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ANNUAL
Financial Report
For the Years Ended June 30, 2010 and 2009
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, 2010 and 2009
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
TTY: (651) 282-2660
SOUTHWEST MINNESOTA STATE UNIVERSITY
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
TABLE OF CONTENTS
INTRODUCTION
Page
Transmittal Letter .................................................................................................................................... 5
Organization 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
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 .................................................................... 46
1
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2
INTRODUCTION
3
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4
5
6
June 30, 2010
Board of Trustees
Minnesota State
Colleges and Universities
Chancellor
James H. McCormick
President
David C. Danahar
SMSU
Foundation
Athletic Director
Chris Hmielewski
Affirmative Action
Director
Deb Almer
Associate VP for
Student Affairs and
Dean of Students
Scott Crowell
Provost/VP for Academic
and Student Affairs
Beth Weatherby
VP for Finance and
Administration
Doug Fraunfelder
7
VP for Advancement
vacant
The financial activity of the Southwest Minnesota 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.
8
FINANCIAL SECTION
9
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
Minnesota State Colleges and Universities
St. Paul, Minnesota
We have audited the accompanying financial statements of Southwest Minnesota 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 Southwest
Minnesota State University Foundation, a discretely presented component unit of Southwest Minnesota
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 Southwest Minnesota 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 Southwest Minnesota 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 26,
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
10
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 26, 2010
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, 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 footnotes, which follow this section.
Southwest Minnesota State University (SMSU) 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 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 2010 enrollment of 6,431 students
including 484 graduate students. SMSU’s full year 2009/2010 equivalent enrollment is 3,822 students. The
University has approximately 371 full and part-time employees.
SMSU boasts over 50 baccalaureate majors including business, education, english, environmental science,
agronomy, marketing, culinology and fine arts. SMSU offers 43 minors, 4 associate degree majors, and 16
preprofessional programs as well as graduate degrees in business, education and special education. The University
is accredited by the Higher Learning Commission (HLC) of the North Central Association of Colleges. 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 recreation/athletic facility was added
in 1995. 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 was 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 are currently undergoing a $9 million renovation scheduled to be completed by June 2012.
FINANCIAL HIGHLIGHTS
Southwest Minnesota State University’s 2010 state appropriation decreased by $1.8 million from the amount
received in 2009. Undergraduate tuition rate increases of 5 percent in fiscal year 2010, 3 percent in fiscal year 2009,
and 4 percent in fiscal year 2008 have been necessary to supplement the lagging state appropriation. During fiscal
year 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. The University has continued to meet student needs with enrollment
increasing and staffing levels decreasing.
Student FYE
State appropriation
State appropriation per student
$
$
FY10
3,822
16,044,285
4,198
Change
2.9 %
(10.3)%
(12.8)%
FY09
3,716
$ 17,887,374
$
4,814
Change
1.0 %
1.3 %
0.2 %
FY08
3,678
$ 17,660,319
$
4,802
Assets totaled $101.1 million in fiscal year 2010 compared to $92.5 million in fiscal year 2009 and $91.4 million in
fiscal year 2008. Net assets, which represent the residual interest in the University’s assets after liabilities are
deducted, totaled $65.8 million in fiscal year 2010 compared to $59.6 million in fiscal year 2009 and $58.1 million
12
in fiscal year 2008. As of June 30, 2010, net assets is comprised of capital assets, net of related debt of $59.5
million, restricted assets of $1.5 million, and unrestricted assets of $4.8 million.
Operating revenues increased $1.3 million from fiscal year 2009 to fiscal year 2010 and increased $712 thousand
from fiscal year 2008 to fiscal year 2009. The increases are a result of tuition increases and an increase in housing
rates and occupancy.
Total operating expenses decreased $241 thousand from fiscal year 2009 to fiscal year 2010 and increased $2.9
million from fiscal year 2008 to fiscal year 2009. In fiscal year 2009, operating expenses increased because of
salary and benefit increases, a large purchase of computers, and purchases of new residence hall furniture and
mattresses. In fiscal year 2010, the operating expense decrease was the result of budget cuts. The 2010 expenses
also included a one-time expenditure of $517 thousand for additional residence hall furniture.
