Northwestern Oklahoma State University

              NORTHWESTERN
OKLAHOMA STATE
UNIVERSITY
June 30, 2010
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
AUDITED FINANCIAL STATEMENTS
Independent Auditors’ Report ................................................................................................................. 1
Management’s Discussion and Analysis ................................................................................................ 3
Statements of Net Assets ......................................................................................................................... 10
Statements of Revenues, Expenses and Changes in Net Assets ........................................................ 11
Statements of Cash Flows ....................................................................................................................... 12
Notes to Financial Statements ................................................................................................................ 14
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Funding Progress for Supplemental Retirement Annuity Plan
and Other Post Employment Insurance Benefits Plan-Unaudited ................................................ 53
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 ............................................................................. 54
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 on the Schedule of Expenditures of Federal Awards ......................... 56
Schedule of Expenditures of Federal Awards ...................................................................................... 59
Notes to Schedule of Expenditures of Federal Awards ...................................................................... 60
Schedule of Findings and Questioned Costs ........................................................................................ 61
Summary Schedule of Prior Audit Findings ........................................................................................ 63
Independent Auditors’ Report
Board of Regents
Regional University System of Oklahoma
Northwestern Oklahoma State University
Oklahoma City, Oklahoma
We have audited the accompanying statements of net assets of Northwestern Oklahoma State
University (the “University”), a component unit of the State of Oklahoma, as of and for the
years ended June 30, 2010 and 2009, and the related statements of revenues, expenses and
changes in net assets and cash flows for the year 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’s discretely presented component unit, the Northwestern Oklahoma State University
Foundation, Inc. and Alumni Association (the “Foundation”). Those financial statements were
audited by another auditor, whose report thereon has been furnished to us, and in our opinion,
insofar as they relate to the amounts included for the Foundation, are based on the report of the
other auditor.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The financial statements of the
Foundation were audited by other auditors and were not audited in accordance with
Government Auditing Standards. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and 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.
In our opinion, based on our audits and the report of the other auditor, the financial statements
referred to above present fairly, in all material respects, the respective financial position of
Northwestern Oklahoma State University and its discretely presented component unit,
Northwestern Oklahoma State University Foundation, Inc. and Alumni Association, as of June 30,
2010 and 2009, and the respective changes in its net assets and, where applicable, its cash flows
thereof for the year then ended, in conformity with accounting principle generally accepted in
the United States of America.
1
2
In accordance with Government Auditing Standards, we have also issued our report dated
October 29, 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 is important 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.
Oklahoma City, Oklahoma
October 29, 2010
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
3
OVERVIEW OF FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS
Northwestern Oklahoma State University is pleased to present its financial statements for fiscal
year 2010, with selected comparative information for fiscal years 2009 and 2008. Management’s
discussion and analysis is designed to focus on current activities, resulting changes, and current
known facts, so it should be read in conjunction with the University’s financial statements and
footnotes. There are three financial statements presented: 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 the tables in this MD&A are presented in millions of dollars. This
discussion and analysis of the University���s financial statements provides an overview of its
financial activities for the year. Accounting standards require that financial statements for the
Northwestern Oklahoma State University Foundation, Inc. be reported with the University’s
report.
Statement of Net Assets
The Statement of Net Assets presents the Assets (current and non-current), Liabilities (current
and noncurrent), and Net Assets (assets minus liabilities) as of the end of the fiscal year. The
purpose of this statement is to give readers of the financial statements a fiscal snapshot of
Northwestern Oklahoma State University.
These statements include all assets and liabilities using the accrual basis of accounting, which is
consistent with the accounting used by private sector institutions. Readers of the Statement of
Net Assets can determine the assets available to continue the operations of the institution.
Amounts owed to vendors and lending institutions can also be determined. Finally, the
Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their
availability for expenditure by the institution.
Net assets – the difference between assets and liabilities – is one way to measure the
University’s health, or position. Over time, increases or decreases in net assets are an indicator
of whether or not the University’s financial health is improving. Non-financial factors are also
important to consider, including student enrollment and condition of campus buildings. Net
assets are divided into three categories. The first category, Invested in Capital Assets, Net of
Debt, provides information on the institution’s property, plant and equipment. The next
category, Restricted Net Assets-Expendable, is divided into two categories, Scholarship and
Capital Project and Debt Service. These expendable net assets are available for expenditure by
the institution, but must be spent for purposes as determined by donors and/or external entities
that have placed time or purpose restrictions on the use of the assets. The final category is
Unrestricted Net Assets. Unrestricted assets are available to the institution for any lawful
purpose of the institution.
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
4
Statement of Net Assets (Continued)
A Condensed Statement of Net Assets is prepared from the University’s Statement of Net
Assets and summarizes the assets, liabilities, and net assets as of June 30, 2010 compared to year
ending June 30, 2009 and June 30, 2008.
CONDENSED STATEMENT OF NET ASSETS
(In Millions)
2010 2009 2008
ASSETS
Current assets $ 4.7 $ 4.3 $ 4.1
NONCURRENT ASSETS
Capital Assets, Net of Depreciation 26.7 24.2 21.8
Other assets 2.5 2.3 4.9
TOTAL ASSETS 33.9 30.8 30.8
LIABILITIES
Current liabilities 1.3 1.4 2.1
Noncurrent liabilities 9.0 9.3 10.0
TOTAL LIABILITIES 10.3 10.7 12.1
NET ASSETS
Invested in Capital Assets 17.6 14.4 11.5
Restricted 2.5 2.6 4.7
Unrestricted 3.5 3.1 2.5
TOTAL NET ASSETS $ 23.6 $ 20.1 $ 18.7
June 30,
June 30, 2010 compared to June 30, 2009
The total assets of the University increased from 2009 to 2010. Small increases occurred in cash
and cash equivalents, accounts receivable, and prepaid pension asset. The largest increase was
in the capital asset section. This included the addition of the new football locker room and
permanent baseball seating, renovations to the cafeteria and a remodel project to the university
bookstore. The total liabilities for the year decreased by $474,870. The primary decrease was a
result of payment of accounts payable associated with the new football locker room facility.
June 30, 2009 compared to June 30, 2008
The total assets of the University did not change from 2008 to 2009. Items within total assets,
however, did show some variation. This included a small increase in cash along with an
increase in net capital assets associated with the 2005 OCIA bond issue which funded the
construction of the Woodward Campus and the renovation of the Science Building and the
Health & Physical Education Building on the Alva Campus. Other assets decreased due to the
receivable from state agencies amount being transferred to the capital asset account during
FY09. The total liabilities for the year decreased by $1,395,342. The decrease, primarily in
accounts payable, resulted from the payments due on the construction of the building projects
associated with the 2005 OCIA bond issue.
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
5
Statement of Revenues, Expenses and Changes in Net Assets
The Statement of Revenues, Expenses and Changes in Net Assets presents the University’s results
of operation for the year and the effect on net assets. Operating revenues and expenses are
generated from “exchange” transactions that arise in the course of normal activity for the
organization. The comparison of operating revenues to operating expenses is an important
measure of an institution’s fiscal stability. Public institutions will normally not have an excess of
operating revenues over operating expenses because state appropriations are considered
nonoperating revenues under accounting principles generally accepted in the United States of
America.
CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
(In Millions)
2010 2009 2008
Operating Revenue
Student Tuition and Fees
(net of scholarship allowance of $6.9, $5.8, and $5.2, respectively) $ 3.7 $ 4.1 $ 3.5
Federal, State and Local Grants/Contracts 1.1 1.1 0.8
Auxiliary 3.6 3.2 2.9
Other 0.2 0.3 0.2
Total 8.6 8.7 7.4
Operating Expenses
Compensation and Employee Benefits 16.4 15.6 15.1
Contractual Services 2.0 2.1 1.7
Supplies and Materials 1.9 2.1 2.1
Depreciation 1.7 1.4 1.2
Utilities 0.9 0.9 0.9
Communication Expense 0.2 0.2 0.2
Scholarships and Fellowships 2.4 1.8 1.4
Other Operating Expense 0.7 0.8 0.6
Total Operating Expenses 26.2 24.9 23.2
Operating Income (Loss) (17.6) ( 16.2) (15.8)
Nonoperating Revenue (Loss)
State Appropriations 11.0 11.0 11.0
OTRS on-behalf Payments 0.6 0.7 0.7
Federal and State Grants/Contracts 4.9 3.5 3.1
Gifts 0.3 0.2 0.2
Investment Income 0.2 0.3 0.5
Interest Expense (0.4) (0.5) (0.5)
Net Nonoperating Revenue 16.6 15.2 15.0
Income (Loss) before Other Revenue/Expense ( 1.0) (1.0) (0.8)
Other Revenue/Expenses 4.5 2.4 2.2
Change in Net Assets 3.5 1.4 1.4
Net assets, beginning of year 20.1 18.7 17.3
Net assets, end of year $ 23.6 $ 20.1 $ 18.7
Year Ended June 30,
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
6
Statement of Revenues, Expenses and Changes in Net Assets (Continued)
Year Ended June 30, 2010 compared to Year ended June 30, 2009
The Statement of Revenues, Expenses and Changes in Net Assets shows a change in net assets
of $3.5 million dollars. This significant increase, as compared to prior years, is the result of
finishing and capitalizing the football locker room and permanent baseball seating projects. The
University received capital grants and gifts totaling over $2.8 million in FY 2010.
It is important to understand the relationship of revenues to expenses over time. The graph
below shows the stability of the relationship of operating revenues to operating expenses over
the past three years.
Operating Revenues vs. Operating Expenses
(Millions of Dollars)
The following charts show the relationship of state appropriations when compared to tuition
and fees over the past three years. Northwestern experienced an increase in overall enrollment
in fiscal year 2010. This increase, primarily in the freshman class, was a continuing direct result
of the Enrollment Management Plan that was implemented during FY07. For FY10
Northwestern received a reduction of state funding in the amount of $442,247 due to declining
state revenues. No tuition or mandatory fee increases were approved for FY10. No across the
board salary increases were given to employees in FY10. As part of a planned recruitment
effort, allowances for scholarships were increased for FY10. The auxiliary account shows an
increase in revenue due to an adjustment in room and board rates and an increase in students
living in campus housing. Expenses for campus housing also increased due to more students
living on campus and auxiliary funds being earmarked for capital facility improvements.
The following two charts show graphically the changes in tuition and fees along with the
changes in state appropriations for fiscal year 2008 through fiscal year 2010.
-
5.0
10.0
15.0
20.0
25.0
30.0
2010 2009 2008
8.6 8.7 7.4
26.2 25 23.2
Operating Revenue Operating Expenses
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
7
Statement of Revenues, Expenses and Changes in Net Assets (Continued)
Tuition & Fees vs. State Appropriations
(Millions of Dollars)
-
1.0
2.0
3.0
4.0
5.0
2010 2009 2008
3.7 4.1
3.5
Tuitions & Fees
-
2.0
4.0
6.0
8.0
10.0
12.0
2010 2009 2008
10.0 11.0 11.0
State Appropriations
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
8
Statement of Cash Flows
The final statement presented by Northwestern Oklahoma State University is the Statement of
Cash Flows. The primary purpose of the Statement of Cash Flows is to provide information
about the cash receipts and disbursements of an entity during a period. This statement also aids
in the assessment of an entity’s ability to generate future net cash flows, ability to meet obligations
as they come due, and needs for external financing. The statement is divided into five parts.
STATEMENT OF CASH FLOWS
2010 2009 2008
Cash provided (used) by:
Operating activities $ ( 15.5) $ ( 14.4) $ (13.9)
Noncapital financing activities 16.2 14.7 14.3
Investing activities 0.3 0.3 0.2
Capital and related financing activities ( 0.6) ( 0.1) 0.2
Net increase (decrease) in cash 0.4 0.5 0.8
Cash, beginning of year 5.2 4.7 3.9
Cash, end of year $ 5.6 $ 5.2 $ 4.7
The first section presents operating cash flows and shows the net cash used by the operating
activities of the institution. 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 shows the cash flows from investing activities
and shows the purchase, proceeds, and interest received from investing activities. The fourth
section presents cash flows from capital and related financing activities. This section deals with
the cash used for the acquisition and construction of capital and related items. The fifth section
reconciles the net cash used to the operating income or loss reflected on the Statement of
Revenues, Expenses, and Change in Net Assts.
The University’s cash increased by $531,794 from 2009 to 2010 and by $494,869 from 2008 to
2009. This resulted from a planned strategy to increase cash reserves in preparation for
upcoming challenging economic times in Oklahoma.
Managements’ Discussion and Analysis (Unaudited)
Northwestern Oklahoma State University
June 30, 2010
9
ECONOMIC OUTLOOK
The economic stability and future growth of the University is directly related to the state’s
economic stability. During recessionary times, Oklahoma historically trails 18 to 24 months
behind the east and west coasts in recovering economically. During FY09 the State of
Oklahoma started to experience an economic downturn which continued into FY10. Due to
reduced revenue collections, the State of Oklahoma was forced to adjust down the revenue
appropriations originally budgeted for higher education. Also during FY10, there was no
tuition or mandatory fee increases.
A continuing strategic direction for the University was to focus on student recruitment and
retention. With the help of an aggressive enrollment management plan, the university faculty
and staff worked closely with all potential and current students in an effort to recruit and retain
the very best students. These efforts were successful as Northwestern experienced an increase
in both head count (7 percent) and credit hours generated (8.5 percent) for FY10.
A new fundraising effort started in FY08, “Vision for Victory,” was targeted to update the football
and baseball athletic facilities. Over 2.3 million dollars was raised to construct a new football
locker room, add permanent seating and a press box to the baseball field and to construct a new
dugout for the home baseball team. These projects were completed during FY10.
Northwestern has placed a high priority on the development of grants and sponsored programs.
Grant activity continued to grow during FY10 with the award of an USDA grant to add an
elevator to the Science Building. Meanwhile, Northwestern continued to receive grants for the
operation of two TRIO programs, Oklahoma Small Business Development Center, CWPEP and
a Violence Prevention Program.
During FY10, construction began on a new agricultural educational classroom and shop at the
university farm. This will help fulfill the mission of delivering instruction for a new program
added at Northwestern, fulfilling a state wide need for agriculture education graduates. This
building project was made possible by special state appropriations along with private funds.
Two endowed faculty chairs have been established for the Agriculture Education program.
The future of Northwestern Oklahoma State University is bright but funding continues to be an
ongoing concern. Actual state appropriations continue to fall below 50 percent of the university
budget. Federal stimulus funds (ARRA) made up about approximately 3.3 percent, or $716,289
of the total university budget. Several cost savings measures were implemented during FY09
and continued during FY10 in anticipation of several difficult future funding years.
