state senate. The Board approves the University biennial
budget request and allocation as part of the Minnesota State Colleges and Universities’ total budget.
Budgetary control is maintained at the University. The University President has the authority and responsibility
to administer the budget and can transfer money between programs within the University without Board
approval. The budget of the University can be legally amended by the authority of the Vice Chancellor/Chief
Financial Officer.
24
The state appropriations do not lapse at year end. Any unexpended appropriation from the first year of a
biennium is available for the second year. Any unexpended balance may also carry over into future bienniums.
Capital Appropriation Revenue — Minnesota State Colleges and Universities is responsible for paying one
third of the debt service for certain general obligation bonds sold for capital projects, as specified in the
authorizing legislation. The portion of general obligation bond debt service that is payable by the state of
Minnesota is recognized by Minnesota State Colleges and Universities as capital appropriation revenue when
the related expenses are incurred. Individual colleges and universities are allocated cash, capital appropriation
revenue, and debt based on capital project expenses.
Cash and Cash Equivalents — The cash balance represents cash in the state treasury and demand deposits in
local bank accounts. Cash equivalents are short term, highly liquid investments having original maturities
(remaining time to maturity at acquisition) of three months or less. Cash and cash equivalents can include
amounts in demand deposits, savings accounts, cash management pools, repurchase agreements, and money
market funds.
Restricted cash is cash held for capital projects and cash in the Revenue Fund for capital projects and debt
service. The Revenue Fund is used to account for the revenues, expenses and net assets of revenue producing
facilities which are supported through usage. It has the authority to sell revenue bonds for the construction and
maintenance of revenue producing facilities.
All balances related to the state appropriation, tuition revenues and most fees are in the state treasury. The
University also has an account in a local bank. The activities handled through the local bank include financial
aid, student payroll, auxiliary, and student activities.
Investments — The Minnesota State Board of Investment invests the University’s balances in the state treasury,
except for the Revenue Fund, as part of a state investment pool. This asset is reported as a cash equivalent.
Interest income earned on pooled investments is allocated to the colleges and universities.
Cash in the Revenue Fund is invested separately. The Fund contracts with the Minnesota State Board of
Investment and U.S. Bank, N.A. for investment management services. Investments are reported at fair value
and reported as a cash equivalent. Restricted investments are investments held in the Revenue Fund for capital
projects and debt service.
Receivables — Receivables are shown net of an allowance for uncollectible accounts.
Prepaid Expenses — Prepaid expenses consist primarily of deposits in the state of Minnesota Debt Service
Fund for future general obligation bond payments.
Capital Assets — Capital assets are recorded at cost or, for donated assets, at fair value at the date of
acquisition. Estimated historical cost has been used when actual cost is not available. Such assets are
depreciated or amortized on a straight line basis over the useful life of the assets.
Estimated useful lives are as follows:
Buildings
35-40 years
Building improvements 15-20 years
Equipment
3-20 years
Library collections
7 years
25
Equipment includes all items with an original cost of $10,000 and over for items purchased since July 1, 2008;
$5,000 and over for items purchased between July 1, 2003 and June 30, 2008; and $2,000 and over for items
purchased prior to July 1, 2003. Buildings, building improvements, and internally developed software include
all projects with a cost of $250,000 and over for projects started since July 1, 2008, and $100,000 and over for
projects started prior to July 1, 2008. All land and library collection purchases are capitalized regardless of
amount spent.
Funds Held for Others — Funds held for others are primarily assets held for student organizations.
Long Term Liabilities — The state of Minnesota appropriates for and sells general obligation bonds to support
construction and renovation of the Minnesota State Colleges and Universities’ facilities as approved through the
state’s capital budget process. The University is responsible for a portion of the debt service on the bonds sold
for some University projects. The University may also enter into capital lease agreements for certain capital
assets. Other long term liabilities include notes payable, compensated absences, early termination benefits,
other postemployment benefits and workers’ compensation claims.
Minnesota State Colleges and Universities may finance the construction, renovation and acquisition of facilities
for student residences and student unions through the sale of revenue bonds. These activities are accounted for
and reported in the Revenue Fund included herein. Details on the Revenue Fund bonds are available in the
separately audited and issued Revenue Fund annual financial report. Copies are available from the Financial
Reporting System Director, Minnesota State Colleges and Universities, 30 7th St. E., Suite 350, St. Paul,
Minnesota 55101-7804.
Operating Activities — Operating activities as reported in the statements of revenues, expenses and changes in
net assets are those that generally result from exchange transactions such as payments received for providing
services and payments made for services or goods received. Nearly all of the University’s expenses are from
exchange transactions. Certain significant revenue streams relied upon for operations are recorded as
nonoperating revenues, including state appropriations, federal, state and private grants, and investment income.
Unearned Revenue — Unearned revenue consists primarily of tuition received, but not yet earned, for summer
session. It also includes amounts received from grants which have not yet been earned under the terms of the
agreement.
Federal Grants — The University participates in several federal grant programs. The largest programs include
Pell, TRIO, Federal Work Study, and Supplemental Educational Opportunity Grant. Federal Grant revenue is
recognized as nonoperating revenue in accordance with GASB Statement No. 33, Accounting and Financial
Reporting for Nonexchange Transactions. Expenditures under government contracts are subject to review by
the granting authority. To the extent, if any, that such a review reduces expenditures allowable under these
contracts, the University will record such disallowance at the time the determination is made.
Capital Grants — The University receives federal, state, and private grants which are restricted for the
acquisition or construction of capital assets.
Tuition, Fees, and Sales, Net — Tuition, fees, and sales are reported net of scholarship allowances. See Note 12
for additional information.
Restricted Student Payments — Restricted student payments consist of room, board, sales, and fees revenue
restricted for payment of revenue bonds, and are net of scholarship allowances. See Note 12 for additional
information.
26
Use of Estimates — To prepare the basic financial statements in conformity with generally accepted accounting
principles, management must make estimates and assumptions. These estimates and assumptions may affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The most significant areas that require the use of management’s
estimates relate to allowances for uncollectible accounts, scholarship allowances, workers’ compensation
claims, and compensated absences.