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, 2010, 2009 and 2008 respectively, is as
follows:
(In Thousands)
2010
$ 15,257
5,360
2009
$ 14,597
4,587
2008
$ 14,892
17,825
880
79,664
101,161
854
72,500
92,538
837
57,802
91,356
8,704
26,634
35,338
7,997
24,952
32,949
7,900
25,336
33,236
$ 65,823
$ 59,589
$ 58,120
Current assets
Restricted assets
Noncurrent assets:
Student loans receivable, net
Capital assets, net
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets
Current assets consist primarily of cash, cash equivalents and investments totaling $13.7, $12.5 and $12.5 million at
June 30, 2010, 2009 and 2008, respectively. This represents approximately 3.8 months of operating expenses
(excluding depreciation) compared to 3.4 months at June 30, 2009 and 3.6 months at June 30, 2008.
Restricted assets were substantially higher in fiscal year 2008. The University received bond proceeds at the end of
2007 for the construction of a new residence hall. The bond proceeds have been spent and the residence hall is
completed. Capital assets have increased with the lab improvements in progress and the completion of the regional
event center and residence hall.
Current liabilities consist primarily of accounts payable, salaries and related benefits payable. Included are
restricted accounts payable for capital projects of $2.3 million at June 30, 2010, $1.7 million at June 30, 2009 and
13
$2.4 million at June 30, 2008. 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, 2010, 2009 and 2008, respectively, are summarized as follows:
(In Thousands)
Net Assets
2010
Invested in capital assets, net of related debt
$ 59,515
Restricted
1,486
Unrestricted
4,822
Total net assets
$ 65,823
2009
$ 53,918
2,279
3,392
$ 59,589
2008
$ 52,558
2,439
3,123
$ 58,120
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, Office of the Chancellor
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, 2010,
totaled $79.7 million, net of accumulated depreciation of $50.7 million.
Capital outlays totaled $10.4 million in 2010. Capital appropriations of $7 million, $1.5 million and $9.7 million
were received in fiscal years 2010, 2009 and 2008, respectively. The major projects in 2010 were the continuation
of lab renovations and elevator code improvements.
Capital Assets, Net of Depreciation (In Thousands)
80,000
Land
70,000
Construction in Progress
60,000
50,000
Buildings and
Improvements
40,000
Equipment
30,000
Library Collections
20,000
10,000
2010
2009
2008
Bonds 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.
14
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.
Summarized statements for the years ended June 30, 2010, 2009 and 2008, respectively, follow:
(In Thousands)
Operating revenue:
2010
Tuition, auxiliary and sales, net
$ 15,850
Restricted student payments, net
5,118
Other revenue
165
Total operating revenue
21,133
$
2009
15,007
4,658
162
19,827
$
2008
14,524
4,503
88
19,115
Nonoperating revenue:
State appropriations
Capital appropriations
Federal grants
State grants
Private and capital grants
Interest income
Other nonoperating revenues
Total nonoperating revenue
Total revenue
16,044
7,035
5,830
2,186
1,681
97
158
33,031
54,164
17,887
1,458
3,543
1,915
2,418
311
2,022
29,554
49,381
17,660
9,660
3,309
2,067
5,215
700
112
38,723
57,838
Operating expense:
Salaries and benefits
Supplies and services
Depreciation
Financial aid, net
Other
Total operating expenses
30,914
9,565
3,213
872
2,409
46,973
31,258
9,877
2,972
549
2,558
47,214
30,165
8,915
2,356
357
2,525
44,318
Nonoperating expense
Total expense
957
47,930
698
47,912
1,054
45,372
6,234
59,589
$ 65,823
1,469
58,120
59,589
12,466
45,654
58,120
Increase in net assets
Net assets, beginning of year
Net assets, end of year
$
$
Tuition and state appropriations are the primary sources of funding for the University’s academic programs. Tuition
rate increases and state appropriation funding are discussed above in the Financial Highlights section. Restricted
student payments have increased each year because of increased occupancy and rate increases in residential life. In
fiscal year 2010, federal grants revenue increased from additional Pell grants and $864 thousand from the American
Recovery and Reinvestment Act of 2009.
