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UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 AUDITED FINANCIAL STATEMENTS Independent Auditors’ Report ................................................................................................................. 1 Management’s Discussion and Analysis ................................................................................................ 3 Statements of Net Assets ........................................................................................................................... 8 Statements of Revenues, Expenses and Changes in Net Assets .......................................................... 9 Statements of Cash Flows ....................................................................................................................... 10 Notes to Financial Statements ................................................................................................................ 12 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress for Supplemental Retirement Annuity Plan and Other Post Employment Insurance Benefits-Unaudited ......................................................... 45 OTHER SUPPLEMENTARY INFORMATION Supplemental Schedule--2010 Combining Statement of Net Assets ................................................ 46 Supplemental Schedule--2010 Combining Statement of Revenues, Expenses and Changes in Net Assets .......................................................................................................................................... 47 Supplemental Schedule--2009 Combining Statement of Net Assets ................................................ 48 Supplemental Schedule--2009 Combining Statement of Revenues, Expenses and Changes in Net Assets .......................................................................................................................................... 49 REPORTS REQUIRED BY GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133 Independent Auditors’ 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 ..................................................... 50 Independent Auditors’ Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 and the Schedule of Expenditures of Federal Awards ............................... 52 Schedule of Expenditures of Federal Awards ...................................................................................... 55 Notes to Schedule of Expenditures of Federal Awards ...................................................................... 58 Schedule of Findings and Questioned Costs ........................................................................................ 59 Summary Schedule of Prior Audit Findings ........................................................................................ 66 Independent Auditors’ Report Board of Regents Regional University System of Oklahoma University of Central Oklahoma Oklahoma City, Oklahoma We have audited the statements of net assets of the University of Central Oklahoma (the “University”), a component unit of the State of Oklahoma, as of June 30, 2010 and 2009, and the related statements of revenues, expenses and changes in net assets and cash flows for the years then ended. These financial statements are the responsibility of the University’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of the University of Central Oklahoma Alumni Association (the “Alumni Association”) or the KCSC Classical Radio Foundation (the “KCSC Foundation”), discretely presented component units of the University, whose financial statements collectively reflect total assets of $916,760 and $851,760 as of June 30, 2010 and 2009, respectively, and total revenues of $186,274 and $270,917, respectively, for the years then ended of the aggregate discretely presented component units. Those financial statements were audited by other auditors, whose reports thereon have been furnished to us, and in our opinion, insofar as it relates to the amounts included for the Alumni Association and the KCSC Foundation, is based on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the Alumni Association and the KCSC Foundation were audited by other auditors and were not audited in accordance with Government Auditing Standards. The financial statements of the UCO Student Housing Foundation (the “Housing Foundation”) and the University of Central Oklahoma Foundation, Inc. (the “University Foundation”) were also 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, assessing the accounting principles used and the 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. 1 2 In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the University of Central Oklahoma and its discretely presented component units, the University Foundation, the Alumni Association and the KCSC Foundation., as of June 30, 2010 and 2009, and the respective changes in financial position and, where applicable, 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 31, 2010 on our consideration of the University’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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. Management’s Discussion and Analysis and the Schedules of Funding Progress for the Supplemental Retirement Annuity Plan and Other Post-Employment Insurance Benefits Plan are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. 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 opinions on the financial statements that collectively comprise the University’s basic financial statements. The Supplemental Combining Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. Oklahoma City, Oklahoma October 31, 2010 3 MANAGEMENT’S DISCUSSION & ANALYSIS As the 4 time National Champion, UCO Cheer squad knows to Live Central is to embrace the qualities of Community, Character and Civility. To Live Central is to involve your life with the lives of those you encounter, to give to life to others. OVERVIEW The following Management’s Discussion and Analysis (MD&A) provides an overview of University of Central Oklahoma’s (UCO) financial performance based on currently known facts, decisions and conditions and is designed to assist readers in understanding the accompanying financial statements. These financial statements are prepared in accordance with Government Accounting Standards Board (GASB) principles and focus on UCO as a whole. The financial statements encompass UCO and the discretely presented component units; however, the MD&A focuses only on UCO’s blended unit. Information relating to the component units can be found in their separately issued financial statements. UCO’s report includes three basic financial statements: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. All dollar amounts in this MD&A are presented in thousands of dollars. STATEMENT OF NET ASSETS The Statement of Net Assets presents the financial position of UCO at the end of the fiscal year. From the data presented, readers of the statement are able to determine the assets available to continue the operations of UCO. They also are able to determine how much UCO owes vendors, investors and lending institutions. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability to pay expenses of UCO. The change in net assets is one indicator of whether the overall financial condition has improved or worsened during the year when considered with non-financial facts such as enrollment levels and the condition of the facilities. The following table shows a condensed statement of net assets at: Assets are what UCO owns and are measured in current value, except for property and equipment, which are recorded at historical cost less accumulated depreciation. Assets are categorized as either current, to be exhausted during the next twelve months or noncurrent, more than twelve months. Assets: Current assets decreased in the current year by less than $1 million after an increase in 2009 by $6.5 million these changes are due to the three major building projects’ restricted cash being categorized as current in 2009 and the expense of some of those funds in 2010. Capital assets continue to increase, in 2010 by $7.9 million and by $9.7 million in 2009 due to expenditures primarily for the Forensic Science Institute and Transformational Learning Center building projects in progress. In working toward the completion of the Forensic Science Institute, $3.9 million was expended in 2010 and $7.3 in 2009. Leading toward the completion of the Transformational Learning Center $5.7 million was expended during 2010 with $2.2 million expended during 2009. Other assets increased by $1.4 million in 2010 due to moving the remaining restricted cash to current as the projects draw to a close in the next year. In 2009, noncurrent assets decreased by $13.5 million largely due to moving restricted cash for the completion of the three building projects into the current category. Liabilities: Current liabilities increased by $1.4 million in 2010 and decreased by approximately $1 million in 2009. These changes are made up of normal operating fluctuations for such items as accounts payable, accrued payroll and benefits, deferred revenue and current portion of noncurrent liabilities (bonds, capital leases, and notes). This fluctuation is not considered to be unusual or represent a trend. 4 MANAGEMENT’S DISCUSSION & ANALYSIS Noncurrent liabilities decreased by approximately $3.3 million in 2010 and $3.9 million in 2009. This is attributable to each year’s payment of principle on long term obligations. In 2010, one capital lease was incurred for an additional $1 million for a energy conservation project. In 2009, no additional debt, short term or long term, was incurred. Net Assets: Net assets represent the total assets of UCO less total liabilities. The change in net assets is a net component of the changes to assets and liabilities as described above, and in the footnotes to the financial statements. STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS The Statement of Revenues, Expenses and Changes in Net Assets presents the revenues earned and expenses incurred during the year. Activities are reported as either operating or non-operating. A public university’s dependency on state aid (appropriations) and gifts will result in operating deficits (losses). The Governmental Accounting Standards Board (GASB) requires state appropriations and gifts to be classified as nonoperating revenues. The purpose of the statement is to present the revenues received by UCO, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent. Operating revenues are generally received for providing goods and services to the various customers of UCO. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of UCO. Nonoperating revenues are revenues received for which goods and services are not provided. State capital appropriations are considered neither operating nor nonoperating revenues and are reported under “Other Revenues, Expenses, Gains and Losses”. The following summarizes UCO’s revenues, expenses and changes in net assets, for the year ended June 30: Operating Revenues Tuition & Fees 65.70% Housing Fees 13.20% Auxilliary & Other 9.56% Grants & Partners 11.53% Operating Revenue Fiscal Year 2010 In July 2010, UCO hosted the World Sitting Volleyball championships. 26 countries spanning five continents competed and put the “C” of Community to the test. Community is not just about your campus, your country or you. Thousands of hours and an army of student and staff volunteers later; UCO passed the test. 5 MANAGEMENT’S DISCUSSION & ANALYSIS The following summarizes the operating revenues by source, which were used to fund UCO’s operating activities for the fiscal years ended June 30: Operating revenues: 2010 had a Tuition and Fee revenue increase of 4.34% due to the increase in the credit hours for Fall, Spring and Summer semesters. In 2009, improvement in operating revenues was due to an increase in Tuition and Fees associated with a boost in credit hours and an increase in tuition over the prior fiscal year. Small class size and personal attention given every student attending UCO whether an incoming freshman or graduating senior are still maintained even with the growth in FTE and credit hours. UCO has a goal to grow the grant program to $20 million dollars by 2015. Grants have increase by 29.97% in 2010 over 2009 and a 23.66% increase from 2008 to 2009. Increasing grant awards for undergraduate research leads to an addition of $2.1 million dollars in 2010 to be used to enhance the student experience. As more commuter students continued to sign up for a meal plan, revenues in auxiliary grew by 10.8% for 2010. A complete remodeling of the food service areas led to an 18% increase in meal plan sales in 2009 and better all around quality for the student. Operating Expenses The following summarizes the operating expenses by the natural classification, for the fiscal years ended: Operating expenses increased $8.8 million in 2010 and $5.9 million 2009. Operating expenses reflect the normal expenses of operating UCO, and carrying out the educational mission. The increase in expenses reflects the use of increases in operating revenues and declining state appropriations, as follows: Personnel service costs increased 2.1% equating to $1.9 million in 2010 compared to a $4 million increase in 2009. The major use of these funds resulted in the employment of additional faculty and staff to meet the demands due to record increases in student FTE and credit hours. Growth in the area of instruction continues to reflect UCO’s commitment to the quality of the learning experience; reinforcing that the student and their education is our first priority. Striving to hold back costs, passed on to students through tuition, UCO is continuing to hold salaries flat without raises. UCO’s green commitment is evident through the use of 100% wind power, biodiesel, sustainability efforts, a new lead certified building, and the energy management improvements throughout the campus that continue to hold rising energy costs in check. Though utility costs and consumption rose in fiscal years 2010, 2009 and 2008 for all areas of higher education, UCO’s resourcefulness has held the line in controlling our utility costs. As the average student continues to struggle to afford the university experience, UCO continues to strive to provide more financial aid per student to lighten that burden. Scholarships and fellowships for 2010 reflect an increase of $4.3 million dollars which is a 40.67% increase over 2009. Scholarships in 2009 reflected a $1.8 million dollar increase over 2008. In providing increased scholarship and fellowship resources, UCO’s is seeing an increase in first generation students and returning veterans seeking to enhance their quality of life and to give back to their community. Nonoperating Revenues and Expenses Certain revenue sources that UCO relies on to maintain more affordable tuition rates and provide funding for operations, including State Appropriations, which are defined under GASB as nonoperating revenue. Nonoperating expenses include costs related to capital assets. The following summarizes the nonoperating revenues and expenses for the fiscal years ended: The ��C” of Character is displayed when we keep our commitments to others no matter the personal cost. Character demonstrates honesty; keeps commitments; behaves in a respectful manner; displays trustworthiness. 6 MANAGEMENT’S DISCUSSION & ANALYSIS Net nonoperating revenues and expenses reflect a $5.8 million increase in 2010 and an increase of $1.4 million in 2009. The largest change is due to a $5.6 million receipt of financial aid for 2010 to meet the growing number of qualified student’s needs due to a change in Federal regulations. In 2009, financial aid increased by $1.3 million. State Appropriations continue to stay fairly flat with a 1.27% increase in 2010 and a 2.7% increase in 2009. As State appropriations continue to reflect the State’s financial position UCO continues to seek ways to offset dwindling resources and reduce the size of requested tuition increase. The 2010 annual report from the Commissioners of Land Office continues to show that UCO receives the fewest dollars per student of any university in Oklahoma for capital expenditures. STATEMENT OF CASH FLOWS The Statement of Cash Flows provides additional information about UCO’s financial results by reporting the major sources and uses of cash. This statement will assist in evaluating UCO’s ability to generate net cash flows, its ability to meet its obligations as they come due, and its need for external financing. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of UCO. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related assets. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. The following summarizes UCO’s cash flow for the years ending: CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2010, UCO has $117.6 million in capital assets, net of accumulated depreciation compared to 2009 where UCO had $109.7 million in capital assets, net of accumulated depreciation. The following table summarizes UCO’s capital assets, net of accumulated depreciation: Debt Administration As of June 30, 2010, UCO had $79.5 million compared to 2009 where UCO had $82.6 million in outstanding bonds, capital leases, and notes payable, representing a decrease of approximately $3.1 million in 2010 and $3.9 million in 2009. This decrease represents the payments on existing obligations. The following summarizes the outstanding long-term debt as of: The “C” of Civility is open to others' ideas and opinions; courteous when speaking to others; considerate of the feelings and thoughts of others; tolerant. Civility is grasping the idea that we are interdependent no matter who we are. 7 MANAGEMENT’S DISCUSSION & ANALYSIS ECONOMIC OUTLOOK The State of Oklahoma provided approximately 39.13% for FY10 and 43.5% for FY09 of the University of Central Oklahoma’s revenue resources for the operation of the university. Looking forward to FY11, State revenues, which support higher education, are in a state of uncertainty. Though first quarter reports show the State’s results are better than the same time last year. UCO continues to be cautious regarding State funding support. UCO’s FY11 State Appropriations are slated to decrease at least one million dollars and the Federal stimulus funds passed to UCO will decrease approximately five hundred thousand dollars. Federal stimulus dollars will not be available beyond FY11. Enrollment continues to increase even with current economic uncertainty. Fall of FY11 enrollment is up 6.27% over the Fall semester of FY10 which itself was an increase of 2.34% over the prior year’s Fall semester. However, the continued slow economic recovery, of the State and Nation, creates a shadowy picture at best, therefore fluctuations of both number of students and credit hour production is uncertain. As shown in the attached financial statements, the University had an approximate $5.7 million dollar increase in operating revenues for the year FY10. In the FY09 operating revenue increased $5.9 million dollars from FY08. Undergraduate research grants funding increased $2.1 million dollars over the FY09. Also Federal financial aid increased $5.5 million dollars in FY10 where previously the FY09 increase was only $1.3 million dollars. These indicators of strong financial position will allow the university to manage the upcoming year without significant reductions in programming or services. We will continue to monitor the State and National economic conditions as part of our financial decision making process. The University continues to develop scenarios to reduce costs and increase operating revenues to protect critical academic programming, while being sensitive to the individual economic condition of our students. We are not aware of any additional facts or conditions expected to have a significant impact on the financial position or results of operations during the upcoming fiscal year. The outlook is positive for the new degree programs that have grown from the first class of 150 in August 2009 to 400 that began classes in August 2010. ACM is reaching both traditional and non-traditional music students and has brought nation-wide acclaim to UCO in just its first year. Roger Daltrey, lead singer of the Who, was on campus at ACM to teach one of the Master’s classes during the year. Here he is answering questions with Scott Booker, CEO of ACM after the session. STATEMENTS OF NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 2010 2009 ASSETS CURRENT ASSETS Cash and cash equivalents $ 40,731,032 $ 34,602,547 $ 494,888 $ 2,554,224 Restricted cash and cash equivalents 8,455,083 7,860,921 - - Restricted Investments 5,846,704 15,856,817 3,608,813 3,881,649 Investments held by others - - 158,464 145,983 Accounts receivable, net 14,280,553 11,643,289 - - Interest receivable 39,980 35,951 40,200 67,305 Loan receivable - - - 4,939 Prepaid expenses 6,099 5,410 4,144 6,143 Inventories 32,840 38,205 - - Contributions receivable - - 477,782 673,058 Current portion of student loans receivable, net 105,000 175,000 - - TOTAL CURRENT ASSETS 69,497,291 70,218,140 $ 4,784,291 $ 7,333,301 NONCURRENT ASSETS Restricted investments 3,309,660 1,994,472 $ 14,152,732 $ 10,861,453 Investments held by others - - 236,645 220,620 Student loans receivable, net 1,996,508 1,798,188 - - Other assets 563,772 587,897 22,517 22,518 Prepaid pension asset 2,145,426 2,247,048 - - Capitalized collections 4,544,290 4,544,290 - - Capital assets, net 113,066,896 105,128,864 1,656,950 1,703,139 TOTAL NONCURRENT ASSETS 125,626,552 116,300,759 16,068,844 12,807,730 TOTAL ASSETS $ 195,123,843 $ 186,518,899 $ 20,853,135 $ 20,141,031 LIABILITIES CURRENT LIABILITIES Accounts payable $ 4,490,858 $ 3,916,091 $ 226,399 $ 27,260 Accrued payroll and benefits 2,635,045 2,463,639 - - Accrued interest payable 370,357 383,478 - - Deferred revenue 2,983,033 2,506,838 - - Deposits held in custody for others 494,964 406,670 158,302 147,023 Current portion of noncurrent liabilities 4,800,557 4,673,213 37,494 35,892 TOTAL CURRENT LIABILITIES 15,774,814 14,349,929 422,195 210,175 NONCURRENT LIABILITIES, net of current portion Accrued compensated absences 1,224,225 1,286,104 $ - $ - Federal loan program contributions refundable 1,840,864 1,868,798 - - Bonds payable 45,600,000 47,635,000 - - Notes payable 6,070,000 6,475,000 849,148 886,642 ODFA master lease obligation 5,973,572 5,617,192 - - Lease obligation payable to state agency 18,624,880 19,769,059 - - TOTAL NONCURRENT LIABILITIES 79,333,541 82,651,153 849,148 886,642 TOTAL LIABILITIES $ 95,108,355 $ 97,001,082 $ 1,271,343 $ 1,096,817 NET ASSETS Invested in capital assets, net of related debt $ 29,655,233 $ 27,552,410 $ - $ - Restricted for: Nonexpendable 659,161 622,567 13,223,599 12,694,809 Expendable: 3,239,830 3,338,571 Scholarships, research, instruction and other 4,185,720 4,105,921 - - Loans 348,410 344,020 - - Capital projects 1,039,784 2,253,963 - - Debt service 17,670,365 15,541,835 - - Unrestricted 46,456,815 39,097,101 3,118,363 3,010,834 TOTAL NET ASSETS $ 100,015,488 $ 89,517,817 $ 19,581,792 $ 19,044,214 See notes to financial statements University June 30, Component Units June 30, Aggregate Discretely Presented 8 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 2010 2009 OPERATING REVENUES Student tuition and fees (included in fees are $3,724,953 of revenues dedicated for bond repayments) $ 70,040,850 $ 64,918,509 $ - $ - Less scholarship, discounts and allowances (18,442,726) (15,464,475) - - Net student revenues 51,598,124 49,454,034 - - Federal grants and contracts 3,246,632 1,966,059 - - State and local grants and contracts 5,810,036 5,001,837 - - Bookstore operations 1,031,191 979,103 - - Housing and food service revenues ($1,391,720 and pledged as security on 2001 UCO Student Housing Foundation Bonds) 10,365,234 9,148,526 - - Parking and University Center revenues (total revenues are dedicated as security for bond repayments.) 