Net Assets — The difference between assets and liabilities is net assets. Net assets are classified further for
accounting and reporting purposes into the following three net asset categories:
•
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 expendable: Net assets subject to externally imposed stipulations. Net asset restrictions for
the University are as follows:
Restricted for bond covenants — revenue bond restrictions.
Restricted for other — Includes restrictions for the following:
Capital projects — restricted for completion of capital projects.
Donations — restricted for specific purpose.
Debt service — legally restricted for bond debt repayments.
Faculty contract obligations — required faculty development and travel.
Loans — University capital contributed for Perkins loans.
Net Assets Restricted for Other
(In Thousands)
2012
Donations
$
47
Debt service
840
Faculty contract obligations
409
Loans
113
Total
$ 1,409
•
2011
48
887
397
115
$ 1,447
$
Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestricted net assets
may be designated for specific purposes by action of management, the System Office, or the Board of
Trustees.
New Accounting Pronouncements — In December 2010, the GASB issued Statement No. 60, Accounting and
Reporting for Service Concession Arrangements. The objective of this statement is to improve financial
reporting by establishing recognition, measurement, and disclosure requirements for Service Concession
Arrangements (SCA’s) for both transferors and governmental operators, and by requiring governments to
account for and report SCAs in the same manner, which improves the comparability of financial statements. In
addition, it is designed to alleviate the confusion that can arise when determining what guidance should be
applied in complex circumstances not previously specifically addressed in GASB literature. The requirements
of this statement are effective for Minnesota State Colleges and Universities for the year ended June 30, 2013.
The effect GASB Statement No. 60 will have on the fiscal year 2013 basic financial statements has not been
determined.
27
2.
CASH, CASH EQUIVALENTS, AND INVESTMENTS
Cash and Cash Equivalents — All balances related to the appropriation, tuition, and most fees are in the state
treasury. In addition, the University has a checking and a money market account in a local bank. The activities
handled through the local bank include financial aid, student payroll, auxiliary, and student activities.
Minnesota Statutes, Section 118A.03, requires that deposits be secured by depository insurance or a
combination of depository insurance and collateral securities held in the state’s name by an agent of the state.
This statute further requires that such insurance and collateral shall be at least 10 percent greater than the
amount on deposit.
The following table summarizes cash and cash equivalents:
Year Ended June 30
(In Thousands)
Carrying Amount
Cash, in bank
$
Cash, trustee account (US Bank)
Total local cash and cash equivalents
Total treasury cash accounts
Grand Total
$
2012
1,012
1,557
2,569
16,855
19,424
2011
806
1,557
2,363
15,985
$ 18,348
$
At June 30, 2012 and 2011, the University’s local bank balances were $1,240,713 and $901,707, respectively.
These balances were adjusted by items in transit to arrive at the University’s cash in bank balance.
The University’s balance in the treasury, except for the Revenue Fund, is invested by the Minnesota State Board
of Investment as part of the state investment pool. This asset is reported as a cash equivalent.
Investments — The Minnesota State Board of Investment manages the majority of the state’s investments. The
University also has investments in a brokerage account with Bremer Investment Management and Trust. All
investments are governed by Minnesota Statutes, Chapters 11A and 356A. Minnesota Statutes, Section 11A.24,
broadly restricts investments to obligations and stocks of the United States and Canadian governments, their
agencies and registered corporations, other international securities, short term obligations of specified high
quality, restricted participation as a limited partner in venture capital, real estate, or resource equity investments,
and the restricted participation in registered mutual funds. Generally, when applicable, the statutes limit
investments to those rated within the top four quality rating categories of a nationally recognized rating agency.
The statutes further prescribe the maximum percentage of fund assets that may be invested in various asset
classes and contain specific restrictions to ensure the quality of the investments.
Within statutory parameters, the Minnesota State Board of Investment has established investment guidelines
and benchmarks for all funds under its management. These investment guidelines and benchmarks are tailored
to the particular needs of each fund and specify investment objectives, risk tolerance, asset allocation,
investment management structure, and specific performance standards.
Custodial Credit Risk — Custodial credit risk for investments is the risk that in the event of a failure of the
counterparty, the University will not be able to recover the value of the investments that are in the possession of
an outside party. Board procedure 7.5.1 requires compliance with Minnesota Statutes, Section 118A.03 and
further excludes the use of FDIC insurance when meeting collateral requirements.
Credit Risk — Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. The University’s policy for reducing its exposure to credit risk is to comply with Minnesota
Statutes, Section 118A.04. This statute limits investments to the top quality rating categories of a nationally
recognized rating agency.
28
Concentration of Credit Risk — Concentration of credit risk is the risk of loss attributed to the magnitude of a
government’s investment in a single issuer. The University’s policy for reducing this risk of loss is to comply
with Board procedure 7.5.1 which recommends investments be diversified by type and issuer.
Interest Rate Risk — Interest rate risk is the risk that changes in interest rates will adversely affect the fair value
of an investment. The University complies with Board procedure 7.5.1 that recommends considering
fluctuating interest rates and cash flow needs when purchasing short term and long term debt investments.
As of June 30, the University had the following investments and maturities:
Investment Type
U.S. agency obligations
U.S. agency mortgage backed sec
U.S. treasuries
Municipal obligations
Total
Year Ended June 30
(in Thousands)
Weighted
Maturity
2012
Fair Value
(Years)
$
25
0.40
110
2.05
25
0.30
336
2.61
$
496
Portfolio weighted average maturity
3.
2011
Fair Value
$
182
121
8
183
$
494
2.25
Weighted
Maturity
(Years)
1.93
1.60
0.52
2.00
1.85
ACCOUNTS RECEIVABLE
At June, 2012 and 2011, the total accounts receivable balances for the University were $1,149,607 and
$954,742, respectively, less an allowance for uncollectible receivables of $278,505 and $253,806, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2012
2011
Tuition
$
335 $
333
Fees
136
127
Room and board
200
187
Sales and services
94
42
Third party obligations
39
55
Other
346
211
Total accounts receivable
1,150
955
Allowance for uncollectible accounts
(279)
(254)
871 $
701
Net accounts receivable
$
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Age
Less than 1 year
1 to 3 years
3 to 5 years
Over 5 years
29
Allowance
Percentage
15
45
70
95
4.