Private grants of $1.1 and $4 million were received in fiscal years 2009 and 2008, respectively, for the construction
of the regional event center. Donations of capital assets, scoreboards and lighting at the regional event center,
increased other nonoperating revenue in fiscal year 2009.
15
Revenue by Source (In Thousands)
20,000
15,000
10,000
5,000
2010
-
2009
2008
The University is relying to a greater extent on student tuition as a revenue source.
COMPONENT UNIT
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 $729,901,
$723,605 and $696,057 to SMSU scholarships for the years ended June 30, 2010, 2009 and 2008, respectively. In
fiscal years 2009 and 2008, the Foundation also contributed $2.7 and $4.1 million for the construction of the
Regional Event Center, scoreboards and lighting, respectively.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking toward the future, fiscal year 2011 should remain relatively similar to fiscal year 2010. The University will
maintain the cuts made in fiscal year 2010, use the remaining stabilization funds received through the American
Recovery and Reinvestment Act of 2009, and use tuition revenue increases to balance the budget in fiscal year 2011.
The difficult economic times are anticipated to be even worse for the state budget in the next biennium.
The Minnesota Management and Budget July 2010 Economic Outlook projected the state deficit for the 2012-2013
biennium at $5.766 billion. The Minnesota State Colleges and Universities System share of the deficit is projected
to be between $105 to $210 million over the biennium. Based on these assumptions we are projecting a reduction in
appropriation to Southwest Minnesota State University between $2.9 and $5.9 million over the biennium. Although
some of the reduction may be offset by tuition increases we are still projecting a budget deficit of $2.5 to $5 million
over the biennium. The percent of the University’s total resources received from the state appropriation is currently
less than 43 percent and will likely continue to decrease until the state is able to appropriate adequate funding to
higher education in Minnesota.
Enrollment is expected to be relatively stable over the next few years. Even though SMSU’s enrollment may be
relatively stable and/or increasing, the enrollment increases at many other Minnesota State Colleges and Universities
have increased at a faster rate. This has a negative effect on the percentage of allocation that SMSU receives of the
total Minnesota State Colleges and Universities appropriation. SMSU’s initial appropriation received is less today
16
than it was ten years ago. Tuition rate increases have been capped by the Board of Trustees and are likely to be
limited in the next year also. Unless funding is received through sources other than state appropriation or tuition
revenue, total resources for the University are likely to decrease. The plan to maintain the University’s balanced
budget, while costs continue to increase, will come from savings in both salary and non-salary expenditures. In
managing our budget, the highest priority continues to be to serve the needs of our students.
We are committed to building upon current efforts to enhance the University’s academic reputation, reduce our
operating costs, strengthen internal controls and effectively manage our financial risks. 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
17
SOUTHWEST MINNESOTA STATE UNIVERSITY
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Assets
Current Assets
Cash and cash equivalents
Investments
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
Student loans and other assets, net
Capital assets, net
Total noncurrent assets
Total Assets
$
13,320
424
202
531
554
226
15,257
2009
$
11,707
750
114
1,366
404
256
14,597
5,357
5,357
4,583
4,583
3
3
5,360
4
4
4,587
880
79,664
80,544
101,161
854
72,500
73,354
92,538
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
3,151
665
511
2,270
188
52
1,433
395
39
8,704
3,117
653
455
1,721
183
142
1,239
452
35
7,997
22,039
3,589
1,006
26,634
35,338
20,387
3,545
1,020
24,952
32,949
Net Assets
Invested in capital assets, net of related debt
Restricted expendable, bond covenants
Restricted expendable, other
Unrestricted
Total Net Assets
59,515
1,486
4,822
65,823
53,918
1,110
1,169
3,392
59,589
$
The notes are an integral part of the financial statements.
