METROPOLITAN STATE UNIVERSITY
A MEMBER OF THE
MINNESOTA STATE COLLEGES AND UNIVERSITIES SYSTEM
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
Prepared by:
Metropolitan State University
2nd FL New Main
700 E. 7th St.
St. Paul, MN 55106-3000
Upon request, this publication is available in alternate formats by calling one of the following:
General number (651) 297-5579
Toll free: 1-888-667-2848
TTY: (651) 282-2660
METROPOLITAN STATE UNIVERSITY
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
TABLE OF CONTENTS
INTRODUCTION
Page
Transmittal Letter ................................................................................................................................... 5
Organization Chart ................................................................................................................................. 9
FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 12
Management’s Discussion and Analysis .............................................................................................. 14
Basic Financial Statements
Statements of Net Assets ............................................................................................................... 20
Metropolitan State University Foundation – Statements of Financial Position ............................ 21
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 22
Metropolitan State University Foundation – Statements of Activities .......................................... 23
Statements of Cash Flows ............................................................................................................. 24
Notes to the Financial Statements ................................................................................................. 26
SUPPLEMENTAL 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 .................................................................. 48
1
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2
INTRODUCTION
3
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4
5
6
7
8
9
Gary Seiler
Interim Provost & Vice
President for Academic
Affairs
Trenda Boyum-Breen
Vice President for
Student Affairs
Murtuza Siddiqui
Vice President
Administration & Finance
Sue Hammersmith
President
James H. McCormick
Chancellor
Minnesota State
Colleges and Universities
Board of Trustees
June 30, 2010
Robert Heuermann
Vice President for
University
Advancement
Thomas Cook
Executive Assistant to the
President & Director,
Government Relations
Truly Webb
Interim Affirmative
Action Officer
The financial activity of the Metropolitan State University is included in this report. The University is one
of 32 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.
10
FINANCIAL SECTION
11
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
Minnesota State Colleges and Universities
St. Paul, Minnesota
We have audited the accompanying financial statements of Metropolitan State University (the
University), a campus of Minnesota State Colleges and Universities, as of and for the years ended
June 30, 2010 and 2009, 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 Metropolitan
State University Foundation, a discretely presented component unit of Metropolitan State University.
Those financial statements were audited by other auditors whose report thereon has been furnished to
us, and our opinion, insofar as it relates to the amounts included for the discretely presented
component unit mentioned above, is based on the report 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 Metropolitan State University Foundation
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 provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the financial statements referred to
above present fairly, in all material respects, the financial position of Metropolitan State University as of
June 30, 2010 and 2009, and the respective changes in financial position and cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October 22,
2010, on our consideration of the University’s internal control over financial reporting and our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing
the results of our audit.
An independent member of Nexia International
12
Board of Trustees
Minnesota State Colleges and Universities
Page 2
The accompanying Management Discussion and Analysis, as listed in the table of contents, is not a
required part of the basic financial statements but is supplementary information required by
U.S. generally accepted accounting principles. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the information and
express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements. The
accompanying introductory section, as listed in the table of contents, is presented for purposes of
additional analysis and is not a required part of the basic financial statements. The introductory section
has not been subjected to the auditing procedures applied in the audit of the basic financial statements
and, accordingly, we express no opinion on it.
LarsonAllen LLP
Minneapolis, Minnesota
October 22, 2010
13
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provides an overview of the financial position and activities of Metropolitan
State University, a member of Minnesota State Colleges and Universities, at June 30, 2010, 2009 and 2008 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 notes, which follow this section.
Metropolitan State University is one of 32 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, vice chancellors, and college and university presidents, and has broad policy responsibility for system
planning, academic programs, fiscal management, personnel, admissions requirements, tuition and fees, and policies
and procedures.
The University is a comprehensive public institution of higher learning with over 10,000 students, 95 percent of
which are transfer students. The average age of the student on campus is 32 years old and is enrolled at the
University with an average of four transcripts. Approximately 90 percent of students work while attending school,
most full time. The University employs about 1,000 faculty and staff members, including approximately 550 parttime community faculty who are often practitioners in the fields in which they teach.
Metropolitan State University offers certificate programs; baccalaureate, masters and doctorate degrees, and the
University participates in the Minnesota Transfer Curriculum. The University is accredited by the Higher Learning
Commission. The largest programs based on enrollment are individualized programs, business, accounting,
information and computer science, nursing and criminal justice. Our individualized program, which enables
students to customize degree requirements to fit their individual academic aspirations, is one of the unusual
opportunities offered at Metropolitan State University. The Urban Teacher Program, which was developed in
collaboration with Minneapolis Community and Technical College, Inver Hills Community College, and the
Minneapolis and St. Paul Public Schools, is a unique program designed to increase the number of teachers of color
in urban schools.
The University’s Minneapolis campus is collocated with Minneapolis Community and Technical College. This
relationship continues to provide an exciting opportunity to collaborate with a partner school on programming to
benefit our combined student population, by providing a learning bridge for the students who are transitioning from
a two-year system to a four-year state university.
Metropolitan State University continues to partner with Saint Paul College and Minneapolis Community and
Technical College in ―
The Power of You‖ program. This is a program that makes the first two years of college
available tuition free and is available to individuals who have graduated from a public school in Minneapolis or St.
Paul beginning in 2007 and are current residents of either of these cities.
FINANCIAL HIGHLIGHTS
The University’s financial position improved during fiscal year 2010. Assets totaled $87.9 million compared to
liabilities of $30.0 million. Net assets, which represent the residual interest in the University’s assets after liabilities
are deducted, are comprised of $40.6 million in capital assets net of related debt, restricted assets of $3.4 million,
and unrestricted net assets of $13.9 million.