PREPAID EXPENSE
Prepaid expense consists primarily of funds which have been deposited in the state’s Debt Service Fund for
future general obligation bond payments in the amounts of $560,928 and $608,548 for fiscal years 2012 and
2011, respectively. Minnesota Statutes, Section 16A.641, requires all state agencies to have on hand on
December 1 of each year an amount sufficient to pay all general obligation bond principal and interest due, and
to become due, through July 1 of the second year. Also included in prepaid expense for fiscal years June 30,
2012 and 2011 was $26,326 and $29,969, respectively, stemming from prepaid software maintenance
agreements and prepaid software contractual support.
5.
LOANS RECEIVABLE
Loans receivable balances consist of loans under the Federal Perkins Loan program. The federal government
provides the funding for the loans with amounts collected used for new loan advances. The Minnesota State
Colleges and Universities loans collections unit is responsible for loan collections. As of June 30, 2012 and
2011, the total loans receivable for this program were $1,117,701 and $1,165,249, respectively, less an
allowance for uncollectible loans of $129,800 and $118,500, respectively.
6.
CAPITAL ASSETS
Summaries of changes in capital assets for fiscal years 2012 and 2011 follow:
Year Ended June 30, 2012
(In Thousands)
Beginning
Balance
Increases Decreases
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
$
203 $
564
767
— $
1,441
1,441
— $
—
—
Completed
Construction
— $
(1,211)
(1,211)
Ending
Balance
203
794
997
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
126,230
4,642
1,607
132,479
—
223
161
384
—
402
226
628
1,211
—
—
1,211
127,441
4,463
1,542
133,446
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
49,997
3,061
930
53,988
3,225
335
220
3,780
—
357
226
583
—
—
—
—
53,222
3,039
924
57,185
1,211
— $
76,261
77,258
Total capital assets depreciated, net
Total capital assets, net
$
78,491
79,258 $
30
(3,396)
(1,955) $
45
45 $
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases Decreases
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
203 $
6,625
6,828
— $
2,811
2,811
— $
—
—
— $
(8,872)
(8,872)
Ending
Balance
203
564
767
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
117,358
4,605
1,595
123,558
—
103
245
348
—
66
233
299
8,872
—
—
8,872
126,230
4,642
1,607
132,479
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
47,013
2,776
933
50,722
2,984
351
230
3,565
—
66
233
299
—
—
—
—
49,997
3,061
930
53,988
8,872
— $
78,491
79,258
Total capital assets depreciated, net
Total capital assets, net
7.
$
Completed
Construction
$
72,836
79,664 $
(3,217)
(406) $
—
— $
ACCOUNTS PAYABLE
Accounts payable represent amounts due for goods and services received prior to the end of the fiscal year.
Summary of Accounts Payable at June 30
(In Thousands)
2012
2011
Capital expenditures
$
104 $
26
Purchased services
310
240
Repairs and maintenance
86
34
Supplies
237
82
Other payables
80
183
Total
$
817 $
565
In addition, as of June 30, 2012 and 2011, the University had amounts payable from restricted assets of
$601,360 and $279,207, which were related to capital projects, financed by general obligation bonds and
revenue bonds.
8.
LONG TERM OBLIGATIONS
Summaries of amounts that are due within one year are reported in the current liability section of the statements
of net assets.
31
The changes in long term debt for fiscal years 2012 and 2011 follow:
Year Ended June 30, 2012
(In Thousands)
Beginning
Balance
Increases Decreases
Liabilities for:
Bond premium/discount
General obligation bonds
Notes payable
Revenue bonds
Total long term debt
$
$
466
5,602
250
16,990
23,308
$
1
65
844
—
910
$
$
53
414
226
858
1,551
$
Ending
Balance
$
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases Decreases
Liabilities for:
Bond premium/discount
General obligation bonds
Notes payable
Revenue bonds
Total long term debt
$
$
139
5,286
232
17,815
23,472
$
$
379
691
250
—
1,320
$
52
375
232
825
1,484
$
414
5,253
868
16,132
22,667
Current
Portion
$
$
Ending
Balance
$
466
5,602
250
16,990
23,308
$
—
385
301
897
1,583
Current
Portion
$
—
411
—
859
1,270
$
The changes in other compensation benefits for fiscal years 2012 and 2011 follow:
Year Ended June 30, 2012
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
$
$
3,401
32
607
291
4,331
$
$
605
—
285
208
1,098
Decreases
$
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
$
$
3,463
32
433
56
3,984
32
$
$
278
32
268
283
861
374
32
134
163
703
Decreases
$
$
340
32
94
48
514
Ending
Balance
$ 3,632
—
758
336
$ 4,726
Current
Portion
$
$
Ending
Balance
$ 3,401
32
607
291
$ 4,331
397
—
—
151
548
Current
Portion
$
$
374
32
—
128
534
Bond Premium/Discount — In fiscal year 2012 and 2011 bonds were issued resulting in premiums of $597 and
$379,153, respectively. Amortization is calculated using the straight line method and amortized over the
average remaining life of the bonds.
General Obligation Bonds — The state of Minnesota sells general obligation bonds to finance most of the
Minnesota State Colleges and Universities’ capital projects. The interest rate on these bonds ranges from 2.0 to
5.5 percent. Minnesota State Colleges and Universities is responsible for paying one third of the debt service
for certain general obligation bonds sold for those capital projects, as specified in the authorizing legislation.
This debt obligation is allocated to the colleges and universities based upon the specific projects funded. The
general obligation bond liability included in these financial statements represents the University’s share.
Notes Payable —Notes payable consists of an equipment financing agreement, a loan from the MnSCU system
office and an energy loan from the Minnesota Department of Commerce. Interest rates on the notes range from
0 percent to 1.85 percent. As of June 30, 2012, $91,527 of the energy loan proceeds has not been received.