STATEMENTS OF NET ASSETS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
2010 2009 2010 2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,049,135 $ 3,706,118 $ 566,192 $ 655,479
Accounts receivable, net 316,953 299,124 491,022 925,000
Receivable from state agencies 256,853 273,045 - -
Interest receivable 7,111 7,239 31,218 39,615
Inventories 41,613 48,317 - -
Current portion of notes receivable, net 4,231 5,537 - -
TOTAL CURRENT ASSETS 4,675,896 4,339,380 1,088,432 1,620,094
NONCURRENT ASSETS
Restricted cash and cash equivalents 1,631,359 1,562,087 - -
Investments held by others 347,824 347,824 9,652,923 8,537,107
Student loans receivable, net 33,832 31,767 - -
Prepaid pension asset 355,171 184,004 - -
Other assets 120,870 125,474 22,958 26,419
Capital assets, net 26,712,372 24,203,391 877,630 893,487
TOTAL NONCURRENT ASSETS 29,201,428 26,454,547 10,553,511 9,457,013
TOTAL ASSETS $ 3 3,877,324 $ 3 0,793,927 $ 1 1,641,943 $ 11,077,107
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 182,880 $ 213,171 $ 13,239 $ 25,042
Accrued payroll 76,335 91,516 - -
Accrued interest payable 9,726 10,274 - -
Deferred revenue 133,225 126,514 - -
Deposits held in custody for others 136,371 113,115 532,927 265,586
Current portion of non current liabilities 755,907 809,420 - -
TOTAL CURRENT LIABILITIES 1,294,444 1,364,010 546,166 290,628
NONCURRENT LIABILITIES
Accrued compensated absences 266,162 225,446 - -
ODFA master lease program 2,415,000 2,620,000 - -
Federal loan program contributions refundable 40,561 43,536 - -
Lease obligation payable to state agency 6,258,412 6,496,457 - -
Note payable - - 516,194 637,656
Other noncurrent liabilities - - 55,388 64,425
TOTAL NONCURRENT LIABILITIES 8,980,135 9,385,439 571,582 702,081
TOTAL LIABILITIES 10,274,579 10,749,449 1,117,748 992,709
NET ASSETS
Invested in capital assets, net of debt 17,582,700 14,377,605 - -
Restricted
Nonexpendable
Grants, bequests and contributions - - 12,108,664 11,665,798
Expendable
Scholarships, instruction and other 500,740 488,182 1,023,329 1,575,909
Capital projects and debt service 2,017,787 2,135,623 - -
Unrestricted 3,501,518 3,043,068 (2,607,798) ( 3,157,309)
TOTAL NET ASSETS $ 2 3,602,745 $ 2 0,044,478 $ 1 0,524,195 $ 10,084,398
See notes to financial statements.
June 30, June 30,
University Component Unit
10
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
2010 2009 2010 2009
OPERATING REVENUES
Student tuition and fees, net of scholarship discounts
and allowances of $6,901,000 and $5,761,000 $ 3,697,377 $ 4,085,522 $ - $ -
Federal and state grants and contracts 1,060,899 1,102,053 - -
Housing and food service, net of scholarship discounts
and allowances of $131,000 and $112,000 3,591,396 3,190,481 - -
Investment income (loss) - - 1,227,245 (2,176,724)
Contributions - - 1,260,595 1,949,382
Other operating revenues 250,824 285,127 67,697 79,170
TOTAL OPERATING REVENUES 8,600,496 8,663,183 2,555,537 (148,172)
OPERATING EXPENSES
Compensation and employee benefits 16,360,957 15,562,404 - -
Contractual services 1,969,373 2,098,507 - -
Supplies and materials 1,891,006 2,109,500 - -
Depreciation 1,697,400 1,422,419 - -
Utilities 927,914 943,814 - -
Communication expense 253,361 205,525 - -
Scholarships and fellowships 2,435,363 1,820,924 949,928 364,285
Other operating expenses 689,483 770,216 489,608 520,840
TOTAL OPERATING EXPENSES 26,224,857 24,933,309 1,439,536 885,125
Operating income (loss) (17,624,361) (16,270,126) 1,116,001 (1,033,297)
NONOPERATING REVENUES (EXPENSES)
State appropriations 10,208,647 11,047,097 - -
State payments from federal ARRA revenues 824,071 - - -
OTRS on-behalf payments 604,995 681,419 - -
Federal and state grants and contracts 4,912,057 3,439,165 - -
Gifts 285,751 214,839 - -
Investment income 239,505 291,336 - -
Interest expense (437,094) (463,637) - -
NET NONOPERATING REVENUE (EXPENSES) 16,637,932 15,210,219 - -
Income (loss) before other revenues,
expenses, gains and losses (986,429) (1,059,907) 1,116,001 (1,033,297)
Capital grants and gifts 2,861,184 106,314 (676,204) (1,572,972)
State appropriations restricted for capital purposes 1,081,921 1,694,086 - -
OCIA on-behalf state appropriations 601,591 628,785 - -
Change in net assets 3,558,267 1,369,278 439,797 (2,606,269)
NET ASSETS, BEGINNING OF YEAR 20,044,478 18,675,200 10,084,398 12,690,667
NET ASSETS, END OF YEAR $ 23,602,745 $ 20,044,478 $ 10,524,195 $ 10,084,398
See notes to financial statements.
Year Ended June 30, Year Ended June 30,
University Component Unit
11
STATEMENTS OF CASH FLOWS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Tuition and fees $ 3,691,975 $ 4,055,430
Grants and contracts 1,059,900 1,070,094
Auxiliary enterprise charges and other operating receipts 3,836,744 3,471,369
Payments to employees for salaries and benefits (15,912,096) (14,980,214)
Payments to suppliers ( 8,142,991) ( 7,997,180)
NET CASH USED IN OPERATING ACTIVITIES (15,466,468) (14,380,501)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State appropriations 10,208,647 11,047,097
State payments from federal ARRA revenues 824,071 -
Nonoperating grants 4,912,057 3,439,165
Other student financial assistance received 4,598,000 4,396,000
Other student financial assistance payments ( 4,598,000) ( 4,396,000)
Gifts for other than capital purposes 285,751 214,839
NET CASH PROVIDED BY NONCAPITAL
FINANCING ACTIVITIES 16,230,526 14,701,101
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 255,825 305,453
NET CASH PROVIDED BY INVESTING ACTIVITIES 255,825 305,453
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Cash paid for capital assets ( 1,372,012) ( 4,560,003)
Capital appropriations received 1,081,921 1,694,086
Proceeds from capital debt and leases - 3,062,055
Interest paid on capital debt and leases (120,003) (134,822)
Repayment of capital debt and leases ( 197,500) ( 192,500)
NET CASH USED IN CAPITAL AND
RELATED FINANCING ACTIVITIES (607,594) ( 131,184)
NET CHANGE IN CASH AND CASH EQUIVALENTS 412,289 494,869
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,268,205 4,773,336
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,680,494 $ 5,268,205
See notes to financial statements.
Year Ended June 30,
12
STATEMENTS OF CASH FLOWS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
2010 2009
RECONCILIATION OF OPERATING LOSS TO
NET CASH USED IN OPERATING ACTIVITIES
Operating loss $ (17,624,361) $ (16,270,126)
Adjustments to reconcile operating loss
to net cash used by operating activities
Depreciation expense 1,697,400 1,422,419
Net loss on disposal of fixed assets - 101,131
On-behalf contributions to teachers' retirement system 604,995 681,419
Changes in assets and liabilities
Accounts receivable (17,829) (55,148)
Loans to students and employees (759) (2,914)
Inventories 6,704 (4,304)
Prepaid pension asset (171,167) (37,215)
Other assets - (72,985)
Accounts payable and accrued expenses (18,657) (122,145)
Deferred revenue 6,711 (8,228)
Student and other deposits 23,256 8,150
Compensated absences 30,214 (15,433)
Liability to federal government (2,975) (5,122)
NET CASH USED IN OPERATING ACTIVITIES $ (15,466,468) $ (14,380,501)
NONCASH INVESTING, NONCAPITAL FINANCING
AND CAPITAL AND RELATED FINANCING ACTIVITIES
Interest on capital debt paid by state
agency on behalf of the University 321,617 333,285
Principal on capital debt paid by state
agency on behalf of the University 279,974 295,500
NONCASH INVESTING, NONCAPITAL FINANCING AND
CAPITAL AND RELATED FINANCING ACTIVITIES $ 601,591 $ 628,785
RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO STATEMENTS OF NET ASSETS
Current assets
Cash and cash equivalents 4,049,135 3,706,118
Noncurrent assets
Restricted cash and cash equivalents 1,631,359 1,562,087
TOTAL CASH AND CASH EQUIVALENTS $ 5,680,494 $ 5,268,205
See notes to financial statements.