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
14
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 declined
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 Statement of Revenues, Expenses and Changes in Net Assets. A
summary of the University’s assets, liabilities and net assets as of June 30, 2010, 2009 and 2008, respectively, is as
follows (in thousands):
Current assets
Restricted assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets
$
2010
29,544
2,271
56,116
87,931
11,110
18,874
29,984
57,947
$
$
$
2009
25,106
1,329
45,583
72,018
10,127
15,657
25,784
46,234
$
$
2008
22,796
979
45,730
69,505
8,478
15,666
24,144
45,361
Current assets consist primarily of cash totaling $26.2 million at June 30, 2010, an overall increase of $3.8 million in
unrestricted cash over the prior year. This increase is the result of increases in tuition and fees, improved collection
efforts and enforced payment deadlines, and improved grant management.
Current liabilities consist primarily of salaries payable, unearned revenue, accounts payable and restricted accounts
payable, current obligations for repayment of debt, and compensation benefits. Current liabilities increased by $1.0
million over the prior year, related primarily to salaries payable, unearned revenue, and restricted accounts payable.
Salaries payable increases of $0.1 million are due to planned increases in faculty and staff headcounts. Increases in
unearned revenue of $0.8 million are related primarily to increases in deferred summer session tuition, and restricted
accounts payable increases of $0.9 million are related to construction projects funded with general obligation bonds.
Net assets represent the residual interest in the University’s assets after liabilities are deducted. The University’s net
assets as of June 30, 2010, 2009 and 2008, respectively, are summarized as follows (in thousands):
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total net assets
$
$
2010
40,636
3,417
13,894
57,947
$
$
2009
33,272
2,929
10,033
46,234
$
$
2008
32,262
2,807
10,292
45,361
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 - primarily includes debt service, donations received for specific purposes, capital projects, faculty
contracts, and funds reserved for legislatively mandated purposes.
15
Changes in net assets for fiscal years 2008 through 2010 are presented as follows:
Net Assets (In Thousands)
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
Invested in Capital
Assets (net)
Restricted expendable,
bond covenants
Restricted expendable,
other
Unrestricted
2010
2009
2008
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the University’s academic programs and student life is the
development and renewal of its capital assets. The University is in the process of updating its master facilities plan
to maintain its complement of existing facilities while systematically addressing new construction needs. Capital
assets as of June 30, 2010, totaled $56.1 million, net of accumulated depreciation of $26.7 million. Construction of
the Law Enforcement and Criminal Justice Education Center, a collaborative project with Hennepin Technical
College and Minneapolis Community and Technical College, is in progress and projected to open by the start of
classes in Fall 2010. In the 2010 legislative session, the University received $5.8 million in capital bonding for
renovation of a condemned building into smart classrooms. This project is expected to be complete before the start
of classes in Fall 2011. The University is preparing for design and property acquisition for a new Science Education
Center on the St. Paul Campus as part of the 2012 bonding request from Minnesota State Colleges and Universities.
Additional information on capital and debt activities can be found in Note 5 and Note 7 to the financial statements.
Capital Assets, Net of Depreciation (In Thousands)
Land
60,000
Construction in Progress
50,000
40,000
Buildings and
Improvements
30,000
Equipment
20,000
Library Collections
10,000
2010
2009
2008
16
Total
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
The Statement 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 GASB requires classification of state
appropriations as non-operating revenue. Summarized statements for the years ended June 30, 2010, 2009 and 2008,
respectively, follows (in thousands):
2010
Operating revenue:
Tuition, auxiliary and sales, net
Restricted student payments
Other revenue
Total operating revenue
$
2009
2008
27,496 $
1,385
47
28,928
24,748 $
1,224
54
26,026
22,810
1,203
54
24,067
Non-operating revenue:
State appropriations
Capital appropriations
Other
Total non-operating revenue
Total revenue
21,987
9,017
16,293
47,297
76,225
24,128
689
10,655
35,472
61,498
23,299
287
8,531
32,117
56,184
Operating expense:
Salaries and benefits
Services and other expenses
Depreciation
Financial aid, net
Total operating expense
43,615
15,835
2,299
2,092
63,841
42,816
13,799
2,306
1,126
60,047
38,021
12,934
2,401
791
54,147
Non-operating expense:
Interest expense
Other
Total non-operating expense
Total expense
623
48
671
64,512
539
39
578
60,625
618
48
666
54,813
Change in net assets
Total net assets, beginning of year
Net assets, end of year
11,713
46,234
57,947 $
873
45,361
46,234 $
1,371
43,990
45,361
$
Tuition and state appropriations are the primary sources of funding for the University’s academic programs. Tuition
increased by 5.0 percent in fiscal year 2010; however, after including federal ARRA stimulus funds used for tuition
mitigation, the rate of change to students was 3.0 percent. The state appropriation decreased in fiscal year 2010 by
$2.1 million due to continuing reductions in state funding for higher education.
One way to examine a teaching institution’s focus on its mission is by reviewing the percentage of its operating
expenses dedicated to instructional costs. Instructional costs are defined as costs of direct instruction plus costs for
academic support (i.e. academic advisors, college support staff, library, academic computing, etc.). From the
perspective of the higher education industry, the higher this percentage is, the more mission-focused the institution
is considered to be, with 50 percent as the threshold. The chart below displays this information for Metropolitan
State University for fiscal years 2008, 2009 and 2010. Metropolitan State University has consistently exceeded this
threshold each of those years, investing 60 percent of its operating budget into direct instructional activities during
fiscal year 2010, indicating that the University continues to stay focused on the core teaching mission of the
institution.