When the lighting project is completed in the fall of 2012 the funds will be advanced. The full amount of the
energy loan principal is included in the Long-Term Debt Repayment Schedule.
Revenue Bonds — The Revenue Fund is authorized by Minnesota Statutes, Section 136F.98, to issue revenue
bonds whose aggregate principal shall not exceed $300,000,000 at any time. The proceeds of these bonds are
used to finance the acquisition, construction and remodeling of buildings for residence hall, student union, food
service and other revenue producing and related facilities at the state universities. Revenue bonds currently
outstanding have interest rates of 3.875 percent to 6.5 percent.
The revenue bonds are payable solely from, and collateralized by, an irrevocable pledge of revenues to be
derived from the operation of the financed buildings and from student fees. These revenue bonds are payable
through 2027. Annual principal and interest payments on the bonds are expected to require less than 26.82
percent of net revenues. The total principal and interest remaining to be paid on the bonds is $21,523,992.
Principal and interest paid for the current year and total customer net revenues were $1,560,492 and $5,827,430,
respectively.
Compensated Absences — University employees accrue vacation leave, sick leave and compensatory leave at
various rates within limits specified in the collective bargaining agreements. The liability for compensated
absences is payable as severance pay under specific conditions. This leave is liquidated only at the time of
termination from state employment.
Early Termination Benefits — Early termination benefits are benefits received for discontinuing services earlier
than planned. See Note 9 for details.
Net Other Postemployment Benefits — Net other postemployment benefits are health insurance benefits for
certain retired employees under a single employer fully insured plan. Under the health benefits program retirees
are required to pay 100 percent of the total premium cost. Since the premium is a blended rate determined on
the entire active and retiree population, the retirees are receiving an implicit rate subsidy. See Note 10 for
further details.
Workers’ Compensation — The state of Minnesota Department of Management and Budget manages the self
insured workers’ compensation claims activities. The reported liability for workers’ compensation of $335,537
and $291,030 at June 30, 2012 and 2011, respectively, is based on claims filed for injuries to state employees
occurring prior to the fiscal year end, and is an undiscounted estimate of future payments.
Capital Contributions — The liabilities of $984,597 and $995,652 at June 30, 2012 and 2011, respectively,
represent the amount the University would owe the federal government if it were to discontinue the Perkins loan
program. The net change is $(11,055) and $(10,253) for the fiscal years 2012 and 2011, respectively.
33
Principal and interest payment schedules are provided in the following table for general obligation bonds,
revenue bonds and notes payable. There are no payment schedules for bond premium/discount, compensated
absences, early termination benefits, net other postemployment benefits, workers’ compensation, or capital
contributions.
Fiscal Years
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2032
Total
Long Term Debt Repayment Schedule
(In Thousands)
General Obligation
Revenue Bonds
Notes Payable*
Bonds
Principal
Interest
Principal Interest Principal Interest
$
385 $
241 $
897 $ 666 $
301 $
10
385
223
926
628
305
5
356
205
965
588
74
2
348
187
999
546
74
1
339
170
1,044
503
75
1
1,682
603
5,471
1,822
131
1
1,274
224
5,830
640
—
—
484
32
—
—
—
—
$ 5,253 $ 1,885 $ 16,132 $ 5,393 $
960 $
20
*The repayment schedule includes $91,527 of energy loan principle not yet received.
9.
EARLY TERMINATION BENEFITS
Early termination benefits are defined as benefits received for discontinuing services earlier than planned.
Certain bargaining unit contracts, Inter Faculty Organization (IFO) and Minnesota State University Association
of Administrative Service Faculty (MSUAASF), provide for this benefit. The following is a description of the
different benefit arrangements for each contract, including the number of retired faculty receiving the benefit
and the amount of future liability as of the end of fiscal years 2012 and 2011.
Inter Faculty Organization (IFO) contract
The IFO contract allows faculty members who meet certain eligibility and combination of age and years of
service requirements to receive an early retirement incentive cash payment based on base salary at time of
separation, as well as an amount equal to the employer’s contribution for one year’s health insurance premiums
deposited in his/her health care savings plan at time of separation. The cash incentive can be paid either in one
or two payments. The number of retired faculty who received this benefit and the amount of future liability for
those faculty as of the end of fiscal years 2012 and 2011 is as follows:
Fiscal Year
2012
2011
Number
of Faculty
—
Future Liability
(In Thousands)
$
1
—
32
Minnesota State University Association of Administrative Service Faculty (MSUAASF) contract
The MSUAASF contract allows faculty members who meet certain eligibility and combination of age and years
of service requirements to receive an early retirement incentive cash payment based on base salary at time of
separation, as well as an amount equal to the employer’s contribution for one year’s health insurance premiums
deposited in his/her health care savings plan at time of separation. The cash incentive can be paid either in one
or two payments. As of the end of fiscal years 2012 and 2011, no retired faculty are receiving this benefit.
34
10. NET OTHER POSTEMPLOYMENT BENEFITS
The University provides health insurance benefits for certain retired employees under a single employer fully
insured plan, as required by Minnesota Statute, Section 471.61 subdivision 2B. Active employees who retire
when eligible to receive a retirement benefit from a Minnesota public pension plan and do not participate in any
other health benefits program providing coverage similar to that herein described, will be eligible to continue
coverage with respect to both themselves and their eligible dependent(s) under the health benefits program.
Retirees are required to pay 100 percent of the total premium cost. Since the premium is a blended rate
determined on the entire active and retiree population, the retirees are receiving an implicit rate subsidy. As of
July 1, 2010, there were approximately 10 retirees receiving health benefits from the health plan.
Annual OPEB Cost and Net OPEB Obligation — The annual other postemployment benefit (OPEB) cost
(expense) is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially
determined in accordance with the parameters of GASB Statement No. 45 Accounting and Financial Reporting
by Employers for Post Employment Benefits Other Than Pensions. The ARC represents a level of funding that,
if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or funding excess) over a period not to exceed 30 years.