Year Ended June 30,
13
NOTES TO FINANCIAL STATEMENTS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
14
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization: Northwestern Oklahoma State University (the “University”) is a
regional University operating under the jurisdiction of the Regional University System of
Oklahoma and the Oklahoma State Regents for Higher Education.
Reporting Entity: The financial reporting entity, as defined by Governmental Accounting
Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, and Governmental
Accounting Standards Board (GASB) Statement No. 39, Determining whether Certain
Organizations Are Component Units-an amendment of GASB Statement No. 14, includes the accounts
and funds of the University and its discretely presented component unit, Northwestern
Oklahoma State University Foundation, Inc. and Alumni Association (the “Foundation”). The
University is a component unit of the State of Oklahoma and is included in the general-purpose
financial statements of the State of Oklahoma as part of the Higher Education component unit.
Component Unit: The University implemented GASB Statement No. 39 in 2004. Northwestern
Oklahoma State University Foundation, Inc. (the “Foundation”) and Alumni Association (the
“Association��) are combined and considered a component unit of the University under GASB
39, and their financial statements are discretely presented with the financial statements of the
University. The Foundation is a perpetual corporation formed under the laws of the State of
Oklahoma for charitable, benevolent, educational and scientific purposes. Its specific purpose is
to benefit the University through charitable actions and activities. Its activities are guided by a
Board of Trustees, which receives no compensation for their activities. The Association is an
unincorporated association formed for the benefit of the Alumni of Northwestern Oklahoma
State University as a whole. Its specific purpose is to provide alumni with information about
University related organizations and activities. Is activities are guided by a Board of Directors
who receives no compensation for their activities. In September 1986, the two organizations
adopted an operating agreement for their mutual benefit. Its purpose was to avoid repetition of
projects and to pool the resources of the two organizations. The two organizations will remain
separate entities, each governed by its own board. The president of the Association will be
appointed as a trustee of the Foundation. Accounting for the funds and fund transactions will
be accomplished by the Foundation. The Foundation will provide financial support as needed
to the Alumni Association. Each year the Alumni Association Board will present a budget to
the Foundation Board to finance its operations.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
15
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 Statement 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
nonoperating 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.
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 statement of revenues, expenses and changes
in net assets. At June 30, 2010 and 2009, all of the University’s investments were considered cash
equivalents.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
16
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 government, 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 consist of maintenance supplies and 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
long-term student loans, 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. For equipment, the University’s capitalization policy
includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than
five years. Renovations to buildings, infrastructure, and land improvements that significantly
increase the value or extend the useful life of the structure and that have a cost of $5,000 or more
are capitalized. Routine repairs and maintenance are charged to operating expense in the year
in which the expense is incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the
assets, generally 40 years for buildings, 20 years for infrastructure and land improvements, and
5 years for library materials and equipment.
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. Deferred revenues also include amounts received from grant and contract sponsors that
have not yet been earned.
Compensated Absences: Employee vacation pay is accrued at year-end for financial statement
purposes. The liability and expense incurred are recorded at year-end as accrued vacation
payable in the statements of net assets, and as a component of compensation and benefit
expense in the statements of revenues, expenses and changes in net assets.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
17
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
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, (2) estimated amounts for accrued compensated absences and other liabilities that will
not be paid within the next fiscal year, and (3) other liabilities that, although payable within one
year, are to be paid from funds that are classified as noncurrent assets.
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.
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.
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 of Oklahoma, is exempt
from all federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
However, the University may be subject to income taxes on unrelated business income under
the Internal Revenue Code Section 511(a)(2)(B).
Use of Estimates: The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from these estimates.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
18
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Classification of Revenues: The University has classified its revenues as either operating or
nonoperating 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) interest on institutional student loans, and (4) certain federal, state and local
grants and contracts.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics
of nonexchange transactions, such as gifts and contributions, 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.
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 nonoperating 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.
Reclassification of Financial Statement Presentation: Certain reclassifications have been made to
the 2009 financial statements to conform with the 2010 financial statement presentation. Such
reclassifications have had no effect on changes in net assets as previously reported.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
19
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 and all its funds and agencies. 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 and invests them in (a) U.S. treasury
securities which are explicitly backed by the full faith and credit of the U.S. government; (b) U.S.
agency securities which carry an implicit guarantee of the full faith and credit of the U.S.
government; (c) money market mutual funds which participate in investments, either directly
or indirectly, in securities issued by the U.S. treasury and/or agency and repurchase
agreements relating to such securities; (d) investments related to tri-party repurchase
agreements which are collateralized at 102% and, whereby, the collateral is held by a third party
in the name of the OST; (e) collateralized certificates of deposits; (f) commercial paper; (g)
obligations of state and local governments; and (h) State of Israel bonds.
At June 30, 2010 and 2009, the carrying amount of all University deposits with the OST and
other financial institutions were $5,680,494 and $5,268,205, respectively. These amounts
consisted of deposits with the OST ($5,675,824 and $5,262,385) and change funds ($4,670 and
$5,820). Of funds on deposit with the OST, amounts invested in OK INVEST total $2,496,031 in
2010 and $2,286,093 in 2009.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
20
NOTE B--DEPOSITS AND INVESTMENTS--Continued
Deposits--Continued: 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 are
as follows:
Cost Market Value
U.S. Agency Securities $ 956,378 $ 972,435
Money Market Mutual Fund 218,480 218,480
Mortgage Backed Agency Securities 883,042 921,410
Certificates of Deposit 141,970 141,970
Tri-party Repurchase Agreements 160,073 160,073
Municipal Bonds 53,780 57,664
Foreign Bonds 10,005 9,893
U.S. Treasury Obligations 72,303 76,531
Totals $ 2,496,031 $ 2,558,456
OK Invest Protfolio
At June 30, 2010
Cost Market Value
U.S. Agency Securities $ 1,006,128 $ 1,036,278
Money Market Mutual Fund 180,247 180,247
Mortgage Backed Agency Securities 518,378 524,661
Certificates of Deposit 145,701 145,701
Tri-party Repurchase Agreements 178,568 178,568
Municipal Bonds 36,763 37,064
Foreign Bonds 4,355 4,355
U.S. Treasury Obligations 215,953 223,499
Totals $ 2,286,093 $ 2,330,373
OK Invest Protfolio
At June 30, 2009
Agencies and funds that are considered to be part of the State’s reporting entity in the State’s
Comprehensive Annual Financial Report 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 and its funds’
and agencies’ daily cash flow requirements.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
21
NOTE B--DEPOSITS AND INVESTMENTS--Continued
Deposits--Continued: 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
http://www.treasurer.state.ok.us/. 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 two 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 of Oklahoma, the Federal Deposit Insurance Corporation or any other
government agency.
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) obligations of the United States government, its agencies and instrumentalities;
(b) prime banker’s acceptances; (c) investment grade obligations of state and local governments;
(d) money market funds; (e) collateralized or insured certificates of deposits; (f) negotiable
certificates of deposits; (g) prime commercial paper; and (h) repurchase agreements.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
22
NOTE B--DEPOSITS AND INVESTMENTS--Continued
Investments--Continued: 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 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 custodial credit risk.