17
Operating Expenses by Functional Classification
70%
60%
Instruction / Academic
Support
50%
Institutional Support
40%
Physical Plant
30%
Student Services
20%
10%
Other
0%
2010
2009
2008
COMPONENT UNIT
The Metropolitan State University Foundation is a component unit of Metropolitan State University. The
Foundation helps the University raise funds, provides financial support to students, and assists the University fund
projects consistent with the University’s mission.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking toward the future, management believes that the University is positioned to continue its strong financial
condition and level of excellence. The state demographer projects two trends of interest to higher education — the
decline in the number of new high school graduates, and the continued strong population growth in communities of
color and new immigrants. Unlike more traditional institutions, Metropolitan State University’s focus has always
been on adult students, which are projected to be a growth market in higher education. With nearly 100,000 students
in attendance at metropolitan area community and technical colleges, the University is positioning itself to be the
provider for upper level courses for those students. As the most diverse public university in the state, Metropolitan
State University has worked hard to become an institution of choice for communities of color and recent
immigrants, and thus is well-positioned to take advantage of the demographic projections in those groups.
An ongoing challenge for the University will be staying financially accessible, given the shifts in funding sources
for public higher education in Minnesota. In the year 2000, the state paid about 65 percent of the cost of education
for our students, with tuition and other revenue covering the other 35 percent. In fiscal year 2010, the University’s
base appropriation declined to 33 percent of total revenue, and tuition and other revenue accounted for 67 percent.
The more reliant the University must be on tuition as its primary source of income, the more difficult it will be to
remain affordable. With a projected state deficit of approximately $5.8 billion in the 2012-2013 biennium, the
prospects for improvement in state funding towards higher education are unfavorable. In addition to declining state
funds, the University will be impacted by the expiration of $3.1 million in federal stimulus funds, beginning with the
fiscal year 2012 budget.
Collective bargaining for the 2012-2013 biennium will also be challenging. The projected state budget deficit will
pose additional challenges as wages have been frozen for most bargaining units for the past two years. In addition,
health insurance costs and retirement contribution rates are anticipated to increase significantly. The competitiveness
of University faculty compensation will also be a factor as the state has declined in national competitiveness over
the last decade.
18
With the 6.8 percent enrollment growth the University has experienced in each of the past 2 years, and with
projected enrollment growth for the future, the University is faced with demands on space to meet its educational
needs. The completion of the Law Enforcement and Criminal Justice Education Center (LECJEC) building, in
partnership with Hennepin Technical College on its Brooklyn Park campus, has allowed those programs to vacate
leased space and move into the new facility. This has provided some relief, but the University is experiencing the
need for additional classroom space.
In summary, the University faces budget challenges in the upcoming 2012-2013 biennium and beyond.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Metropolitan State University’s financial position
for all those with an interest in the University. Questions concerning any of the information provided in this report
or requests for additional financial information should be addressed to:
Vice President for Finance and Administration
Metropolitan State University
700 East 7th Street
St. Paul, MN 55106-5000
19
METROPOLITAN STATE UNIVERSITY
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
Assets
Current Assets
Cash and cash equivalents
Grants receivable
Accounts receivable, net
Prepaid expense
Student loans and other assets, net
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
Capital assets, net
Total noncurrent assets
2010
$
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
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Total noncurrent liabilities
Total Liabilities
Net Assets
Invested in capital assets, net of related debt
Restricted expendable, bond covenants
Restricted expendable, other
Unrestricted
Total Net Assets
$
The notes are an integral part of the financial statements.
20
26,176
603
1,532
1,230
3
29,544
2009
$
22,366
482
1,271
983
4
25,106
2,259
2,259
1,316
1,316
12
12
2,271
13
13
1,329
56,116
56,116
45,583
45,583
87,931
72,018
4,241
587
3,084
1,356
57
47
1,121
617
11,110
4,097
1,391
2,264
414
60
210
976
715
10,127
14,359
4,515
18,874
11,335
4,322
15,657
29,984
25,784
40,636
679
2,738
13,894
33,272
473
2,456
10,033
57,947
$
46,234
METROPOLITAN STATE UNIVERSITY FOUNDATION
STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Assets
Current Assets
Cash and cash equivalents
Investments
Pledges and contributions receivable
Other receivables
Total current assets
$
Noncurrent Assets
Investments held for endowment
Other assets held for endowment
Total noncurrent assets
Total Assets
$
Liabilities and Net Assets
Current Liabilities
Accounts payable
Scholarships payable
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.
21
2,044
7
155
2
2,208
2,340
139
2,479
4,687
255
39
294
343
1,694
2,356
4,393
4,687
2009
$
$
$
$
2,033
205
2
2,240
2,146
223
2,369
4,609
297
16
313
347
1,654
2,295
4,296
4,609
METROPOLITAN STATE UNIVERSITY
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
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
Nonoperating Revenues (Expenses)
Appropriations
Federal grants
State grants
Private grants
Interest income
Interest expense
Grants to other organizations
Total nonoperating revenues (expenses)
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital appropriations
Capital grants
Loss on disposal of capital assets
Change in net assets
Total Net Assets, Beginning of Year
Total Net Assets, End of Year
$
The notes are an integral part of the financial statements.
22
24,855
1,738
903
1,385
47
28,928
2009
$
22,403
1,539
806
1,224
54
26,026
43,615
9,118
1,581
1,294
2,299
2,092
3,842
63,841
(34,913)
42,816
8,302
1,543
614
2,306
1,126
3,340
60,047
(34,021)
21,987
11,043
4,092
745
91
(623)
(24)
37,311
24,128
6,193
2,885
1,107
128
(539)
(38)
33,864
2,398
(157)
9,017
322
(24)
11,713
689
342
(1)
873
46,234
57,947
$
45,361
46,234
METROPOLITAN STATE UNIVERSITY FOUNDATION
STATEMENTS OF ACTIVITIES
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Support and Revenue
Contributions
Investment income
Unrealized gains and (losses)
Total support and revenue
$
Expenses
Program Services
Program services
Total program services
Supporting services
Management and general
Fundraising expenses
Total supporting services
Total expenses
Change in Net Assets
2009
861
155
69
1,085
$
759
759
906
906
41
188
229
988
53
192
245
1,151
97
Net Assets, Beginning of Year
Net Assets, End of Year
$
The notes are an integral part of the financial statements.