2,264,008 2,198,882 - - Interest earned on loans to students 18,749 18,883 - - Other operating revenues 4,434,245 4,234,070 - - TOTAL OPERATING REVENUES 78,768,219 73,001,394 - - OPERATING EXPENSES Compensation and employee benefits 98,348,469 96,355,796 - - Contractual services 3,883,232 3,627,098 56,012 17,099 Supplies and materials 16,426,408 14,992,191 63,050 3,033 Depreciation 6,616,650 6,459,207 47,665 287 Utilities 2,683,617 2,678,376 - - Scholarships and fellowships 15,087,260 10,724,494 - - Other operating expenses 14,521,361 13,937,773 2,284,154 1,698,468 TOTAL OPERATING EXPENSES 157,566,997 148,774,935 2,450,881 1,718,887 Operating income (loss) (78,798,778) (75,773,541) (2,450,881) (1,718,887) NONOPERATING REVENUES (EXPENSES) State appropriations 60,909,102 64,376,151 - - State appropriations - ARRA funds 4,286,658 - - - Federal funded student aid 18,894,687 13,333,243 - - OTRS on-behalf contributions 3,905,924 4,138,019 - - Gifts - 1,966 1,824,882 2,425,235 Net/investment income (losses) 828,052 1,200,703 1,163,577 (2,106,057) Interest expense (3,570,237) (3,680,812) - - NET NONOPERATING REVENUES (EXPENSES) 85,254,186 79,369,270 2,988,459 319,178 Income (loss) before other revenues, expenses, gains and losses 6,455,408 3,595,729 537,578 (1,399,709) State appropriations restricted for capital purposes 1,721,978 1,777,330 - - OCIA on-behalf state appropriations 2,154,747 2,141,105 - - Gift of capital assets 165,538 192,640 - - CHANGE IN NET ASSETS 10,497,671 7,706,804 537,578 (1,399,709) NET ASSETS, BEGINNING OF YEAR 89,517,817 81,811,013 19,044,214 20,443,923 NET ASSETS, END OF YEAR $ 100,015,488 $ 89,517,817 $ 19,581,792 $ 19,044,214 See notes to financial statements. Aggregate Discretely Presented Year Ended June 30, Component Units $1,388,862 for 2010 and 2009, respectively, and $3,539,890 for 2010 and 2009, respectively, Year Ended June 30, University 9 STATEMENTS OF CASH FLOWS UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees $ 46,765,236 $ 49,316,590 Grants and contracts 9,920,466 6,223,642 Auxiliary enterprises and other receipts 19,874,476 16,378,228 Interest collected on loans to students 18,749 18,883 Payments to employees for salaries and benefits (94,232,515) (91,675,563) Payments to suppliers and others (51,863,877) (47,460,315) Loans issued to students (280,067) (497,648) Collections of loans issued to students 151,747 203,779 Net cash used in operating activites (69,645,785) (67,492,404) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State and federal aid 84,090,447 77,711,360 Other student financial assistance received (54,385,500) (48,695,790) Other student financial assistance disbursed 54,385,500 48,695,790 Net cash provided by noncapital financing activities 84,090,447 77,711,360 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of investments 10,043,023 10,022,432 Purchases of investments (1,348,096) (1,348,098) Interest income received 824,023 1,200,068 Net cash provided by investing activities 9,518,950 9,874,402 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Cash paid for capital assets (14,593,533) (16,122,782) Capital appropriations received 1,721,978 1,777,328 Proceeds of capital debt and leases 1,216,538 192,640 Payments on capital debt and leases (2,995,393) (2,873,414) Interest paid on capital debt and leases (2,590,555) (2,651,115) Net cash used in capital and related financing activities (17,240,965) (19,677,343) Net increase in cash and cash equivalents 6,722,647 416,015 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 42,463,468 42,047,453 CASH AND CASH EQUIVALENTS, END OF YEAR $ 49,186,115 $ 42,463,468 Year Ended June 30, 10 STATEMENTS OF CASH FLOWS--Continued UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Operating Loss $ (78,798,778) $ (75,773,541) Adjustments to reconcile operating loss to net cash used in operating activities Depreciation and amortization expense 6,616,650 6,459,207 Loss on disposal of fixed assets 3 8,851 2 9,192 Amortization 3 1,124 - On-behalf contributions to teachers' retirement system 3,905,924 4,138,019 Changes in assets and liabilities Accounts receivable (2,637,264) (1,109,810) Prepaid pension asset 101,622 7,698 Prepaid expense (689) 838 Inventories 5,365 2,583 Student loans receivable (128,320) (293,869) Accounts payable 574,767 (1,516,443) Accrued payroll and benefits 171,406 272,642 Student and other deposits 8 8,294 (15,715) Deferred revenues 476,195 7 8,997 Federal loan program contributions refundable (27,934) (34,076) Accrued compensated absences (62,998) 261,874 Net cash used in operating activities $ (69,645,785) $ (67,492,404) NONCASH INVESTING, NONCAPITAL FINANCING AND CAPITAL AND RELATED FINANCING ACTIVITIES Interest on capital debt paid by State Agency $ 992,803 $ 1,045,957 on behalf of the University Principal on capital debt paid by State Agency on behalf of the University 1,161,944 1,095,148 Total noncash investing, noncapital financing and capital and related financing activities $ 2,154,747 $ 2,141,105 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENTS OF NET ASSETS Current assets Cash and cash equivalents $ 40,731,032 $ 34,602,547 Restricted cash and cash equivalents 8,455,083 7,860,921 Total cash and cash equivalents $ 49,186,115 $ 42,463,468 See notes to financial statements. Year Ended June 30, 11 NOTES TO FINANCIAL STATEMENTS UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 12 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity: University of Central Oklahoma (the University) is a metropolitan university operating under the jurisdiction of the Regional University System of Oklahoma and the Oklahoma State Regents for Higher Education. The University is a component unit of the State of Oklahoma (the “State”) and is included in the general purpose financial statements of the State as part of the higher education component unit. Blended Component Unit: Based on Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, and Governmental Accounting Standards Board (GASB) No. 39, Determining Whether Certain Organizations Are Component Units-an amendment of GASB statement No. 14, for determining component units, UCO Student Housing Foundation (the “Housing Foundation”) is included within the University reporting entity as a blended component unit. The Housing Foundation is responsible for administration and operation of the University Suites, a student housing facility constructed with bond revenues issued through the Edmond Economic Development Authority. The Housing Foundation is governed by a Board of Directors comprised primarily of management of the University. In addition, University employees and facilities are used for virtually all activities of the Housing Foundation. Separate financial statements of the Housing Foundation have been prepared and can be obtained by contacting the University’s Assistant Vice President for Administration. Discretely Presented Component Units: Based on the criteria for determining component units from GASB Statement No. 39, certain University direct support organizations are included within the University’s reporting entity as discretely presented component units. The nature and significance of the relationship between the University and the component units are such that exclusion would cause the University’s financial statements to be misleading or incomplete. These are separate, not-for-profit corporations organized and operated exclusively to assist the University to achieve excellence by providing supplemental support and resources. An annual audit of each organization’s financial statements is conducted by independent certified public accountants. Separate financial statements of the University’s component units can be obtained by contacting the University’s Assistant Vice President for Administration. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 13 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Discretely Presented Component Units--Continued: The discretely presented component units included in the University’s financial reporting entity are: University of Central Oklahoma Foundation, Inc. (the “University Foundation”) is a separate legal entity with its own Board of Trustees. The Foundation provides support for the University by way of scholarships and other direct resources. The University contracts with the Foundation to provide limited services and office space in exchange for the support the University receives from the Foundation. A portion of the scholarships awarded by the Foundation is remitted to the University after the University pays the award recipient. University of Central Oklahoma Alumni Association (the “Association”) establishes and maintains a close relationship and cooperation between the alumni of the University and their alma mater. The University supports the Association by providing personnel, office space, furniture and equipment at no charge to the Association. KCSC Classical Radio Foundation (“KCSC Foundation”) is a 501(c) (3) organization created to support the University’s KCSC Radio Station. Its purpose is to support and promote classical music radio in Oklahoma. The University’s component units are nonprofit organizations that report under Financial Accounting Standards Board (FASB) standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the component units’ financial information in the University's financial reporting entity for these differences. Although the University is the exclusive beneficiary of the component units, the component units are independent of the University in all respects. The component units are not subsidiaries or affiliates of the University and are not directly or indirectly controlled by the University. Moreover, the assets of the component units are the exclusive property of the component units and do not belong to the University. The University is not accountable for, and does not have ownership of, any of the financial and capital resources of the component units. The University does not have the power or authority to mortgage, pledge, or encumber the assets of the component units. The Board of Directors / Trustees of the component units are entitled to make all decisions regarding the business and affairs of the component units, including, without limitation, distributions made to the University. Third parties dealing with the University should not rely upon the financial statements of the component units for any purpose without consideration of all of the foregoing conditions and limitations. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 14 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Financial Statement Presentation: The University’s financial statements are presented in accordance with the requirements of GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis – for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. Under GASB Statements No. 34 and 35, the University is required to present a statement of net assets classified between current and noncurrent assets and liabilities, a statement of revenues, expenses and changes in net assets, with separate presentation for operating and non-operating revenues and expenses, and a statement of cash flows using the direct method. Basis of Accounting: For financial reporting purposes, the University is considered a special purpose government engaged only in business-type activities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-agency transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash Equivalents: For purposes of the statements of cash flows, the University considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Funds invested through the State Treasurer’s Cash Management Program are considered cash equivalents. The University Foundation excludes cash and cash equivalent funds held in the Foundation’s investment portfolio as cash equivalents. Investments: The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses and changes in net assets. The University Foundation investments consist of cash and cash equivalents, certificates of deposits, government agency securities, corporate bonds, mutual funds, common and preferred stocks, pooled funds, and limited partnership interests. Investments are carried at fair value and realized gains and losses on sales of investments are computed on the first-in, first-out basis. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 15 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Accounts Receivable: Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Oklahoma. Accounts receivable also include amounts due from the federal, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories: Inventories are carried at the lower of cost or market on the first-in, first-out (“FIFO”) basis. Restricted Cash and Investments: Cash and investments that are externally restricted to make debt service payments maintain sinking or reserve funds, or to purchase capital or other noncurrent assets are classified as restricted assets in the statements of net assets. Capital Assets: Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts, net of accumulated depreciation. For equipment, the University’s capitalization policy includes all items with a unit cost of $2,500 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 30 years for infrastructure, land improvements, and building renovations, and 5 to 10 years for library materials and equipment. Impairments are recorded to reduce the carrying value of the assets to their net realizable value determined by management based on facts and circumstances at the time of the determination. No property and equipment impairments were recorded in 2010 or 2009. Capitalized Collections: Collections are capitalized at estimated fair values at the date of contribution. The University’s capitalized collections consist primarily of works of art. These collections were valued for reporting purposes at $4,544,290 and $4,544,290 at June 30, 2010 and 2009, respectively. Contributions in the value of $165,538 and $183,740 were received at June 30, 2010 and 2009, respectively. The University Foundation does not include either the cost or the value of its collections in the statements net assets, nor does it recognize gifts of collection items as revenues in the statements of revenues, expenses and changes in net assets. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 16 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Deferred Revenue: Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Compensated Absences: Employees’ vacation pay and compensatory time are accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued compensated absences in the statements of net assets, and as a component of compensation and benefit expense in the statement of revenues, expenses and changes in net assets. Noncurrent Liabilities: Noncurrent liabilities include (1) principal amounts of revenue bonds payable, notes payable, and capital lease obligations with contractual maturities greater than one year, and (2) estimated amounts for accrued compensated absences and other liabilities that will not be paid within the next fiscal year. Net Assets: The University’s net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets – expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted net assets – nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for any purpose. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 17 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Net Assets--Continued: When an expense is incurred that can be paid using either restricted or unrestricted resources, the University’s policy is to first apply the expense towards restricted resources, and then toward unrestricted resources. Income Taxes: The University, as a political subdivision of the State, is exempt from all federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. The discretely presented component units of the University are generally exempt from federal income taxes under applicable provisions of Section 501 of the Internal Revenue Code. The component units are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. As a result, no provision for income taxes is included in the financial statements. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported assets and liabilities and disclosures of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Classification of Revenues: The University has classified its revenues as either operating or non-operating revenues according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, net of scholarship discounts and allowances, (3) certain grants and contracts and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, student aid revenues and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations, governmental and other pass through grants and investment income. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 18 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Scholarship Discounts and Allowances: Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the statements of revenues, expenses, and changes in net assets. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the University and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other Federal, State or nongovernmental programs are recorded as either operating or non-operating revenues in the University’s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded a scholarship discount and allowance. NOTE B--DEPOSITS AND INVESTMENTS Deposits: Custodial credit risk for deposits is the risk that in the event of a bank failure, the University’s deposits may not be returned or the University will not be able to recover collateral securities in the possession of an outside party. Generally, the University deposits its funds with the Office of the State Treasurer (OST) and those funds are pooled with funds of other state agencies and then, in accordance with statutory limitations, are placed in financial institutions or invested as the OST may determine, in the State’s name. State statutes require the OST to ensure that all state funds are either insured by Federal Deposit Insurance, collateralized by securities held by the cognizant Federal Reserve Bank, or invested in U.S. government obligations. The OST’s responsibilities include receiving and collateralizing the deposit of State funds, investing State funds in compliance with statutory requirements, and maintaining adequate liquidity to meet the cash flow needs of the State. If the University deposits funds directly with financial institutions, those funds must be insured by Federal Deposit Insurance or collateralized by securities held by the cognizant Federal Reserve Bank in the University’s name. Some deposits with the OST are placed in the OST’s internal investment pool OK INVEST. OK INVEST pools the resources of all state funds and agencies. The State Treasurer has determined that current holdings in OK INVEST should be limited to obligations of the US Government, its agencies and instrumentalities; including agency senior debt and mortgage-backed pass-through securities, obligations of state and local governments, tri-party repurchase agreements, money market mutual funds, collateralized Certificates of Deposit, and State of Israel Bonds. Various other investments, as allowed by law, may be added to the OK Invest portfolio as the State Treasurer determines. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 19 NOTE B--DEPOSITS AND INVESTMENTS--Continued Deposits--Continued: At June 30, 2010 and 2009, the carrying amount of all University and blended component unit deposits with the OST and other financial institutions was $49,168,385 and $42,445,239, respectively. These amounts consisted of deposits with the OST ($48,799,485 and $41,983,535) and U.S. financial institutions ($388,900 and $461,704). The University also maintains petty cash funds totaling $17,730 in 2010 and $18,230 in 2009. Of funds on deposit with the OST, amounts invested in OK INVEST total $15,062,558 in 2010 and $13,010,648 in 2009. For financial reporting purposes, deposits with the OST that are invested in OK INVEST are classified as cash equivalents. The distribution of deposits in OK INVEST is as follows: Cost Market U.S. agency securities $ 5,771,361 $ 5,868,262 Money market mutual funds 1,318,437 1,318,437 Certificates of deposit 856,735 856,735 Tri-party repurchase agreements 965,981 965,981 Mortgage-backed agency securities 5,328,812 5,560,347 Municipal bonds 324,540 347,980 Foreign bonds 60,375 59,699 U.S. Treasury obligations 436,317 461,837 TOTAL $ 15,062,558 $ 15,439,278 June 30, 2010 OK INVEST Portfolio Cost Market U.S. agency securities $ 5,726,092 $ 5,897,680 Money market mutual funds 1,025,821 1,025,821 Certificates of deposit 829,217 829,217 Tri-party repurchase agreements 1,016,267 1,016,267 Mortgage-backed agency securities 2,950,203 2,985,961 Municipal bonds 209,225 210,940 Foreign bonds 24,787 24,787 U.S. Treasury obligations 1,229,036 1,271,982 TOTAL $ 13,010,648 $ 13,262,655 June 30, 2009 OK INVEST Portfolio NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 20 NOTE B--DEPOSITS AND INVESTMENTS--Continued Deposits--Continued: Agencies and funds that are considered to be part of the State’s reporting entity in the State’s Comprehensive Annual Financial Report and who have funds deposited with the State Treasurer are allowed to participate in OK INVEST. Oklahoma statutes and the OST establish the primary objectives and guidelines governing the investment of funds in OK INVEST. Safety, liquidity, and return on investment are the objectives which establish the framework for the day to day OK INVEST management with an emphasis on safety of the capital and the probable income to be derived and meeting the State’s daily cash flow requirements. Guidelines in the investment policy address credit quality requirements, diversification percentages and specify the types and maturities of allowable investments, and the specifics regarding these policies can be found on the OST website at www.ok.gov/treasurer/. The State Treasurer, at his discretion, may further limit or restrict such investments on a day to day basis. OK INVEST includes a substantial investment in securities with an overnight maturity as well as in U.S. government securities with a maturity of up to ten years. OK INVEST maintains an overall weighted average maturity of less than 2 years. Participants in OK INVEST maintain an interest in its underlying investments and, accordingly, may be exposed to certain risks. As stated in the OST information statement, the main risks are interest rate risk, credit/default risk, liquidity risk, and U.S. government securities risk. Interest rate risk is the risk that during periods of rising interest rates, the yield and market value of the securities will tend to be lower than prevailing market rates; in periods of falling interest rates, the yield will tend to be higher. Credit/default risk is the risk that an issuer or guarantor of a security, or a bank or other financial institution that has entered into a repurchase agreement, may default on its payment obligations. Liquidity risk is the risk that OK INVEST will be unable to pay redemption proceeds within the stated time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. U.S. Government securities risk is the risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Various investment restrictions and limitations are enumerated in the State Treasurer’s Investment Policy to mitigate those risks; however, any interest in OK INVEST is not insured or guaranteed by the State, the Federal Deposit Insurance Corporation or any other government agency. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 21 NOTE B--DEPOSITS AND INVESTMENTS--Continued Deposits--Continued: The University Foundation maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. The University has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash or cash equivalents. Investments: Investment credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Generally, the University’s investments are managed by the State Treasurer. In accordance with state statutes, the State Treasurer may only purchase and invest in (a) United States treasury bills, notes and bonds and obligations fully insured or unconditionally guaranteed; (b) United States government agency securities; (c) collateralized or insured certificates of deposits; (d) negotiable certificates of deposits; (e) bankers’ acceptances; (f) commercial paper; (g) obligations of state and local governments, including obligations of Oklahoma State public trusts; (h) and repurchase agreements and tri-party repurchase agreements. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Investments that are held for longer periods of time are subject to increased risk of adverse interest changes. Neither the University nor State statutes limit investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates; however, the OST Investment Policy limits the average maturity on its portfolio to four (4) years, with certain individual securities having more restrictive limits as defined in the policy. Concentration of credit risk is the risk of loss attributed to the magnitude of the University’s investment in a single issuer. Neither the University’s investment policy nor State statutes place limits on amounts that can be invested in any one issuer; however, the OST Investment Policy states that, with the exception of U.S. Treasury securities, no more than 50% of the State’s total funds may be invested in a single security type or with a single financial institution, with diversification percentages being more restrictive on individual securities. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty, the University will not be able to recover the value of its investments or collateral securities in the possession of an outside party. As of June 30, 2010 and 2009, none of the University’s investments were subject to custody credit risk. The University component units have funds invested with Merrill Lynch and other local banking institutions. The majority of marketable securities are combined in common investment pools and invested on the basis of a total return policy to provide income and improve opportunities to realize appreciation in investment values. At June 30, 2010 and 2009, respectively, $3,034,813 and $3,556,649 are classified as current and $14,152,732 and $10,861,453 are classified as noncurrent on the statements of net assets. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 22 NOTE B--DEPOSITS AND INVESTMENTS--Continued Bond Fund Cash and Investments: Certain non-pooled cash and investments are restricted in purpose by policies incorporated in applicable bond indentures. Credit risk policy generally restricts investing to cash, investments fully insured by the FDIC and U.S. government and agency securities or mutual funds investing in these types of securities. There may be some variance among the investments authorized by the specific bond indentures of University bond issues. A trustee bank generally provides the management of restricted, non-pooled investments. Custodial credit risk is not addressed by bond indentures. Interest rate risk in bond indentures provide that investments mature in no more than six to sixty months depending on the purpose of the funds and the requirements of the account in which the funds are deposited (i.e. construction, reserve, operations and maintenance, etc.) Concentration of credit risk is not addressed. At June 30, 2010 and 2009, the University had investments in restricted bond funds totaling $9,156,364 and $17,851,289, respectively. At June 30, 2010 and 2009, respectively, $5,846,704 and $15,865,817 are classified as current and $3,309,660 and $1,994,472 are classified as noncurrent on the statement of net assets. The fair market value of these funds approximated their carrying value at June 30, 2010 and 2009. The invested bond funds are not subject to maturity dates and are due on demand. According to Standard and Poor’s rating service, the funds had an average credit rating of AAAm at June 30, 2010. All investments for the University, including its blended component unit, and discrete component units at June 30, 2010 and 2009, respectively, were as follows: Component University Unit Investments Investments Cash and cash equivalent funds $ 8,764,351 $ 941,552 Guaranteed investment contract 392,013 - Certificate of deposit - 3,636,793 Government securities - 2,585,534 Corporate bonds - 1,169,418 Mutual funds - 4,336,237 Equity Securities - 5,187,383 Other - 63,092 $ 9,156,364 $ 17,920,009 2010 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 23 NOTE B--DEPOSITS AND INVESTMENTS--Continued Bond Fund Cash and Investments--Continued: Component University Unit Investments Investments Cash and cash equivalent funds $ 17,459,276 $ 513,369 Guaranteed investment contract 392,013 - Certificate of deposit - 3,556,649 Government securities - 3,629,373 Corporate bonds - 527,568 Mutual funds - 103,054 Equity Securities - 5,288,778 Other - 1,124,311 $ 17,851,289 $ 14,743,102 2009 NOTE C--ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2010 and 2009: 2010 Component University Units Student tuition and fees $ 10,172,374 $ - Auxiliary enterprises and other operating activities 11,067,524 - Federal, state, and private grants and contracts 1,886,959 - Contributions receivable - 485,601 23,126,857 485,601 Less allowance for doubtful accounts (8,846,305) (7,819) Net accounts receivable $ 14,280,552 $ 477,782 2009 Component University Units Student tuition and fees $ 10,091,747 $ - Auxiliary enterprises and other operating activities 7,355,191 - Federal, state, and private grants and contracts 2,733,505 - Contributions receivable - 694,556 20,180,443 694,556 Less allowance for doubtful accounts (8,537,154) ( 21,498) Net accounts receivable $ 11,643,289 $ 673,058 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 24 NOTE D--NOTES RECEIVABLE Student loans made through the Federal Perkins Loan Program (the “Program”) comprise substantially all of the loans receivable at June 30, 2010 and 2009. Under this Program, the federal government provides funds for approximately 90% of the total contribution for student loans with the University providing the balance. Under certain conditions such loans can be forgiven at annual rates of 10% to 30% of the original balance up to a maximum of 50% to 100% of the original loan. The federal government reimburses the University to the extent of 10% of the amounts forgiven for loans originated prior to July 1, 1993 under the Federal Perkins Loan Program. No reimbursements