At June 30, 2010 and 2009, the University had investments in funds totaling $347,824 and
$347,824, respectively, related to the ODFA Lease program. These funds had a fair market value
of $347,824 at June 30, 2010 and 2009. These funds are carried as investments held by others in the
University’s statement of net assets. The funds are not subject to maturity dates and are due on
demand. The funds had an average credit rating of Aaa at June 30, 2010 according to a credit
rating agency.
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. The OST and/or a trustee bank generally provide 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.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
23
NOTE C--ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at June 30:
2010 2009
Student tuition and fees $ 238,711 $ 208,339
Auxiliary enterprises and other operating activities 98,251 82,941
Federal, state, and private grants and contracts 190,788 189,789
527,750 481,069
Less allowance for doubtful accounts 210,797 181,945
Net accounts receivable $ 316,953 $ 299,124
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 75% 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 maximums 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 provided for loans originated after this date. Amounts refundable to the
U.S. Government upon cessation of the Program of $40,561 and $43,536 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
portions 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,
which in management’s opinion, is sufficient to absorb loans that will ultimately be written off.
At June 30, 2010 and 2009, loan receivable consisted of the following:
2010 2009
Perkins loans receivable $ 38,263 $ 37,617
Less allowance for uncollectible loans ( 200) ( 313)
Loans receivable, net $ 38,063 $ 37,304
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
24
NOTE E--CAPITAL ASSETS
Following are the changes in 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 $ 676,382 $ - $ - $ - $ 6 76,382
Construction in progress 231,855 21,797 (231,855) - 2 1,797
Total assets not being depreciated $ 908,237 $ 21,797 $ (231,855) $ -$ 6 98,179
Other capital assets
Land improvements $ 1,471,805 $ 466,361 $ - $ - $ 1 ,938,166
Leasehold improvements 43,381 - - - 4 3,381
Buildings 36,941,036 3,409,393 231,855 - 4 0,582,284
Furniture, fixtures and equipment 2,504,179 219,817 - (82,497) 2 ,641,499
Library materials 2,058,563 89,013 - (45,663) 2 ,101,913
Total other capital assets 43,018,964 4,184,584 231,855 (128,160) 4 7,307,243
Less accumulated depreciation for
Land improvements 687,674 126,911 - - 8 14,585
Leasehold improvements 43,381 - - - 4 3,381
Buildings 15,312,811 1,223,868 - - 1 6,536,679
Furniture, fixtures and equipment 2,020,100 192,302 - (82,497) 2 ,129,905
Library materials 1,659,844 154,319 - (45,663) 1 ,768,500
Total accumulated depreciation 19,723,810 1,697,400 - (128,160) 2 1,293,050
Other capital assets, net $ 23,295,154 $ 2,487,184 $ 231,855 $ -$ 2 6,014,193
Capital asset summary:
Capital assets not being depreciated $ 908,237 $ 21,797 $ (231,855) $ - $ 6 98,179
Other capital assets, at cost 43,018,964 4,184,584 231,855 (128,160) 4 7,307,243
Total cost of capital assets 43,927,201 4,206,381 - (128,160) 4 8,005,422
Less accumulated depreciation 19,723,810 1,697,400 - (128,160) 2 1,293,050
Capital assets, net $ 24,203,391 $ 2,508,981 $ -$ - $ 2 6,712,372
At June 30, 2010, the cost and related accumulated depreciation of assets held under capital
lease obligations were $11,478,432 and $1,819,466 respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
25
NOTE E--CAPITAL ASSETS--Continued
Following are the changes in 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 $ 676,382 $ - $ - $ - $ 6 76,382
Construction in progress 5,546,085 231,855 (5,546,085) - 2 31,855
Total assets not being depreciated $ 6,222,467 $ 231,855 $ (5,546,085) $ -$ 9 08,237
Other capital assets
Land improvements $ 1,294,901 $ 161,904 $ 15,000 $ - $ 1 ,471,805
Leasehold improvements 43,381 - - - 4 3,381
Buildings 28,482,786 3,224,301 5,531,085 (297,136) 3 6,941,036
Furniture, fixtures and equipment 2,396,535 154,715 - (47,071) 2 ,504,179
Library materials 1,969,586 138,051 - (49,074) 2 ,058,563
Total other capital assets 34,187,189 3,678,971 5,546,085 (393,281) 4 3,018,964
Less accumulated depreciation for
Land improvements 589,336 98,338 - - 6 87,674
Leasehold improvements 43,381 - - - 4 3,381
Buildings 14,529,701 979,115 - (196,005) 1 5,312,811
Furniture, fixtures and equipment 1,885,731 181,441 - (47,072) 2 ,020,100
Library materials 1,545,393 163,525 - (49,074) 1 ,659,844
Total accumulated depreciation 18,593,542 1,422,419 - (292,151) 1 9,723,810
Other capital assets, net $ 15,593,647 $ 2,256,552 $ 5,546,085 $ (101,130) $ 2 3,295,154
Capital asset summary:
Capital assets not being depreciated $ 6,222,467 $ 231,855 $ (5,546,085) $ - $ 9 08,237
Other capital assets, at cost 34,187,189 3,678,971 5,546,085 (393,281) 4 3,018,964
Total cost of capital assets 40,409,656 3,910,826 - (393,281) 4 3,927,201
Less accumulated depreciation 18,593,542 1,422,419 - (292,151) 1 9,723,810
Capital assets, net $ 21,816,114 $ 2,488,407 $ -$ (101,130) $ 2 4,203,391
At June 30, 2009, the cost and related accumulated depreciation of assets held under capital
lease obligations were $11,478,432 and $1,348,723 respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
26
NOTE F--LONG-TERM LIABILITIES
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
Capital lease obligations
ODFA master lease $ 2,817,500 $ - $ 197,500 $ 2 ,620,000 $ 205,000
OCIA lease obligation 6,596,206 - 279,974 6 ,316,232 229,463
Premium on OCIA lease obligation 180,225 - 8,582 1 71,643 -
Total capital lease obligations 9,593,931 - 486,056 9 ,107,875 434,463
Other liabilities
Accrued compensated absences 557,392 299,334 269,120 5 87,606 321,444
Federal loan program contributions 43,536 - 2,975 4 0,561 -
Total other liabilities 600,928 299,334 272,095 6 28,167 321,444
Total long-term liablities $ 10,194,859 $ 299,334 $ 758,151 $ 9 ,736,042 $ 755,907
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
Capital lease obligations
ODFA master lease $ 3,010,000 $ - $ 192,500 $ 2 ,817,500 $ 197,500
OCIA lease obligation 6,891,706 - 295,500 6 ,596,206 279,974
Premium on OCIA lease obligation 188,808 - 8,583 1 80,225 -
Total capital lease obligations 10,090,514 - 496,583 9 ,593,931 477,474
Other liabilities
Accrued compensated absences 572,825 292,862 308,295 5 57,392 331,946
Federal loan program contributions 48,658 - 5,122 4 3,536 -
Total other liabilities 621,483 292,862 313,417 6 00,928 331,946
Total long-term liablities $ 10,711,997 $ 292,862 $ 810,000 $ 1 0,194,859 $ 809,420
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
27
NOTE F--LONG-TERM LIABILITIES--Continued
Capital Lease Obligations
Oklahoma Capital Improvement Authority Lease Obligation
In September 1999, the Oklahoma Capital Improvement Authority (OCIA) issued its OCIA
Bond Issues, 1999 Series A, B and C. Of the total bond indebtedness, the State Regents for
Higher Education allocated $850,000 to the University. Concurrently with the allocation, the
University entered into a lease agreement with OCIA, for the project being funded by the OCIA
bonds. The lease agreement provides for the University to make specified monthly payments to
OCIA over the respective terms of the agreement, which is for 20 years. The proceeds of the
bonds and subsequent lease are to provide for capital improvements at the University.