23
1,254
173
(285)
1,142
4,296
4,393
(9)
$
4,305
4,296
METROPOLITAN STATE UNIVERSITY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Cash Flows from Operating Activities
Cash received from customers
Cash paid to suppliers for goods or services
Cash payments to employees
Financial aid disbursements
Net cash flows used in operating activities
$
Cash Flows from Noncapital Financing Activities
Appropriations
Agency activity
Federal grants
State grants
Private grants
Grants to other organizations
Net cash flows from noncapital financing activities
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation
Capital grant
Proceeds from sale of capital assets
Proceeds from borrowing
Proceeds from bond premium
Interest paid
Repayment of bond principal
Net cash flows used in capital and related financing activities
Cash Flows from Investing Activities
Investment earnings
Net cash flows from investing activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
24
2009
29,198
(16,778)
(43,293)
(2,076)
(32,949)
$
25,756
(13,191)
(41,311)
(1,150)
(29,896)
21,987
(162)
11,202
4,092
745
(24)
37,840
24,128
207
5,997
2,885
1,091
(38)
34,270
(11,875)
9,017
322
1
4,060
149
(757)
(1,092)
(175)
(1,819)
689
342
310
17
(546)
(956)
(1,963)
37
37
93
93
4,753
2,504
23,682
28,435
21,178
23,682
$
METROPOLITAN STATE UNIVERSITY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Operating Loss
$
Adjustment to Reconcile Operating Loss to
Net Cash Flows used in Operating Activities
Depreciation
Change in assets and liabilities
Accounts receivable
Accounts payable
Salaries and benefits payable
Other compensation benefits
Unearned revenues
Other liabilities
Net reconciling items to be added to operating income
Net cash flow used in operating activities
Non-Cash Investing, Capital, and Financing Activities
Capital projects on account
Amortization of bond premium
Investment earnings on account
Loss on retirement of capital assets
$
$
25
(34,913)
2009
$
(34,021)
2,299
2,306
(256)
(835)
144
95
526
(9)
1,964
(32,949)
(118)
630
614
891
(161)
(37)
4,125
(29,896)
1,396
3
(24)
$
$
451
46
6
(1)
METROPOLITAN STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
1.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation — The reporting policies of Metropolitan 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 Metropolitan 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. Metropolitan 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. Metropolitan State University Foundation is considered
significant to the University and is included as a discretely presented component unit and separately identified
in Note 16. Complete financial statements may be obtained from Metropolitan State University Foundation,
700 East Seventh Street, St. Paul, MN 55106-5000.
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.
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 biennia.
26
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 as well as cash equivalents. 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 include amounts in demand deposits, savings accounts, cash management pools, repurchase
agreements, and money market funds.
Restricted cash is cash held for capital projects. The Revenue Fund holds restricted cash for capital projects and
debt service. The Revenue Fund is used to account for the revenues, expenses, and net assets of revenue
producing facilities. 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 has one checking account in a local bank. The activities handled through the local bank include
financial aid, student payroll, auxiliary operations, 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 retained by the Office of the Chancellor and allocated to the
colleges and universities as part of the appropriation allocation process.
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.
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 Expense — Prepaid expense consists 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
Building improvements
Equipment
Library collections
35-40 years
15-20 years
3-20 years
7 years
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 students and student organizations.
27
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 compensated absences, early termination benefits, net other
postemployment benefits, and workers’ compensation claims.
Minnesota State Colleges and Universities may finance the construction, renovation, and acquisition of facilities
for student residences, student unions, and parking facilities 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 financial report. Copies are available from the
financial reporting director, Minnesota State Colleges and Universities, Wells Fargo Place, 30 7th St. E., Suite
350, St. Paul, Minnesota 55101-7804
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.
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.
Tuition, Fees, and Sales, Net — Tuition, fees, and sales are reported net of scholarship allowances of $8,459,725
and $6,308,993 for fiscal years 2010 and 2009, respectively. The University does not conduct retail sales.
Restricted Student Payments — Restricted student payments consist of fee revenue restricted for payment of
revenue bonds.
Federal Grants — Metropolitan State University participates in several federal grant programs. The largest
programs include Pell, TRIO, Supplemental Educational Opportunity Grant, and Federal Work Study. Federal
Grant revenue is recognized as nonoperating revenue in accordance with GASB Statement No. 33, Accounting
and Financial Reporting for Nonexchange Transactions. During fiscal year 2010, $1,532,375 of federal aid
was recognized as revenue related to the American Recovery and Reinvestment Act of 2009. Of this amount,
$395,343 was used to mitigate tuition increases that would have otherwise been necessary. 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.
Reclassifications — Certain prior year amounts have been reclassified to conform to current year presentation.
These classifications had no effect on net assets previously reported. Fiscal year 2009 federal and state grant
revenue, in the amount of $6,193,076 and $2,885,139 respectively, have been reclassified from operating to
nonoperating revenue. This reclassification increases the total operating loss by $9,078,215 while increasing
total nonoperating revenue by the same amount.
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. For fiscal year 2010, the estimate used to calculate the allowance for uncollectible
accounts was changed to align more closely with historical receivable collections.
28
Net Assets — The difference between assets and liabilities is net assets. Net assets are further classified 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
Metropolitan State 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.
Debt service — legally restricted for bond repayments.
Donations — restricted per donor requests.
Faculty contract obligations — faculty development and travel required by contracts.
Restricted for Other
(In Thousands)
2010
Capital projects
$ 903
Debt service
1,186
Donations
101
Faculty contract obligations
548
Total
$ 2,738
2009
902
946
101
507
$ 2,456
$
Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestricted net
assets may be designated for specific purposes by action of management, Office of the Chancellor,
or the Board of Trustees.
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 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.