The following table shows the components of the annual OPEB cost for fiscal years 2012 and 2011, the amount
actually contributed to the plan, and changes in the net OPEB obligation:
Components of the Annual OPEB Cost
(In Thousands)
2012
Annual required contribution (ARC)
Interest on net OPEB obligation
Adjustment to ARC
Annual OPEB Cost
Contributions during the year
Increase in net OPEB obligation
Net OPEB obligation, beginning of year
Net OPEB obligation, end of year
$
$
279 $
29
(23)
285
(134)
151
607
758 $
2011
264
21
(17)
268
(94)
174
433
607
The University’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net
OPEB obligation for fiscal years 2012 and 2011, were as follows:
Year Ended, June 30
(In Thousands)
2012
2011
Net OPEB obligation, beginning of year
$ 607
$ 433
Annual OPEB Cost
285
268
Employer contribution
(134)
(94)
Net OPEB obligation, end of year
$ 758
$ 607
Percentage contributed
47.02 %
35.07 %
35
Funding Status — There are currently no assets that have been irrevocably deposited in a trust for future health
benefits. Therefore, the actuarial value of assets is zero.
Actuarial
Valuation
Date
July 1, 2010
Actuarial
Value of
Assets
(a)
$ —
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Funded
Liability
Liability
Ratio
(b)
(b - a)
(a/b)
$ 2,658
$ 2,658
0.00%
Covered
Payroll
(c)
$ 24,460
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
10.87%
Actuarial Methods and Assumptions — Actuarial valuations involve estimates of the value of reported amounts
and assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding
the funded status of the plan and the annual required contributions of the employer are subject to continual
revision as actual results are compared with past expectations and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the
employer and the plan members) and include the types of benefits provided at the time of each valuation. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short term
volatility in actuarial accrued liabilities, consistent with the long term perspective of the calculations.
In the July 1, 2010 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial
assumptions included a 4.75 percent discount rate, which is based on the estimated long term investment yield
on the general assets, using an underlying long term inflation assumption of 3 percent.
The annual healthcare cost trend rate is 6.25 percent initially, reduced incrementally to an ultimate rate of 5
percent after twenty years. The unfunded actuarial accrued liability is being amortized as a level dollar amount
over an open 30 year period.
11. LEASE AGREEMENTS
Income Lease – In July 1, 2007, the University entered into a five year lease agreement with the Agricultural
Utilization Research Institute. On July 1, 2012, the lease was extended for an additional five years. The
University is leasing office space to the nonprofit organization.
Future expected lease payments to be received are as follows:
(In Thousands)
Fiscal Year
Amount
2013
$
88
2014
90
2015
90
2016
93
2017
93
$
454
36
12. TUITION, FEES, AND SALES, NET
The following table provides information related to tuition, fees, and sales revenue:
Description
Tuition
Fees
Sales
Restricted student payments
Total
Gross
$ 19,798
2,071
1,403
5,797
$ 29,069
Year Ended June 30
(In Thousands)
2012
Scholarship
Allowance
Net
$
(7,058) $ 12,740
(421)
1,650
—
1,403
(158)
5,639
$
(7,637) $ 21,432
$
$
Gross
19,909
2,030
1,492
6,131
29,562
2011
Scholarship
Allowance
$
(6,742) $
(470)
—
(323)
$
(7,535) $
Net
13,167
1,560
1,492
5,808
22,027
13. OPERATING EXPENSES BY FUNCTIONAL CLASSIFICATION
The following tables provide information related to operating expenses by functional classification:
Year Ended June 30, 2012
(In Thousands)
Description
Academic support
Institutional support
Instruction
Public service
Student services
Auxiliary enterprises
Scholarships & fellowships
Less interest expense
Total operating expenses
Salaries
2,176
2,842
10,964
371
4,064
1,303
—
—
$ 21,720
$
Benefits
691
913
3,436
117
1,331
656
—
—
$
7,144
$
$
$
Other
1,403
2,592
3,126
654
2,603
4,893
321
—
15,592
$
$
Interest
96
126
483
16
181
66
—
(968)
—
$
$
Total
4,366
6,473
18,009
1,158
8,179
6,918
321
(968)
44,456
Year Ended June 30, 2011
(In Thousands)
Description
Academic support
Institutional support
Instruction
Public service
Student services
Auxiliary enterprises
Scholarships & fellowships
Less interest expense
Total operating expenses
Salaries
2,384
2,895
11,965
292
4,224
1,717
—
—
$ 23,477
$
Benefits
773
886
3,948
98
1,360
435
—
—
$
7,500
$
37
$
$
Other
1,658
1,863
3,505
467
2,729
5,354
769
—
16,345
$
$
Interest
102
123
516
13
181
70
—
(1,005)
—
$
$
Total
4,917
5,767
19,934
870
8,494
7,576
769
(1,005)
47,322
14. EMPLOYEE PENSION PLANS
The University participates in three retirement plans: the State Employees Retirement Fund, administered by the
Minnesota State Retirement System; the Teachers Retirement Fund, administered by the Minnesota Teachers
Retirement Association; and the Minnesota State Colleges and Universities Defined Contribution Retirement
Plan.
State Employees Retirement Fund (SERF)
Pension fund information is provided by the Minnesota State Retirement System, which prepares and publishes
its own stand alone comprehensive annual financial report, including financial statements and required
supplementary information. Copies of the report may be obtained directly from Minnesota State Retirement
System at 60 Empire Drive, Suite 300, St. Paul, Minnesota 55103-3000.
SERF is a cost sharing, multiple employer defined benefit plan. All classified employees are covered by this
plan. A classified employee is one who serves in a civil service position. Normal retirement age is 65. The
annuity formula is the greater of a step rate with a flat rate reduction for each month of early retirement, or a
level rate (the higher step rate) with an actuarial reduction for early retirement. The applicable rates for each
year of allowable service are 1.2 percent and 1.7 percent of the members’ average salary, which is defined as
the highest salary paid in five successive years of service. Minnesota State Colleges and Universities, as an
employer for some participants, is liable for a portion of any unfunded accrued liability of this fund.