are guaranteed for loans originated after this date. Amounts refundable to the U.S. Government upon cessation of the Program of approximately $1,841,000 and $1,869,000 at June 30, 2010 and 2009, respectively, are reflected in the accompanying statements of net assets as noncurrent liabilities. As the University determines loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The allowance for uncollectible loans only applies to University funded loans and the University portion of federal student loans, as the University is not obligated to fund the federal portion of uncollected student loans. The University has provided an allowance for uncollectible loans that, in management’s opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2010 and 2009, loans receivable consisted of the following: 2010 Component University Units Total loans receivable $ 2,258,439 $ 2 2,517 Less: allowance for uncollectible loans 156,931 - Loans receivable, net $ 2,101,508 $ 2 2,517 2009 Component University Units Total loans receivable $ 2,111,312 $ 2 7,457 Less: allowance for uncollectible loans 138,124 - Loans receivable, net $ 1,973,188 $ 2 7,457 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 25 NOTE E--CAPITAL ASSETS Following are the changes in University capital assets for the year ended June 30, 2010: Balance Retirements/ Balance June 30, 2009 Additions Transfers Adjustments June 30, 2010 Capital assets not being depreciated Land $ 2,201,502 $ 9,726 $ - $ - $ 2,211,228 Art Collections 4,544,290 - - - 4,544,290 Construction in-progress 12,663,008 11,307,339 - - 23,970,347 Total capital assets not being depreciated 19,408,800 11,317,065 - - 30,725,865 Other capital assets Non-major infrastructure networks 1,450,621 45,282 - - 1,495,903 Land improvements 8,637,301 71,509 - - 8,708,810 Buildings 124,111,638 313,019 - - 124,424,657 Furniture, fixtures and equipment 30,849,710 2,846,658 - ( 1,411,872) 32,284,496 Library materials 17,786,850 - - - 17,786,850 Total other capital assets 182,836,120 3,276,468 - ( 1,411,872) 184,700,716 Less accumulated depreciation for Non-major infrastructure networks (1,102,178) (74,795) - - ( 1,176,973) Land improvements (5,465,974) ( 292,381) - - ( 5,758,355) Buildings (48,260,568) (3,982,155) - - ( 52,242,723) Furniture, fixtures and equipment ( 21,526,272) ( 2,241,562) - 1,373,021 ( 22,394,813) Library materials (16,216,774) ( 25,757) - - (16,242,531) Total accumulated depreciation ( 92,571,766) (6,616,650) - 1,373,021 ( 97,815,395) Other capital assets, net 90,264,354 ( 3,340,182) - ( 38,851) 86,885,321 Capital asset summary: Capital assets not being depreciated 19,408,800 11,317,065 - - 30,725,865 Other capital assets, at cost 182,836,120 3,276,468 - (1,411,872) 184,700,716 Total cost of capital assets 202,244,920 14,593,533 - ( 1,411,872) 215,426,581 Less accumulated depreciation ( 92,571,766) (6,616,650) - 1,373,021 ( 97,815,395) Capital assets, net $ 109,673,154 $ 7,976,883 $ -$ ( 38,851) $ 117,611,186 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 26 NOTE E--CAPITAL ASSETS--Continued Following are the changes in University capital assets for the year ended June 30, 2009: Balance Retirements/ Balance June 30, 2008 Additions Transfers Adjustments June 30, 2009 Capital assets not being depreciated Land $ 2,181,916 $ 19,586 $ - $ - $ 2,201,502 Art Collections 4,360,550 183,740 - - 4,544,290 Construction in-progress 6,045,164 10,375,024 (3,757,180) - 12,663,008 Total capital assets not being depreciated 12,587,630 10,578,350 (3,757,180) - 19,408,800 Other capital assets Non-major infrastructure networks 1,450,621 - - - 1,450,621 Land improvements 7,987,189 650,112 - - 8,637,301 Buildings 121,221,443 2,890,195 - - 124,111,638 Furniture, fixtures and equipment 25,765,339 2,004,124 3,757,180 (676,933) 30,849,710 Library materials 17,786,850 - - - 17,786,850 Total other capital assets 174,211,442 5,544,431 3,757,180 (676,933) 182,836,120 Less accumulated depreciation for Non-major infrastructure networks (1,029,647) (72,531) - - (1,102,178) Land improvements (5,178,076) (287,898) - - (5,465,974) Buildings (44,481,177) (3,779,391) - - (48,260,568) Furniture, fixtures and equipment (19,911,959) (2,262,054) - 647,741 (21,526,272) Library materials (16,191,017) (25,757) - - (16,216,774) Total accumulated depreciation (86,791,876) (6,427,631) - 647,741 (92,571,766) Other capital assets, net 87,419,566 (883,200) 3,757,180 (29,192) 90,264,354 Capital asset summary: Capital assets not being depreciated 12,587,630 10,578,350 (3,757,180) - 19,408,800 Other capital assets, at cost 174,211,442 5,544,431 3,757,180 (676,933) 182,836,120 Total cost of capital assets 186,799,072 16,122,781 - (676,933) 202,244,920 Less accumulated depreciation (86,791,876) (6,427,631) - 647,741 (92,571,766) Capital assets, net $ 100,007,196 $ 9,695,150 $ -$ (29,192) $ 109,673,154 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 27 NOTE F--LONG-TERM LIABILITIES University long-term liability activity for the year ended June 30, 2010 was as follows: Amounts Balance Balance due within June 30, 2009 Additions Reductions June 30, 2010 one year Bonds payable and capital lease obligations Revenue bonds payable $ 49,545,000 $ - $ (1,910,000) $ 47,635,000 $ 2,035,000 Capital lease obligations 26,176,102 1,058,000 (1,857,338) 25,376,764 778,312 Notes payable 6,865,000 - (390,000) 6,475,000 405,000 Total bonds and capital leases 82,586,102 1,058,000 (4,157,338) 79,486,764 3,218,312 Other liabilities Accrued compensated absences 2,869,467 1,392,919 (1,455,915) 2,806,471 1,582,245 Federal loan program contributions 1,868,797 - (27,934) 1,840,863 - Total other liabilities 4,738,264 1,392,919 (1,483,849) 4,647,334 1,582,245 Total long-term liabilities $ 87,324,366 $ 2,450,919 $ (5,641,187) $ 84,134,098 $ 4,800,557 University long-term liability activity for the year ended June 30, 2009 was as follows: Amounts Balance Balance due within June 30, 2008 Additions Reductions June 30, 2009 one year Bonds payable and capital lease obligations Revenue bonds payable $ 51,375,000 $ - $ (1,830,000) $ 49,545,000 $ 1,910,000 Capital lease obligations 27,939,664 - (1,763,562) 26,176,102 789,850 Notes payable 7,240,000 - (375,000) 6,865,000 390,000 Total bonds and capital leases 86,554,664 - (3,968,562) 82,586,102 3,089,850 Other liabilities Accrued compensated absences 2,607,596 1,628,971 (1,367,100) 2,869,467 1,583,363 Federal loan program contributions 1,902,874 - (34,077) 1,868,797 - Total other liabilities 4,510,470 1,628,971 (1,401,177) 4,738,264 1,583,363 Total long-term liabilities $ 91,065,134 $ 1,628,971 $ (5,369,739) $ 87,324,366 $ 4,673,213 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 28 NOTE F--LONG-TERM LIABILITIES--Continued Revenue Bonds Payable Revenue bonds payable consisted of the following at June 30, 2010 and 2009: 2010 2009 University Center and Parking Revenue Refunding Bonds, Series 2003 $ 12,335,000 $ 13,060,000 Library Revenue Refunding Bonds, Series 2003 5,255,000 5,565,000 ODFA Public Facilities Financing Program Revenue Refunding Bonds, Series 2003 2,045,000 2,280,000 Wellness Center Student Facilities Revenue Bonds, Series 2000 7,720,000 7,935,000 Wantland Stadium Facility Revenue Bonds, Series 2004 12,310,000 12,550,000 UCO Student Housing Foundation Revenue Bonds, Series 2001 7,970,000 8,155,000 Total Revenue Bonds Payable $ 47,635,000 $ 49,545,000 University Center and Parking Revenue Refunding Bonds, Series 2003 The University Center and Parking Revenue Bonds, issued June 1, 2003, are secured by and payable both as to principal and interest from the student facility fee, parking fee, gross receipts from operations of auxiliary enterprises, and all monies in funds and accounts held by the trustee bank and are available for such payment. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 9,690,000 Serial Final 06/1/2016 $ 710,000 to 875,000 2.00% to 3.60% Semiannual 7,500,000 Term 6/1/2019 $ 2,820,000 4.00% Semiannual 6/1/2022 $ 3 ,195,000 5.00% Semiannual 6/1/2023 $ 1 ,485,000 4.13% Semiannual $ 17,190,000 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 29 NOTE F--LONG-TERM LIABILITIES--Continued Library Revenue Refunding Bonds, Series 2003 The Library Revenue Bonds, issued June 1, 2003, are secured by and payable both as to principal and interest from gross receipts from a library fee and all monies in funds and accounts held by the trustee bank available for such payment. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 4,150,000 Serial Final 06/1/2016 $ 305,000 to 375,000 2.00% to 3.60% Semiannual 3,185,000 Term 6/1/2019 $ 1,200,000 4.00% Semiannual 6/1/2022 $ 1,355,000 5.00% Semiannual 6/1/2023 $ 630,000 4.125% Semiannual $ 7,335,000 Oklahoma Development Finance Authority (ODFA) Public Facilities Financing Program Revenue Refunding Bonds, Series 2003A The ODFA Series 2003A Bonds, issued June 1, 2003, are secured by and payable both as to principal and interest from the University’s Section 13 and New College Funds received from the State of Oklahoma and all monies in funds and accounts held by the trustee bank and available for such payment. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 3,635,000 Serial Final 06/1/2018 $ 220,000 to 275,000 2.00% to 4.00% Semiannual Wellness Center Student Facilities Revenue Bonds Series 2000 The Wellness Center Student Facilities Revenue Bonds, issued August 22, 2000, are secured by and payable both as principal and interest from, gross receipts of a $2.30 per credit hour Student Facility Fee equal to at least 1.25 times the annual debt service requirement and funds held by the trustee bank. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 1,515,000 Serial Final 08/1/2010 $ 80,000 to 235,000 4.50% to 5.15% Semiannual 7,485,000 Term 8/1/2015 $ 1,565,000 5.40% Semiannual 8/1/2020 $ 2,395,000 5.60% Semiannual 8/1/2025 $ 3,525,000 5.70% Semiannual $ 9,000,000 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 30 NOTE F--LONG-TERM LIABILITIES--Continued UCO Student Housing Foundation Revenue Bonds Series 2001A and 2001B The Student Housing Foundation Revenue Bonds, issued April 19, 2001, are secured by and payable both as to principal and interest from general revenues and the accounts, documents, chattel paper, instruments, and general intangibles arising in any manner from the UCO Student Housing Foundation’s operation of the project. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 8,305,000 Serial 6/1/2031 $ 150,000 to 615,000 Variable Semiannual Regional University System of Oklahoma Student Facilities Revenue Bonds (Wantland Stadium Revenue Bonds) The Wantland Stadium Facility Revenue Bonds, issued July 7, 2004, are secured by a facility fee of $3 per credit hour which is pledged for debt service requirements on these bonds. The University has also recorded an asset for its pro-rata share of the bond issuance costs, and is amortizing that asset over the term of the lease agreement. At June 30, 2010 and 2009, the unamortized bond issuance costs totaled $168,960 and $175,600, respectively. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due Taxable $ 685,000 Serial Final 06/1/2010 $ 220,000 to 240,000 4.20% to 5.00% Semiannual X 3,075,000 Term 6/1/2019 $ 290,000 to 400,000 3.65% to 4.60% Semiannual 9,235,000 Term 6/1/2024 $ 2,340,000 5.50% Semiannual 6/1/2034 $ 6,895,000 5.00% Semiannual $ 12,995,000 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 31 NOTE F--LONG-TERM LIABILITIES--Continued The scheduled maturities of University revenue bonds payable are as follows for the years ending June 30: Principal Interest Total Years Ending June 30: 2011 $ 2,035,000 $ 2,128,315 $ 4,163,315 2012 2,115,000 2,058,573 4,173,573 2013 2,210,000 1,982,023 4,192,023 2014 2,305,000 1,900,780 4,205,780 2015 2,395,000 1,812,223 4,207,223 2016 - 2020 13,195,000 7,481,572 20,676,572 2021 - 2025 12,970,000 4,134,871 17,104,871 2026 - 2030 6,630,000 1,771,701 8,401,701 2031 - 2035 3,780,000 430,619 4,210,619 $ 47,635,000 $ 23,700,677 $ 71,335,677 Notes Payable The University has one note payable for environmental control equipment. Original Installment Effective Number of Balance Balance Amount Date Frequency Amount Interest Rate Installments 2010 2009 $ 8 ,905,000 4/1/2002 Monthly $ 61,908 5.20% 240 $ 6,475,000 $ 6,865,000 Future minimum principal and interest payments under the notes payable obligations are as follows: Principal Interest Total Years Ending June 30: 2011 $ 405,000 $ 335,244 $ 740,244 2012 425,000 317,019 742,019 2013 445,000 297,256 742,256 2014 470,000 274,450 744,450 2015 490,000 250,363 740,363 2015 - 2019 2,865,000 843,356 3,708,356 2020 - 2024 1,375,000 111,800 1,486,800 $ 6,475,000 $ 2,429,488 $ 8,904,488 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 32 NOTE F--LONG-TERM LIABILITIES--Continued Capital Lease Obligations Oklahoma Capitol Improvement Authority Leases In September 2000, the Oklahoma Capitol Improvement Authority (OCIA) issued its OCIA Bond Issues, Series 1999A. Of the total bond indebtedness, the State Regents for Higher Education allocated $2,500,000 for the 1999 Series to the University. In April 2006, OCIA issued its OCIA Bond Issues, Series 2006D. The University was allocated $19,805,623 of this total issue by the State Regents. Concurrently with the allocations, the University entered into lease agreements with OCIA, which included for the six projects being funded by the OCIA bonds. The lease agreements provide for the University to make specified monthly payments over the varying terms for the specific projects, ranging from 10 to 30 years. The proceeds of the bonds and subsequent lease are to provide for capital improvements, furniture and equipment at the University. Through June 30, 2009, the University has drawn down 100% of the 1999 Series and 71% of 2006D Series of its total allotment for expenses incurred in connection with specific projects. These expenses are being recorded as capital assets or operating expenses, in accordance with University policy. The University has recorded a lease obligation payable to OCIA for the total amount of the allotment, less repayment made during the fiscal years. The University has also recorded an asset for its pro-rata share of the bond issuance costs, and is amortizing that asset over the term of the lease agreement. At June 30, 2010 and 2009, the unamortized bond issuance costs totaled $94,785 and $103,363 respectively. During the years ended June 30, 2010 and 2009, OCIA made lease principal and interest payments totaling $2,154,747 and $2,141,105, respectively, on behalf of the University. These on-behalf payments have been recorded as restricted state appropriations in the University’s statements of revenues, expenses and changes in net assets. Oklahoma Development Finance Authority Master Lease Program The Oklahoma Development Finance Authority (ODFA) issued the ODFA Master Lease Revenue Bonds. ODFA issues bonds to fund capital improvements at state colleges and universities in Oklahoma. ODFA allocates the bond proceeds to colleges and universities in the form of financing leases. The University has recorded capital improvements funded by the leases and the resulting capital lease obligations in its statement of net assets. At June 30, 2010 and 2009, the unamortized bond issuance costs totaled $60,250 and $57,200, respectively. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 33 NOTE F--LONG-TERM LIABILITIES--Continued Capital Lease Obligations--Continued Oklahoma Development Finance Authority Master Lease Program--Continued The lease agreements calls for monthly payments to ODFA in an amount that equals debt service requirements on the portion of the bonds used to finance the leases. After payment of bond closing costs, the net bond proceeds were deposited into ODFA trust accounts as required by the bond indentures. At June 30, 2010 and 2009, trust accounts balances total $485,338 and $380,183, respectively, and are included with Restricted Investments on the University’s statement of net assets. Bond Series UCO's Allocated Amount Final Payment 2004A $ 1,825,000 6/1/2024 2005A 2,405,000 6/1/2025 2006B 1,508,000 5/15/2011 2007A 151,000 5/15/2012 2007C 2,020,000 12/1/2027 2009B 1,058,000 12/1/2029 Monies in the acquisition funds are restricted for the projects being funded by the Series 2009C. Debt service reserve funds are restricted for the payment of principal and interest pursuant to the agreements. Future minimum lease payments under the University’s capital lease obligations are as follows: Principal Interest Total Years Ending June 30: 2011 $ 778,312 $ 1,201,654 $ 1,979,966 2012 457,341 1,173,849 1,631,190 2013 424,613 1,153,686 1,578,299 2014 437,193 1,138,688 1,575,881 2015 446,896 1,121,185 1,568,081 2016-2020 2,210,381 5,322,899 7,533,280 2021-2025 2,020,000 4,869,283 6,889,283 2026-2030 762,000 4,526,902 5,288,902 2031-2033 17,840,028 2,150,322 19,990,350 $ 25,376,764 $ 22,658,468 $ 48,035,232 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 34 NOTE F--LONG-TERM LIABILITIES--Continued Total interest costs incurred in 2010 was $3,588,688 of which $18,451 was capitalized. Total interest costs incurred in 2009 was $3,802,242 of which $121,430 was capitalized. Other Leases The University has entered into a lease agreement with its component unit, the University Foundation, to lease their music building for a period of 25 years in the amount of $6,689 per month. The lease commenced in January 2002 and will terminate at the end of the 300th month. In accordance with the agreement, the monthly rent adjusts every 5 years to mirror the change in the interest rate paid by the Foundation. In addition, the University agreed to pay the Foundation an additional sum of $1,200 per year plus the EEDA’s annual administrative fee which is 1/8th of 1% of the declining principal balance of the loan on the property. This lease may be cancelled at the end of any year should funding for the lease not be approved by the Regional University System of Oklahoma and budgeted and approved by the University’s administration. The University has entered into a lease agreement with its component unit, the University Foundation, to lease the building and grounds located at 400 N. Littler, 115 and 117 E. 4th and 29 S.E.4th, Edmond, Oklahoma for a period of one year. The lease calls for monthly rental payments plus reimburse the Foundation for related property taxes and insurance. The lease commenced in May 2005. This lease automatically renews for a term of one year through May 2013, unless notified in writing sixty days in advance of the anniversary date. Monthly rental payments were $2,432 and $3,062 at June 30, 2010 and 2009, respectively. NOTE G--RETIREMENT PLANS The University’s academic and nonacademic personnel are covered by various retirement plans. The plans available to University personnel include the Oklahoma Teachers’ Retirement System (“OTRS”), which is a State of Oklahoma public employees retirement system, the Teachers’ Insurance Annuity Association, which is a defined contribution plan, and the Supplemental Retirement Annuity (“SRA”), a single employer defined benefit plan available to employees hired prior to July 1, 1995. The University does not maintain the accounting records, hold the investments for, or administer these plans. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 35 NOTE G--RETIREMENT PLANS--Continued Oklahoma Teachers’ Retirement System Plan Description The University contributes to the Oklahoma Teachers’ Retirement System, a cost-sharing multiple employer defined benefit pension plan sponsored by the State. OTRS provides defined retirement benefits based on members’ final compensation, age and term of service. In addition, the retirement program provides for benefits upon disability and to survivors upon the death of eligible members. The benefit provisions are established and may be amended by the legislature of the State. Title 70 of the Oklahoma Statutes, Sections 17-101 through 17-116.9, as amended, assigns the authority for management and operation of the Plan to the Board of Trustees of OTRS. OTRS is not required to provide for a cost-of living adjustment. The OTRS issues a publicly available financial report that includes financial statements and supplementary information for OTRS. That report may be obtained by writing to Teachers’ Retirement System of Oklahoma, P.O. Box 53524, Oklahoma City, Oklahoma 73152-3524, or by calling (405) 521- 2387. Funding Policy The University is required to contribute a fixed percentage of annual compensation on behalf of active members. The employer contribution rate was 7.55% from January 1, 2008 through December 31, 2008 and 8.05% from January 1, 2009 through December 31, 2009. From January 1, 2010 through December 31, 2010 the employer contribution rate is 8.55%. The contribution rate is applied to annual compensation and is determined by State statute. Employees’ contributions are also determined by State statute. For all employees, the contribution rate was 7% of covered salaries and fringe benefits in 2010, 2009 and 2008, respectively. Percentages of the compensation in excess of $15,000 for the employee’s contributions were paid directly by the University to the OTRS for 2010, 2009 and 2008, respectively. The University’s contributions to the OTRS for the years ended June 30, 2010, 2009, and 2008, were approximately $9,230,000, $8,752,000, and $7,882,000, respectively. These contributions included the University’s statutory contribution and the share of the employee’s contribution paid directly by the University. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 36 NOTE G--RETIREMENT PLANS--Continued Oklahoma Teachers’ Retirement System--Continued Funding Policy--Continued The State of Oklahoma is also required to contribute to the OTRS on behalf of the participating employers. For 2010, the State of Oklahoma contributed 5% of state revenues from sales and use taxes and individual income taxes, to the OTRS on behalf of participating employers. The University has estimated the amounts contributed to the OTRS by the State on its behalf by multiplying the ratio of its covered salaries to total covered salaries for the OTRS for the year by the applicable percentage of taxes collected during the year. For the years ended June 30, 2010 and 2009, total amounts contributed to the OTRS by the State of Oklahoma on behalf of the University were approximately $3,906,000 and $4,138,000, respectively. These on-behalf payments have been recorded as both revenues and expenses of the current funds in the financial statements in the statements of revenues, expenses and changes in net assets. Supplemental Retirement Annuity (SRA) Plan Description The University’s SRA plan is a single employer, defined benefit pension plan administered by the University’s Board of Regents. The SRA was established by the University’s Board of Regents to provide supplemental retirement and death benefits to University employees who were hired prior to July 1, 1995, or to those eligible employees’ beneficiaries. The authority to amend the SRA’s benefit provisions rests with the University’s Board of Regents. The SRA does not issue a standalone financial report, nor is it included in the financial report of another entity. Funding Policy The authority to establish and amend eligible employees’ and employer contribution obligations to the SRA rests with the University’s Board of Regents. Eligible employees are not required to make contributions to the SRA. The University is required to contribute to the SRA an actuarially determined amount on an annual basis. Under a policy adopted in December 2002, the Plan must achieve 80% funding of the pension benefit obligation by December 1, 2022. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 37 NOTE G--RETIREMENT PLANS--Continued Annual Pension Cost & Net Pension Obligation (Asset) Annual pension cost and net pension obligation (asset) of the SRA as of June 30, 2010 and 2009 are as follows: 2010 2009 Annual required contribution $ 1,057,660 $ 963,568 Interest on net pension obligation (asset) (179,764) (180,380) Adjustment to annual required contribution 228,867 229,651 Annual pension cost 1,106,763 1,012,839 Contributions made (1,005,141) (1,005,141) Increase in net pension obligation 101,622 7,698 Net pension obligation (asset) at beginning of year (2,247,048) (2,254,746) Net pension obligation (asset) at end of year $ (2,145,426) $ (2,247,048) The annual required contributions for 2010 and 2009 were determined as part of an actuarial valuation on June 30, 2010 and 2009, using the projected unit credit actuarial cost method. The actuarial assumptions included (a) a discount rate of 8% per year to determine the present value of future benefit payments; (b) retirement at age 65; (c) an 8% rate of return on investments; (d) projected salary increases of 3.5% per year; and (e) an 8% interest rate for post-retirement individual annuity settlement benefits. The value of the SRA assets is based on the TIAA-CREF group annuity account asset value. The unfunded actuarial accrued liability is being amortized over twenty years as a level dollar amount on a closed basis. Year Ended Annual Pension Percentage of Net Pension June 30, Cost (APC) APC Contributed Obligation (Asset) 2010 $ 1,106,763 90.8% $ (2,145,426) 2009 1,012,839 99.2% (2,247,048) 2008 1,141,982 88.0% (2,254,746) NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 38 NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS (OPEB) Postemployment Healthcare Plan Plan Description The University’s postemployment healthcare plan is an agent multiple-employer defined benefit plan administered by the Regional University System of Oklahoma Board of Regents (“RUSO”). The plan provides medical and life insurance benefits to eligible retired employees until age 65. A retiring employee must have been employed full-time in the Regional University System of Oklahoma for not less than ten years immediately preceding the date of retirement; been a member of the Oklahoma Teachers’ Retirement System during that time; and elected to receive a vested benefit under the provision of the Oklahoma Teachers’ Retirement System. As of June 30, 2010, there were a total of 1,268 participants in the plan. The retirement insurance program was adopted by the Board of Regents in 1985. In March 2008, the Retiree Medical Trust for Regional University system of Oklahoma was established to hold assets and pay benefits on behalf of the University’s postemployment healthcare plan, and is administered by The Bank of Oklahoma, N.A. Prior to the establishment of the trust, the insurance benefits were accounted for on a pay-as-you-go basis so that premiums were made from current operating funds. In 2009, the board voted to eliminate this benefit for anyone hired after July 1, 2009, which will affect future years. Funding Policy The contribution requirements of the University are established and may be amended by the RUSO. The University is required to contribute the annual required contribution (ARC) of the employer, in an amount actuarially determined in accordance with the parameters of GASB Statement 45. 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 thirty years. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 39 NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS (OPEB)--Continued Postemployment Healthcare Plan--Continued Annual OPEB Cost The University’s annual required contributions were $613,300 and $557,439, in 2010 and 2009, respectively. In 2008, the University’s annual OPEB cost (expense) of $970,074 was equal to the ARC plus the actual insurance benefits paid during the year, which have been reimbursed from the trust account. The annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation at June 30, 2010 and 2009 were as follows: Percentage of Net Fiscal Annual Annual OPEB OPEB Year Ended OPEB Cost Cost Contributed Obligation 6/30/2010 $ 613,300 100% $ - 6/30/2009 557,439 100% - 6/30/2008 970,074 145% - Funded Status and Funding Progress The funded status of the plan as of June 30, 2010, was as follows: Actuarial accrued liability (AAL) $ 5,371,791 Actuarial value of plan assets 1,241,612 Unfunded actuarial accrued liability (UAAL) $ 4,130,179 Funded ratio (actuarial value of plan assets/AAL) 23.1% Covered payroll (active plan members) $ 67,966,227 UAAL as a percentage of covered payroll 6.1% Actuarial valuation of an ongoing plan involves 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 the healthcare cost trend. 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. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 40 NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS (OPEB)--Continued Postemployment Healthcare Plan--Continued Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan 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 short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. For the June 30, 2010 actuarial valuation, the Projected Unit Credit Cost Method was used. The actuarial assumptions included a 7.0% investment rate of return and an annual healthcare cost inflationary increase of 9.0%. NOTE I--FUNDS HELD IN TRUST BY OTHERS Beneficial Interest in State School Land Funds The University has a beneficial interest in the Section Thirteen Fund State Educational Institutions and the New College Fund administered by the Commissioners of the Land Office as trustees for the various educational institutions entitled thereto. The University has the right to receive annually 3.7% of the distributions of income produced by Section Thirteen Fund State Educational Institutions assets and 100% of the distributions of income produced by the University of Central Oklahoma’s New College Fund. The University received $963,950 and $739,340 during the years ended June 30, 2010 and 2009, respectively, which is restricted to the construction or acquisition of buildings, equipment, or other capital items. These amounts are recorded as restricted capital gifts in the statements of revenues, expenses and changes in net assets. State law prohibits the distribution of any corpus of these funds to the beneficiaries. The total trust reserve for University of Central Oklahoma, held in trust by the commissioners of Land Office, was approximately $13,493,000 and $12,374,000 at June 30, 2010 and 2009, respectively. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 41 NOTE I--FUNDS HELD IN TRUST BY OTHERS--Continued Oklahoma State Regents Endowment Trust Fund The University participates in the Oklahoma State Regents’ Endowment Program (the “Endowment Program”). Under the Endowment Program, the State matches contributions received. Such contributions generally come from private donations through the Foundation, for endowed chairs, lectureships, fellowships, and similar activities. The State matched amounts, plus any retained accumulated earnings, totaled approximately $1,091,000 and $953,000 at June 30, 2010 and 2009, respectively, and is invested by the Oklahoma State Regents on behalf of the University. The University is entitled to receive an annual distribution of 4.5% of the three-year average of the June 30th market values on these funds. As legal title of the State Regents matching endowment funds is retained by the Oklahoma State Regents, the funds available for distribution are approximately $73,000 and $55,000 at June 30, 2010 and 2009, respectively. NOTE J--COMMITMENTS AND CONTINGENCIES The University conducts certain programs pursuant to various grants and contracts, which are subject to audit by federal and state agencies. Costs questioned as a result of these audits, if any, may result in refunds to these governmental agencies from various sources of the University. The University participates in the Federal Family Education Loan Program (the “FFEL Program”). The FFEL Program does not require the University to draw down cash; however, the University is required to perform certain administrative functions under the FFEL Program. Failure to perform such functions may require the University to reimburse the loan guarantee agencies. For the years ended June 30, 2010 and 2009, approximately $54,386,000 and $48,696,000 respectively, of FFEL Program loans were provided to University students. NOTE K--RISK MANAGEMENT During the ordinary course of business, the University may be subjected to various lawsuits and civil action claims. Management believes that resolution of any such matters pending at June 30, 2010 will not have material adverse impact to the University. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 42 NOTE K--RISK MANAGEMENT--Continued The University is exposed to various risks of loss from torts; theft of, damage to, and destruction of assets; errors and omissions; employee injuries and illnesses; natural disasters; and employee health, life, and accident benefits. Commercial insurance coverage is purchased on a limited basis for special events and large dollar items that are under the State Risk deductibles. The University, along with other state agencies and political subdivisions, participates in the State of Oklahoma Risk Management Program and the State Insurance Fund, public entity risk pools currently operating as a common risk management and insurance program for its members. The University pays annual premiums to the pools for tort, property, and liability insurance coverage. The Oklahoma Risk Management Pool’s governing agreement specifies that the pool will be self-sustaining though member premiums and will reinsure through commercial carriers for claims in excess of specified stop-loss amounts. The University also participates in the College Association of Liability Management (“CALM”) Workers’ Compensation Plan for its workers’ compensation coverage. CALM is an Interlocal Cooperative Act Agency that was organized to provide workers’ compensation insurance coverage for participating colleges and universities through the State Insurance Fund. CALM is a political subdivision of the State and is governed by a Board of Trustees elected from members of the participating colleges and universities. NOTE L--ACCOUNTING STANDARDS ISSUED NOT YET ADOPTED In 2010, GASB issued Statement No. 59, Financial Instruments Omnibus. GASB No. 59 provides updates and improvements to existing standards regarding financial reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been identified in practice. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2010. Earlier application is encouraged. Management has determined that this Statement will have no effect on the University’s financial condition or results of operations. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 43 NOTE M--SEGMENT INFORMATION The following financial information represents an identifiable activity for which revenue bonds are outstanding and for which segment information is to be reported, as required by GASB Statement No. 34, as amended. The bonds were issued to construct a student housing facility for the University. UCO Student Housing Foundation- Series 2001 The UCO Student Housing Foundation operated the student housing facility known as the University Suites II. Revenues pledged include all room rentals and other revenues generated from the housing facility. Condensed Statement of Net Assets Student Housing Student Housing 2010 2009 ASSETS Current assets $ 7 37,868 $ 7 77,663 Capital assets 5 ,474,766 5 ,651,372 Other assets 2 ,610,828 1 ,865,145 TOTAL ASSETS 8 ,823,462 8 ,294,180 LIABILITIES Current liabilities 1 ,353,055 7 42,186 Long-term liabilities 7 ,760,000 7 ,970,000 TOTAL LIABILITIES 9 ,113,055 8 ,712,186 NET ASSETS Unrestricted 2 ,205,641 2 ,085,622 Invested in capital assets, net of debt (2,495,234) (2,503,628) TOTAL NET ASSETS (DEFICIENCY) $ (289,593) $ (418,006) NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 44 NOTE M--SEGMENT INFORMATION--Continued Condensed Statement of Revenues Expenses and Changes in Net Assets Student Housing Student Housing 2010 2009 OPERATING REVENUES $ 1,629,845 $ 1,482,225 Depreciation expense (176,605) (216,624) Other operating expenses (1,197,702) (987,340) NET OPERATING INCOME 255,538 2 78,261 NONOPERATING REVENUES (EXPENSES) Investment income 57 8 ,585 Interest expense (127,182) (216,512) NET NONOPERATING EXPENSES (127,125) (207,927) Transfers - - Change in net assets 128,413 70,334 NET ASSETS, BEGINNING OF YEAR (418,006) (488,340) NET ASSETS, END OF YEAR $ (289,593) $ (418,006) Condensed Statement of Cash Flows Student Housing Student Housing 2010 2009 Net cash provided by operating activities $ 7 46,046 $ 4 07,614 Net cash provided by bond activities - - Net cash flows used by noncapital financing activities - - Net cash flows used by capital and related financing activities (185,000) (160,000) Net cash provided by investing activities (633,850) (149,193) Net increase in cash (72,804) 98,421 CASH, BEGINNING OF YEAR 461,704 363,283 CASH, END OF YEAR $ 3 88,900 $ 461,704 REQUIRED SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION--UNAUDITED UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered UAAL as a percentage Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll of Covered Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/(c) 6/30/2006 $ 4,790,261 $ 13,357,666 $ 8 ,567,405 35.9% $ 16,113,514 53.2% 6/30/2007 5,387,069 14,791,448 9 ,404,379 36.4% 15,958,108 58.9% 6/30/2008 5,279,537 13,981,155 8 ,701,618 37.8% 15,644,334 55.6% 6/30/2009 4,719,473 14,470,846 9 ,751,373 32.6% 15,140,727 64.4% 6/30/2010 5,009,966 15,086,417 10,076,451 33.2% 13,621,881 74.0% Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered UAAL as a percentage Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll of Covered Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/(c) 6/30/2008 $ 666,000 $ 5,112,000 $ 4,446,000 13.0% $ 51,210,330 8.7% 6/30/2009 944,691 5,371,791 4,427,100 17.6% 57,660,935 7.7% 6/30/2010 1,241,612 5,371,791 4,130,179 23.1% 67,966,227 6.1% The actuarial liability is based on the projected unit credit method. SCHEDULE OF FUNDING PROGRESS FOR SUPPLEMENTAL RETIREMENT ANNUITY PLAN SCHEDULE OF FUNDING PROGRESS FOR OTHER POST EMPLOYMENT INSURANCE BENEFITS 45 OTHER SUPPLEMENTARY INFORMATION SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total ASSETS CURRENT ASSETS Cash and cash equivalents $ 4 0,342,132 $ 388,900 $ 4 0,731,032 $ 311,692 $ 103,928 $ 79,268 $ 494,888 Restricted cash and cash equivalents 8,455,083 - 8,455,083 - - - - Restricted Investments 5,705,866 140,838 5,846,704 3,034,813 - 574,000 3,608,813 Investments held by others - - - - 158,464 - 158,464 Accounts receivable, net 14,077,799 202,754 14,280,553 - - - - Interest receivable 39,980 - 39,980 39,948 - 252 40,200 Loan receivable - - - - - - - Prepaid expenses 723 5,376 6,099 4,144 - - 4,144 Inventories 32,840 - 32,840 - - - - Contributions receivable - - - 477,782 - - 477,782 Current portion of student loans recievable, net 105,000 - 105,000 - - - - TOTAL CURRENT ASSETS 68,759,423 737,868 69,497,291 3,868,379 262,392 653,520 4,784,291 NONCURRENT ASSET Restricted investments 938,610 2,371,050 3,309,660 14,152,732 - - 14,152,732 Investments held by others - - - 236,645 - - 236,645 Investments - - - - - - - Receivable from state agency - - - - - - - Student loans receivable, net 1,996,508 - 1,996,508 - - - - Other assets 323,994 239,778 563,772 22,517 - - 22,517 Prepaid pension asset 2,145,426 - 2,145,426 - - - - Capitalized collections 4,544,290 - 4,544,290 - - - - Capital assets, net 1 07,592,130 5,474,766 1 13,066,896 1,656,102 848 - 1,656,950 TOTAL NONCURRENT ASSETS 1 17,540,958 8,085,594 1 25,626,552 16,067,996 848 - 16,068,844 TOTAL ASSETS $ 186,300,381 $ 8,823,462 $ 195,123,843 $ 19,936,375 $ 263,240 $ 653,520 $ 20,853,135 LIABILITIES CURRENT LIABILITIES Accounts payable $ 3,347,803 $ 1,143,055 $ 4,490,858 $ 197,182 $ - $ 29,217 $ 226,399 Accrued payroll and benefits 2,635,045 - 2,635,045 - - - - Accrued interest payable 370,357 - 370,357 - - - - Deferred revenue 2,983,033 - 2,983,033 - - - - Deposits held in custody for others 494,964 - 494,964 158,302 - - 158,302 Current portion of noncurrent liabilities 4,590,557 210,000 4,800,557 37,494 - - 37,494 TOTAL CURRENT LIABILITIES 14,421,759 1,353,055 15,774,814 392,978 - 29,217 422,195 NONCURRENT LIABILITIES, net of current portion: Accrued compensated absences 1,224,225 - 1,224,225 - - - - Federal loan program contributions refundab 1,840,864 - 1,840,864 - - - - Bonds payable 37,840,000 7,760,000 45,600,000 - - - - Notes payable 6,070,000 - 6,070,000 849,148 - - 849,148 ODFA master lease obligation 5,973,572 - 5,973,572 - - - - Lease obligation payable to state agency 18,624,880 - 18,624,880 - - - - TOTAL NONCURRENT LIABILITIES 71,573,541 7,760,000 79,333,541 849,148 - - 849,148 TOTAL LIABILITIES $ 8 5,995,300 $ 9,113,055 $ 9 5,108,355 $ 1,242,126 $ - $ 29,217 $ 1,271,343 NET ASSETS Invested in capital assets, net of related debt $ 3 2,150,467 $ (2,495,234) $ 2 9,655,233 $ - $ - $ - $ - Restricted for: Nonexpendable 659,161 - 659,161 13,223,599 - - 13,223,599 Expendable: 3,235,065 - 4,765 3,239,830 Scholarships, research, 4,185,720 - 4,185,720 - - - - instruction and other Loans 348,410 - 348,410 - - - - Capital projects 1,039,784 - 1,039,784 - - - - Debt service 17,670,365 - 17,670,365 - - - - Unrestricted 44,251,174 2,205,641 46,456,815 2,235,585 263,240 619,538 3,118,363 TOTAL NET ASSETS $ 100,305,081 $ (289,593) $ 100,015,488 $ 18,694,249 $ 263,240 $ 624,303 $ 19,581,792 See notes to financial statements. TRUE TRUE TRUE TRUE Primary Government Discrete Component Units 46 SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA Year Ended June 30, 2010 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total OPERATING REVENUES Student tuition and fees (included in fees are $3,724,953 $ 70,040,850 $ - $ 70,040,850 $ - $ - $ - $ - Less scholarship, discounts and allowances (18,442,726) - (18,442,726) - - - - Net student revenues 51,598,124 - 51,598,124 - - - - Federal grants and contracts 3,246,632 - 3,246,632 - - - - State and local grants and contracts 5,810,036 - 5,810,036 - - - - Bookstore operations 1,031,191 - 1,031,191 - - - - Housing and food service revenues ($1,391,720 pledged as security on 2001 UCO Student Housing 8,973,514 1,391,720 10,365,234 - - - - Parking and University Center revenues (total revenues are dedicated as security for bond repayments.) 2,264,008 - 2,264,008 - - - - Interest earned on loans to students 1 8,749 - 18,749 - - - - Other operating revenues 4,196,120 238,125 4,434,245 - - - - TOTAL OPERATING REVENUES 77,138,374 1,629,845 78,768,219 - - - - OPERATING EXPENSES Compensation and employee benefits 98,348,469 - 98,348,469 - - - - Contractual services 3,860,750 22,482 3,883,232 38,864 6,448 10,700 56,012 Supplies and materials 16,109,204 317,204 16,426,408 59,231 3,819 - 63,050 Depreciation 6,440,045 176,605 6,616,650 47,399 2 66 - 47,665 Utilities 2,586,088 97,529 2,683,617 - - - - Scholarships and fellowships 15,087,260 15,087,260 - - - - Other operating expenses 13,760,874 760,487 14,521,361 2,163,750 98,985 21,419 2,284,154 TOTAL OPERATING EXPENSES 156,192,690 1,374,307 157,566,997 2,309,244 109,518 32,119 2,450,881 Net operating income (loss) (79,054,316) 255,538 (78,798,778) (2,309,244) (109,518) ( 32,119) (2,450,881) NONOPERATING REVENUES (EXPENSES) State appropriations 60,909,102 - 60,909,102 - - - - State appropriations - ARRA funds 4,286,658 - 4,286,658 Federal funded student aid 18,894,687 - 18,894,687 - - - - OTRS on-behalf contributions 3,905,924 - 3,905,924 - - - - Gifts - - - 1,656,118 114,376 54,388 1,824,882 Investment income 827,995 57 828,052 1,146,067 12,690 4,820 1,163,577 Interest expense (3,443,055) (127,182) (3,570,237) - - - - NET NONOPERATING REVENUES (EXPENSES) 85,381,311 (127,125) 85,254,186 2,802,185 127,066 59,208 2,988,459 Income (loss) before other revenues, 6,326,995 128,413 6,455,408 492,941 17,548 27,089 537,578 expenses, gains and losses State appropriations restricted for capital purposes 1,721,978 - 1,721,978 - - - - OCIA on-behalf state appropriations 2,154,747 - 2,154,747 - - - - Gifts 165,538 - 165,538 - - - - Change in net assets 10,369,258 128,413 10,497,671 492,941 17,548 27,089 537,578 NET ASSETS, BEGINNING OF YEAR 89,935,823 (418,006) 89,517,817 18,201,308 245,692 597,214 19,044,214 NET ASSETS, END OF YEAR $ 100,305,081 $ ( 289,593) $ 100,015,488 $ 18,694,249 $ 263,240 $ 624,303 $ 1 9,581,792 See notes to financial statements. Foundation Bonds) of revenues dedicated for bond repayments) Primary Government Discrete Component Units 47 SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2009 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total ASSETS CURRENT ASSETS Cash and cash equivalents $ 34,140,843 $ 461,704 $ 3 4,602,547 $ 2,179,907 $ 98,595 $ 275,722 $ 2,554,224 Restricted cash and cash equivalents 7,860,921 - 7,860,921 - - - - Restricted Investments 1 5,592,589 264,228 15,856,817 3,556,649 - 325,000 3,881,649 Investments held by others - - - - 145,983 - 145,983 Accounts receivable, net 1 1,596,968 46,321 11,643,289 - - - - Interest receivable 35,951 - 35,951 63,609 - 3,696 67,305 Loan receivable - - - 4,939 - - 4,939 Prepaid expenses - 5,410 5,410 4,493 - 1,650 6,143 Inventories 38,205 - 38,205 - - - - Contributions receivable - - - 673,058 - - 673,058 Current portion of student loans receivable, net 175,000 - 175,000 - - - - TOTAL CURRENT ASSETS 6 9,440,477 777,663 70,218,140 6,482,655 244,578 606,068 7,333,301 NONCURRENT ASSETS Restricted investments 380,661 1,613,811 1,994,472 10,861,453 - - 10,861,453 Investments held by others - - - 220,620 - - 220,620 Investments - - - - - - - Receivable from state agency - - - - - - - Student loans receivable, net 1,798,188 - 1,798,188 - - - - Other assets 336,563 251,334 587,897 22,518 - - 22,518 Prepaid pension asset 2,247,048 - 2,247,048 - - - - Capitalized collections 4,544,290 - 4,544,290 - - - - Capital assets, net 9 9,477,492 5,651,372 1 05,128,864 1,702,025 1,114 - 1,703,139 TOTAL NONCURRENT ASSETS 108,784,242 7,516,517 1 16,300,759 12,806,616 1,114 - 12,807,730 TOTAL ASSETS $ 178,224,719 $ 8,294,180 $ 186,518,899 $ 19,289,271 $ 245,692 $ 606,068 $ 20,141,031 LIABILITIES CURRENT LIABILITIES Accounts payable $ 3 ,359,418 $ 556,673 $ 3,916,091 $ 18,406 $ - $ 8,854 $ 27,260 Accrued payroll and benefits 2,463,639 - 2,463,639 - - - - Accrued interest payable 383,478 - 383,478 - - - - Deferred revenue 2,506,325 513 2,506,838 - - - - Deposits held in custody for others 406,670 - 406,670 147,023 - - 147,023 Current portion of noncurrent liabilities 4,488,213 185,000 4,673,213 35,892 - - 35,892 TOTAL CURRENT LIABILITIES 1 3,607,743 742,186 14,349,929 201,321 - 8,854 210,175 NONCURRRENT LIABILITIES, net of current portion Accrued compensated absences 1,286,104 - 1,286,104 - - - - Federal loan program contributions refundable 1,868,798 - 1,868,798 - - - - Bonds payable 3 9,665,000 7,970,000 47,635,000 - - - - Notes payable 6,475,000 - 6,475,000 886,642 - - 886,642 ODFA master lease obligation 5,617,192 - 5,617,192 - - - - Lease obligation payable to state agency 1 9,769,059 - 19,769,059 - - - - TOTAL NONCURRENT LIABILITIES 7 4,681,153 7,970,000 82,651,153 886,642 - - 886,642 TOTAL LIABILITIES $ 88,288,896 $ 8,712,186 $ 9 7,001,082 $ 1,087,963 $ - $ 8,854 $ 1,096,817 NET ASSETS Invested in capital assets, net of related deb $ 30,056,038 $ (2,503,628) $ 2 7,552,410 $ - $ - $ - $ - Restricted for: - - - - Nonexpendable 622,567 - 622,567 12,694,809 - - 12,694,809 Expendable: 3,313,571 - 25,000 3,338,571 Scholarships, research, instruction and other 4,105,921 - 4,105,921 - - - - Loans 344,020 - 344,020 - - - - Capital projects 2,253,963 - 2,253,963 - - - - Debt service 1 5,541,835 - 15,541,835 - - - - Unrestricted 3 7,011,479 2,085,622 39,097,101 2,192,928 245,692 572,214 3,010,834 TOTAL NET ASSETS $ 89,935,823 $ (418,006) $ 8 9,517,817 $ 18,201,308 $ 245,692 $ 597,214 $ 19,044,214 See notes to financial statements. Primary Government Discrete Component Units 48 SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA Year Ended June 30, 2009 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total OPERATING REVENUES Student tuition and fees (included in fees are $3,539,890 $ 64,918,509 $ - $ 64,918,509 $ - $ - $ - $ - Less scholarship, discounts and allowances (15,464,475) - (15,464,475) - - - - Net student revenues 49,454,034 - 49,454,034 - - - - Federal grants and contracts 1,966,059 - 1,966,059 - - - - State and local grants and contracts 5,001,837 - 5,001,837 - - Bookstore operations 979,103 - 979,103 - - - - Housing and food service revenues ($1,388,862 pledged as security on 2001 UCO Student Housing 7,759,664 1,388,862 9,148,526 - - - - Parking and University Center revenues (total revenues are dedicated as security for bond repayments.) 2,198,882 - 2,198,882 - - - - Interest earned on loans to students 18,883 - 18,883 - - - - Other operating revenues 4,140,707 93,363 4,234,070 - - - - TOTAL OPERATING REVENUES 71,519,169 1,482,225 73,001,394 - - - - OPERATING EXPENSES Compensation and employee benefits 96,355,796 - 96,355,796 - - - - Contractual services 3,606,208 20,890 3,627,098 - 6,399 10,700 17,099 Supplies and materials 14,818,805 173,386 14,992,191 - 3,033 - 3,033 Depreciation 6,242,583 216,624 6,459,207 - 287 - 287 Utilities 2,559,131 119,245 2,678,376 - - - - Scholarships and fellowships 10,724,494 10,724,494 - - - - Other operating expenses 13,263,954 673,819 13,937,773 1,593,650 89,812 15,006 1,698,468 TOTAL OPERATING EXPENSES 147,570,971 1,203,964 148,774,935 1,593,650 99,531 25,706 1,718,887 Net operating income (loss) (76,051,802) 278,261 (75,773,541) (1,593,650) ( 99,531) ( 25,706) (1,718,887) NONOPERATING REVENUES (EXPENSES) State appropriations 64,376,151 - 64,376,151 - - - - Federal funded student aid 13,333,243 - 13,333,243 OTRS on-behalf contributions 4,138,019 - 4,138,019 - - - - Gifts 1,966 - 1,966 2,148,905 133,566 142,764 2,425,235 Investment income 1,192,118 8,585 1,200,703 (2,100,644) ( 19,322) 13,909 (2,106,057) Interest expense (3,464,300) (216,512) (3,680,812) - - - - NET NONOPERATING REVENUES (EXPENSES) 79,577,197 (207,927) 79,369,270 48,261 114,244 156,673 319,178 Income (loss) before other revenues, expenses, gains and losses 3,525,395 70,334 3,595,729 (1,545,389) 14,713 130,967 (1,399,709) State appropriations restricted for capital purposes 1,777,330 - 1,777,330 - - - - OCIA on-behalf state appropriations 2,141,105 - 2,141,105 - - - - Gift of capital assets 192,640 - 192,640 - - - - Change in net assets 7,636,470 70,334 7,706,804 (1,545,389) 14,713 130,967 (1,399,709) NET ASSETS, BEGINNING OF YEAR 82,299,353 (488,340) 81,811,013 19,746,697 230,979 466,247 20,443,923 NET ASSETS, END OF YEAR $ 89,935,823 $ (418,006) $ 89,517,817 $ 18,201,308 $ 245,692 $ 597,214 $ 19,044,214 See notes to financial statements. Foundation Bonds) of revenues dedicated for bond repayments) Primary Government Discrete Component Units 49 REPORTS REQUIRED BY GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133 Independent Auditors’ 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 Regents Regional University System of Oklahoma University of Central Oklahoma Oklahoma City, Oklahoma We have audited the financial statements of the University of Central Oklahoma (the “University”), a component unit of the State of Oklahoma, as of and for the year ended June 30, 2010, and have issued our report thereon dated October 31, 2010. 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. Other auditors audited the financial statements of the University of Central Oklahoma Alumni Association and the KCSC Classical Radio Foundation, discretely presented component units of the University, as described in our report on the University’s financial statements. The financial statements of the UCO Student Housing Foundation, the University of Central Oklahoma Foundation, Inc., the University of Central Oklahoma Alumni Association and the KCSC Classical Radio 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’ 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 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. 50 51 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 identified a deficiency in internal control over financial reporting, described in the accompanying Schedule of Findings and Questioned Costs, that we consider to be a material weaknesses, as defined above. See Finding 2010-01. We also identified a certain deficiency in internal control over financial reporting, described in the accompanying Schedule of Findings and Questioned Costs, that we consider to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. See Finding 2010-02. 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 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 tests disclosed an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying Schedule of Findings Questioned Costs. See Finding 2010-02. The University’s responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. We did not audit the University’s responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of the Board of Regents, management, and federal awarding agencies and is not intended to be, and should not be, used by anyone other than these specified parties. Oklahoma City, Oklahoma October 31, 2010 Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards Board of Regents Regional University System of Oklahoma University of Central Oklahoma Oklahoma City, Oklahoma Compliance We have audited the compliance of the University of Central Oklahoma (the “University”), a component unit of the State of Oklahoma, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2010. The University’s major federal programs are identified in the Summary of Auditors’ Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the University’s management. Our responsibility is to express an opinion on the University’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the University’s compliance with those requirements. In our opinion, the University of Central Oklahoma complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2010. However, the results of our auditing procedures disclosed instances of noncompliance with those requirem
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Description
Title | FY 2010 Audit Report |
OkDocs Class# | Z600.3 F491s 2010 |
Digital Format | PDF, Adobe Reader required |
ODL electronic copy | Downloaded from agency website: www.uco.edu/administration/.../FY%202010%20Audit%20Report.pdf |
Rights and Permissions | This Oklahoma state government publication is provided for educational purposes under U.S. copyright law. Other usage requires permission of copyright holders. |
Language | English |