Cash and cash equivalents are categorized to give an indication of the level of custodial credit risk. Category 1
includes cash and cash equivalents insured or collateralized with securities held by the state or its agent in
Minnesota State Colleges and Universities’ name. Category 3 includes uncollateralized cash and cash
equivalents. All the University’s cash and cash equivalents are classified as Category 1.
At June 30, 2010 and 2009, the University’s bank balance was $2,976,457 and $2,440,710 respectively. These
bank 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.
29
The cash accounts are invested in short term, liquid, high quality debt securities.
Cash and Cash Equivalents at June 30
(In Thousands)
Carrying Amount
2010
Cash, in bank
$
2,154
Cash, trustee account (US Bank)
903
Total local cash and cash equivalents
3,057
Total treasury cash accounts
25,378
Grand Total
$ 28,435
2009
2,439
453
2,892
20,790
$ 23,682
$
Investments — The Minnesota State Board of Investment manages the majority of the state’s investments. All
investments managed by the State Board of Investment are governed by Minnesota Statutes, Chapters 11A and
356A. Minnesota Statutes, Section 11A.24 broadly restricts investments to obligations and stocks of 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 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.
At June 30, 2010 and 2009, Metropolitan State University held no debt securities.
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.
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
fluctuation interest rates and cash flow needs when purchasing short term and long term investments.
Securities Lending Transactions — State statutes do not prohibit the state of Minnesota from participating in
securities lending transactions. The Minnesota State Board of Investment has, by way of custodial trust
agreements, authorized State Street Bank and Trust Company (State Street) and Wells Fargo Bank, Minnesota,
N.A. (Wells Fargo) to act as agents in lending Minnesota’s securities to broker/dealers and banks pursuant to a
form of loan agreement.
During fiscal years 2010 and 2009, State Street and Wells Fargo lent, on behalf of the state of Minnesota,
certain securities held by State Street or Wells Fargo as custodian and received cash (both United States and
30
foreign currency) and securities issued or guaranteed by the United States government, sovereign debt of
foreign countries and irrevocable bank letters of credit as collateral. The securities lending activity for Wells
Fargo ceased in May 2009. Neither State Street nor Wells Fargo has the ability to pledge or sell collateral
securities absent a borrower default. Borrowers were required to deliver collateral for each loan in amounts
equal to not less than 100 percent of the fair value of the loaned securities.
The state of Minnesota did not impose any restrictions during the fiscal years on the amount of the loans that
either State Street or Wells Fargo made on its behalf. State Street and Wells Fargo indemnified the state of
Minnesota by agreeing to purchase replacement securities or return the cash collateral in the event a borrower
failed to return a loaned security or pay distributions thereon. No borrower failed to return loaned securities or
pay distributions thereon during fiscal years 2010 or 2009. In addition, there were no losses during the fiscal
years resulting from default of the borrowers, State Street, or Wells Fargo.
During fiscal years 2010 and 2009, the state of Minnesota and the borrowers maintained the right to terminate
all securities lending transactions on demand. The cash collateral received on each loan was invested in the
separately managed funds of the Minnesota State Board of Investment. Because the loans were terminable at
will, their duration did not generally match the duration of the investments made with cash collateral. On
June 30, 2010 and 2009, the state of Minnesota had no credit risk exposure to borrowers because the amounts
the state owed the borrowers exceeded the amounts the borrowers owed the state.
The University had no security lending allocation for fiscal year 2010 and 2009. The following tables provide
information related to the securities invested by State Street:
Security Lending Analysis, State Street, at June 30
(In Thousands)
2010
2009
Fair value of securities on loan
$3,720,274
$6,587,602
Collateral held
3,845,017
6,829,949
Average duration
8 days
37 days
Average weighted maturity
43 days
201 days
3.
ACCOUNTS RECEIVABLE
The accounts receivable balances are made up primarily of receivables from individuals. At June 30, 2010 and
2009, the total accounts receivable balances for the University were $2,499,428 and $3,388,928, respectively,
less an allowance for uncollectible receivables of $967,856 and $2,117,749, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2010
2009
Tuition
$ 1,568 $ 1,818
Financial aid
379
759
Fees
127
139
Sales and services
107
243
Third party obligations
20
51
Other
299
379
Total accounts receivable
2,500
3,389
Less allowance for uncollectible accounts
(968)
(2,118)
Net accounts receivable
$ 1,532 $ 1,271
31
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Fiscal Year 2010
Allowance
Age
Percentage
Less than 1 year
15%
1 to 3 years
45%
3 to 5 years
70%
Over 5 years
95%
Fiscal Year 2009
Allowance
Age
Percentage
Less than 1 year
2%
1 to 2 years
50%
Over 2 years
100%
4. PREPAID EXPENSE
Prepaid expense consists of $1,229,945 and $982,549 for fiscal years 2010 and 2009, respectively. For each
year respectively, $1,186,046 and $945,435 have been deposited in the state’s Debt Service Fund for future
general obligation bond payments. 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 fiscal year. In addition, $43,899 and $37,114 reflects
prepaid software maintenance agreements in fiscal years 2010 and 2009, respectively.
5. CAPITAL ASSETS
Summaries of changes in capital assets for fiscal years 2010 and 2009 follow:
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increase
Capital assets, not depreciated:
Land
$
Construction in progress
Total capital assets, not depreciated
3,322 $
2,332
5,654
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
60,327
2,306
2,170
64,803
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
Total capital assets depreciated, net
Total capital assets, net
21,821
1,655
1,398
24,874
39,929
45,583 $
$
32
— $
12,518
12,518
—
165
174
339
1,843
161
295
2,299
(1,960)
10,558 $
Decrease
— $
—
—
Completed
Construction
Ending
Balance
— $ 3,322
(878)
13,972
(878)
17,294
—
201
282
483
878
—
—
878
61,205
2,270
2,062
65,537
—
176
282
458
25
25 $
—
—
—
—
878
— $
23,664
1,640
1,411
26,715
38,822
56,116
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increase
Capital assets, not depreciated:
Land
$
Construction in progress
Total capital assets, not depreciated
6.