The statutory authority for SERF is Minnesota Statutes, Chapter 352. For fiscal year 2010 the funding
requirement for both employer and employee was 4.75 percent. For fiscal years 2011 and 2012 the funding
requirement was 5 percent for both employer and employee. Actual contributions were 100 percent of required
contributions.
Required contributions for Southwest Minnesota State University were:
(In Thousands)
Fiscal Year Amount
2012
$ 276
2011
274
2010
242
Teachers Retirement Fund (TRF)
Pension fund information is provided by the Minnesota Teachers Retirement Association, which prepares and
publishes its own stand alone comprehensive annual financial report, including financial statements and
required supplementary information. Copies of the report may be obtained directly from Minnesota Teachers
Retirement Association at 60 Empire Drive, Suite 400, St. Paul, Minnesota 55103-3000.
The TRF is a cost sharing, multiple employer defined benefit plan. Teachers and other related professionals
may participate in TRF. Normal retirement age is 65. Coordinated membership includes participants who are
covered by the Social Security Act. The annuity formula is the greater of a step rate with a flat reduction for
each month of early retirement, or a level rate (the higher step rate) with an actuarially based reduction for early
retirement. The applicable rates for coordinated members are 1.2 percent and 1.7 percent for service rendered
before July 1, 2006, and 1.4 percent and 1.9 percent for service rendered on or after July 1, 2006. Minnesota
State Colleges and Universities, an employer for some participants, is liable for a portion of any unfunded
accrued liability of this fund.
38
The statutory authority for TRF is Minnesota Statutes, Chapter 354. For fiscal years 2010 and 2011 the funding
requirement was 5.5 percent for both employer and employee coordinated members. For fiscal year 2012 the
funding requirement was 6 percent for both employer and employee coordinated members. Beginning July 1,
2011, both employee and employer contribution rate increases were and will continue to be phased in with a 0.5
percent increase, occurring every July 1 over three years, until it reaches a contribution rate of 7.5 percent on
July 1, 2014. Actual contributions were 100 percent of required contributions.
Required contributions for Southwest Minnesota State University were:
(In Thousands)
Fiscal Year Amount
2012
$ 174
2011
180
2010
198
Minnesota State Colleges and Universities Defined Contribution Retirement Fund
General Information — The Minnesota State Colleges and Universities Defined Contribution Retirement Fund
includes two plans, an Individual Retirement Account Plan and a Supplemental Retirement Plan. Both plans are
mandatory, tax deferred, single employer defined contribution plans authorized by Minnesota Statutes, Chapters
354B and 354C. The plans are designed to provide retirement benefits to Minnesota State Colleges and
Universities unclassified employees. An unclassified employee is one who belongs to Minnesota State Colleges
and Universities specific bargaining units. The plans cover unclassified teachers, librarians, administrators and
certain other staff. The plans are mandatory for qualified employees and vesting occurs immediately.
The administrative agent of the two plans is Teachers Insurance and Annuity Association College Retirement
Equities Fund (TIAA-CREF). Separately issued financial statements can be obtained from TIAA-CREF,
Normandale Lake Office park, 8000 Norman Center Drive, Suite 1100, Bloomington, MN 55437.
Individual Retirement Account Plan — (IRAP)
Participation — Every employee who is in unclassified service is required to participate in TRF or IRAP upon
achieving eligibility. An unclassified employee is one who serves in a position deemed unclassified according
to Minnesota Statutes. This includes presidents, vice presidents, deans, administrative or service faculty,
teachers, and other managers and professionals in academic and academic support programs. Eligibility begins
with the employment contract for the first year of unclassified service in which the employee is hired for more
than 25 percent of a full academic year, excluding summer session. An employee remains a participant of the
plan, even if employed for less than 25 percent of a full academic year in subsequent years.
Contributions — There are two member groups participating in the IRAP, a faculty group and an administrators
group. For both faculty and administrators, the employer and employee statutory contribution rates are 6
percent and 4.5 percent, respectively. The contributions are made under the authority of Minnesota Statutes,
Chapter 354B.
Required contributions for Southwest Minnesota State University were:
(In Thousands)
Fiscal Year Employer Employee
2012
$
681 $
508
2011
732
546
2010
708
529
39
Supplemental Retirement Plan — (SRP)
Participation — Every employee who has completed two full time years of unclassified service with Minnesota
State Colleges and Universities must participate upon achieving eligibility. The eligible employee is enrolled
on the first day of the fiscal year following completion of two full time years. Vesting occurs immediately and
the normal retirement age is 55.
Contributions — Participants contribute 5 percent of the eligible compensation up to a defined maximum
annual contribution as specified in the following table:
Member Group
Inter Faculty Organization
Minnesota State University Association of Administrative and Service Faculty
Administrators
Eligible
Compensation
$6,000 to $51,000
6,000 to 50,000
6,000 to 60,000
Annual
Maximum
$2,250
2,200
2,700
The University matches amounts equal to the contributions made by participants. The contributions are made
under the authority of Minnesota Statutes, Chapter 354C.
Required contributions for Southwest Minnesota State University were:
(In Thousands)
Fiscal Year
Amount
2012
$ 387
2011
420
2010
428
15. SEGMENT INFORMATION
A segment is an identifiable activity reported as a standalone entity for which one or more revenue bonds are
outstanding. A segment has a specific identifiable revenue stream pledged in support of revenue bonds and has
related expenses, gains and losses, and assets and liabilities that are required by an external party to be
accounted for separately.
40
Minnesota State Colleges and Universities issues revenue bonds to finance the University dormitories and
student unions.