18
$
SOUTHWEST MINNESOTA 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
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
Deferred 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
58
2,878
472
12
13
7
25
3,465
650
290
2,479
7,281
203
10,903
14,368
44
9
167
515
735
2009
$
$
$
119
2,660
402
6
14
6
18
3,225
945
282
2,268
7,554
196
11,245
14,470
29
12
455
496
6,794
7,529
7,292
7,788
584
3,503
2,752
6,839
872
3,265
2,545
6,682
14,368
$
14,470
SOUTHWEST MINNESOTA 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
12,935
1,514
1,401
5,118
165
21,133
2009
$
12,109
1,605
1,293
4,658
162
19,827
30,914
6,265
2,611
689
3,213
872
2,409
46,973
(25,840)
31,258
6,060
2,959
858
2,972
549
2,558
47,214
(27,387)
Nonoperating Revenues (Expenses)
Appropriations
Federal grants
State grants
Private grants
Interest income
Interest expense
Grants to other organizations
Total nonoperating revenues (expenses)
16,044
5,830
2,186
1,318
97
(927)
(27)
24,521
17,887
3,543
1,915
1,295
311
(670)
(28)
24,253
Loss Before Other Revenues, Expenses, Gains, or Losses
(1,319)
(3,134)
7,035
363
158
(3)
6,234
1,458
1,123
1,774
207
41
1,469
Capital appropriations
Capital grants
Donated assets and supplies
Insurance proceeds
Gain (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.
20
59,589
65,823
$
58,120
59,589
SOUTHWEST MINNESOTA STATE UNIVERSITY FOUNDATION
STATEMENTS OF ACTIVITIES
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Support and Revenue
Contributions
In-kind contributions
Investment income
Realized losses
Unrealized gains and (losses)
Program income
Fundraising income
Rental income
Other income
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 expenses
Total supporting services
Total expenses
Change in Net Assets
1,477
387
95
(117)
525
368
50
740
16
3,541
2009
$
241
730
687
486
450
2,594
355
724
691
2,899
249
4,918
296
494
790
3,384
297
421
718
5,636
157
Net Assets, Beginning of Year
Net Assets, End of Year
$
The notes are an integral part of the financial statements.
21
3,142
333
117
(353)
(533)
129
94
742
3
3,674
6,682
6,839
(1,962)
$
8,644
6,682
SOUTHWEST MINNESOTA 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
Insurance proceeds
Cash repayment of program loans
Cash paid to suppliers for goods or services
Cash payments to employees
Financial aid disbursements
Cash payments of program loans
Net cash used in operating activities
$
21,252
623
168
(11,828)
(30,896)
(886)
(208)
(21,775)
2009
$
19,726
141
(12,780)
(31,143)
(560)
(147)
(24,763)
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
16,044
(90)
5,712
2,186
1,318
(27)
25,143
17,887
38
3,563
1,915
1,375
(28)
24,750
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 (discount)
Interest paid
Repayment of note principal
Repayment of bond principal
Net cash flows used in capital and related financing activities
(9,814)
7,035
363
1
207
3,060
49
(1,000)
(225)
(1,086)
(1,410)
(15,189)
1,458
2,010
41
866
6
(674)
(224)
(368)
(12,074)
Cash Flows from Investing Activities
Proceeds from sales and maturities of investments
Purchase of investments
Investment earnings
Net cash flows from investing activities
750
(425)
104
429
Net Increase (Decrease) in Cash and Cash Equivalents
332
332
2,387
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
22
16,290
18,677
(11,755)
$
28,045
16,290
SOUTHWEST MINNESOTA 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
Provision for loan defaults
Loan principal repayments
Loans issued
Loans forgiven
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 be added to operating income
Net cash flow used in operating activities
Non-Cash Investing, Capital, and Financing Activites
Capital projects on account
Donated capital assets
Investment earnings on account
Amortization of bond premium (discount)
$
$
23
(25,840)
2009
$
(27,387)
3,213
6
168
(208)
12
158
2,972
7
141
(147)
11
195
639
(36)
34
(12)
(14)
75
30
4,065
(21,775)
(743)
76
67
53
(3)
(18)
13
2,624
(24,763)
(2,318)
4
(24)
$
$
(1,724)
1,579
33
(20)
SOUTHWEST MINNESOTA 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 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 17. 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 two accounts in local banks. The activities handled through a 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 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 SBI 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 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
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
25
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 director, Minnesota State Colleges and Universities, Office of the Chancellor, Financial Reporting,
Wells Fargo Place, 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. During fiscal year 2010, $864,367 of federal aid was recognized as
revenue related to the American Recovery and Reinvestment Act of 2009. Of this amount, $279,321 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.