3,322 $
705
4,027
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
60,134
2,226
2,124
64,484
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
Total capital assets depreciated, net
Total capital assets, net
20,000
1,534
1,247
22,781
41,703
45,730 $
$
— $
1,820
1,820
—
135
205
340
1,821
175
310
2,306
(1,966)
(146) $
Decrease
— $
—
—
Completed
Construction
— $
(193)
(193)
Ending
Balance
3,322
2,332
5,654
—
55
159
214
193
—
—
193
60,327
2,306
2,170
64,803
—
54
159
213
1
1 $
—
—
—
—
193
— $
21,821
1,655
1,398
24,874
39,929
45,583
ACCOUNTS PAYABLE
Accounts payable represent amounts due at June 30, 2010 and 2009, for goods and services received prior to the
end of the fiscal year.
Summary of Accounts Payable at June 30
(In Thousands)
2010
2009
Purchased services
$ 265 $ 644
Interagency agreements
31
249
Capital assets
40
37
Supplies
25
113
Financial aid
16
34
Other payables
210
314
Total accounts payable $ 587 $ 1,391
In addition, as of June 30, 2010 and 2009, the University had payable from restricted assets in the amounts of
$1,356,086 and $414,102 which was related to capital projects financed by general obligation bonds.
7.
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.
33
The changes in long term debt for fiscal years 2010 and 2009 are as follows:
Liabilities for:
Bond premium
General obligation bonds
Revenue bonds
Total long term debt
Liabilities for:
Bond premium
General obligation bonds
Revenue bonds
Total long term debt
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases
Decreases
$
397
7,481
4,433
$ 12,311
$
149
4,060
$
$ 4,209
$
57
765
218
1,040
Ending
Balance
$
489
10,776
4,215
$ 15,480
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases Decreases
$
426
7,913
4,641
$ 12,980
$
17
310
$
$
327
$
46
742
208
996
Current
Portion
$
890
231
1,121
—
$
Ending
Balance
$
397
7,481
4,433
$ 12,311
Current
Portion
$
758
218
976
$
The changes in other compensation benefits for fiscal years 2010 and 2009 follow:
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases
$
$
4,073
208
493
263
5,037
$
$
321
86
265
205
877
Decreases
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
$
$
3,689
54
313
90
4,146
34
$
401
208
256
263
$ 1,128
277
208
113
184
782
Decreases
$
$
17
54
76
90
237
Ending
Balance
$ 4,117
86
645
284
$ 5,132
Current
Portion
$
$
Ending
Balance
$ 4,073
208
493
263
$ 5,037
412
86
119
617
Current
Portion
$
$
402
208
105
715
Bond Premium — Bonds were issued in fiscal years 2010 and 2009 resulting in premiums of $149,159 and
$16,505, respectively. Amortization is calculated using the straight-line method and amortized over the
remaining average life of the bonds.
General Obligation Bonds Liability — The state of Minnesota sells general obligation bonds to finance most of
Minnesota State Colleges and Universities’ capital projects. The interest rate on these bonds ranges from
2 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 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 bonds liability included in these financial statements represents the University’s share.
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 dormitory, residence hall, food
service, student union, and other revenue producing and related facilities at the state universities. Revenue
funds currently outstanding have interest rates of 4.25 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 2023. Annual principal and interest payments on the bonds are expected to require less than 32.83
percent of net revenues. The total principal and interest remaining to be paid on the bonds is $5,898,838.
Principal and interest paid for the current year and total customer net revenues were $449,862 and $1,384,870,
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 8 for additional information.
Net Other Postemployment Benefits — 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 9 for further
details.
Workers’ Compensation — The state of Minnesota Department of Management and Budget manages the self
insured workers’ compensations claims activities. The reported liability for workers’ compensation of
$283,887 and $262,711 at June 30, 2010 and 2009, 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.
Principal and interest payment schedules are provided in the following table for general obligation and revenue
bonds. There are no payment schedules for compensated absences, early termination benefits, net other
postemployment benefits, or workers’ compensation.
35
Long Term Debt Repayment Schedule
(In Thousands)
Fiscal Years
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
Total
8.
Revenue Bonds
Principal
Interest
$
231
$ 223
243
211
256
198
270
184
285
170
1,676
591
1,254
107
$
4,215
$ 1,684
General
Obligation Bonds
Principal
Interest
$
890
$ 497
891
457
829
414
829
373
768
333
3,257
1,137
2,218
448
1,094
109
$ 10,776
$ 3,768
EARLY TERMINATION BENEFITS
Early termination benefits are defined as benefits received for discontinuing services earlier than planned.
The Inter Faculty Organization (IFO) contract provides for this benefit. The following is a description of the
benefit arrangements, including number of retired faculty receiving the benefit, and the amount of future
liability as of the end of fiscal years 2010 and 2009.
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 2010 and 2009, follow:
Fiscal Year
2010
2009
9.
Number of Faculty
3
2
Future Liability
(In thousands)
$ 86
208
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 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, 2008, there were approximately 9 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.
36
The following table shows the components of the annual OPEB cost for 2010 and 2009, the amount actually
contributed to the plan, and changes in the net OPEB obligation:
Components of the Annual OPEB Cost
(In Thousands)
2010
2009
Annual required contribution (ARC)
$ 261
$ 253
Interest on net OPEB obligation
23
15
Adjustment to ARC
(19)
(12)
Annual OPEB cost
265
256
Contributions during the year
(113)
(76)
Increase in net OPEB obligation
152
180
Net OPEB obligation, beginning of year
493
313
Net OPEB obligation, end of year
$ 645
$ 493
The University’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net
OPEB obligation for fiscal years 2010 and 2009 were as follows:
For Year Ended June 30
(In Thousands)
2010
Beginning of year net OPEB obligation
493
$
Annual OPEB cost
265
Employer contribution
(113)
End of year net OPEB obligation
645
$
Percentage contributed
42.64%
$
$
2009
313
256
(76)
493
29.69 %
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, 2008
Actuarial
Value
of Assets
(a)
$
—
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Liability
Liability
(b)
(b - a)
2,323 $
2,323
Funded
Covered
Ratio
Payroll
(a/b)
(c)
0.00% $ 34,005
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
6.83%
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.