Through June 30, 2010, the University has drawn down its total allotment of $850,000 for
expenditures incurred in connection with specified projects. These expenditures have been
capitalized as capital assets or recorded as non-capitalized 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 repayments made during the fiscal year. 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 $477 and $528, respectively.
In 2004, the OCIA issued bond series 2004A that refunded a significant portion of the 1999A
bonds. Consequently, the amortization of the 1999A bond issue will end in 2010. The lease
agreement will no longer secure the 1999A bond issue but will now act as security for the 2004A
bond issue over the term of the lease through the year 2020. As a result, there are two
amortization schedules, which have been combined, related to this one lease agreement.
In November 2005, the Oklahoma Capital Improvement Authority (OCIA) issued its OCIA
Bond Issues, 2005 Series F and G. Of the total bond indebtedness, the State Regents for Higher
Education allocated $6,813,432 to the University. Concurrently with the allocation, the University
entered into a lease agreement with OCIA, which includes three projects being funded by the
OCIA bonds. The lease agreement provides for the University to make specified monthly
payments to OCIA over the term of the agreement. The projects have terms 5 to 30 years. The
proceeds of the bonds and the subsequent leases are to provide for capital improvements at the
University.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
28
NOTE F--LONG-TERM LIABILITIES--Continued
Capital Lease Obligations--Continued
Oklahoma Capital Improvement Authority Lease Obligation--Continued
Through June 30, 2010, the University has drawn down the total of $6,813,432 for expenditures
incurred in connection with specified projects. These expenses have been capitalized as investment
in fixed assets in accordance with University policy. The University has recorded a lease obligation
payable to OCIA for the total amount of the allotment, less repayments made on the University’s
behalf.
During the years ended June 30, 2010 and 2009, OCIA made lease principal and interest
payments totaling $601,591 and $628,785, respectively, on behalf of the University. These on-behalf
payments have been recorded as restricted state appropriations in the statements of
revenues, expenses and changes in net assets.
Oklahoma Development Finance Authority Master Lease Program
In December 2002, the ODFA issued its ODFA Master Lease Revenue Bonds, Series 2002C. Of
the total bond indebtedness, the State Regents for Higher Education allocated $3,815,000 to the
University. Concurrently with the allocation, the University entered into a lease agreement
with ODFA, for the project being funded by the ODFA bonds. The lease agreement provides
for the University to make specified monthly payments to ODFA over the respective terms of
the agreement, which is through December 1, 2020. The proceeds of the bonds and subsequent
leases are to provide for capital improvements to the University.
Investments Held By Others consist of the following funds under the ODFA program at June
30, 2010 and 2009:
June 30, 2010 June 30, 2009
Debt service reserve fund $ 347,824 $ 347,824
Total assets held by others $ 347,824 $ 347,824
Funds in the acquisition fund are restricted for the project being funded by the Series 2002C
program. Debt service reserve funds are restricted for the payment of principal and interest
pursuant to the agreements, and capitalized interest fund are restricted for the payment of
interest during the construction period.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
29
NOTE F--LONG-TERM LIABILITIES--Continued
Capital Lease Obligations--Continued
Oklahoma Development Finance Authority Master Lease Program--Continued
Future minimum lease payments under the University’s obligations for OCIA and ODFA are as
follows.
Principal Interest Total
Year Ending June 30:
2011 434,463 422,726 857,189
2012 452,062 404,961 857,023
2013 469,965 386,091 856,056
2014 491,992 365,474 857,466
2015 514,448 343,596 858,044
2016-2020 2,841,593 1,345,521 4,187,114
2021-2025 1,725,308 750,175 2,475,483
2026-2030 2,006,401 309,036 2,315,437
$ 8,936,232 $ 4,327,580 $ 13,263,812
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 Supplemental
Retirement Annuity (“SRA”), a single employer defined benefit plan available to employees
hired prior to July 1, 1987, and a defined contribution 403(b) plan. The University does not
maintain the accounting records, hold the investments for, or administer these plans.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
30
NOTE G--RETIREMENT PLANS--Continued
Oklahoma Teachers’ Retirement System (OTRS)
Plan Description
The University contributes to the Oklahoma Teachers’ Retirement System (OTRS), a cost-sharing
multiple-employer defined benefit pension plan sponsored by the State of Oklahoma. 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 of Oklahoma. Title 70 of the Oklahoma Statutes, Sections 17-101
through 116.9, as amended, assigns the authority for management and operation of the Plan to
the Board of Trustees of OTRS. OTRS does not provide for a cost of living adjustment. 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, 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 7.05% for the first six months of fiscal year
2008 and at January 1, 2008 the contribution rate changed to 7.55%. The contribution rate
remained 7.55% until January 1, 2009, when it increased to 8.05%. On January 1, 2010, the
employer contribution rate increased again to 8.55%. This 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. During
2010, the University paid the entire amount of employees’ contributions to OTRS directly. For
compensation in excess of $5,000 in 2009 and $10,000 in 2008, the employees’ contributions were
paid directly by the University to the OTRS.
The University’s contribution to OTRS for the years ended June 30, 2010, 2009 and 2008, was
approximately $1,840,000, $1,533,000 and $1,253,000, 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
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
31
NOTE G--RETIREMENT PLANS--Continued
Oklahoma Teachers’ Retirement System (OTRS)-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 contribution was 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 of Oklahoma on
its behalf by multiplying the ratio of its covered salaries to total covered salaries for OTRS for
the year by the applicable percentage of taxes collected during the year. For the years ended
June 30, 2010 and 2009, the total amounts contributed to the OTRS by the State of Oklahoma on
behalf of the University were approximately $605,000 and $681,000, respectively. These on
behalf payments have been recorded as both revenues and expenses in the statements of
revenues, expenses and changes in net assets.
Defined Contribution Plan
The University also has a defined contribution 403(b) plan (DCP) available to full-time employees.
The DCP is administered by the RUSO System, and the plan provisions are established and may
be amended by the Board of Regents. Plan members may make voluntary contributions in
accordance with IRS regulations. The University has no contribution requirements, and no
contributions were made during the years ended June 30, 2010, 2009 and 2008.
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, 1987, 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
stand-alone financial report nor is it included in the financial report of another entity.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
32
NOTE G--RETIREMENT PLANS--Continued
Supplemental Retirement Annuity (SRA)--Continued
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.
Annual Cost and Net Obligation (Asset)
Annual pension cost and net pension obligation (asset) of the SRA for 2010 and 2009 are as
follows:
2010 2009
Annual required contribution $ 184,812 $ 159,577
Interest on net pension obligation (14,720) (11,743)
Adjustment to annual required contribution 18,741 14,951
Annual pension cost 188,833 162,785
Contribution made (360,000) (200,000)
Increase in net pension obligation (171,167) (37,215)
Net pension obligation (asset) at beginning of year (184,004) (146,789)
Net pension obligation (asset) at end of year $ (355,171) $ (184,004)
The annual required contribution for 2010 and 2009 was 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;
and (d) projected salary increases of 3.5% per year. 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 fifteen years as a level dollar amount on a closed basis.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
33
NOTE G--RETIREMENT PLANS--Continued
Supplemental Retirement Annuity (SRA)--Continued
Trend Information
Year Ended Annual Pension Percentage of APC Net Pension
June 30 Cost (APC) Contributed Obligation (Asset)
2010 $ 188,833 190.6% $ ( 355,171)
2009 $ 162,785 122.9% $ ( 184,004)
2008 $ 179,592 111.4% $ ( 146,789)
Funded Status and Funding Progress
The funded status of the plan as of June 30 was as follows:
2010 2009
Actuarial accrued liability (AAL) $ 2,539,213 $ 2,457,468
Actuarial value of plan assets 837,245 674,591
Unfunded actuarial accrued liability (UAAL) $ 1,701,968 $ 1,782,877
Funded ratio (actuarial value of plan assets/AAL) 33.0% 27.5%
Covered payroll (active plan members) $ 2,272,632 $ 2,328,722
UAAL as a percentage of covered payroll 74.9% 76.6%
NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS
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
(the University’s Board). 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 262 active participants in the plan. The
retirement insurance program was adopted by the Board of Regents in 1985. In March of 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 was
administered by The Bank Oklahoma, N.A.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
34
NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS
Plan Description--Continued
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. The plan does not
issue a stand-alone financial report nor is it included in the financial report of another entity.