Capital Grants — The University receives federal, state, and private grants which are restricted for the
acquisition or construction of capital assets.
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 $3,542,977 and $1,914,656 respectively, have been reclassified from operating to
nonoperating revenue. This reclassification increased the total operating loss by $5,457,633 while increasing
total nonoperating revenue by the same amount.
Tuition, Fees, and Sales, Net — Tuition, fees, and sales are reported net of scholarship allowances of
$6,693,394 and $5,608,779 for fiscal years 2010 and 2009, respectively. Sales are also net of cost of goods sold
of $10,881 and $28,360 for fiscal years 2010 and 2009, respectively.
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 of $355,119 and $256,831 for
26
fiscal years 2010 and 2009, respectively. Sales are also net of cost of goods sold of $17,061 and $9,045 for
fiscal years 2010 and 2009, respectively.
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.
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.
Restricted for Other
(In Thousands)
2010
Capital projects
$
119
Donations
308
Debt service
554
Faculty contract obligations
389
Loans
116
Total
$ 1,486
2009
273
—
404
375
117
$ 1,169
$
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 one checking and one savings account in a local bank. The activities
handled through the local bank include financial aid, student payroll, auxiliary, and student activities.
27
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 at June 30
(In Thousands)
Carrying Amount
2010
Cash, in bank
$
596
Cash, trustee account (US Bank)
1,557
Total local cash and cash equivalents
2,153
Total treasury cash accounts
16,524
Grand Total
$ 18,677
2009
446
1,444
1,890
14,400
$ 16,290
$
At June 30, 2010 and 2009, the University’s local bank balances were $678,191 and $528,057, 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 SBI 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. 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 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 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.
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.
28
As of June 30, the University had the following investments and maturities:
Years Ended June 30
(In Thousands)
Investment Type
U.S. agency obligations
U.S. agency mortgage-backed securities
Municipal obligations
Total fair value
2010
Fair Value
$
202
197
25
$
424
Weighted
Maturities
(Years)
2.50
2.02
2.65
2.29
The University had two long term repurchase agreements with a local bank as of June 30, 2009 with a balance
of $750,000, which were classified as 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
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 table provides 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
29
3.
ACCOUNTS RECEIVABLE
The accounts receivable balances are made up primarily of receivables from individuals with the exception of
$830,202 due from State of Minnesota Risk Management for an insurance claim at June 30, 2009. At June 30,
2010 and 2009, the total accounts receivable balances for the University were $731,089 and $1,568,433,
respectively, less an allowance for uncollectible receivables of $200,204 and $202,474, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2010
2009
Tuition
$
251 $
293
Fees
114
116
Room and board
126
108
Sales and services
98
77
Third party obligations
50
47
Insurance proceeds
—
830
Other
92
97
Total accounts receivable
731
1,568
Less allowance for uncollectible accounts
(200)
(202)
Net accounts receivable
$
531 $ 1,366
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Fiscal Year 2010
Allowance
Percentage
Less than 1 year
15%
1 to 3 years
45%
3 to 5 years
70%
Over 5 years
95%
4.
Fiscal Year 2009
Allowance
Percentage
Less than 1 year
2%
1 to 2 years
50%
Over 2 years
100%
PREPAID EXPENSE
Prepaid expense consists of $554,006 and $404,304 for fiscal years 2010 and 2009, respectively, which 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 year.
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, 2010 and
2009, the total loans receivable for this program were $1,185,376 and $1,158,120, respectively, less an
allowance for uncollectible loans of $106,700 and $101,200, respectively.
30
6.