37
In the July 1, 2008 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 8.97 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.
10. LEASE AGREEMENTS
Operating Leases — The University is committed under various leases primarily for building space. These
leases are considered for accounting purposes to be operating leases. Lease expenses for the years ended
June 30, 2010 and 2009, totaled $1,152,179 and $980,116 for fiscal years 2010 and 2009, respectively.
Metropolitan State University’s Minneapolis campus is collocated with Minneapolis Community and Technical
College (MCTC). The University has an agreement with MCTC to reimburse MCTC for a share of facilities
expenses. The University has also extended and increased leased space for the Midway Campus through
July 30, 2013.
Future minimum lease payments are as follows:
Year Ended June 30
(In Thousands)
Year
Amount
2011 $ 1,230
2012
1,239
2013
1,242
2014
104
Total $ 3,815
Income Leases — Metropolitan State has an income lease with the Saint Paul Public Library Dayton’s Bluff
Branch that commenced on July 1, 2004 and continues through June 30, 2014.
The University has an income lease with Verizon for a lease for cell phone tower located on campus. The
current lease commenced February 6, 2004 and continues through February 5, 2014.
Future expected income receipts for existing lease agreements are as follows:
Year Ended June 30
(In Thousands)
Year
Amount
2011 $
98
2012
102
2013
105
2014
98
Total $ 403
38
11. OPERATING EXPENSES BY FUNCTIONAL CLASSIFICATION
The following table provides information related to operating expenses by functional classification:
For the Year Ended June 30, 2010
(In Thousands)
Salaries/
Benefits
$ 12,397
4,908
19,805
800
5
859
4,536
305
—
—
$ 43,615
Description
Academic support
Institutional support
Instruction
Operation & maintenance of plant
Public service
Research
Student services
Auxiliary enterprises
Depreciation
Scholarships & fellowships
Total operating expenses
Other
$ 2,681
3,562
3,160
4,632
27
215
999
559
2,299
2,092
$ 20,226
Total
$ 15,078
8,470
22,965
5,432
32
1,074
5,535
864
2,299
2,092
$ 63,841
For the Year Ended June 30, 2009
(In Thousands)
Salaries/
Benefits
$ 12,671
5,091
19,544
807
8
109
4,283
303
—
—
$ 42,816
Description
Academic support
Institutional support
Instruction
Operation & maintenance of plant
Public service
Research
Student services
Auxiliary enterprises
Depreciation
Scholarships & fellowships
Total operating expenses
Other
$ 2,491
3,577
1,890
4,348
72
65
814
542
2,306
1,126
$ 17,231
Total
$ 15,162
8,668
21,434
5,155
80
174
5,097
845
2,306
1,126
$ 60,047
12. EMPLOYEE PENSION PLANS
Metropolitan State 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
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.
39
The 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. Beginning July 1, 2007 the funding
requirement for both employer and employee was 4.25 percent. The funding contribution rate increases 0.25
percent in each of the subsequent years until reaching 5 percent from July 1, 2010, and thereafter. For the
period July 1, 2009 to June 30, 2010, the funding requirement is 4.75 percent for both employer and employee.
Actual contributions were 100 percent of required contributions.
Required contributions for Metropolitan State University were:
(In Thousands)
Fiscal Year Amount
2010
$ 321
2009
308
2008
284
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.
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 those 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, as an employer for some participants, is liable for a portion of any unfunded accrued
liability of this fund.
The statutory authority for TRF is Minnesota Statutes, Chapter 354. Effective July 1, 2007, the funding
requirement is 5.5 percent for both employer and employee coordinated members. Beginning July 1, 2011, both
employee and employer contribution rate increases will be phased in with a 0.5 percent increase occurring every
July 1 over four 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 Metropolitan State University were:
(In Thousands)
Fiscal Year
Amount
2010
$ 256
2009
251
2008
209
40
Minnesota State Colleges and Universities Defined Contribution Retirement Fund
General Information — The 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. 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 — Each 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. Contributions are made under the authority of Minnesota Statutes,
Chapter 354B.
Required contributions for Metropolitan State University were:
Fiscal Year
2010
2009
2008
(In Thousands)
Employer
Employee
$ 1,094 $
813
1,096
815
888
656
Supplemental Retirement Plan (SRP)
Participation — Each unclassified 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 normal retirement age is 55.
Contributions — Participants contribute to the SRP portion of the plan 5 percent of the eligible compensation
up to a defined maximum annual contribution as specified in the following table:
Member
Group
Inter Faculty Organization
MN State Univ. Assoc. of Administrators & Service Faculty
Minnesota State Colleges and Universities Administrators
41
Eligible
Compensation
$6,000 to $51,000
6,000 to 50,000
6,000 to 60,000
Maximum
Annual
Contributions
$ 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 Metropolitan State University were:
(In Thousands)
Fiscal Year Amount
2010
$ 491
2009
418
2008
353
13. SEGMENT INFORMATION
A segment is an identifiable activity reported as a stand alone 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, assets, and liabilities that are required by an external party to be accounted
for separately. Minnesota State Colleges and Universities issues revenue bonds to finance the University
parking ramp.