Funding Policy
The contribution requirements of the University are established and may be amended by the
Regional University System of Oklahoma Board of Regents. The University is required to
contribute the annual required contribution 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. The
current ARC is $167,688 and represents 1.4% (percent) of covered payroll.
Annual Cost and Net Obligation (Asset)
Annual OPEB cost and net OPEB obligation (asset) of the plan for 2010 and 2009 are as follows:
2010 2009
Annual required contribution $ 167,688 $ 154,404
Interest on net OPEB obligation - -
Adjustment to annual required contribution - -
Annual OPEB cost 167,688 154,404
Contribution made (167,688) (227,389)
Decrease (Increase) in net OPEB obligation - (72,985)
Net OPEB obligation (asset) at beginning of year (72,985) -
Net OPEB obligation (asset) at end of year $ (72,985) $ (72,985)
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%.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
35
NOTE H--OTHER POST-EMPLOYMENT INSURANCE BENEFITS--Continued
Trend Information
Fiscal Year Annual Annual OPEB Cost Net OPEB
Ended OPEB Cost Contributed Obligation (Asset)
2010 $ 1 67,688 100% $ (72,985)
2009 $ 1 54,404 147% $ (72,985)
2008 $ 1 86,000 100% $ -
Funded Status and Funding Progress
The funded status of the plan as of June 30 was as follows:
2010 2009
Actuarial accrued liability (AAL) $ 1,671,673 $ 1,390,862
Actuarial value of plan assets 348,724 266,191
Unfunded actuarial accrued liability (UAAL) $ 1,322,949 $ 1,124,671
Funded ratio (actuarial value of plan assets/AAL) 20.9% 19.1%
Covered payroll (active plan members) $ 12,012,999 $ 11,248,169
UAAL as a percentage of covered payroll 11.0% 10.0%
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
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
36
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’s “New College Fund”. The University received approximately $964,000 and
$739,000 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 state appropriations for capital purposes 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 fund for Northwestern Oklahoma State University, held in
trust by the Commissioners of Land Office, was approximately $13,493,000 and $12,374,000 at
June 30, 2010 and 2009.
Oklahoma State Regents Endowment Trust Fund
In connection with the Oklahoma State Regents’ Endowment Program (the “Endowment
Program”), the State of Oklahoma has matched contributions received under the Endowment
Program. The state match amounts, plus any retained accumulated earnings, totaled
approximately $3,836,000 and $3,429,000 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 5% of the market value at year end on these funds. As legal title of the
State Regents matching endowment funds is retained by the Oklahoma State Regents, only the
funds available for distribution, approximately $257,000 and $273,000 at June 30, 2010 and 2009,
respectively, have been reflected as assets in the statements of net assets.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
37
NOTE J--COMMITMENTS AND CONTINGENCIES
The University conducts certain programs pursuant to various grants that 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, $4,598,000 and $4,396,000, respectively, of FFEL
Program loans were provided to University students.
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 and 2009 will not have material adverse impact to the University.
NOTE K--RISK MANAGEMENT
The University is exposed to various risks of loss from torts; theft of, damage to, and destruction of
assets; business interruption; errors and omission; employee injuries and illness; natural disasters;
and employee health, life, and accident benefits. Commercial insurance coverage is purchased
for claims arising from such matters other than torts, property, and workers’ compensation.
Settled claims have not exceeded this commercial coverage in any of the three preceding years.
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 of Oklahoma and is governed by a board of trustees elected
from members of the participating colleges and universities.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
38
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 in
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
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
39
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION
The following are significant disclosures of Northwestern Oklahoma State University Foundation,
Inc. and Alumni Association:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Northwestern Oklahoma State University Foundation, Inc. (the Foundation)
is a not-for-profit organization whose mission and principal activities are to promote the
educational and cultural interest of Northwestern Oklahoma State University (the
University), a public institution of higher education. The Foundation’s revenues and other
support are derived principally from contributions and its activities are conducted in the
Alva, Oklahoma, area.
Although the University does not control the timing or amount of receipts from the
Foundation, the majority of the Foundation’s resources and related income are restricted
by donors for the benefit of the University. Because these restricted resources held by the
Foundation can only be used by, or for the benefit of, the University, the Foundation is
considered a component unit of the University and is discretely presented in the
University’s financial statements.
The Alumni Association is an unincorporated association formed for the benefit of the
Alumni of Northwestern Oklahoma State University as a whole, its specific purpose is to
provide the Alumni with information about the University related organizations and
activities. In September 1986, the Foundation and the Alumni Association adopted an
operating agreement for their mutual benefit. Its purpose was to avoid repetition of
projects and to pool the resources of the two organizations. The two organizations
remained separate entities, each governed by its own Board of Trustees. The president of
the Alumni Association is appointed as a trustee of the Foundation. Accounting for funds
and fund transactions are maintained by the Foundation. The Foundation provides
financial support as needed for the Alumni Association. Both organizations are referred
herein as “the Foundation”.
Basis of Presentation: The financial statements of the Foundation have been prepared on
the accrual basis of accounting. Net assets and revenues, gains, and losses are classified
based upon the existence or absence of donor-imposed restrictions as follows:
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
40
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Unrestricted net assets: Net assets that are not subject to donor-imposed stipulations.
Temporary restricted net assets: Net assets subject to donor-imposed stipulations that
can be fulfilled by actions of the Foundation pursuant to those stipulations or that
expire by the passage of time.
Permanently restricted net assets: Net assets subject to donor-imposed stipulations that
they be maintained permanently by the Foundation. Generally, the donors of such
assets permit the Foundation to use all or part of the income earned on the assets.
Income and gains on investments are reported as increases in permanently restricted net
assets if the terms of the gift that gave rise to the investment or applicable law require
such amounts to be added to permanent endowment principal. Income and gains are
reported as increases in temporarily restricted net assets if the terms of the gift or
applicable law impose restrictions on the use of the income and as increases in
unrestricted net assets in all other cases.
Contributions: The Foundation reports gifts of cash and other assets as restricted support
if they are received with donor stipulations that limit the use of the donated assets. When
a donor restriction expires, that is, when a stipulated time restriction ends or purpose
restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted
net assets and reported in the statement of activities as net assets released from
restrictions.
Promises to Give: Unconditional promises to give are recognized as revenues or gains in
the period received and as assets, decreases of liabilities, or expenses, depending on the
form of the benefits received. Conditional promises to give are recognized only when the
conditions on which they depend are substantially met and the promises become
unconditional.
Collections: All collections of works of art, historical treasures, and similar assets are
capitalized. Items added to the collections are capitalized at cost if purchased or at
estimated fair value on the acquisition date, if donated. Collection items sold or removed
are reported as unrestricted or temporarily restricted gains or losses depending on donor
stipulations, if any, placed on the items at the time of acquisition.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
41
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Real Property: Real property consists primarily of land and farm property donated to the
Foundation. Management has made attempts to revalue portions of the real property
assets at subsequent dates. The Foundation’s management is of the opinion that revaluation
of all the real property would not have a significant impact on the Foundation’s statements
of financial position or changes in net assets.