CAPITAL ASSETS
Summaries of changes in capital assets for fiscal years 2010 and 2009 follow:
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases Decreases
$
203 $
1,345
1,548
— $
9,968
9,968
— $
—
—
Completed
Construction
— $
(4,688)
(4,688)
Ending
Balance
203
6,625
6,828
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
112,670
4,511
1,621
118,802
—
213
230
443
—
119
256
375
4,688
—
—
4,688
117,358
4,605
1,595
123,558
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
44,357
2,532
961
47,850
2,656
329
228
3,213
—
85
256
341
—
—
—
—
47,013
2,776
933
50,722
4,688
— $
72,836
79,664
Total capital assets depreciated, net
Total capital assets, net
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
$
70,952
72,500 $
(2,770)
7,198 $
34
34 $
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases Decreases
$
203 $
16,312
16,515
— $
14,527
14,527
— $
—
—
Completed
Construction
— $
(29,494)
(29,494)
Ending
Balance
203
1,345
1,548
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
83,176
3,115
1,678
87,969
—
1,435
164
1,599
—
39
221
260
29,494
—
—
29,494
112,670
4,511
1,621
118,802
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
41,929
2,258
951
45,138
2,428
313
231
2,972
—
39
221
260
—
—
—
—
44,357
2,532
961
47,850
29,494
— $
70,952
72,500
Total capital assets depreciated, net
Total capital assets, net
$
42,831
59,346 $
31
(1,373)
13,154 $
—
— $
7.
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)
2010
2009
Capital expenditures
$
71 $
—
Purchased services
303
268
Repairs and maintenance
103
80
Supplies
96
84
Other payables
92
221
Total
$
665 $
653
In addition, as of June 30, 2010 and 2009, the University had amounts payable from restricted assets of
$2,270,074 and $1,721,227, which was 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. The changes in long term debt for fiscal years 2010 and 2009 follow:
Liabilities for:
Bond premium/discount
General obligation bonds
Notes payable
Revenue bonds
Total long term debt
Liabilities for:
Bond premium/discount
General obligation bonds
Notes payable
Revenue bonds
Total long term debt
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases Decreases
$
$
114
3,584
457
17,471
21,626
$
$
49
2,015
—
1,045
3,109
$
$
24
313
225
701
1,263
Ending
Balance
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases Decreases
$
$
128
3,694
—
17,530
21,352
$
$
32
6
185
681
—
872
$
$
20
295
224
59
598
139
5,286
232
17,815
23,472
Current
Portion
$
$
Ending
Balance
$
$
114
3,584
457
17,471
21,626
—
376
232
825
1,433
Current
Portion
$
$
—
313
225
701
1,239
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
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
$
$
3,536
77
298
86
3,997
$
$
410
32
230
27
699
Decreases
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
$
3,450
174
145
175
3,944
$
$
521
39
223
67
850
483
77
95
57
712
Decreases
$
$
435
136
70
156
797
Ending
Balance
$ 3,463
32
433
56
$ 3,984
Current
Portion
$
$
Ending
Balance
$ 3,536
77
298
86
$ 3,997
339
32
—
24
395
Current
Portion
$
$
341
77
—
34
452
Bond Premium/Discount — In fiscal year 2010 bonds were issued resulting in premiums of $66,243 and
discounts of $17,200. Bonds were issued in fiscal year 2009 resulting in premiums of $6,312. 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 consist of financing agreements on computers and equipment that are under the
capitalization threshold of $10,000. The interest rate on these notes ranges from 2.99 percent to 6.1 percent.
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 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 2027. Annual principal and interest payments on the bonds are expected to require less than 28.08
percent of net revenues. The total principal and interest remaining to be paid on the bonds is $24,646,256.
Principal and interest paid for the current year and total customer net revenues were $1,432,802 and $5,564,616,
respectively.
33
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 $56,319
and $86,245 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.
Capital Contributions — The liabilities of $1,005,905 and $1,019,928 at June 30, 2010 and 2009, respectively,
represent the amount the University would owe the federal government if it were to discontinue the Perkins loan
program. The net change decreased $14,023 and $2,533 for fiscal year 2010 and 2009, respectively.
Principal and interest payment schedules are provided in the following table for revenue bonds, general
obligation bonds, capital leases, and notes payable.
There are no payment schedules for bond
premium/discounts, compensated absences, early termination benefits, other postemployment benefits, workers’
compensation, or capital contributions.