Metropolitan State University’s Portion of the Revenue Fund
(In Thousands)
2010
2009
796 $
914
4,782
6,492
611
915
4,931
6,457
339
4,004
4,343
349
4,235
4,584
567
1,582
2,149 $
498
1,375
1,873
$
1,385 $
(905)
480
(204)
276
1,873
2,149 $
1,223
(874)
349
(179)
170
1,703
1,873
CONDENSED STATEMENTS OF CASH FLOWS
Net cash provided (used) by
Operating activities
$
Investing activities
Capital and related financing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
$
361 $
23
(444)
(60)
1,719
1,659 $
553
66
(521)
98
1,621
1,719
CONDENSED STATEMENTS OF NET ASSETS
Assets
Current assets
Restricted assets
Noncurrent assets
Total assets
Liabilities
Current liabilities
Noncurrent liabilities
Total liabilities
Net Assets:
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
Nonoperating revenues (expenses)
Change in net assets
Net assets, beginning of year
Net assets, end of year
42
$
$
$
14. RELATED PARTY TRANSACTIONS
The Metropolitan State University’s Minneapolis campus is collocated with Minneapolis Community and
Technical College (MCTC) and shares physical plant, institutional and academic support, and student services
cost. The University and MCTC have an agreement to share costs using relevant cost bases. This agreement
articulates a cost allocation methodology which ensures that equitable and complete costs are absorbed by both
schools. In fiscal years 2010 and 2009, the University’s shared cost expense was $593,097 and $548,811,
respectively. The University recorded $0 and $248,811 in shared costs payable to MCTC at June 30, 2010 and
2009, respectively.
15. COMMITMENTS
During fiscal year 2010, construction continued on the Law Enforcement and Criminal Justice Education
Center, a partnership between the University, Minneapolis Community and Technical College, and Hennepin
Technical College. The building is being constructed on the campus of Hennepin Technical College. Upon
completion, the total cost of the project will be $15.6 million, of which $13.2 million had been expended by the
end of fiscal year 2010. Residual commitments to the University total $2.4 million.
In fiscal year 2010, the University has received bond funds for construction of the Smart Classroom project on
the St. Paul campus. Total cost of the project will be $6.6 million, of which $0.6 million had been expended as
of the end of fiscal year 2010. Residual commitments to the University total $6.0 million.
16. 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 manages these risks through state of Minnesota insurance plans including the state of Minnesota
Risk Management Fund, a self insurance 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 purchases optional physical damage coverage for their newest or most expensive
vehicles. Property coverage offered by the Minnesota Risk Management Fund is as follows:
Coverage
Institution deductible
Fund responsibility
Primary reinsurer coverage
Multiple reinsurers’ 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
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
$4,000,000
$25,000
Metropolitan State University retains the risk of loss and did not have any settlements in excess of coverage in
the last three years.
The Minnesota Risk Management Fund purchased student intern professional liability insurance on the open
market for the University.
Student intern professional liability per occurrence
Student intern professional liability annual aggregate
43
$1,000,000
$5,000,000
Minnesota State Colleges and Universities participate in the State Employee Group Insurance Plan, which
provides life insurance and 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 liability during the fiscal years
ended June 30, 2010 and 2009.
Fiscal Years Ended
June 30, 2010
June 30, 2009
(In Thousands)
Beginning
Net Additions
Liability
& Changes
$ 263
$ 205
90
263
Payments
$ 184
90
Ending
Liability
$ 284
263
17. COMPONENT UNITS
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations Are Component
Units, the following foundation affiliated with Metropolitan State University is a legally separate, tax exempt
entity and reported as a component unit.
The Metropolitan 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 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.
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 FASB Accounting Standards Codification (ASC)
958-205, Presentation of Financial Statements (previously FAS 117). Net assets, which are classified on the
existence or absence of donor imposed restrictions, are classified and reported according to the following
classes:
Unrestricted: 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 will be 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 the
foundation to use all or part of the income earned on any related investments for general or
specific purposes.
The University received $168,667 and $172,730 in fiscal years 2010 and 2009, respectively, from the
Foundation for scholarships. In addition, the University received $523,788 and $701,407 for program support
for the fiscal years ended June 30, 2010 and 2009, respectively. The University pays the salaries and benefits of
certain individuals providing services to the Foundation. The estimated value of these salaries and benefits was
$576,669 and $508,654 for the fiscal years ended June 30, 2010 and 2009, respectively.
44
Investments —The Foundation’s investments are presented in accordance with FASB ASC 958-320,
Investments-Debt and Equity Securities (previously FAS 124). 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 statements of financial position.
Schedule of Investments at June 30
(In Thousands)
Investments
2010
Money market & certificate of deposit
$
369
Fixed income/bonds/US treasuries
515
Balanced mutual funds
612
Equity based mutual funds
790
Equity securities
7
Alternative investments
54
Total investments
$
2,347
45
$
$
2009
269
196
830
799
—
52
2,146
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SUPPLEMENTAL SECTION
47
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
Board of Trustees
Minnesota State Colleges and Universities
St. Paul, Minnesota
We have audited the financial statements of Metropolitan State University (the University) as of and for
the year ended June 30, 2010, and have issued our report thereon dated October 22, 2010. We did not
audit the financial statements of Metropolitan State University Foundation, a discretely presented
component unit of Metropolitan State University. Those financial statements were audited by other
auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the
amounts included for the discretely presented component unit mentioned above, is based on the report
of the other auditors. We conducted our audit in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. The financial
statements of Metropolitan State University Foundation were not audited in accordance with
Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the University’s internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
University’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the University’s internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a
timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did
not identify any deficiencies in internal control over financial reporting that we consider to be material
weaknesses as defined above.
An independent member of Nexia International
48
Board of Trustees
Minnesota State Colleges and Universities
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the University’s financial statements are free
of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit and, accordingly, we do not express
such an opinion. The results of our test disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the Board of Trustees and management of
the University and is not intended to be and should not be used by anyone other than these specified
parties.
LarsonAllen LLP
Minneapolis, Minnesota
October 22, 2010
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