A summary table of the University’s portion of the Revenue Fund follows:
Southwest Minnesota State University Portion of the Revenue Fund
(In Thousands)
CONDENSED STATEMENTS OF NET ASSETS
Assets:
Current assets
Current restricted assets
Noncurrent restricted assets
Capital assets
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Invested in capital assets, net of related debt
Restricted
Total net assets
CONDENSED STATEMENTS OF REVENUES,
EXPENSES, AND CHANGES IN NET ASSETS
Operating revenues
Operating expenses
Net operating income (loss)
Nonoperating revenues (expenses)
Gain on disposal of capital assets
Change in net assets
Net assets, beginning of year
Net assets, end of year
CONDENSED STATEMENTS OF CASH FLOWS
Net cash provided (used) by:
Operating activities
Investing activities
Noncapital and related financing activities
Capital and related financing activities
Net decrease
Cash, beginning of year
Cash, end of year
41
2012
$
$
$
$
$
$
444
3,135
3
30,041
33,623
2011
$
496
3,143
1
31,312
34,952
1,158
15,493
16,651
1,254
16,404
17,658
16,868
104
16,972
$
17,294
—
17,294
2012
5,827
(5,456)
371
(693)
—
(322)
17,294
16,972
2011
6,174
(6,363)
(189)
(721)
32
(878)
18,172
$ 17,294
1,250
18
250
(1,569)
(51)
3,409
3,358
$
$
$
1,304
37
—
(1,667)
(326)
3,735
3,409
16. COMMITMENTS AND CONTINGENCIES
Minnesota State Colleges and Universities is in negotiations with the faculty bargaining units for the 2011-2013
contract period. Furthermore, the legislative sub-committee on employee relations rejected the settlements
reached by the State with MAPE and AFSCME for the same period. As a result, these contracts have not been
approved nor implemented. It is possible that the full legislature will consider and approve the settlements
during the regular legislative session. Whether there will be retroactive pay owed to state employees as a result
of negotiated settlements, and the impact such settlements may have on the fiscal year 2012 financials, remains
unknown. Therefore, no provision for related expense or liability, if any, has been reflected in these financial
statements.
Effective May 20, 2005, the University and Southwest Minnesota State University Foundation entered into a
property management agreement. The SMSU Foundation constructed a student housing apartment building on
land owned by the SMSU Foundation. The University is managing the building that is being used in its student
housing program. The agreement commenced on August 1, 2006 and shall end on June 30, 2016, unless
extended or terminated as provided in the agreement.
There are currently five repair and replacement projects in process totaling $1.4 million. As of June 30, 2012,
$800 thousand has been spent. The projects are expected to be completed by December 2012. Funding has also
been approved for design of a Science Lab Renovation Project in the amount of $500 thousand with an
estimated completion date of December 2016. These funds are unspent.
17. RISK MANAGEMENT
Minnesota State Colleges and Universities is exposed to various risks of loss related to tort; theft of, damage to,
or destruction of assets; error or omissions; and employer obligations. Minnesota State Colleges and
Universities manage these risks through state of Minnesota insurance plans including the state of Minnesota
Risk Management Fund and through purchased insurance coverage.
Automobile liability coverage is required by the state and is provided by the Minnesota Risk Management
Fund. The University also purchased optional physical damage coverage for their newest or most expensive
vehicles.
Property and casualty coverage is required by Minnesota State Colleges and Universities policy. The
University also selected inland marine coverage on the newer computers, scoreboards, digital cameras and
artwork. The University also purchases professional liability insurance for athletic trainers, medical staff,
students working as personal care attendants, social work interns, mental health counselors and career
counselors. Property coverage offered by the Minnesota Risk Management Fund is as follows:
Coverage Type
Institution deductible
Fund responsibility
Primary re-insurer coverage
Multiple re-insurers’ coverage
Bodily injury and property damage per person
Bodily injury and property damage per occurrence
Annual maximum paid by fund, excess by reinsurer
Maintenance deductible for additional claims
42
Amount
$25,000
Deductible to $1,000,000
$1,500,001 to $12,000,000
$12,000,001 to $500,000,000
$500,000
$1,500,000
$2,000,000
$25,000
Southwest Minnesota State University retains the risk of loss. The University did not have any settlements in
excess of coverage for the last three years.
The Minnesota Risk Management Fund purchased student intern professional liability insurance on the open
market for the University.
Minnesota State Colleges and Universities participates in the State Employee Group Insurance Plan, which
provides life insurance, hospital, medical and dental benefits coverage through provider organizations.
Workers’ compensation is covered through state participation in the Workers’ Compensation Reinsurance
Association, which pays for catastrophic workers’ compensation claims. Other workers’ compensation risks are
covered through self insurance for which Minnesota State Colleges and Universities pays the cost of claims
through the state Workers’ Compensation Fund. A Minnesota State Colleges and Universities workers’
compensation payment pool helps institutions manage the volatility of such claims. Annual premiums are
assessed by the pool based on salary dollars and claims history. From this pool all workers’ compensation
claims are paid to the state Workers’ Compensation Fund.
The following table presents changes in the balances of workers’ compensation claims liability during the fiscal
years ended June 30, 2012 and 2011:
(In Thousands)
Fiscal Year Ended 6/30/12
Fiscal Year Ended 6/30/11
Beginning
Liability
Additions
$ 291
$
208
56
283
Payments &
Other
Ending
Reductions
Liability
$
163
$ 336
48
291
18. COMPONENT UNITS
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations Are Component
Units, the following foundation affiliated with Southwest Minnesota State University is a legally separate, tax
exempt entity and reported as a component unit.
The Southwest Minnesota State University Foundation is a separate legal entity formed for the purpose of
obtaining and disbursing funds for the sole benefit of the University. The University does not appoint any
members of the board and the resources held by the foundation can only be used by, or for, the benefit of the
University. The Foundation’s relationship with the institution is such that exclusion of the Foundation’s
financial statements would cause the University’s financial statements to be misleading or incomplete. The
Foundation is considered a component unit of the University and their statements are discretely presented in the
University’s financial statements.
43
The Foundation’s financial statements have been prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles as prescribed by the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 958-205, Presentation of Financial Statements. Net assets and
revenues, expenses, gains, and losses are classified based on the existence or absence of donor imposed
restrictions. Accordingly, net assets of the Foundation and changes therein are classified and reported as
follows:

Unrestricted net assets: Net assets that are not subject to donor imposed stipulations.

Temporarily restricted net assets: Net assets subject to donor imposed restrictions as to how the assets
are used.