Full text | UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 AUDITED FINANCIAL STATEMENTS Independent Auditors’ Report ................................................................................................................. 1 Management’s Discussion and Analysis ................................................................................................ 3 Statements of Net Assets ........................................................................................................................... 8 Statements of Revenues, Expenses and Changes in Net Assets .......................................................... 9 Statements of Cash Flows ....................................................................................................................... 10 Notes to Financial Statements ................................................................................................................ 12 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress for Supplemental Retirement Annuity Plan and Other Post Employment Insurance Benefits-Unaudited ......................................................... 45 OTHER SUPPLEMENTARY INFORMATION Supplemental Schedule--2010 Combining Statement of Net Assets ................................................ 46 Supplemental Schedule--2010 Combining Statement of Revenues, Expenses and Changes in Net Assets .......................................................................................................................................... 47 Supplemental Schedule--2009 Combining Statement of Net Assets ................................................ 48 Supplemental Schedule--2009 Combining Statement of Revenues, Expenses and Changes in Net Assets .......................................................................................................................................... 49 REPORTS REQUIRED BY GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133 Independent Auditors’ 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 ..................................................... 50 Independent Auditors’ Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 and the Schedule of Expenditures of Federal Awards ............................... 52 Schedule of Expenditures of Federal Awards ...................................................................................... 55 Notes to Schedule of Expenditures of Federal Awards ...................................................................... 58 Schedule of Findings and Questioned Costs ........................................................................................ 59 Summary Schedule of Prior Audit Findings ........................................................................................ 66 Independent Auditors’ Report Board of Regents Regional University System of Oklahoma University of Central Oklahoma Oklahoma City, Oklahoma We have audited the statements of net assets of the University of Central Oklahoma (the “University”), a component unit of the State of Oklahoma, as of June 30, 2010 and 2009, and the related statements of revenues, expenses and changes in net assets and cash flows for the years then ended. These financial statements are the responsibility of the University’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of the University of Central Oklahoma Alumni Association (the “Alumni Association”) or the KCSC Classical Radio Foundation (the “KCSC Foundation”), discretely presented component units of the University, whose financial statements collectively reflect total assets of $916,760 and $851,760 as of June 30, 2010 and 2009, respectively, and total revenues of $186,274 and $270,917, respectively, for the years then ended of the aggregate discretely presented component units. Those financial statements were audited by other auditors, whose reports thereon have been furnished to us, and in our opinion, insofar as it relates to the amounts included for the Alumni Association and the KCSC Foundation, is based on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the Alumni Association and the KCSC Foundation were audited by other auditors and were not audited in accordance with Government Auditing Standards. The financial statements of the UCO Student Housing Foundation (the “Housing Foundation”) and the University of Central Oklahoma Foundation, Inc. (the “University Foundation”) were also 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, assessing the accounting principles used and the 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. 1 2 In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the University of Central Oklahoma and its discretely presented component units, the University Foundation, the Alumni Association and the KCSC Foundation., as of June 30, 2010 and 2009, and the respective changes in financial position and, where applicable, 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 31, 2010 on our consideration of the University’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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. Management’s Discussion and Analysis and the Schedules of Funding Progress for the Supplemental Retirement Annuity Plan and Other Post-Employment Insurance Benefits Plan are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. 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 opinions on the financial statements that collectively comprise the University’s basic financial statements. The Supplemental Combining Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the basic financial statements taken as a whole. Oklahoma City, Oklahoma October 31, 2010 3 MANAGEMENT’S DISCUSSION & ANALYSIS As the 4 time National Champion, UCO Cheer squad knows to Live Central is to embrace the qualities of Community, Character and Civility. To Live Central is to involve your life with the lives of those you encounter, to give to life to others. OVERVIEW The following Management’s Discussion and Analysis (MD&A) provides an overview of University of Central Oklahoma’s (UCO) financial performance based on currently known facts, decisions and conditions and is designed to assist readers in understanding the accompanying financial statements. These financial statements are prepared in accordance with Government Accounting Standards Board (GASB) principles and focus on UCO as a whole. The financial statements encompass UCO and the discretely presented component units; however, the MD&A focuses only on UCO’s blended unit. Information relating to the component units can be found in their separately issued financial statements. UCO’s report includes three basic financial statements: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. All dollar amounts in this MD&A are presented in thousands of dollars. STATEMENT OF NET ASSETS The Statement of Net Assets presents the financial position of UCO at the end of the fiscal year. From the data presented, readers of the statement are able to determine the assets available to continue the operations of UCO. They also are able to determine how much UCO owes vendors, investors and lending institutions. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability to pay expenses of UCO. The change in net assets is one indicator of whether the overall financial condition has improved or worsened during the year when considered with non-financial facts such as enrollment levels and the condition of the facilities. The following table shows a condensed statement of net assets at: Assets are what UCO owns and are measured in current value, except for property and equipment, which are recorded at historical cost less accumulated depreciation. Assets are categorized as either current, to be exhausted during the next twelve months or noncurrent, more than twelve months. Assets: Current assets decreased in the current year by less than $1 million after an increase in 2009 by $6.5 million these changes are due to the three major building projects’ restricted cash being categorized as current in 2009 and the expense of some of those funds in 2010. Capital assets continue to increase, in 2010 by $7.9 million and by $9.7 million in 2009 due to expenditures primarily for the Forensic Science Institute and Transformational Learning Center building projects in progress. In working toward the completion of the Forensic Science Institute, $3.9 million was expended in 2010 and $7.3 in 2009. Leading toward the completion of the Transformational Learning Center $5.7 million was expended during 2010 with $2.2 million expended during 2009. Other assets increased by $1.4 million in 2010 due to moving the remaining restricted cash to current as the projects draw to a close in the next year. In 2009, noncurrent assets decreased by $13.5 million largely due to moving restricted cash for the completion of the three building projects into the current category. Liabilities: Current liabilities increased by $1.4 million in 2010 and decreased by approximately $1 million in 2009. These changes are made up of normal operating fluctuations for such items as accounts payable, accrued payroll and benefits, deferred revenue and current portion of noncurrent liabilities (bonds, capital leases, and notes). This fluctuation is not considered to be unusual or represent a trend. 4 MANAGEMENT’S DISCUSSION & ANALYSIS Noncurrent liabilities decreased by approximately $3.3 million in 2010 and $3.9 million in 2009. This is attributable to each year’s payment of principle on long term obligations. In 2010, one capital lease was incurred for an additional $1 million for a energy conservation project. In 2009, no additional debt, short term or long term, was incurred. Net Assets: Net assets represent the total assets of UCO less total liabilities. The change in net assets is a net component of the changes to assets and liabilities as described above, and in the footnotes to the financial statements. STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS The Statement of Revenues, Expenses and Changes in Net Assets presents the revenues earned and expenses incurred during the year. Activities are reported as either operating or non-operating. A public university’s dependency on state aid (appropriations) and gifts will result in operating deficits (losses). The Governmental Accounting Standards Board (GASB) requires state appropriations and gifts to be classified as nonoperating revenues. The purpose of the statement is to present the revenues received by UCO, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent. Operating revenues are generally received for providing goods and services to the various customers of UCO. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of UCO. Nonoperating revenues are revenues received for which goods and services are not provided. State capital appropriations are considered neither operating nor nonoperating revenues and are reported under “Other Revenues, Expenses, Gains and Losses”. The following summarizes UCO’s revenues, expenses and changes in net assets, for the year ended June 30: Operating Revenues Tuition & Fees 65.70% Housing Fees 13.20% Auxilliary & Other 9.56% Grants & Partners 11.53% Operating Revenue Fiscal Year 2010 In July 2010, UCO hosted the World Sitting Volleyball championships. 26 countries spanning five continents competed and put the “C” of Community to the test. Community is not just about your campus, your country or you. Thousands of hours and an army of student and staff volunteers later; UCO passed the test. 5 MANAGEMENT’S DISCUSSION & ANALYSIS The following summarizes the operating revenues by source, which were used to fund UCO’s operating activities for the fiscal years ended June 30: Operating revenues: 2010 had a Tuition and Fee revenue increase of 4.34% due to the increase in the credit hours for Fall, Spring and Summer semesters. In 2009, improvement in operating revenues was due to an increase in Tuition and Fees associated with a boost in credit hours and an increase in tuition over the prior fiscal year. Small class size and personal attention given every student attending UCO whether an incoming freshman or graduating senior are still maintained even with the growth in FTE and credit hours. UCO has a goal to grow the grant program to $20 million dollars by 2015. Grants have increase by 29.97% in 2010 over 2009 and a 23.66% increase from 2008 to 2009. Increasing grant awards for undergraduate research leads to an addition of $2.1 million dollars in 2010 to be used to enhance the student experience. As more commuter students continued to sign up for a meal plan, revenues in auxiliary grew by 10.8% for 2010. A complete remodeling of the food service areas led to an 18% increase in meal plan sales in 2009 and better all around quality for the student. Operating Expenses The following summarizes the operating expenses by the natural classification, for the fiscal years ended: Operating expenses increased $8.8 million in 2010 and $5.9 million 2009. Operating expenses reflect the normal expenses of operating UCO, and carrying out the educational mission. The increase in expenses reflects the use of increases in operating revenues and declining state appropriations, as follows: Personnel service costs increased 2.1% equating to $1.9 million in 2010 compared to a $4 million increase in 2009. The major use of these funds resulted in the employment of additional faculty and staff to meet the demands due to record increases in student FTE and credit hours. Growth in the area of instruction continues to reflect UCO’s commitment to the quality of the learning experience; reinforcing that the student and their education is our first priority. Striving to hold back costs, passed on to students through tuition, UCO is continuing to hold salaries flat without raises. UCO’s green commitment is evident through the use of 100% wind power, biodiesel, sustainability efforts, a new lead certified building, and the energy management improvements throughout the campus that continue to hold rising energy costs in check. Though utility costs and consumption rose in fiscal years 2010, 2009 and 2008 for all areas of higher education, UCO’s resourcefulness has held the line in controlling our utility costs. As the average student continues to struggle to afford the university experience, UCO continues to strive to provide more financial aid per student to lighten that burden. Scholarships and fellowships for 2010 reflect an increase of $4.3 million dollars which is a 40.67% increase over 2009. Scholarships in 2009 reflected a $1.8 million dollar increase over 2008. In providing increased scholarship and fellowship resources, UCO’s is seeing an increase in first generation students and returning veterans seeking to enhance their quality of life and to give back to their community. Nonoperating Revenues and Expenses Certain revenue sources that UCO relies on to maintain more affordable tuition rates and provide funding for operations, including State Appropriations, which are defined under GASB as nonoperating revenue. Nonoperating expenses include costs related to capital assets. The following summarizes the nonoperating revenues and expenses for the fiscal years ended: The ��C” of Character is displayed when we keep our commitments to others no matter the personal cost. Character demonstrates honesty; keeps commitments; behaves in a respectful manner; displays trustworthiness. 6 MANAGEMENT’S DISCUSSION & ANALYSIS Net nonoperating revenues and expenses reflect a $5.8 million increase in 2010 and an increase of $1.4 million in 2009. The largest change is due to a $5.6 million receipt of financial aid for 2010 to meet the growing number of qualified student’s needs due to a change in Federal regulations. In 2009, financial aid increased by $1.3 million. State Appropriations continue to stay fairly flat with a 1.27% increase in 2010 and a 2.7% increase in 2009. As State appropriations continue to reflect the State’s financial position UCO continues to seek ways to offset dwindling resources and reduce the size of requested tuition increase. The 2010 annual report from the Commissioners of Land Office continues to show that UCO receives the fewest dollars per student of any university in Oklahoma for capital expenditures. STATEMENT OF CASH FLOWS The Statement of Cash Flows provides additional information about UCO’s financial results by reporting the major sources and uses of cash. This statement will assist in evaluating UCO’s ability to generate net cash flows, its ability to meet its obligations as they come due, and its need for external financing. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of UCO. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related assets. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. The following summarizes UCO’s cash flow for the years ending: CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2010, UCO has $117.6 million in capital assets, net of accumulated depreciation compared to 2009 where UCO had $109.7 million in capital assets, net of accumulated depreciation. The following table summarizes UCO’s capital assets, net of accumulated depreciation: Debt Administration As of June 30, 2010, UCO had $79.5 million compared to 2009 where UCO had $82.6 million in outstanding bonds, capital leases, and notes payable, representing a decrease of approximately $3.1 million in 2010 and $3.9 million in 2009. This decrease represents the payments on existing obligations. The following summarizes the outstanding long-term debt as of: The “C” of Civility is open to others' ideas and opinions; courteous when speaking to others; considerate of the feelings and thoughts of others; tolerant. Civility is grasping the idea that we are interdependent no matter who we are. 7 MANAGEMENT’S DISCUSSION & ANALYSIS ECONOMIC OUTLOOK The State of Oklahoma provided approximately 39.13% for FY10 and 43.5% for FY09 of the University of Central Oklahoma’s revenue resources for the operation of the university. Looking forward to FY11, State revenues, which support higher education, are in a state of uncertainty. Though first quarter reports show the State’s results are better than the same time last year. UCO continues to be cautious regarding State funding support. UCO’s FY11 State Appropriations are slated to decrease at least one million dollars and the Federal stimulus funds passed to UCO will decrease approximately five hundred thousand dollars. Federal stimulus dollars will not be available beyond FY11. Enrollment continues to increase even with current economic uncertainty. Fall of FY11 enrollment is up 6.27% over the Fall semester of FY10 which itself was an increase of 2.34% over the prior year’s Fall semester. However, the continued slow economic recovery, of the State and Nation, creates a shadowy picture at best, therefore fluctuations of both number of students and credit hour production is uncertain. As shown in the attached financial statements, the University had an approximate $5.7 million dollar increase in operating revenues for the year FY10. In the FY09 operating revenue increased $5.9 million dollars from FY08. Undergraduate research grants funding increased $2.1 million dollars over the FY09. Also Federal financial aid increased $5.5 million dollars in FY10 where previously the FY09 increase was only $1.3 million dollars. These indicators of strong financial position will allow the university to manage the upcoming year without significant reductions in programming or services. We will continue to monitor the State and National economic conditions as part of our financial decision making process. The University continues to develop scenarios to reduce costs and increase operating revenues to protect critical academic programming, while being sensitive to the individual economic condition of our students. We are not aware of any additional facts or conditions expected to have a significant impact on the financial position or results of operations during the upcoming fiscal year. The outlook is positive for the new degree programs that have grown from the first class of 150 in August 2009 to 400 that began classes in August 2010. ACM is reaching both traditional and non-traditional music students and has brought nation-wide acclaim to UCO in just its first year. Roger Daltrey, lead singer of the Who, was on campus at ACM to teach one of the Master’s classes during the year. Here he is answering questions with Scott Booker, CEO of ACM after the session. STATEMENTS OF NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 2010 2009 ASSETS CURRENT ASSETS Cash and cash equivalents $ 40,731,032 $ 34,602,547 $ 494,888 $ 2,554,224 Restricted cash and cash equivalents 8,455,083 7,860,921 - - Restricted Investments 5,846,704 15,856,817 3,608,813 3,881,649 Investments held by others - - 158,464 145,983 Accounts receivable, net 14,280,553 11,643,289 - - Interest receivable 39,980 35,951 40,200 67,305 Loan receivable - - - 4,939 Prepaid expenses 6,099 5,410 4,144 6,143 Inventories 32,840 38,205 - - Contributions receivable - - 477,782 673,058 Current portion of student loans receivable, net 105,000 175,000 - - TOTAL CURRENT ASSETS 69,497,291 70,218,140 $ 4,784,291 $ 7,333,301 NONCURRENT ASSETS Restricted investments 3,309,660 1,994,472 $ 14,152,732 $ 10,861,453 Investments held by others - - 236,645 220,620 Student loans receivable, net 1,996,508 1,798,188 - - Other assets 563,772 587,897 22,517 22,518 Prepaid pension asset 2,145,426 2,247,048 - - Capitalized collections 4,544,290 4,544,290 - - Capital assets, net 113,066,896 105,128,864 1,656,950 1,703,139 TOTAL NONCURRENT ASSETS 125,626,552 116,300,759 16,068,844 12,807,730 TOTAL ASSETS $ 195,123,843 $ 186,518,899 $ 20,853,135 $ 20,141,031 LIABILITIES CURRENT LIABILITIES Accounts payable $ 4,490,858 $ 3,916,091 $ 226,399 $ 27,260 Accrued payroll and benefits 2,635,045 2,463,639 - - Accrued interest payable 370,357 383,478 - - Deferred revenue 2,983,033 2,506,838 - - Deposits held in custody for others 494,964 406,670 158,302 147,023 Current portion of noncurrent liabilities 4,800,557 4,673,213 37,494 35,892 TOTAL CURRENT LIABILITIES 15,774,814 14,349,929 422,195 210,175 NONCURRENT LIABILITIES, net of current portion Accrued compensated absences 1,224,225 1,286,104 $ - $ - Federal loan program contributions refundable 1,840,864 1,868,798 - - Bonds payable 45,600,000 47,635,000 - - Notes payable 6,070,000 6,475,000 849,148 886,642 ODFA master lease obligation 5,973,572 5,617,192 - - Lease obligation payable to state agency 18,624,880 19,769,059 - - TOTAL NONCURRENT LIABILITIES 79,333,541 82,651,153 849,148 886,642 TOTAL LIABILITIES $ 95,108,355 $ 97,001,082 $ 1,271,343 $ 1,096,817 NET ASSETS Invested in capital assets, net of related debt $ 29,655,233 $ 27,552,410 $ - $ - Restricted for: Nonexpendable 659,161 622,567 13,223,599 12,694,809 Expendable: 3,239,830 3,338,571 Scholarships, research, instruction and other 4,185,720 4,105,921 - - Loans 348,410 344,020 - - Capital projects 1,039,784 2,253,963 - - Debt service 17,670,365 15,541,835 - - Unrestricted 46,456,815 39,097,101 3,118,363 3,010,834 TOTAL NET ASSETS $ 100,015,488 $ 89,517,817 $ 19,581,792 $ 19,044,214 See notes to financial statements University June 30, Component Units June 30, Aggregate Discretely Presented 8 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 2010 2009 OPERATING REVENUES Student tuition and fees (included in fees are $3,724,953 of revenues dedicated for bond repayments) $ 70,040,850 $ 64,918,509 $ - $ - Less scholarship, discounts and allowances (18,442,726) (15,464,475) - - Net student revenues 51,598,124 49,454,034 - - Federal grants and contracts 3,246,632 1,966,059 - - State and local grants and contracts 5,810,036 5,001,837 - - Bookstore operations 1,031,191 979,103 - - Housing and food service revenues ($1,391,720 and pledged as security on 2001 UCO Student Housing Foundation Bonds) 10,365,234 9,148,526 - - Parking and University Center revenues (total revenues are dedicated as security for bond repayments.) 