Minnesota State Colleges and
Universities
Board of Trustees Meeting
December 14, 2004
Table of Contents
• Audit Results, Reports Issued and New Standards
Implemented, Including Component Units
• Management Recommendations
• Required Communication
• Financial Statement Highlights
• Questions and Open Discussion
Audit Results – Reports Issued
• Independent Auditors’ Report on Financial Statements (System
Wide) – Unqualified Opinion.
• Report References Other Campus Auditors and 2003 System
Wide Auditors.
• Independent Auditors’ report on Financial Statements (Revenue
Bond) – Unqualified Opinion.
• Independent Auditors’ Report on Compliance and on Internal
Control Over Financial Reporting Based Upon the Audit
Performed in Accordance With Government Auditing Standards
– no findings or material weaknesses, except for certain colleges
and universities that did not maintain depository
insurance/collateral securities at required minimum levels
during the year.
New Standards
• SAS 99 – New Fraud Standards. Requires
additional communication of fraud risks, increased
documentation of fraud risks and unpredictable
audit tests for risk areas. No fraud identified as a
result of our testing.
• GASB 39 – Component Units. Requires
reassessment of significant component units. The
seven University Foundations were deemed
significant and included in the annual audit report.
Separate pages for identification of component
units.
Component Units
• New for Fiscal year 2004 audit, as required by GASB
Statement 39.
• Includes University Foundations that are “Significant”.
Includes Southwest, Winona, Metropolitan State, Mankato,
Bemidji, Moorhead and St. Cloud.
• Total Assets at June 30, 2004 totaled $114,279,000
• Total Revenues recognized for the year ended June 30,
2004 totaled $25,314,000.
• Shown as separate statement in the consolidated MnSCU
report to allow the financial statement readers to
distinguish between MnSCU and the Foundations.
Management Recommendations
• System Access and Security – Continue to review
applicable system access rights at campus level to reduce
incompatibilities.
• Financial Reporting Process and Structure – Continue
to train and pass down responsibilities to campus level.
• Accounting Disciplines – Explore interim financial
reporting to assist in year end work load.
• Computer Processing Environment/Information
Protection Plan – continue to implement OLA
recommendations for security concerns (consistency of
security, system privileges, password management, data
warehouse security.)
Management Recommendations
• New Accounting Pronouncements –
– GASB 45 – Post Employment Benefits – effective June
30, 2008.
– GASB 39 – Component Units – implemented June 30,
2004.
– GASB 40 – Deposit and Investment Risk Disclosures –
effective June 30, 2005.
– GASB 42 – Impairment of Capital Assets and for
Insurance recoveries – effective June 30, 2006.
Required Communication
•
•
•
•
•
•
•
•
•
OUR RESPONSIBILITY UNDER GENERALLY ACCEPTED AUDITING
STANDARDS AND GOVERNMENT AUDITING STANDARDS – reasonable but not
absolute assurance that financial statements are free of material misstatement. Sampling
used in testing. No opinion on internal controls.
SIGNIFICANT ACCOUNTING POLICIES – Note 1 to the Financial Statements
ACCOUNTING ESTIMATES - the most sensitive estimates were:
Depreciation, Allowance for uncollectible A/R, Scholarship Allowances (Alternate
Method), Workers Compensation Claims, Compensated Absences - reasonable and
consistent
AUDIT ADJUSTMENTS - reallocation of capital appropriations between campuses
and the adjustments for prior year compensated absences and capital assets.