Permanently restricted net assets: Net assets subject to donor imposed stipulations that they be
maintained permanently by each foundation. Generally, the donors of these assets permit each
foundation to use all or part of the income earned on any related investments for general or specific
purposes. Capital gains on permanently restricted net assets are considered to be part of the principal
and are added to permanently restricted net assets.
The University received $1,364,701 and $1,377,141 in fiscal years 2012 and 2011, respectively, from
Southwest Minnesota State University Foundation. Of this amount $614,697 and $670,649 in fiscal years 2012
and 2011, respectively, was for scholarships; $291,216 and $181,069, respectively, was for various program
donations; $0 and $52,486, respectively, was for capital asset donations; and $458,788 and $472,937,
respectively, was for various other uses.
Investments — The Foundation’s investments are presented in accordance with FASB ASC 958-320,
Investments – Debt and Equity Securities. Under ASC 958-320, investments in marketable securities with
readily determinable fair values and all investments in debt securities are reported at their fair values in the
statement of financial position.
Schedule of Investments at June 30
(In Thousands)
2012
Money market savings
$
124
Fixed income securities
3,264
Equity securities
4,822
Total investments
$ 8,210
2011
92
2,673
4,404
$ 7,169
$
Endowment Funds— The Foundation’s endowment includes both donor-restricted funds and funds designated
by the Foundation Board of Trustees to function as endowments. As required by generally accepted accounting
principles, net assets associated with endowment funds, including funds designated by the Board of Trustees to
function as endowments, are classified and reported based on the existence or absence of donor-imposed
restrictions.
44
Changes in endowment net assets as of June 30, 2012 are as follows:
Schedule of Endowment Net Assets
As of June 30, 2012
(In Thousands)
Permanently
Restricted
Net assets, beginning of year
3,000
$
Change in value of trusts
110
Contributions
45
Net assets, end of year
$
3,155
Changes in endowment net assets as of June 30, 2011 are as follows:
Schedule of Endowment Net Assets
As of June 30, 2011
(In Thousands)
Permanently
Restricted
Net assets, beginning of year
2,752
$
Change in value of trusts
199
Contributions
49
Net assets, end of year
$
3,000
Capital Assets — Summaries of the Foundations’ capital assets for fiscal years 2012 and 2011 are:
Schedule of Capital Assets at June 30
(In Thousands)
2012
Capital assets, not depreciated:
Land
$
265 $
265
Total capital assets, not depreciated
Capital assets, depreciated:
Buildings and improvements
7,966
37
Equipment
8,003
Total capital assets, depreciated
Less total accumulated depreciation
1,555
6,448
Total capital assets depreciated, net
Total capital assets, net
$ 6,713 $
2011
265
265
8,126
37
8,163
1,420
6,743
7,008
Long Term Debt — A summary of the Foundation’s long term debt is as follows:
Schedule of Long Term Debt at June 30
(In Thousands)
2012
Assessment payable
$
— $
Notes payable
1,260
Student housing revenue note
4,713
Total long term debt
5,973
Less current portion
783
Net long term debt
$ 5,190 $
45
2011
4
1,662
4,901
6,567
515
6,052
Assessment Payable — Street and utility assessments are due to the City of Marshall. They are secured by real
estate with annual payments of $7,817 plus interest at 6.2 percent.
Notes Payable — Bremer Bank: A $228,000 note is secured by a blanket policy over the Foundation assets
along with a purchase money security interest in the lights for the Regional Event Center. Quarterly payments
of $7,950 including interest at 6.72 percent began September 15, 2008 and mature on June 15, 2013.
A $337,500 note is secured by the first priority in the Foundation’s Campaign Investment Account. Quarterly
payments of $11,800 including interest of 6.79 percent began September 15, 2008 and mature on June 15, 2013.
An $875,000 note is secured by the first priority in the scoreboard for the Regional Event Center. Quarterly
payments of $31,250 including interest at 7.24 percent began December 15, 2008 and mature on
September 15, 2013.
Aramark Educational Services, LLC: A $350,000 unsecured note is interest free with quarterly payments of
$10,938. The payments began on July 1, 2008 and will mature on June 30, 2016.
Schwan’s Corporate Giving Foundation: This represents the amount of gifts pledged to the Foundation on
behalf of the construction of the Regional Events Center. The agreement states that all funds pledged to the
Foundation on behalf of the construction of the Regional Events Center will be used to pay down the Schwan’s
note at Bremer Bank NA, Marshall, Minnesota. The Foundation has received pledges totaling $2,000,000 and
has paid $1,928,534 towards the balance to date. The remainder of the funds will be paid as the pledges are
received.
Student Housing Revenue Note — The note was issued through the City of Marshall and is payable to Bremer
Bank, National Association. It is secured by the Foundation Residence Hall. The current interest rate is 3.35
percent until May 24, 2015 at which time (and every five years thereafter) the interest rate shall be adjusted to
an interest rate equal to the then LIBOR rate plus 2.75 percent. The final payment is due May 25, 2030.
Principal and interest payment schedule is provided below:
Long Term Debt Repayment Schedule
(In Thousands)
Fiscal Years
Principal
Interest
2013
$
783 $
223
2014
789
185
2015
254
141
2016
261
134
2017
224
127
2018-2022
1,243
514
2023-2027
1,469
288
2028-2031
950
47
Total
$ 5,973 $ 1,659
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REQUIRED SUPPLEMENTARY
INFORMATION SECTION
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SOUTHWEST MINNESOTA STATE UNIVERSITY
SCHEDULE OF FUNDING PROGRESS FOR NET OTHER POSTEMPLOYMENT BENEFITS
Actuarial
Valuation
Date
July 1, 2006
July 1, 2008
July 1, 2010
Schedule of Funding Progress
(In Thousands)
Unfunded
Actuarial Actuarial
Value of Accrued Actuarial Accrued Funded
Liability
Ratio
Assets
Liability
(a)
(b)
(b - a)
(a/b)
$ —
$ 2,191
$ 2,191
0.00%
—
2,383
2,383
0.00
—
2,658
2,658
0.00
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Covered
Payroll
(c)
$ 24,369
23,049
24,460
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
8.99%
10.34
10.87
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SUPPLEMENTARY SECTION
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52
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