2,264,008 2,198,882 - - Interest earned on loans to students 18,749 18,883 - - Other operating revenues 4,434,245 4,234,070 - - TOTAL OPERATING REVENUES 78,768,219 73,001,394 - - OPERATING EXPENSES Compensation and employee benefits 98,348,469 96,355,796 - - Contractual services 3,883,232 3,627,098 56,012 17,099 Supplies and materials 16,426,408 14,992,191 63,050 3,033 Depreciation 6,616,650 6,459,207 47,665 287 Utilities 2,683,617 2,678,376 - - Scholarships and fellowships 15,087,260 10,724,494 - - Other operating expenses 14,521,361 13,937,773 2,284,154 1,698,468 TOTAL OPERATING EXPENSES 157,566,997 148,774,935 2,450,881 1,718,887 Operating income (loss) (78,798,778) (75,773,541) (2,450,881) (1,718,887) NONOPERATING REVENUES (EXPENSES) State appropriations 60,909,102 64,376,151 - - State appropriations - ARRA funds 4,286,658 - - - Federal funded student aid 18,894,687 13,333,243 - - OTRS on-behalf contributions 3,905,924 4,138,019 - - Gifts - 1,966 1,824,882 2,425,235 Net/investment income (losses) 828,052 1,200,703 1,163,577 (2,106,057) Interest expense (3,570,237) (3,680,812) - - NET NONOPERATING REVENUES (EXPENSES) 85,254,186 79,369,270 2,988,459 319,178 Income (loss) before other revenues, expenses, gains and losses 6,455,408 3,595,729 537,578 (1,399,709) State appropriations restricted for capital purposes 1,721,978 1,777,330 - - OCIA on-behalf state appropriations 2,154,747 2,141,105 - - Gift of capital assets 165,538 192,640 - - CHANGE IN NET ASSETS 10,497,671 7,706,804 537,578 (1,399,709) NET ASSETS, BEGINNING OF YEAR 89,517,817 81,811,013 19,044,214 20,443,923 NET ASSETS, END OF YEAR $ 100,015,488 $ 89,517,817 $ 19,581,792 $ 19,044,214 See notes to financial statements. Aggregate Discretely Presented Year Ended June 30, Component Units $1,388,862 for 2010 and 2009, respectively, and $3,539,890 for 2010 and 2009, respectively, Year Ended June 30, University 9 STATEMENTS OF CASH FLOWS UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees $ 46,765,236 $ 49,316,590 Grants and contracts 9,920,466 6,223,642 Auxiliary enterprises and other receipts 19,874,476 16,378,228 Interest collected on loans to students 18,749 18,883 Payments to employees for salaries and benefits (94,232,515) (91,675,563) Payments to suppliers and others (51,863,877) (47,460,315) Loans issued to students (280,067) (497,648) Collections of loans issued to students 151,747 203,779 Net cash used in operating activites (69,645,785) (67,492,404) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State and federal aid 84,090,447 77,711,360 Other student financial assistance received (54,385,500) (48,695,790) Other student financial assistance disbursed 54,385,500 48,695,790 Net cash provided by noncapital financing activities 84,090,447 77,711,360 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of investments 10,043,023 10,022,432 Purchases of investments (1,348,096) (1,348,098) Interest income received 824,023 1,200,068 Net cash provided by investing activities 9,518,950 9,874,402 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Cash paid for capital assets (14,593,533) (16,122,782) Capital appropriations received 1,721,978 1,777,328 Proceeds of capital debt and leases 1,216,538 192,640 Payments on capital debt and leases (2,995,393) (2,873,414) Interest paid on capital debt and leases (2,590,555) (2,651,115) Net cash used in capital and related financing activities (17,240,965) (19,677,343) Net increase in cash and cash equivalents 6,722,647 416,015 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 42,463,468 42,047,453 CASH AND CASH EQUIVALENTS, END OF YEAR $ 49,186,115 $ 42,463,468 Year Ended June 30, 10 STATEMENTS OF CASH FLOWS--Continued UNIVERSITY OF CENTRAL OKLAHOMA 2010 2009 RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Operating Loss $ (78,798,778) $ (75,773,541) Adjustments to reconcile operating loss to net cash used in operating activities Depreciation and amortization expense 6,616,650 6,459,207 Loss on disposal of fixed assets 3 8,851 2 9,192 Amortization 3 1,124 - On-behalf contributions to teachers' retirement system 3,905,924 4,138,019 Changes in assets and liabilities Accounts receivable (2,637,264) (1,109,810) Prepaid pension asset 101,622 7,698 Prepaid expense (689) 838 Inventories 5,365 2,583 Student loans receivable (128,320) (293,869) Accounts payable 574,767 (1,516,443) Accrued payroll and benefits 171,406 272,642 Student and other deposits 8 8,294 (15,715) Deferred revenues 476,195 7 8,997 Federal loan program contributions refundable (27,934) (34,076) Accrued compensated absences (62,998) 261,874 Net cash used in operating activities $ (69,645,785) $ (67,492,404) NONCASH INVESTING, NONCAPITAL FINANCING AND CAPITAL AND RELATED FINANCING ACTIVITIES Interest on capital debt paid by State Agency $ 992,803 $ 1,045,957 on behalf of the University Principal on capital debt paid by State Agency on behalf of the University 1,161,944 1,095,148 Total noncash investing, noncapital financing and capital and related financing activities $ 2,154,747 $ 2,141,105 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENTS OF NET ASSETS Current assets Cash and cash equivalents $ 40,731,032 $ 34,602,547 Restricted cash and cash equivalents 8,455,083 7,860,921 Total cash and cash equivalents $ 49,186,115 $ 42,463,468 See notes to financial statements. Year Ended June 30, 11 NOTES TO FINANCIAL STATEMENTS UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 12 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity: University of Central Oklahoma (the University) is a metropolitan university operating under the jurisdiction of the Regional University System of Oklahoma and the Oklahoma State Regents for Higher Education. The University is a component unit of the State of Oklahoma (the “State”) and is included in the general purpose financial statements of the State as part of the higher education component unit. Blended Component Unit: Based on Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, and Governmental Accounting Standards Board (GASB) No. 39, Determining Whether Certain Organizations Are Component Units-an amendment of GASB statement No. 14, for determining component units, UCO Student Housing Foundation (the “Housing Foundation”) is included within the University reporting entity as a blended component unit. The Housing Foundation is responsible for administration and operation of the University Suites, a student housing facility constructed with bond revenues issued through the Edmond Economic Development Authority. The Housing Foundation is governed by a Board of Directors comprised primarily of management of the University. In addition, University employees and facilities are used for virtually all activities of the Housing Foundation. Separate financial statements of the Housing Foundation have been prepared and can be obtained by contacting the University’s Assistant Vice President for Administration. Discretely Presented Component Units: Based on the criteria for determining component units from GASB Statement No. 39, certain University direct support organizations are included within the University’s reporting entity as discretely presented component units. The nature and significance of the relationship between the University and the component units are such that exclusion would cause the University’s financial statements to be misleading or incomplete. These are separate, not-for-profit corporations organized and operated exclusively to assist the University to achieve excellence by providing supplemental support and resources. An annual audit of each organization’s financial statements is conducted by independent certified public accountants. Separate financial statements of the University’s component units can be obtained by contacting the University’s Assistant Vice President for Administration. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 13 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Discretely Presented Component Units--Continued: The discretely presented component units included in the University’s financial reporting entity are: University of Central Oklahoma Foundation, Inc. (the “University Foundation”) is a separate legal entity with its own Board of Trustees. The Foundation provides support for the University by way of scholarships and other direct resources. The University contracts with the Foundation to provide limited services and office space in exchange for the support the University receives from the Foundation. A portion of the scholarships awarded by the Foundation is remitted to the University after the University pays the award recipient. University of Central Oklahoma Alumni Association (the “Association”) establishes and maintains a close relationship and cooperation between the alumni of the University and their alma mater. The University supports the Association by providing personnel, office space, furniture and equipment at no charge to the Association. KCSC Classical Radio Foundation (“KCSC Foundation”) is a 501(c) (3) organization created to support the University’s KCSC Radio Station. Its purpose is to support and promote classical music radio in Oklahoma. The University’s component units are nonprofit organizations that report under Financial Accounting Standards Board (FASB) standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the component units’ financial information in the University's financial reporting entity for these differences. Although the University is the exclusive beneficiary of the component units, the component units are independent of the University in all respects. The component units are not subsidiaries or affiliates of the University and are not directly or indirectly controlled by the University. Moreover, the assets of the component units are the exclusive property of the component units and do not belong to the University. The University is not accountable for, and does not have ownership of, any of the financial and capital resources of the component units. The University does not have the power or authority to mortgage, pledge, or encumber the assets of the component units. The Board of Directors / Trustees of the component units are entitled to make all decisions regarding the business and affairs of the component units, including, without limitation, distributions made to the University. Third parties dealing with the University should not rely upon the financial statements of the component units for any purpose without consideration of all of the foregoing conditions and limitations. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 14 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Financial Statement Presentation: The University’s financial statements are presented in accordance with the requirements of GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis – for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. Under GASB Statements No. 34 and 35, the University is required to present a statement of net assets classified between current and noncurrent assets and liabilities, a statement of revenues, expenses and changes in net assets, with separate presentation for operating and non-operating revenues and expenses, and a statement of cash flows using the direct method. Basis of Accounting: For financial reporting purposes, the University is considered a special purpose government engaged only in business-type activities. Accordingly, the University’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-agency transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash Equivalents: For purposes of the statements of cash flows, the University considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Funds invested through the State Treasurer’s Cash Management Program are considered cash equivalents. The University Foundation excludes cash and cash equivalent funds held in the Foundation’s investment portfolio as cash equivalents. Investments: The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses and changes in net assets. The University Foundation investments consist of cash and cash equivalents, certificates of deposits, government agency securities, corporate bonds, mutual funds, common and preferred stocks, pooled funds, and limited partnership interests. Investments are carried at fair value and realized gains and losses on sales of investments are computed on the first-in, first-out basis. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 15 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Accounts Receivable: Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Oklahoma. Accounts receivable also include amounts due from the federal, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories: Inventories are carried at the lower of cost or market on the first-in, first-out (“FIFO”) basis. Restricted Cash and Investments: Cash and investments that are externally restricted to make debt service payments maintain sinking or reserve funds, or to purchase capital or other noncurrent assets are classified as restricted assets in the statements of net assets. Capital Assets: Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts, net of accumulated depreciation. For equipment, the University’s capitalization policy includes all items with a unit cost of $2,500 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 30 years for infrastructure, land improvements, and building renovations, and 5 to 10 years for library materials and equipment. Impairments are recorded to reduce the carrying value of the assets to their net realizable value determined by management based on facts and circumstances at the time of the determination. No property and equipment impairments were recorded in 2010 or 2009. Capitalized Collections: Collections are capitalized at estimated fair values at the date of contribution. The University’s capitalized collections consist primarily of works of art. These collections were valued for reporting purposes at $4,544,290 and $4,544,290 at June 30, 2010 and 2009, respectively. Contributions in the value of $165,538 and $183,740 were received at June 30, 2010 and 2009, respectively. The University Foundation does not include either the cost or the value of its collections in the statements net assets, nor does it recognize gifts of collection items as revenues in the statements of revenues, expenses and changes in net assets. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 16 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Deferred Revenue: Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Compensated Absences: Employees’ vacation pay and compensatory time are accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued compensated absences in the statements of net assets, and as a component of compensation and benefit expense in the statement of revenues, expenses and changes in net assets. Noncurrent Liabilities: Noncurrent liabilities include (1) principal amounts of revenue bonds payable, notes payable, and capital lease obligations with contractual maturities greater than one year, and (2) estimated amounts for accrued compensated absences and other liabilities that will not be paid within the next fiscal year. Net Assets: The University’s net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets – expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted net assets – nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for any purpose. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 17 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Net Assets--Continued: When an expense is incurred that can be paid using either restricted or unrestricted resources, the University’s policy is to first apply the expense towards restricted resources, and then toward unrestricted resources. Income Taxes: The University, as a political subdivision of the State, is exempt from all federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. The discretely presented component units of the University are generally exempt from federal income taxes under applicable provisions of Section 501 of the Internal Revenue Code. The component units are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. As a result, no provision for income taxes is included in the financial statements. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported assets and liabilities and disclosures of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Classification of Revenues: The University has classified its revenues as either operating or non-operating revenues according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, net of scholarship discounts and allowances, (3) certain grants and contracts and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, student aid revenues and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations, governmental and other pass through grants and investment income. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 18 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Scholarship Discounts and Allowances: Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the statements of revenues, expenses, and changes in net assets. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the University and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other Federal, State or nongovernmental programs are recorded as either operating or non-operating revenues in the University’s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded a scholarship discount and allowance. NOTE B--DEPOSITS AND INVESTMENTS Deposits: Custodial credit risk for deposits is the risk that in the event of a bank failure, the University’s deposits may not be returned or the University will not be able to recover collateral securities in the possession of an outside party. Generally, the University deposits its funds with the Office of the State Treasurer (OST) and those funds are pooled with funds of other state agencies and then, in accordance with statutory limitations, are placed in financial institutions or invested as the OST may determine, in the State’s name. State statutes require the OST to ensure that all state funds are either insured by Federal Deposit Insurance, collateralized by securities held by the cognizant Federal Reserve Bank, or invested in U.S. government obligations. The OST’s responsibilities include receiving and collateralizing the deposit of State funds, investing State funds in compliance with statutory requirements, and maintaining adequate liquidity to meet the cash flow needs of the State. If the University deposits funds directly with financial institutions, those funds must be insured by Federal Deposit Insurance or collateralized by securities held by the cognizant Federal Reserve Bank in the University’s name. Some deposits with the OST are placed in the OST’s internal investment pool OK INVEST. OK INVEST pools the resources of all state funds and agencies. The State Treasurer has determined that current holdings in OK INVEST should be limited to obligations of the US Government, its agencies and instrumentalities; including agency senior debt and mortgage-backed pass-through securities, obligations of state and local governments, tri-party repurchase agreements, money market mutual funds, collateralized Certificates of Deposit, and State of Israel Bonds. Various other investments, as allowed by law, may be added to the OK Invest portfolio as the State Treasurer determines. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 19 NOTE B--DEPOSITS AND INVESTMENTS--Continued Deposits--Continued: At June 30, 2010 and 2009, the carrying amount of all University and blended component unit deposits with the OST and other financial institutions was $49,168,385 and $42,445,239, respectively. These amounts consisted of deposits with the OST ($48,799,485 and $41,983,535) and U.S. financial institutions ($388,900 and $461,704). The University also maintains petty cash funds totaling $17,730 in 2010 and $18,230 in 2009. Of funds on deposit with the OST, amounts invested in OK INVEST total $15,062,558 in 2010 and $13,010,648 in 2009. For financial reporting purposes, deposits with the OST that are invested in OK INVEST are classified as cash equivalents. The distribution of deposits in OK INVEST is as follows: Cost Market U.S. agency securities $ 5,771,361 $ 5,868,262 Money market mutual funds 1,318,437 1,318,437 Certificates of deposit 856,735 856,735 Tri-party repurchase agreements 965,981 965,981 Mortgage-backed agency securities 5,328,812 5,560,347 Municipal bonds 324,540 347,980 Foreign bonds 60,375 59,699 U.S. Treasury obligations 436,317 461,837 TOTAL $ 15,062,558 $ 15,439,278 June 30, 2010 OK INVEST Portfolio Cost Market U.S. agency securities $ 5,726,092 $ 5,897,680 Money market mutual funds 1,025,821 1,025,821 Certificates of deposit 829,217 829,217 Tri-party repurchase agreements 1,016,267 1,016,267 Mortgage-backed agency securities 2,950,203 2,985,961 Municipal bonds 209,225 210,940 Foreign bonds 24,787 24,787 U.S. Treasury obligations 1,229,036 1,271,982 TOTAL $ 13,010,648 $ 13,262,655 June 30, 2009 OK INVEST Portfolio NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 20 NOTE B--DEPOSITS AND INVESTMENTS--Continued Deposits--Continued: Agencies and funds that are considered to be part of the State’s reporting entity in the State’s Comprehensive Annual Financial Report and who have funds deposited with the State Treasurer are allowed to participate in OK INVEST. Oklahoma statutes and the OST establish the primary objectives and guidelines governing the investment of funds in OK INVEST. Safety, liquidity, and return on investment are the objectives which establish the framework for the day to day OK INVEST management with an emphasis on safety of the capital and the probable income to be derived and meeting the State’s daily cash flow requirements. Guidelines in the investment policy address credit quality requirements, diversification percentages and specify the types and maturities of allowable investments, and the specifics regarding these policies can be found on the OST website at www.ok.gov/treasurer/. The State Treasurer, at his discretion, may further limit or restrict such investments on a day to day basis. OK INVEST includes a substantial investment in securities with an overnight maturity as well as in U.S. government securities with a maturity of up to ten years. OK INVEST maintains an overall weighted average maturity of less than 2 years. Participants in OK INVEST maintain an interest in its underlying investments and, accordingly, may be exposed to certain risks. As stated in the OST information statement, the main risks are interest rate risk, credit/default risk, liquidity risk, and U.S. government securities risk. Interest rate risk is the risk that during periods of rising interest rates, the yield and market value of the securities will tend to be lower than prevailing market rates; in periods of falling interest rates, the yield will tend to be higher. Credit/default risk is the risk that an issuer or guarantor of a security, or a bank or other financial institution that has entered into a repurchase agreement, may default on its payment obligations. Liquidity risk is the risk that OK INVEST will be unable to pay redemption proceeds within the stated time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. U.S. Government securities risk is the risk that the U.S. government will not provide financial support to U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Various investment restrictions and limitations are enumerated in the State Treasurer’s Investment Policy to mitigate those risks; however, any interest in OK INVEST is not insured or guaranteed by the State, the Federal Deposit Insurance Corporation or any other government agency. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 21 NOTE B--DEPOSITS AND INVESTMENTS--Continued Deposits--Continued: The University Foundation maintains cash in bank deposit accounts that, at times, may exceed federally insured limits. The University has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash or cash equivalents. Investments: Investment credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Generally, the University’s investments are managed by the State Treasurer. In accordance with state statutes, the State Treasurer may only purchase and invest in (a) United States treasury bills, notes and bonds and obligations fully insured or unconditionally guaranteed; (b) United States government agency securities; (c) collateralized or insured certificates of deposits; (d) negotiable certificates of deposits; (e) bankers’ acceptances; (f) commercial paper; (g) obligations of state and local governments, including obligations of Oklahoma State public trusts; (h) and repurchase agreements and tri-party repurchase agreements. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Investments that are held for longer periods of time are subject to increased risk of adverse interest changes. Neither the University nor State statutes limit investment maturities as a means of managing exposure to fair value losses arising from increasing interest rates; however, the OST Investment Policy limits the average maturity on its portfolio to four (4) years, with certain individual securities having more restrictive limits as defined in the policy. Concentration of credit risk is the risk of loss attributed to the magnitude of the University’s investment in a single issuer. Neither the University’s investment policy nor State statutes place limits on amounts that can be invested in any one issuer; however, the OST Investment Policy states that, with the exception of U.S. Treasury securities, no more than 50% of the State’s total funds may be invested in a single security type or with a single financial institution, with diversification percentages being more restrictive on individual securities. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty, the University will not be able to recover the value of its investments or collateral securities in the possession of an outside party. As of June 30, 2010 and 2009, none of the University’s investments were subject to custody credit risk. The University component units have funds invested with Merrill Lynch and other local banking institutions. The majority of marketable securities are combined in common investment pools and invested on the basis of a total return policy to provide income and improve opportunities to realize appreciation in investment values. At June 30, 2010 and 2009, respectively, $3,034,813 and $3,556,649 are classified as current and $14,152,732 and $10,861,453 are classified as noncurrent on the statements of net assets. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 22 NOTE B--DEPOSITS AND INVESTMENTS--Continued Bond Fund Cash and Investments: Certain non-pooled cash and investments are restricted in purpose by policies incorporated in applicable bond indentures. Credit risk policy generally restricts investing to cash, investments fully insured by the FDIC and U.S. government and agency securities or mutual funds investing in these types of securities. There may be some variance among the investments authorized by the specific bond indentures of University bond issues. A trustee bank generally provides the management of restricted, non-pooled investments. Custodial credit risk is not addressed by bond indentures. Interest rate risk in bond indentures provide that investments mature in no more than six to sixty months depending on the purpose of the funds and the requirements of the account in which the funds are deposited (i.e. construction, reserve, operations and maintenance, etc.) Concentration of credit risk is not addressed. At June 30, 2010 and 2009, the University had investments in restricted bond funds totaling $9,156,364 and $17,851,289, respectively. At June 30, 2010 and 2009, respectively, $5,846,704 and $15,865,817 are classified as current and $3,309,660 and $1,994,472 are classified as noncurrent on the statement of net assets. The fair market value of these funds approximated their carrying value at June 30, 2010 and 2009. The invested bond funds are not subject to maturity dates and are due on demand. According to Standard and Poor’s rating service, the funds had an average credit rating of AAAm at June 30, 2010. All investments for the University, including its blended component unit, and discrete component units at June 30, 2010 and 2009, respectively, were as follows: Component University Unit Investments Investments Cash and cash equivalent funds $ 8,764,351 $ 941,552 Guaranteed investment contract 392,013 - Certificate of deposit - 3,636,793 Government securities - 2,585,534 Corporate bonds - 1,169,418 Mutual funds - 4,336,237 Equity Securities - 5,187,383 Other - 63,092 $ 9,156,364 $ 17,920,009 2010 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 23 NOTE B--DEPOSITS AND INVESTMENTS--Continued Bond Fund Cash and Investments--Continued: Component University Unit Investments Investments Cash and cash equivalent funds $ 17,459,276 $ 513,369 Guaranteed investment contract 392,013 - Certificate of deposit - 3,556,649 Government securities - 3,629,373 Corporate bonds - 527,568 Mutual funds - 103,054 Equity Securities - 5,288,778 Other - 1,124,311 $ 17,851,289 $ 14,743,102 2009 NOTE C--ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2010 and 2009: 2010 Component University Units Student tuition and fees $ 10,172,374 $ - Auxiliary enterprises and other operating activities 11,067,524 - Federal, state, and private grants and contracts 1,886,959 - Contributions receivable - 485,601 23,126,857 485,601 Less allowance for doubtful accounts (8,846,305) (7,819) Net accounts receivable $ 14,280,552 $ 477,782 2009 Component University Units Student tuition and fees $ 10,091,747 $ - Auxiliary enterprises and other operating activities 7,355,191 - Federal, state, and private grants and contracts 2,733,505 - Contributions receivable - 694,556 20,180,443 694,556 Less allowance for doubtful accounts (8,537,154) ( 21,498) Net accounts receivable $ 11,643,289 $ 673,058 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 24 NOTE D--NOTES RECEIVABLE Student loans made through the Federal Perkins Loan Program (the “Program”) comprise substantially all of the loans receivable at June 30, 2010 and 2009. Under this Program, the federal government provides funds for approximately 90% of the total contribution for student loans with the University providing the balance. Under certain conditions such loans can be forgiven at annual rates of 10% to 30% of the original balance up to a maximum of 50% to 100% of the original loan. The federal government reimburses the University to the extent of 10% of the amounts forgiven for loans originated prior to July 1, 1993 under the Federal Perkins Loan Program. No reimbursements are guaranteed for loans originated after this date. Amounts refundable to the U.S. Government upon cessation of the Program of approximately $1,841,000 and $1,869,000 at June 30, 2010 and 2009, respectively, are reflected in the accompanying statements of net assets as noncurrent liabilities. As the University determines loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The allowance for uncollectible loans only applies to University funded loans and the University portion of federal student loans, as the University is not obligated to fund the federal portion of uncollected student loans. The University has provided an allowance for uncollectible loans that, in management’s opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2010 and 2009, loans receivable consisted of the following: 2010 Component University Units Total loans receivable $ 2,258,439 $ 2 2,517 Less: allowance for uncollectible loans 156,931 - Loans receivable, net $ 2,101,508 $ 2 2,517 2009 Component University Units Total loans receivable $ 2,111,312 $ 2 7,457 Less: allowance for uncollectible loans 138,124 - Loans receivable, net $ 1,973,188 $ 2 7,457 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 25 NOTE E--CAPITAL ASSETS Following are the changes in University capital assets for the year ended June 30, 2010: Balance Retirements/ Balance June 30, 2009 Additions Transfers Adjustments June 30, 2010 Capital assets not being depreciated Land $ 2,201,502 $ 9,726 $ - $ - $ 2,211,228 Art Collections 4,544,290 - - - 4,544,290 Construction in-progress 12,663,008 11,307,339 - - 23,970,347 Total capital assets not being depreciated 19,408,800 11,317,065 - - 30,725,865 Other capital assets Non-major infrastructure networks 1,450,621 45,282 - - 1,495,903 Land improvements 8,637,301 71,509 - - 8,708,810 Buildings 124,111,638 313,019 - - 124,424,657 Furniture, fixtures and equipment 30,849,710 2,846,658 - ( 1,411,872) 32,284,496 Library materials 17,786,850 - - - 17,786,850 Total other capital assets 182,836,120 3,276,468 - ( 1,411,872) 184,700,716 Less accumulated depreciation for Non-major infrastructure networks (1,102,178) (74,795) - - ( 1,176,973) Land improvements (5,465,974) ( 292,381) - - ( 5,758,355) Buildings (48,260,568) (3,982,155) - - ( 52,242,723) Furniture, fixtures and equipment ( 21,526,272) ( 2,241,562) - 1,373,021 ( 22,394,813) Library materials (16,216,774) ( 25,757) - - (16,242,531) Total accumulated depreciation ( 92,571,766) (6,616,650) - 1,373,021 ( 97,815,395) Other capital assets, net 90,264,354 ( 3,340,182) - ( 38,851) 86,885,321 Capital asset summary: Capital assets not being depreciated 19,408,800 11,317,065 - - 30,725,865 Other capital assets, at cost 182,836,120 3,276,468 - (1,411,872) 184,700,716 Total cost of capital assets 202,244,920 14,593,533 - ( 1,411,872) 215,426,581 Less accumulated depreciation ( 92,571,766) (6,616,650) - 1,373,021 ( 97,815,395) Capital assets, net $ 109,673,154 $ 7,976,883 $ -$ ( 38,851) $ 117,611,186 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 26 NOTE E--CAPITAL ASSETS--Continued Following are the changes in University capital assets for the year ended June 30, 2009: Balance Retirements/ Balance June 30, 2008 Additions Transfers Adjustments June 30, 2009 Capital assets not being depreciated Land $ 2,181,916 $ 19,586 $ - $ - $ 2,201,502 Art Collections 4,360,550 183,740 - - 4,544,290 Construction in-progress 6,045,164 10,375,024 (3,757,180) - 12,663,008 Total capital assets not being depreciated 12,587,630 10,578,350 (3,757,180) - 19,408,800 Other capital assets Non-major infrastructure networks 1,450,621 - - - 1,450,621 Land improvements 7,987,189 650,112 - - 8,637,301 Buildings 121,221,443 2,890,195 - - 124,111,638 Furniture, fixtures and equipment 25,765,339 2,004,124 3,757,180 (676,933) 30,849,710 Library materials 17,786,850 - - - 17,786,850 Total other capital assets 174,211,442 5,544,431 3,757,180 (676,933) 182,836,120 Less accumulated depreciation for Non-major infrastructure networks (1,029,647) (72,531) - - (1,102,178) Land improvements (5,178,076) (287,898) - - (5,465,974) Buildings (44,481,177) (3,779,391) - - (48,260,568) Furniture, fixtures and equipment (19,911,959) (2,262,054) - 647,741 (21,526,272) Library materials (16,191,017) (25,757) - - (16,216,774) Total accumulated depreciation (86,791,876) (6,427,631) - 647,741 (92,571,766) Other capital assets, net 87,419,566 (883,200) 3,757,180 (29,192) 90,264,354 Capital asset summary: Capital assets not being depreciated 12,587,630 10,578,350 (3,757,180) - 19,408,800 Other capital assets, at cost 174,211,442 5,544,431 3,757,180 (676,933) 182,836,120 Total cost of capital assets 186,799,072 16,122,781 - (676,933) 202,244,920 Less accumulated depreciation (86,791,876) (6,427,631) - 647,741 (92,571,766) Capital assets, net $ 100,007,196 $ 9,695,150 $ -$ (29,192) $ 109,673,154 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 27 NOTE F--LONG-TERM LIABILITIES University long-term liability activity for the year ended June 30, 2010 was as follows: Amounts Balance Balance due within June 30, 2009 Additions Reductions June 30, 2010 one year Bonds payable and capital lease obligations Revenue bonds payable $ 49,545,000 $ - $ (1,910,000) $ 47,635,000 $ 2,035,000 Capital lease obligations 26,176,102 1,058,000 (1,857,338) 25,376,764 778,312 Notes payable 6,865,000 - (390,000) 6,475,000 405,000 Total bonds and capital leases 82,586,102 1,058,000 (4,157,338) 79,486,764 3,218,312 Other liabilities Accrued compensated absences 2,869,467 1,392,919 (1,455,915) 2,806,471 1,582,245 Federal loan program contributions 1,868,797 - (27,934) 1,840,863 - Total other liabilities 4,738,264 1,392,919 (1,483,849) 4,647,334 1,582,245 Total long-term liabilities $ 87,324,366 $ 2,450,919 $ (5,641,187) $ 84,134,098 $ 4,800,557 University long-term liability activity for the year ended June 30, 2009 was as follows: Amounts Balance Balance due within June 30, 2008 Additions Reductions June 30, 2009 one year Bonds payable and capital lease obligations Revenue bonds payable $ 51,375,000 $ - $ (1,830,000) $ 49,545,000 $ 1,910,000 Capital lease obligations 27,939,664 - (1,763,562) 26,176,102 789,850 Notes payable 7,240,000 - (375,000) 6,865,000 390,000 Total bonds and capital leases 86,554,664 - (3,968,562) 82,586,102 3,089,850 Other liabilities Accrued compensated absences 2,607,596 1,628,971 (1,367,100) 2,869,467 1,583,363 Federal loan program contributions 1,902,874 - (34,077) 1,868,797 - Total other liabilities 4,510,470 1,628,971 (1,401,177) 4,738,264 1,583,363 Total long-term liabilities $ 91,065,134 $ 1,628,971 $ (5,369,739) $ 87,324,366 $ 4,673,213 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 28 NOTE F--LONG-TERM LIABILITIES--Continued Revenue Bonds Payable Revenue bonds payable consisted of the following at June 30, 2010 and 2009: 2010 2009 University Center and Parking Revenue Refunding Bonds, Series 2003 $ 12,335,000 $ 13,060,000 Library Revenue Refunding Bonds, Series 2003 5,255,000 5,565,000 ODFA Public Facilities Financing Program Revenue Refunding Bonds, Series 2003 2,045,000 2,280,000 Wellness Center Student Facilities Revenue Bonds, Series 2000 7,720,000 7,935,000 Wantland Stadium Facility Revenue Bonds, Series 2004 12,310,000 12,550,000 UCO Student Housing Foundation Revenue Bonds, Series 2001 7,970,000 8,155,000 Total Revenue Bonds Payable $ 47,635,000 $ 49,545,000 University Center and Parking Revenue Refunding Bonds, Series 2003 The University Center and Parking Revenue Bonds, issued June 1, 2003, are secured by and payable both as to principal and interest from the student facility fee, parking fee, gross receipts from operations of auxiliary enterprises, and all monies in funds and accounts held by the trustee bank and are available for such payment. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 9,690,000 Serial Final 06/1/2016 $ 710,000 to 875,000 2.00% to 3.60% Semiannual 7,500,000 Term 6/1/2019 $ 2,820,000 4.00% Semiannual 6/1/2022 $ 3 ,195,000 5.00% Semiannual 6/1/2023 $ 1 ,485,000 4.13% Semiannual $ 17,190,000 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 29 NOTE F--LONG-TERM LIABILITIES--Continued Library Revenue Refunding Bonds, Series 2003 The Library Revenue Bonds, issued June 1, 2003, are secured by and payable both as to principal and interest from gross receipts from a library fee and all monies in funds and accounts held by the trustee bank available for such payment. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 4,150,000 Serial Final 06/1/2016 $ 305,000 to 375,000 2.00% to 3.60% Semiannual 3,185,000 Term 6/1/2019 $ 1,200,000 4.00% Semiannual 6/1/2022 $ 1,355,000 5.00% Semiannual 6/1/2023 $ 630,000 4.125% Semiannual $ 7,335,000 Oklahoma Development Finance Authority (ODFA) Public Facilities Financing Program Revenue Refunding Bonds, Series 2003A The ODFA Series 2003A Bonds, issued June 1, 2003, are secured by and payable both as to principal and interest from the University’s Section 13 and New College Funds received from the State of Oklahoma and all monies in funds and accounts held by the trustee bank and available for such payment. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 3,635,000 Serial Final 06/1/2018 $ 220,000 to 275,000 2.00% to 4.00% Semiannual Wellness Center Student Facilities Revenue Bonds Series 2000 The Wellness Center Student Facilities Revenue Bonds, issued August 22, 2000, are secured by and payable both as principal and interest from, gross receipts of a $2.30 per credit hour Student Facility Fee equal to at least 1.25 times the annual debt service requirement and funds held by the trustee bank. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 1,515,000 Serial Final 08/1/2010 $ 80,000 to 235,000 4.50% to 5.15% Semiannual 7,485,000 Term 8/1/2015 $ 1,565,000 5.40% Semiannual 8/1/2020 $ 2,395,000 5.60% Semiannual 8/1/2025 $ 3,525,000 5.70% Semiannual $ 9,000,000 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 30 NOTE F--LONG-TERM LIABILITIES--Continued UCO Student Housing Foundation Revenue Bonds Series 2001A and 2001B The Student Housing Foundation Revenue Bonds, issued April 19, 2001, are secured by and payable both as to principal and interest from general revenues and the accounts, documents, chattel paper, instruments, and general intangibles arising in any manner from the UCO Student Housing Foundation’s operation of the project. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due $ 8,305,000 Serial 6/1/2031 $ 150,000 to 615,000 Variable Semiannual Regional University System of Oklahoma Student Facilities Revenue Bonds (Wantland Stadium Revenue Bonds) The Wantland Stadium Facility Revenue Bonds, issued July 7, 2004, are secured by a facility fee of $3 per credit hour which is pledged for debt service requirements on these bonds. The University has also recorded an asset for its pro-rata share of the bond issuance costs, and is amortizing that asset over the term of the lease agreement. At June 30, 2010 and 2009, the unamortized bond issuance costs totaled $168,960 and $175,600, respectively. Original Amount Bond Type Installment Date Installment Amount Interest Rate Interest Due Taxable $ 685,000 Serial Final 06/1/2010 $ 220,000 to 240,000 4.20% to 5.00% Semiannual X 3,075,000 Term 6/1/2019 $ 290,000 to 400,000 3.65% to 4.60% Semiannual 9,235,000 Term 6/1/2024 $ 2,340,000 5.50% Semiannual 6/1/2034 $ 6,895,000 5.00% Semiannual $ 12,995,000 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 31 NOTE F--LONG-TERM LIABILITIES--Continued The scheduled maturities of University revenue bonds payable are as follows for the years ending June 30: Principal Interest Total Years Ending June 30: 2011 $ 2,035,000 $ 2,128,315 $ 4,163,315 2012 2,115,000 2,058,573 4,173,573 2013 2,210,000 1,982,023 4,192,023 2014 2,305,000 1,900,780 4,205,780 2015 2,395,000 1,812,223 4,207,223 2016 - 2020 13,195,000 7,481,572 20,676,572 2021 - 2025 12,970,000 4,134,871 17,104,871 2026 - 2030 6,630,000 1,771,701 8,401,701 2031 - 2035 3,780,000 430,619 4,210,619 $ 47,635,000 $ 23,700,677 $ 71,335,677 Notes Payable The University has one note payable for environmental control equipment. Original Installment Effective Number of Balance Balance Amount Date Frequency Amount Interest Rate Installments 2010 2009 $ 8 ,905,000 4/1/2002 Monthly $ 61,908 5.20% 240 $ 6,475,000 $ 6,865,000 Future minimum principal and interest payments under the notes payable obligations are as follows: Principal Interest Total Years Ending June 30: 2011 $ 405,000 $ 335,244 $ 740,244 2012 425,000 317,019 742,019 2013 445,000 297,256 742,256 2014 470,000 274,450 744,450 2015 490,000 250,363 740,363 2015 - 2019 2,865,000 843,356 3,708,356 2020 - 2024 1,375,000 111,800 1,486,800 $ 6,475,000 $ 2,429,488 $ 8,904,488 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 32 NOTE F--LONG-TERM LIABILITIES--Continued Capital Lease Obligations Oklahoma Capitol Improvement Authority Leases In September 2000, the Oklahoma Capitol Improvement Authority (OCIA) issued its OCIA Bond Issues, Series 1999A. Of the total bond indebtedness, the State Regents for Higher Education allocated $2,500,000 for the 1999 Series to the University. In April 2006, OCIA issued its OCIA Bond Issues, Series 2006D. The University was allocated $19,805,623 of this total issue by the State Regents. Concurrently with the allocations, the University entered into lease agreements with OCIA, which included for the six projects being funded by the OCIA bonds. The lease agreements provide for the University to make specified monthly payments over the varying terms for the specific projects, ranging from 10 to 30 years. The proceeds of the bonds and subsequent lease are to provide for capital improvements, furniture and equipment at the University. Through June 30, 2009, the University has drawn down 100% of the 1999 Series and 71% of 2006D Series of its total allotment for expenses incurred in connection with specific projects. These expenses are being recorded as capital assets or operating expenses, in accordance with University policy. The University has recorded a lease obligation payable to OCIA for the total amount of the allotment, less repayment made during the fiscal years. The University has also recorded an asset for its pro-rata share of the bond issuance costs, and is amortizing that asset over the term of the lease agreement. At June 30, 2010 and 2009, the unamortized bond issuance costs totaled $94,785 and $103,363 respectively. During the years ended June 30, 2010 and 2009, OCIA made lease principal and interest payments totaling $2,154,747 and $2,141,105, respectively, on behalf of the University. These on-behalf payments have been recorded as restricted state appropriations in the University’s statements of revenues, expenses and changes in net assets. Oklahoma Development Finance Authority Master Lease Program The Oklahoma Development Finance Authority (ODFA) issued the ODFA Master Lease Revenue Bonds. ODFA issues bonds to fund capital improvements at state colleges and universities in Oklahoma. ODFA allocates the bond proceeds to colleges and universities in the form of financing leases. The University has recorded capital improvements funded by the leases and the resulting capital lease obligations in its statement of net assets. At June 30, 2010 and 2009, the unamortized bond issuance costs totaled $60,250 and $57,200, respectively. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 33 NOTE F--LONG-TERM LIABILITIES--Continued Capital Lease Obligations--Continued Oklahoma Development Finance Authority Master Lease Program--Continued The lease agreements calls for monthly payments to ODFA in an amount that equals debt service requirements on the portion of the bonds used to finance the leases. After payment of bond closing costs, the net bond proceeds were deposited into ODFA trust accounts as required by the bond indentures. At June 30, 2010 and 2009, trust accounts balances total $485,338 and $380,183, respectively, and are included with Restricted Investments on the University’s statement of net assets. Bond Series UCO's Allocated Amount Final Payment 2004A $ 1,825,000 6/1/2024 2005A 2,405,000 6/1/2025 2006B 1,508,000 5/15/2011 2007A 151,000 5/15/2012 2007C 2,020,000 12/1/2027 2009B 1,058,000 12/1/2029 Monies in the acquisition funds are restricted for the projects being funded by the Series 2009C. Debt service reserve funds are restricted for the payment of principal and interest pursuant to the agreements. Future minimum lease payments under the University’s capital lease obligations are as follows: Principal Interest Total Years Ending June 30: 2011 $ 778,312 $ 1,201,654 $ 1,979,966 2012 457,341 1,173,849 1,631,190 2013 424,613 1,153,686 1,578,299 2014 437,193 1,138,688 1,575,881 2015 446,896 1,121,185 1,568,081 2016-2020 2,210,381 5,322,899 7,533,280 2021-2025 2,020,000 4,869,283 6,889,283 2026-2030 762,000 4,526,902 5,288,902 2031-2033 17,840,028 2,150,322 19,990,350 $ 25,376,764 $ 22,658,468 $ 48,035,232 NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 34 NOTE F--LONG-TERM LIABILITIES--Continued Total interest costs incurred in 2010 was $3,588,688 of which $18,451 was capitalized. Total interest costs incurred in 2009 was $3,802,242 of which $121,430 was capitalized. Other Leases The University has entered into a lease agreement with its component unit, the University Foundation, to lease their music building for a period of 25 years in the amount of $6,689 per month. The lease commenced in January 2002 and will terminate at the end of the 300th month. In accordance with the agreement, the monthly rent adjusts every 5 years to mirror the change in the interest rate paid by the Foundation. In addition, the University agreed to pay the Foundation an additional sum of $1,200 per year plus the EEDA’s annual administrative fee which is 1/8th of 1% of the declining principal balance of the loan on the property. This lease may be cancelled at the end of any year should funding for the lease not be approved by the Regional University System of Oklahoma and budgeted and approved by the University’s administration. The University has entered into a lease agreement with its component unit, the University Foundation, to lease the building and grounds located at 400 N. Littler, 115 and 117 E. 4th and 29 S.E.4th, Edmond, Oklahoma for a period of one year. The lease calls for monthly rental payments plus reimburse the Foundation for related property taxes and insurance. The lease commenced in May 2005. This lease automatically renews for a term of one year through May 2013, unless notified in writing sixty days in advance of the anniversary date. Monthly rental payments were $2,432 and $3,062 at June 30, 2010 and 2009, respectively. NOTE G--RETIREMENT PLANS The University’s academic and nonacademic personnel are covered by various retirement plans. The plans available to University personnel include the Oklahoma Teachers’ Retirement System (“OTRS”), which is a State of Oklahoma public employees retirement system, the Teachers’ Insurance Annuity Association, which is a defined contribution plan, and the Supplemental Retirement Annuity (“SRA”), a single employer defined benefit plan available to employees hired prior to July 1, 1995. The University does not maintain the accounting records, hold the investments for, or administer these plans. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 35 NOTE G--RETIREMENT PLANS--Continued Oklahoma Teachers’ Retirement System Plan Description The University contributes to the Oklahoma Teachers’ Retirement System, a cost-sharing multiple employer defined benefit pension plan sponsored by the State. OTRS provides defined retirement benefits based on members’ final compensation, age and term of service. In addition, the retirement program provides for benefits upon disability and to survivors upon the death of eligible members. The benefit provisions are established and may be amended by the legislature of the State. Title 70 of the Oklahoma Statutes, Sections 17-101 through 17-116.9, as amended, assigns the authority for management and operation of the Plan to the Board of Trustees of OTRS. OTRS is not required to provide for a cost-of living adjustment. The OTRS issues a publicly available financial report that includes financial statements and supplementary information for OTRS. That report may be obtained by writing to Teachers’ Retirement System of Oklahoma, P.O. Box 53524, Oklahoma City, Oklahoma 73152-3524, or by calling (405) 521- 2387. Funding Policy The University is required to contribute a fixed percentage of annual compensation on behalf of active members. The employer contribution rate was 7.55% from January 1, 2008 through December 31, 2008 and 8.05% from January 1, 2009 through December 31, 2009. From January 1, 2010 through December 31, 2010 the employer contribution rate is 8.55%. The contribution rate is applied to annual compensation and is determined by State statute. Employees’ contributions are also determined by State statute. For all employees, the contribution rate was 7% of covered salaries and fringe benefits in 2010, 2009 and 2008, respectively. Percentages of the compensation in excess of $15,000 for the employee’s contributions were paid directly by the University to the OTRS for 2010, 2009 and 2008, respectively. The University’s contributions to the OTRS for the years ended June 30, 2010, 2009, and 2008, were approximately $9,230,000, $8,752,000, and $7,882,000, respectively. These contributions included the University’s statutory contribution and the share of the employee’s contribution paid directly by the University. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 36 NOTE G--RETIREMENT PLANS--Continued Oklahoma Teachers’ Retirement System--Continued Funding Policy--Continued The State of Oklahoma is also required to contribute to the OTRS on behalf of the participating employers. For 2010, the State of Oklahoma contributed 5% of state revenues from sales and use taxes and individual income taxes, to the OTRS on behalf of participating employers. The University has estimated the amounts contributed to the OTRS by the State on its behalf by multiplying the ratio of its covered salaries to total covered salaries for the OTRS for the year by the applicable percentage of taxes collected during the year. For the years ended June 30, 2010 and 2009, total amounts contributed to the OTRS by the State of Oklahoma on behalf of the University were approximately $3,906,000 and $4,138,000, respectively. These on-behalf payments have been recorded as both revenues and expenses of the current funds in the financial statements in the statements of revenues, expenses and changes in net assets. Supplemental Retirement Annuity (SRA) Plan Description The University’s SRA plan is a single employer, defined benefit pension plan administered by the University’s Board of Regents. The SRA was established by the University’s Board of Regents to provide supplemental retirement and death benefits to University employees who were hired prior to July 1, 1995, or to those eligible employees’ beneficiaries. The authority to amend the SRA’s benefit provisions rests with the University’s Board of Regents. The SRA does not issue a standalone financial report, nor is it included in the financial report of another entity. Funding Policy The authority to establish and amend eligible employees’ and employer contribution obligations to the SRA rests with the University’s Board of Regents. Eligible employees are not required to make contributions to the SRA. The University is required to contribute to the SRA an actuarially determined amount on an annual basis. Under a policy adopted in December 2002, the Plan must achieve 80% funding of the pension benefit obligation by December 1, 2022. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 37 NOTE G--RETIREMENT PLANS--Continued Annual Pension Cost & Net Pension Obligation (Asset) Annual pension cost and net pension obligation (asset) of the SRA as of June 30, 2010 and 2009 are as follows: 2010 2009 Annual required contribution $ 1,057,660 $ 963,568 Interest on net pension obligation (asset) (179,764) (180,380) Adjustment to annual required contribution 228,867 229,651 Annual pension cost 1,106,763 1,012,839 Contributions made (1,005,141) (1,005,141) Increase in net pension obligation 101,622 7,698 Net pension obligation (asset) at beginning of year (2,247,048) (2,254,746) Net pension obligation (asset) at end of year $ (2,145,426) $ (2,247,048) The annual required contributions for 2010 and 2009 were determined as part of an actuarial valuation on June 30, 2010 and 2009, using the projected unit credit actuarial cost method. The actuarial assumptions included (a) a discount rate of 8% per year to determine the present value of future benefit payments; (b) retirement at age 65; (c) an 8% rate of return on investments; (d) projected salary increases of 3.5% per year; and (e) an 8% interest rate for post-retirement individual annuity settlement benefits. The value of the SRA assets is based on the TIAA-CREF group annuity account asset value. The unfunded actuarial accrued liability is being amortized over twenty years as a level dollar amount on a closed basis. Year Ended Annual Pension Percentage of Net Pension June 30, Cost (APC) APC Contributed Obligation (Asset) 2010 $ 1,106,763 90.8% $ (2,145,426) 2009 1,012,839 99.2% (2,247,048) 2008 1,141,982 88.0% (2,254,746) NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 38 NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS (OPEB) Postemployment Healthcare Plan Plan Description The University’s postemployment healthcare plan is an agent multiple-employer defined benefit plan administered by the Regional University System of Oklahoma Board of Regents (“RUSO”). The plan provides medical and life insurance benefits to eligible retired employees until age 65. A retiring employee must have been employed full-time in the Regional University System of Oklahoma for not less than ten years immediately preceding the date of retirement; been a member of the Oklahoma Teachers’ Retirement System during that time; and elected to receive a vested benefit under the provision of the Oklahoma Teachers’ Retirement System. As of June 30, 2010, there were a total of 1,268 participants in the plan. The retirement insurance program was adopted by the Board of Regents in 1985. In March 2008, the Retiree Medical Trust for Regional University system of Oklahoma was established to hold assets and pay benefits on behalf of the University’s postemployment healthcare plan, and is administered by The Bank of Oklahoma, N.A. Prior to the establishment of the trust, the insurance benefits were accounted for on a pay-as-you-go basis so that premiums were made from current operating funds. In 2009, the board voted to eliminate this benefit for anyone hired after July 1, 2009, which will affect future years. Funding Policy The contribution requirements of the University are established and may be amended by the RUSO. The University is required to contribute the annual required contribution (ARC) of the employer, in an amount actuarially determined in accordance with the parameters of GASB Statement 45. 