Fiscal Years
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
Total
9.
Long Term Debt Repayment Schedule
(In Thousands)
General Obligation
Revenue Bonds
Notes Payable
Bonds
Principal
Interest
Principal Interest Principal Interest
$
376 $
244 $
825 $ 737 $
232 $
5
377
227
858
702
—
—
347
209
897
666
—
—
347
192
926
628
—
—
318
176
965
588
—
—
1,508
652
5,306
2,278
—
—
1,394
289
5,618
1,124
—
—
619
59
2,420
109
—
—
$ 5,286 $ 2,048 $ 17,815 $ 6,832 $
232 $
5
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 2010 and 2009.
34
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, is as follows:
Fiscal Year
2010
2009
Number
of Faculty
1
2
Future Liability
(In Thousands)
$
32
77
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 2010 and 2009, no retired faculty are receiving this benefit.
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, 2008, there were approximately 11 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.
35
The following table shows the components of the annual OPEB cost for fiscal years 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
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
$
$
228 $
14
(12)
230
(95)
135
298
433 $
2009
222
7
(6)
223
(70)
153
145
298
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
2009
Net OPEB obligation, beginning of year
$ 298
$ 145
Annual OPEB Cost
230
223
Employer contribution
(95)
(70)
Net OPEB obligation, end of year
$ 433
$ 298
Percentage contributed
41.30 %
31.39 %
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)
$ —
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Funded
Liability
Liability
Ratio
(b)
(b - a)
(a/b)
$ 2,383
$ 2,383
0.00%
Covered
Payroll
(c)
$ 23,472
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
10.15%
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, 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.
36
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.
11. LEASE AGREEMENTS
Income Lease – July 1, 2007, the University entered into a five year lease agreement with the Agricultural
Utilization Research Institute. 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
2011
$
92
2012
94
Total
$
186
12. 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/
Description
Benefits
Other
Academic support
$ 2,821
$ 1,185
Institutional support
3,801
1,499
Instruction
14,703
894
Operation & maintenance of plant
1,958
1,829
Public service
363
425
Research
—
6
Student services
5,256
1,819
Auxiliary enterprises
2,012
4,317
Depreciation
—
3,213
Scholarships & fellowships
—
872
Total operating expenses
$ 30,914
$ 16,059
Total
$ 4,006
5,300
15,597
3,787
788
6
7,075
6,329
3,213
872
$ 46,973
For the Year Ended June 30, 2009
(In Thousands)
Salaries/
Description
Benefits
Other
Academic support
$ 2,520
$ 1,310
Institutional support
3,750
1,580
Instruction
14,891
869
Operation & maintenance of plant
2,050
1,639
Public service
398
302
Student services
5,586
2,030
Auxiliary enterprises
2,063
4,705
Depreciation
—
2,972
Scholarships & fellowships
—
549
Total operating expenses
$ 31,258
$ 15,956
Total
$ 3,830
5,330
15,760
3,689
700
7,616
6,768
2,972
549
$ 47,214
37
13. 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.
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 Southwest Minnesota State University were:
(In Thousands)
Fiscal Year Amount
2010
$
242
2009
244
2008
231
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.
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.
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
38
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 Southwest Minnesota State University were:
(In Thousands)
Fiscal Year Amount
2010
$
198
2009
192
2008
173
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. 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 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
2010
$
708 $
529
2009
730
543
2008
639
476
Supplemental Retirement Plan — (SRP)
Participation — Each 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.
39
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
2010
$ 428
2009
427
2008
360
14. 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.
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
40
2010
$
$
731
3,206
3
32,603
36,543
2009
$
1,644
4,301
3
33,491
39,439
1,371
17,000
18,371
2,556
16,783
19,339
18,052
120
18,172
18,717
1,383
20,100
$
Southwest Minnesota State University Portion of the Revenue Fund
(In Thousands)
CONDENSED STATEMENTS OF REVENUES,
EXPENSES, AND CHANGES IN NET ASSETS
Operating revenues
Operating expenses
Net operating loss
Nonoperating revenues (expenses)
Insurance proceeds
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
Capital and related financing activities
Net decrease
Cash, beginning of year
Cash, end of year
$
$
$
$
2010
5,564
(6,835)
(1,271)
(657)
—
(1,928)
20,100
18,172
5
80
(2,116)
(2,031)
5,766
3,735
$
$
2009
4,939
(6,742)
(1,803)
(260)
35
(2,028)
22,128
20,100
$
(575)
302
(11,251)
(11,524)
17,290
$
5,766
15. COMMITMENTS
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.