DISAGREEMENTS WITH MANAGEMENT - none
CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS – campus
auditors
ISSUES DISCUSSED PRIOR TO RETENTION OF INDEPENDENT AUDITORS
- normal
DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT - none
Revenues - 2004 and 2003
$700,000,000
$592,802,000
$559,631,000
$498,882,000
$600,000,000
$500,000,000
$449,917,000
$400,000,000
$300,000,000
$200,000,000
$165,993,000
$161,352,000
$64,793,000
$71,720,000
$57,446,000$30,845,000
$86,364,000
$75,421,000
$50,875,000
$46,454,000
$100,000,000
$-
2003
2004
Operating Appropriations
Tuition, Auxiliary and Sales, Net
Federal Grants
State and Private Grants
Restricted Student Payments, Net
Other
Capital Appropriations
2004 Revenues - $1,449,310,000
Capital Appropriations
$64,793,000
4%
Investment Income
$4,152,000
0%
T uition, Auxiliary and Sales, Net
$498,882,000
34%
Operating Appropriations
$559,631,000
39%
Other
$24,642,000
2% State and Private Grants
$71,720,000
5%
Restricted Student Payments, Net
$57,446,000
4%
Federal Grants
$165,993,000
11%
2003 Revenues - $1,463,185,000
Donated Assets
2,137,000
Capital Appropriations
0%
$86,364,000
6%
Operating Appropriations
$592,802,000
41%
Investment Income
$6,233,000
0%
T uition, Auxiliary and Sales, Net
$449,917,000
31%
Restricted Student Payments, Net
$50,875,000
3%
Federal Grants
Other
$161,352,000
$38,084,000 State and Private Grants 11%
3%
$75,421,000
5%
Expenses - 2004 and 2003
$1,000,000,000
$922,014,000
$895,635,000
$900,000,000
$800,000,000
$700,000,000
$600,000,000
$500,000,000
$400,000,000
$300,000,000
$200,000,000
$151,049,000
$85,625,000
$66,555,000
$72,602,000
$45,714,000
$8,483,000
$64,236,000
$100,000,000
$147,363,000
$73,116,000
$74,968,000
$67,753,000 $57,022,000
$34,466,000
$9,384,000
$0
2003
Salaries
Purchased Services
2004
Supplies
Repairs and Maintenance
Depreciation
Financial Aid
Other
Interest
2004 Expenses - $1,386,086,000
Salaries
$922,014,000
67%
Purchased Services
$147,363,000
11%
Supplies
$73,116,000
5%
Interest
$9,384,000
1%
Other
$57,022,000
4%
Repairs and M aintenance
$34,466,000
2%
Depreciation
$67,753,000
Financial Aid
5%
$74,968,000
5%
2003 Expenses - $1,389,899,000
Purchased Services
$151,049,000
11%
Salaries
$895,635,000
64%
Supplies
$64,236,000
5%
Repairs and Maintenance
$45,714,000
3%
Interest
$8,483,000
1%
Financial Aid
$85,625,000
Other
6%
$72,602,000
5%
Depreciation
$66,555,000
5%
Change in Net Assets
$100,000,000
$75,000,000
$73,286,000
$63,224,000
$50,000,000
$25,000,000
$0
2003
2004
Change in Net Assets
Financial Statement Overview - Statement of
Net Assets
• Net Assets Restrictions decreased from $99,382,000 in 2003 to
$71,312,000 in 2004 – due to drop in Capital Project
Restrictions.
• Invested in Capital Assets increased from $794,297,000 in 2003
to $854,354,000 in 2004 – capital assets added $148,150,000,
depreciation deducted $67,753,000.
• Unrestricted Net Assets increased $31,237,000 in 2004, to
$160,650,000 at June 30, 2004. Represents 1.4 months of 2004
operating expenses, compared to 1.1 months in 2003. Typical
goal of governments is 3-6 months, depending on philosophy,
cash flow and board policy. General Fund required reserves at
June 30, 2004 is $51,568,000 and is included above.
Cash and Investment and Net Asset Balances
$1,000,000,000
$854,354,000
$794,297,000
$750,000,000
$451,770,000
$440,588,000
$500,000,000
$250,000,000
$422,260,000
$372,636,000
$129,413,000
$99,382,000
$160,650,000
$71,312,000
$0
2003
Restricted Net Assets
Invested in Capital Assets, Net of Related Debt
Total Cash and Equivalents Balance
Unrestricted Net Assets 2004
Unrestricted Cash and Equivalents Balance
Statement of Net Assets - In Thousands
$1,800,000
$1,620,375
$1,600,000
$1,496,513
$1,400,000
$1,200,000
$1,000,000
$1,086,316
$1,053,067
$1,023,092
$963,485
$800,000
$600,000
$473,421
$460,269
$400,000
$200,000
$313,419
$220,640
$286,635
$186,786
$72,759
$534,059
$526,563
$40,745
$2003
2004
Total Current Assets
Total Restricted Assets
Total Non Current Assets
Total Assets
Total Current Liabilities
Total Non Current Liabilities
Total Liabilities
Total Net Assets
Expendable Net Assets/Annual Operating Expenses
Primary Reserve Ratio
0.175
0.17
0.169
0.165
0.166
0.16
0.155
0.15
0.149
0.145
0.14
0.135
2002
2003
Primary Reserve Ratio
2004
Equity/Total Assets
Equity Ratio
0.9
0.85
0.8
0.75
0.7
0.65
0.67
0.68
0.67
0.6
0.55
0.5
2002
2003
Equity Ratio
2004
Expendable Net Assets/Outstanding Debt
Viability Ratio
1.5
1.248
1.289
1.25
1.184
1
0.75
0.5
0.25
0
2002
2003
Viability Ratio
2004
Revenue Fund - Performance
• Net assets increased $6.8 million in 2004
compared to $13.4 million in 2003.
• Operating Revenue up $6.1 million over 2003 or
10%, a result of Room & Board increases across
the campuses and added capacity at Winona
campus.
• Operating Expenses up $6.5 million over 2003 or
12% with much of the increases in Purchased
Services and Supplies.
Questions and Open Discussion