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 thirty years. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 39 NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS (OPEB)--Continued Postemployment Healthcare Plan--Continued Annual OPEB Cost The University’s annual required contributions were $613,300 and $557,439, in 2010 and 2009, respectively. In 2008, the University’s annual OPEB cost (expense) of $970,074 was equal to the ARC plus the actual insurance benefits paid during the year, which have been reimbursed from the trust account. The annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation at June 30, 2010 and 2009 were as follows: Percentage of Net Fiscal Annual Annual OPEB OPEB Year Ended OPEB Cost Cost Contributed Obligation 6/30/2010 $ 613,300 100% $ - 6/30/2009 557,439 100% - 6/30/2008 970,074 145% - Funded Status and Funding Progress The funded status of the plan as of June 30, 2010, was as follows: Actuarial accrued liability (AAL) $ 5,371,791 Actuarial value of plan assets 1,241,612 Unfunded actuarial accrued liability (UAAL) $ 4,130,179 Funded ratio (actuarial value of plan assets/AAL) 23.1% Covered payroll (active plan members) $ 67,966,227 UAAL as a percentage of covered payroll 6.1% Actuarial valuation of an ongoing plan involves 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 the healthcare cost trend. 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. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 40 NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS (OPEB)--Continued Postemployment Healthcare Plan--Continued Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan 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 short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. For the June 30, 2010 actuarial valuation, the Projected Unit Credit Cost Method was used. The actuarial assumptions included a 7.0% investment rate of return and an annual healthcare cost inflationary increase of 9.0%. NOTE I--FUNDS HELD IN TRUST BY OTHERS Beneficial Interest in State School Land Funds The University has a beneficial interest in the Section Thirteen Fund State Educational Institutions and the New College Fund administered by the Commissioners of the Land Office as trustees for the various educational institutions entitled thereto. The University has the right to receive annually 3.7% of the distributions of income produced by Section Thirteen Fund State Educational Institutions assets and 100% of the distributions of income produced by the University of Central Oklahoma’s New College Fund. The University received $963,950 and $739,340 during the years ended June 30, 2010 and 2009, respectively, which is restricted to the construction or acquisition of buildings, equipment, or other capital items. These amounts are recorded as restricted capital gifts in the statements of revenues, expenses and changes in net assets. State law prohibits the distribution of any corpus of these funds to the beneficiaries. The total trust reserve for University of Central Oklahoma, held in trust by the commissioners of Land Office, was approximately $13,493,000 and $12,374,000 at June 30, 2010 and 2009, respectively. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 41 NOTE I--FUNDS HELD IN TRUST BY OTHERS--Continued Oklahoma State Regents Endowment Trust Fund The University participates in the Oklahoma State Regents’ Endowment Program (the “Endowment Program”). Under the Endowment Program, the State matches contributions received. Such contributions generally come from private donations through the Foundation, for endowed chairs, lectureships, fellowships, and similar activities. The State matched amounts, plus any retained accumulated earnings, totaled approximately $1,091,000 and $953,000 at June 30, 2010 and 2009, respectively, and is invested by the Oklahoma State Regents on behalf of the University. The University is entitled to receive an annual distribution of 4.5% of the three-year average of the June 30th market values on these funds. As legal title of the State Regents matching endowment funds is retained by the Oklahoma State Regents, the funds available for distribution are approximately $73,000 and $55,000 at June 30, 2010 and 2009, respectively. NOTE J--COMMITMENTS AND CONTINGENCIES The University conducts certain programs pursuant to various grants and contracts, which are subject to audit by federal and state agencies. Costs questioned as a result of these audits, if any, may result in refunds to these governmental agencies from various sources of the University. The University participates in the Federal Family Education Loan Program (the “FFEL Program”). The FFEL Program does not require the University to draw down cash; however, the University is required to perform certain administrative functions under the FFEL Program. Failure to perform such functions may require the University to reimburse the loan guarantee agencies. For the years ended June 30, 2010 and 2009, approximately $54,386,000 and $48,696,000 respectively, of FFEL Program loans were provided to University students. NOTE K--RISK MANAGEMENT During the ordinary course of business, the University may be subjected to various lawsuits and civil action claims. Management believes that resolution of any such matters pending at June 30, 2010 will not have material adverse impact to the University. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 42 NOTE K--RISK MANAGEMENT--Continued The University is exposed to various risks of loss from torts; theft of, damage to, and destruction of assets; errors and omissions; employee injuries and illnesses; natural disasters; and employee health, life, and accident benefits. Commercial insurance coverage is purchased on a limited basis for special events and large dollar items that are under the State Risk deductibles. The University, along with other state agencies and political subdivisions, participates in the State of Oklahoma Risk Management Program and the State Insurance Fund, public entity risk pools currently operating as a common risk management and insurance program for its members. The University pays annual premiums to the pools for tort, property, and liability insurance coverage. The Oklahoma Risk Management Pool’s governing agreement specifies that the pool will be self-sustaining though member premiums and will reinsure through commercial carriers for claims in excess of specified stop-loss amounts. The University also participates in the College Association of Liability Management (“CALM”) Workers’ Compensation Plan for its workers’ compensation coverage. CALM is an Interlocal Cooperative Act Agency that was organized to provide workers’ compensation insurance coverage for participating colleges and universities through the State Insurance Fund. CALM is a political subdivision of the State and is governed by a Board of Trustees elected from members of the participating colleges and universities. NOTE L--ACCOUNTING STANDARDS ISSUED NOT YET ADOPTED In 2010, GASB issued Statement No. 59, Financial Instruments Omnibus. GASB No. 59 provides updates and improvements to existing standards regarding financial reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been identified in practice. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2010. Earlier application is encouraged. Management has determined that this Statement will have no effect on the University’s financial condition or results of operations. NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 43 NOTE M--SEGMENT INFORMATION The following financial information represents an identifiable activity for which revenue bonds are outstanding and for which segment information is to be reported, as required by GASB Statement No. 34, as amended. The bonds were issued to construct a student housing facility for the University. UCO Student Housing Foundation- Series 2001 The UCO Student Housing Foundation operated the student housing facility known as the University Suites II. Revenues pledged include all room rentals and other revenues generated from the housing facility. Condensed Statement of Net Assets Student Housing Student Housing 2010 2009 ASSETS Current assets $ 7 37,868 $ 7 77,663 Capital assets 5 ,474,766 5 ,651,372 Other assets 2 ,610,828 1 ,865,145 TOTAL ASSETS 8 ,823,462 8 ,294,180 LIABILITIES Current liabilities 1 ,353,055 7 42,186 Long-term liabilities 7 ,760,000 7 ,970,000 TOTAL LIABILITIES 9 ,113,055 8 ,712,186 NET ASSETS Unrestricted 2 ,205,641 2 ,085,622 Invested in capital assets, net of debt (2,495,234) (2,503,628) TOTAL NET ASSETS (DEFICIENCY) $ (289,593) $ (418,006) NOTES TO FINANCIAL STATEMENTS--Continued UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 44 NOTE M--SEGMENT INFORMATION--Continued Condensed Statement of Revenues Expenses and Changes in Net Assets Student Housing Student Housing 2010 2009 OPERATING REVENUES $ 1,629,845 $ 1,482,225 Depreciation expense (176,605) (216,624) Other operating expenses (1,197,702) (987,340) NET OPERATING INCOME 255,538 2 78,261 NONOPERATING REVENUES (EXPENSES) Investment income 57 8 ,585 Interest expense (127,182) (216,512) NET NONOPERATING EXPENSES (127,125) (207,927) Transfers - - Change in net assets 128,413 70,334 NET ASSETS, BEGINNING OF YEAR (418,006) (488,340) NET ASSETS, END OF YEAR $ (289,593) $ (418,006) Condensed Statement of Cash Flows Student Housing Student Housing 2010 2009 Net cash provided by operating activities $ 7 46,046 $ 4 07,614 Net cash provided by bond activities - - Net cash flows used by noncapital financing activities - - Net cash flows used by capital and related financing activities (185,000) (160,000) Net cash provided by investing activities (633,850) (149,193) Net increase in cash (72,804) 98,421 CASH, BEGINNING OF YEAR 461,704 363,283 CASH, END OF YEAR $ 3 88,900 $ 461,704 REQUIRED SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION--UNAUDITED UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered UAAL as a percentage Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll of Covered Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/(c) 6/30/2006 $ 4,790,261 $ 13,357,666 $ 8 ,567,405 35.9% $ 16,113,514 53.2% 6/30/2007 5,387,069 14,791,448 9 ,404,379 36.4% 15,958,108 58.9% 6/30/2008 5,279,537 13,981,155 8 ,701,618 37.8% 15,644,334 55.6% 6/30/2009 4,719,473 14,470,846 9 ,751,373 32.6% 15,140,727 64.4% 6/30/2010 5,009,966 15,086,417 10,076,451 33.2% 13,621,881 74.0% Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered UAAL as a percentage Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll of Covered Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/(c) 6/30/2008 $ 666,000 $ 5,112,000 $ 4,446,000 13.0% $ 51,210,330 8.7% 6/30/2009 944,691 5,371,791 4,427,100 17.6% 57,660,935 7.7% 6/30/2010 1,241,612 5,371,791 4,130,179 23.1% 67,966,227 6.1% The actuarial liability is based on the projected unit credit method. SCHEDULE OF FUNDING PROGRESS FOR SUPPLEMENTAL RETIREMENT ANNUITY PLAN SCHEDULE OF FUNDING PROGRESS FOR OTHER POST EMPLOYMENT INSURANCE BENEFITS 45 OTHER SUPPLEMENTARY INFORMATION SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2010 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total ASSETS CURRENT ASSETS Cash and cash equivalents $ 4 0,342,132 $ 388,900 $ 4 0,731,032 $ 311,692 $ 103,928 $ 79,268 $ 494,888 Restricted cash and cash equivalents 8,455,083 - 8,455,083 - - - - Restricted Investments 5,705,866 140,838 5,846,704 3,034,813 - 574,000 3,608,813 Investments held by others - - - - 158,464 - 158,464 Accounts receivable, net 14,077,799 202,754 14,280,553 - - - - Interest receivable 39,980 - 39,980 39,948 - 252 40,200 Loan receivable - - - - - - - Prepaid expenses 723 5,376 6,099 4,144 - - 4,144 Inventories 32,840 - 32,840 - - - - Contributions receivable - - - 477,782 - - 477,782 Current portion of student loans recievable, net 105,000 - 105,000 - - - - TOTAL CURRENT ASSETS 68,759,423 737,868 69,497,291 3,868,379 262,392 653,520 4,784,291 NONCURRENT ASSET Restricted investments 938,610 2,371,050 3,309,660 14,152,732 - - 14,152,732 Investments held by others - - - 236,645 - - 236,645 Investments - - - - - - - Receivable from state agency - - - - - - - Student loans receivable, net 1,996,508 - 1,996,508 - - - - Other assets 323,994 239,778 563,772 22,517 - - 22,517 Prepaid pension asset 2,145,426 - 2,145,426 - - - - Capitalized collections 4,544,290 - 4,544,290 - - - - Capital assets, net 1 07,592,130 5,474,766 1 13,066,896 1,656,102 848 - 1,656,950 TOTAL NONCURRENT ASSETS 1 17,540,958 8,085,594 1 25,626,552 16,067,996 848 - 16,068,844 TOTAL ASSETS $ 186,300,381 $ 8,823,462 $ 195,123,843 $ 19,936,375 $ 263,240 $ 653,520 $ 20,853,135 LIABILITIES CURRENT LIABILITIES Accounts payable $ 3,347,803 $ 1,143,055 $ 4,490,858 $ 197,182 $ - $ 29,217 $ 226,399 Accrued payroll and benefits 2,635,045 - 2,635,045 - - - - Accrued interest payable 370,357 - 370,357 - - - - Deferred revenue 2,983,033 - 2,983,033 - - - - Deposits held in custody for others 494,964 - 494,964 158,302 - - 158,302 Current portion of noncurrent liabilities 4,590,557 210,000 4,800,557 37,494 - - 37,494 TOTAL CURRENT LIABILITIES 14,421,759 1,353,055 15,774,814 392,978 - 29,217 422,195 NONCURRENT LIABILITIES, net of current portion: Accrued compensated absences 1,224,225 - 1,224,225 - - - - Federal loan program contributions refundab 1,840,864 - 1,840,864 - - - - Bonds payable 37,840,000 7,760,000 45,600,000 - - - - Notes payable 6,070,000 - 6,070,000 849,148 - - 849,148 ODFA master lease obligation 5,973,572 - 5,973,572 - - - - Lease obligation payable to state agency 18,624,880 - 18,624,880 - - - - TOTAL NONCURRENT LIABILITIES 71,573,541 7,760,000 79,333,541 849,148 - - 849,148 TOTAL LIABILITIES $ 8 5,995,300 $ 9,113,055 $ 9 5,108,355 $ 1,242,126 $ - $ 29,217 $ 1,271,343 NET ASSETS Invested in capital assets, net of related debt $ 3 2,150,467 $ (2,495,234) $ 2 9,655,233 $ - $ - $ - $ - Restricted for: Nonexpendable 659,161 - 659,161 13,223,599 - - 13,223,599 Expendable: 3,235,065 - 4,765 3,239,830 Scholarships, research, 4,185,720 - 4,185,720 - - - - instruction and other Loans 348,410 - 348,410 - - - - Capital projects 1,039,784 - 1,039,784 - - - - Debt service 17,670,365 - 17,670,365 - - - - Unrestricted 44,251,174 2,205,641 46,456,815 2,235,585 263,240 619,538 3,118,363 TOTAL NET ASSETS $ 100,305,081 $ (289,593) $ 100,015,488 $ 18,694,249 $ 263,240 $ 624,303 $ 19,581,792 See notes to financial statements. TRUE TRUE TRUE TRUE Primary Government Discrete Component Units 46 SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA Year Ended June 30, 2010 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total OPERATING REVENUES Student tuition and fees (included in fees are $3,724,953 $ 70,040,850 $ - $ 70,040,850 $ - $ - $ - $ - Less scholarship, discounts and allowances (18,442,726) - (18,442,726) - - - - Net student revenues 51,598,124 - 51,598,124 - - - - Federal grants and contracts 3,246,632 - 3,246,632 - - - - State and local grants and contracts 5,810,036 - 5,810,036 - - - - Bookstore operations 1,031,191 - 1,031,191 - - - - Housing and food service revenues ($1,391,720 pledged as security on 2001 UCO Student Housing 8,973,514 1,391,720 10,365,234 - - - - Parking and University Center revenues (total revenues are dedicated as security for bond repayments.) 2,264,008 - 2,264,008 - - - - Interest earned on loans to students 1 8,749 - 18,749 - - - - Other operating revenues 4,196,120 238,125 4,434,245 - - - - TOTAL OPERATING REVENUES 77,138,374 1,629,845 78,768,219 - - - - OPERATING EXPENSES Compensation and employee benefits 98,348,469 - 98,348,469 - - - - Contractual services 3,860,750 22,482 3,883,232 38,864 6,448 10,700 56,012 Supplies and materials 16,109,204 317,204 16,426,408 59,231 3,819 - 63,050 Depreciation 6,440,045 176,605 6,616,650 47,399 2 66 - 47,665 Utilities 2,586,088 97,529 2,683,617 - - - - Scholarships and fellowships 15,087,260 15,087,260 - - - - Other operating expenses 13,760,874 760,487 14,521,361 2,163,750 98,985 21,419 2,284,154 TOTAL OPERATING EXPENSES 156,192,690 1,374,307 157,566,997 2,309,244 109,518 32,119 2,450,881 Net operating income (loss) (79,054,316) 255,538 (78,798,778) (2,309,244) (109,518) ( 32,119) (2,450,881) NONOPERATING REVENUES (EXPENSES) State appropriations 60,909,102 - 60,909,102 - - - - State appropriations - ARRA funds 4,286,658 - 4,286,658 Federal funded student aid 18,894,687 - 18,894,687 - - - - OTRS on-behalf contributions 3,905,924 - 3,905,924 - - - - Gifts - - - 1,656,118 114,376 54,388 1,824,882 Investment income 827,995 57 828,052 1,146,067 12,690 4,820 1,163,577 Interest expense (3,443,055) (127,182) (3,570,237) - - - - NET NONOPERATING REVENUES (EXPENSES) 85,381,311 (127,125) 85,254,186 2,802,185 127,066 59,208 2,988,459 Income (loss) before other revenues, 6,326,995 128,413 6,455,408 492,941 17,548 27,089 537,578 expenses, gains and losses State appropriations restricted for capital purposes 1,721,978 - 1,721,978 - - - - OCIA on-behalf state appropriations 2,154,747 - 2,154,747 - - - - Gifts 165,538 - 165,538 - - - - Change in net assets 10,369,258 128,413 10,497,671 492,941 17,548 27,089 537,578 NET ASSETS, BEGINNING OF YEAR 89,935,823 (418,006) 89,517,817 18,201,308 245,692 597,214 19,044,214 NET ASSETS, END OF YEAR $ 100,305,081 $ ( 289,593) $ 100,015,488 $ 18,694,249 $ 263,240 $ 624,303 $ 1 9,581,792 See notes to financial statements. Foundation Bonds) of revenues dedicated for bond repayments) Primary Government Discrete Component Units 47 SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA June 30, 2009 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total ASSETS CURRENT ASSETS Cash and cash equivalents $ 34,140,843 $ 461,704 $ 3 4,602,547 $ 2,179,907 $ 98,595 $ 275,722 $ 2,554,224 Restricted cash and cash equivalents 7,860,921 - 7,860,921 - - - - Restricted Investments 1 5,592,589 264,228 15,856,817 3,556,649 - 325,000 3,881,649 Investments held by others - - - - 145,983 - 145,983 Accounts receivable, net 1 1,596,968 46,321 11,643,289 - - - - Interest receivable 35,951 - 35,951 63,609 - 3,696 67,305 Loan receivable - - - 4,939 - - 4,939 Prepaid expenses - 5,410 5,410 4,493 - 1,650 6,143 Inventories 38,205 - 38,205 - - - - Contributions receivable - - - 673,058 - - 673,058 Current portion of student loans receivable, net 175,000 - 175,000 - - - - TOTAL CURRENT ASSETS 6 9,440,477 777,663 70,218,140 6,482,655 244,578 606,068 7,333,301 NONCURRENT ASSETS Restricted investments 380,661 1,613,811 1,994,472 10,861,453 - - 10,861,453 Investments held by others - - - 220,620 - - 220,620 Investments - - - - - - - Receivable from state agency - - - - - - - Student loans receivable, net 1,798,188 - 1,798,188 - - - - Other assets 336,563 251,334 587,897 22,518 - - 22,518 Prepaid pension asset 2,247,048 - 2,247,048 - - - - Capitalized collections 4,544,290 - 4,544,290 - - - - Capital assets, net 9 9,477,492 5,651,372 1 05,128,864 1,702,025 1,114 - 1,703,139 TOTAL NONCURRENT ASSETS 108,784,242 7,516,517 1 16,300,759 12,806,616 1,114 - 12,807,730 TOTAL ASSETS $ 178,224,719 $ 8,294,180 $ 186,518,899 $ 19,289,271 $ 245,692 $ 606,068 $ 20,141,031 LIABILITIES CURRENT LIABILITIES Accounts payable $ 3 ,359,418 $ 556,673 $ 3,916,091 $ 18,406 $ - $ 8,854 $ 27,260 Accrued payroll and benefits 2,463,639 - 2,463,639 - - - - Accrued interest payable 383,478 - 383,478 - - - - Deferred revenue 2,506,325 513 2,506,838 - - - - Deposits held in custody for others 406,670 - 406,670 147,023 - - 147,023 Current portion of noncurrent liabilities 4,488,213 185,000 4,673,213 35,892 - - 35,892 TOTAL CURRENT LIABILITIES 1 3,607,743 742,186 14,349,929 201,321 - 8,854 210,175 NONCURRRENT LIABILITIES, net of current portion Accrued compensated absences 1,286,104 - 1,286,104 - - - - Federal loan program contributions refundable 1,868,798 - 1,868,798 - - - - Bonds payable 3 9,665,000 7,970,000 47,635,000 - - - - Notes payable 6,475,000 - 6,475,000 886,642 - - 886,642 ODFA master lease obligation 5,617,192 - 5,617,192 - - - - Lease obligation payable to state agency 1 9,769,059 - 19,769,059 - - - - TOTAL NONCURRENT LIABILITIES 7 4,681,153 7,970,000 82,651,153 886,642 - - 886,642 TOTAL LIABILITIES $ 88,288,896 $ 8,712,186 $ 9 7,001,082 $ 1,087,963 $ - $ 8,854 $ 1,096,817 NET ASSETS Invested in capital assets, net of related deb $ 30,056,038 $ (2,503,628) $ 2 7,552,410 $ - $ - $ - $ - Restricted for: - - - - Nonexpendable 622,567 - 622,567 12,694,809 - - 12,694,809 Expendable: 3,313,571 - 25,000 3,338,571 Scholarships, research, instruction and other 4,105,921 - 4,105,921 - - - - Loans 344,020 - 344,020 - - - - Capital projects 2,253,963 - 2,253,963 - - - - Debt service 1 5,541,835 - 15,541,835 - - - - Unrestricted 3 7,011,479 2,085,622 39,097,101 2,192,928 245,692 572,214 3,010,834 TOTAL NET ASSETS $ 89,935,823 $ (418,006) $ 8 9,517,817 $ 18,201,308 $ 245,692 $ 597,214 $ 19,044,214 See notes to financial statements. Primary Government Discrete Component Units 48 SUPPLEMENTAL SCHEDULE - COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS UNIVERSITY OF CENTRAL OKLAHOMA Year Ended June 30, 2009 Student Housing Total University Alumni KCSC-FM UCO Foundation University Foundation Association Foundation Total OPERATING REVENUES Student tuition and fees (included in fees are $3,539,890 $ 64,918,509 $ - $ 64,918,509 $ - $ - $ - $ - Less scholarship, discounts and allowances (15,464,475) - (15,464,475) - - - - Net student revenues 49,454,034 - 49,454,034 - - - - Federal grants and contracts 1,966,059 - 1,966,059 - - - - State and local grants and contracts 5,001,837 - 5,001,837 - - Bookstore operations 979,103 - 979,103 - - - - Housing and food service revenues ($1,388,862 pledged as security on 2001 UCO Student Housing 7,759,664 1,388,862 9,148,526 - - - - Parking and University Center revenues (total revenues are dedicated as security for bond repayments.) 2,198,882 - 2,198,882 - - - - Interest earned on loans to students 18,883 - 18,883 - - - - Other operating revenues 4,140,707 93,363 4,234,070 - - - - TOTAL OPERATING REVENUES 71,519,169 1,482,225 73,001,394 - - - - OPERATING EXPENSES Compensation and employee benefits 96,355,796 - 96,355,796 - - - - Contractual services 3,606,208 20,890 3,627,098 - 6,399 10,700 17,099 Supplies and materials 14,818,805 173,386 14,992,191 - 3,033 - 3,033 Depreciation 6,242,583 216,624 6,459,207 - 287 - 287 Utilities 2,559,131 119,245 2,678,376 - - - - Scholarships and fellowships 10,724,494 10,724,494 - - - - Other operating expenses 13,263,954 673,819 13,937,773 1,593,650 89,812 15,006 1,698,468 TOTAL OPERATING EXPENSES 147,570,971 1,203,964 148,774,935 1,593,650 99,531 25,706 1,718,887 Net operating income (loss) (76,051,802) 278,261 (75,773,541) (1,593,650) ( 99,531) ( 25,706) (1,718,887) NONOPERATING REVENUES (EXPENSES) State appropriations 64,376,151 - 64,376,151 - - - - Federal funded student aid 13,333,243 - 13,333,243 OTRS on-behalf contributions 4,138,019 - 4,138,019 - - - - Gifts 1,966 - 1,966 2,148,905 133,566 142,764 2,425,235 Investment income 1,192,118 8,585 1,200,703 (2,100,644) ( 19,322) 13,909 (2,106,057) Interest expense (3,464,300) (216,512) (3,680,812) - - - - NET NONOPERATING REVENUES (EXPENSES) 79,577,197 (207,927) 79,369,270 48,261 114,244 156,673 319,178 Income (loss) before other revenues, expenses, gains and losses 3,525,395 70,334 3,595,729 (1,545,389) 14,713 130,967 (1,399,709) State appropriations restricted for capital purposes 1,777,330 - 1,777,330 - - - - OCIA on-behalf state appropriations 2,141,105 - 2,141,105 - - - - Gift of capital assets 192,640 - 192,640 - - - - Change in net assets 7,636,470 70,334 7,706,804 (1,545,389) 14,713 130,967 (1,399,709) NET ASSETS, BEGINNING OF YEAR 82,299,353 (488,340) 81,811,013 19,746,697 230,979 466,247 20,443,923 NET ASSETS, END OF YEAR $ 89,935,823 $ (418,006) $ 89,517,817 $ 18,201,308 $ 245,692 $ 597,214 $ 19,044,214 See notes to financial statements. Foundation Bonds) of revenues dedicated for bond repayments) Primary Government Discrete Component Units 49 REPORTS REQUIRED BY GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133 Independent Auditors’ 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 Regents Regional University System of Oklahoma University of Central Oklahoma Oklahoma City, Oklahoma We have audited the financial statements of the University of Central Oklahoma (the “University”), a component unit of the State of Oklahoma, as of and for the year ended June 30, 2010, and have issued our report thereon dated October 31, 2010. 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. Other auditors audited the financial statements of the University of Central Oklahoma Alumni Association and the KCSC Classical Radio Foundation, discretely presented component units of the University, as described in our report on the University’s financial statements. The financial statements of the UCO Student Housing Foundation, the University of Central Oklahoma Foundation, Inc., the University of Central Oklahoma Alumni Association and the KCSC Classical Radio 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’ 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 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. 50 51 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 identified a deficiency in internal control over financial reporting, described in the accompanying Schedule of Findings and Questioned Costs, that we consider to be a material weaknesses, as defined above. See Finding 2010-01. We also identified a certain deficiency in internal control over financial reporting, described in the accompanying Schedule of Findings and Questioned Costs, that we consider to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. See Finding 2010-02. 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 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 tests disclosed an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying Schedule of Findings Questioned Costs. See Finding 2010-02. The University’s responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. We did not audit the University’s responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of the Board of Regents, management, and federal awarding agencies and is not intended to be, and should not be, used by anyone other than these specified parties. Oklahoma City, Oklahoma October 31, 2010 Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards Board of Regents Regional University System of Oklahoma University of Central Oklahoma Oklahoma City, Oklahoma Compliance We have audited the compliance of the University of Central Oklahoma (the “University”), a component unit of the State of Oklahoma, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2010. The University’s major federal programs are identified in the Summary of Auditors’ Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the University’s management. Our responsibility is to express an opinion on the University’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the University’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the University’s compliance with those requirements. In our opinion, the University of Central Oklahoma complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2010. However, the results of our auditing procedures disclosed instances of noncompliance with those requirem |
Date created | 2011-07-20 |
Date modified | 2011-07-20 |