Funding was approved in 2008 on a $9.2 million Science and Hospitality/Culinology Labs renovation project
has an estimated completion date of May 2012. As of June 30, 2010, $6.6 million has been spent. Two
electrical and code improvement projects budgeted at $1.9 million were approved in 2009 with an estimated
completion date of June 2010. As of June 30, 2010, $1.8 million has been spent.
Four projects with a total budget of $1.8 million have been approved in 2010. Three have an estimated
completion date of April 2012 and one has an estimated completion date of Nov 2010. As of June 30, 2010,
$71 thousand has been spent.
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 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.
41
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
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
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, 2010 and 2009:
Fiscal Year Ended 6/30/10
Fiscal Year Ended 6/30/09
(In Thousands)
Beginning
Net Additions
Liability
and Changes
$ 86
$ 27
175
67
Payments
$ 57
156
Ending
Liability
$ 56
86
17. 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.
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
42
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.
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 (previously FAS
117). 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 Organization 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 the Organization. Generally, the donors of these assets permit the
Organization 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 $1,728,911and $3,993,608 in fiscal years 2010 and 2009, respectively, from Southwest
Minnesota State University Foundation. Of this amount $729,901 and $723,605 in fiscal years 2010 and 2009,
respectively, was for scholarships; $316,639 and $147,000, respectively, was for various program donations;
$362,547 and $2,701,752, respectively, was for capital asset donations; and $316,824 and $421,251,
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 (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 statement of financial position.
Schedule of Investments at June 30
(In Thousands)
Investments
2010
Money market savings
$
33
Fixed income securities
3,114
Equity securities
2,210
Total investments
$ 5,357
2009
225
2,279
2,424
$ 4,928
$
Capital Assets— Summaries of the Foundations’ capital assets for fiscal years 2010 and 2009 are:
Schedule of Capital Assets at June 30
(In Thousands)
Capital Assets
2010
Capital assets, not depreciated:
Land
$
265
Total capital assets, not depreciated
265
Capital assets, depreciated:
Buildings and improvements
8,126
Equipment
37
Total capital assets, depreciated
8,163
Less total accumulated depreciation
1,147
Total capital assets depreciated, net
7,016
Total capital assets, net
$ 7,281
43
2009
$
$
265
265
8,126
37
8,163
874
7,289
7,554
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)
Long Term Debt
2010
Assessment payable
$
43
Notes payable
2,186
Student housing revenue note
5,080
Total long term debt
7,309
Less current portion
515
Net long term debt
$ 6,794
2009
51
2,469
5,227
7,747
455
$ 7,292
$
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. A $125,000 note is secured by investments in the Expendable Investment fund held at
Bremer Bank. This note matures in full on April 5, 2011 including interest at 4.5 percent.
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 $2,006,000 and
has paid $1,473,534 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 interest rate is 5 percent until
May 2010 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 2030.
Principal and interest payment schedule is provided below:
Long Term Debt Repayment Schedule
(In Thousands)
Fiscal Years
Principal
Interest
2011*
$
515 $
255
2012*
694
244
2013*
846
224
2014*
794
159
2015*
262
142
2016-2020*
1,257
595
2021-2025*
1,365
385
2026-2030*
1,576
111
Total
$ 7,309 $ 2,115
*Student Housing Revenue Note interest is estimated at 5 percent.
44
SUPPLEMENTAL SECTION
45
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 Southwest Minnesota State University (the University) as
of and for the years ended June 30, 2010, and have issued our report thereon dated October 26, 2010.
We did not audit the financial statements of Southwest Minnesota State University Foundation, a
discretely presented component unit of Southwest Minnesota 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 Southwest Minnesota 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
46
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 26, 2010
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