Cash and Cash Equivalents: The Foundation defines cash and cash equivalents to be all cash
and certificates of deposit with original maturities of three months or less. Uninvested cash
held in managed investment accounts is not considered cash or cash equivalents as these
funds are not readily available for paying the Foundation expenses.
Marketable Securities: Marketable securities are stated at fair value. Fair values are generally
determined based upon quoted market prices. Realized gains and losses on sales of
marketable securities are computed on the first-in, first-out basis.
The Foundation utilizes various investment instruments. Marketable securities, in general,
are exposed to various risks, such as interest rate, credit, and overall market volatility.
Due to the level of risk associated with certain investment securities, it is reasonably
possible that changes in the values of marketable securities will occur in the near term and
that such changes could materially affect the amounts reported in the statements of
financial position. Significant fluctuations in fair values could occur from year to year and
the amounts the Foundation will ultimately realize could differ materially.
Tax Status: The Foundation is a nonprofit corporation and is an exempt organization as
defined in Internal Revenue Code Section 501(c)(3). The Foundation has been classified as
an organization that is not a private foundation under Section 509(a) of the Internal
Revenue Code and qualified for deductible contributions under Section 170(b)(1)(A)(vi).
The Foundation receives limited income that is unrelated to its exempt purpose and is
taxable under the Internal Revenue Code.
Property and Equipment: Property and equipment are stated at cost or at estimated fair
value at date of donation. The Foundation provides for depreciation using the straight-line
method over the estimated useful lives of the related assets. Repairs and maintenance are
expensed as incurred, whereas major improvements in excess of $500 are capitalized.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
42
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Allocated Expenses: Expenses by function have been allocated among program and
supporting services classifications on the basis of time records and on estimates made by
the Foundation’s management.
Concentrations of Credit Risk: Financial instruments, which potentially subject the
Foundation to concentrations of credit risk, consist primarily of cash and cash equivalents,
short-term investments and pledges receivable. The Foundation places its cash and
certificates of deposit with high quality financial institutions. Pledges receivable consist of
a large number of contributors throughout the state of Oklahoma. The Foundation
provides an allowance for the estimated uncollectible portion of pledges receivable. The
Foundation’s management believes that the credit risk is adequately provided for to
which it is exposed.
Management Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and disclosures
in the notes thereto. Actual results could differ from those estimates.
Reclassifications: Certain reclassifications have been made to the 2009 financial statements to
conform to the presentation used in 2010.
CASH AND CASH EQUIVALENTS
The Foundation maintains several bank accounts. The table below is designed to disclose
the level of custody credit risk assumed by the Foundation based upon how its deposits
were insured at June 30, 2009 and 2008. FDIC regulations state time and savings accounts
are insured up to a $100,000 maximum.
Category 1 - Insured by FDIC or collateralized with securities held by the Foundation or
by its agent in its name.
Category 2 - Uninsured but collateralized with securities held by the pledging financial
institution’s trust department or agent in the Foundation’s name.
Category 3 – Uninsured and uncollateralized.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
43
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Bank Carrying
Balance Balance 1 2 3
Demand Deposits $ 570,477 $ 501,229 $ 418,317 $ - $ 152,160
Money Market Funds 65,558 64,963 - - 65,558
Totals $ 636,035 $ 566,192 $ 418,317 $ -$ 217,718
June 30, 2010
Custody Credit Risk Category
Bank Carrying
Balance Balance 1 2 3
Demand Deposits $ 304,194 $ 314,020 $ 304,194 $ - $ -
Money Market Funds 467,900 467,900 - - 467,900
Totals $ 772,094 $ 781,920 $ 304,194 $ -$ 467,900
June 30, 2009
Custody Credit Risk Category
PLEDGES RECEIVABLE
Pledges receivable are due as follows at June 30:
2010 2009
Receivable in less than one year $ 540,024 $ 500,000
Receivable in one to five years - 425,000
Total pledges receivable 540,024 925,000
Less: allowance for uncollectible pledges (49,002) -
Net pledges receivable $ 491,022 $ 925,000
The pledges receivable as of June 30, 2010 and 2009 are committed to the funding of the
athletic facility and the horse & rider statues.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
44
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
INVESTMENTS
Investment income consists of the following:
2010 2009
Interest and dividend income $ 354,383 $ 401,970
Realized gains and losses 266,699 (2,332,173)
Unrealized gains and losses 668,469 (246,521)
1,289,551 (2,176,724)
(62,306) (52,707)
$ 1,227,245 $ (2,229,431)
Investments are held for the production of income and consist of the following at June 30,
2010:
Fair Carrying
Cost Value Value
Foundation managed funds
Certificates of deposits $ 231,000 $ 231,009 $ 231,009
Government bonds 98,611 98,082 98,082
Corporate bonds 1,969,126 1,751,088 1,751,088
Preferred stock 5,138 4,621 4,621
Common stock 173,000 51,035 51,035
Mutual funds 717,687 566,033 566,033
Managed futures 400,000 422,249 422,249
3,594,562 3,124,117 3,124,117
Professionally managed funds
Uninvested cash 396,219 396,219 396,219
Corporate bonds 479,408 545,696 545,696
Preferred stock 375,500 434,408 434,408
Common stock 4,850,138 4,937,780 4,937,780
Mutual fudns 215,612 214,703 214,703
6,316,877 6,528,806 6,528,806
$ 9,911,439 $ 9,652,923 $ 9,652,923
Investment Type
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
45
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Investments are held for the production of income and consist of the following at June 30,
2009:
Fair Carrying
Cost Value Value
Foundation managed funds
Certificates of deposits $ 354,000 $ 354,000 $ 354,000
Government bonds 98,728 99,960 99,960
Corporate bonds 2,323,700 1,763,233 1,763,233
Preferred stock 67,210 4,750 4,750
Common stock 173,000 36,330 36,330
Mutual funds 550,584 415,816 415,816
Managed futures 400,000 439,751 439,751
3,967,222 3,113,840 3,113,840
Professionally managed funds
Uninvested cash 204,019 204,019 204,019
Corporate bonds 616,369 624,202 624,202
Preferred stock 388,129 384,685 384,685
Mutual fudns 4,288,352 4,210,361 4,210,361
5,496,869 5,423,267 5,423,267
$ 9,464,091 $ 8,537,107 $ 8,537,107
Investment Type
The following methods and assumptions were used by the Foundation in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: the carrying amounts reported in the statement of financial
position approximate fair values because of the short maturities of those investments.
Certificates of deposits: Valued at fair value by discounting the related cash flows based
upon current yields of similar instruments with comparable durations considering the
credit worthiness of the issuer.
Corporate bonds, government securities, common stocks, preferred stocks, mutual funds and
managed funds: Valued at the closing price reported in the active market in which the
individual securities are traded.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
46
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Mortgage backed bonds: Valued at fair value by discounting related cash flows based upon
U.S. Treasury Bond yields.
The preceding methods described may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Furthermore, although
the organization believes the fair value of certain financial instruments could result in a
different fair value measurement at the reporting date.
LAND, BUILDING, AND EQUIPMENT
Land, building, and equipment consist of the following:
2010 2009
Buildings $ 198,255 $ 198,255
Furniture & Fixtures 52,096 51,606
Automobiles 31,800 31,800
282,151 281,661
Less: accumulated depreciation (141,184) (124,837)
$ 140,967 $ 156,824
Depreciation expense included in the accompanying financial statements for 2010 and
2009 was $16,346 and $16,521, respectively.
NOTES PAYABLE
Note payable consists of the following at June 30, 2010 and 2009:
2010 2009
Line-of-credit (A) $ 401,194 $ 497,656
Line-of-credit (B) 115,000 140,000
$ 516,194 $ 637,656
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
47
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
(A) A $975,000 line-of-credit with interest at 4.0%. The proceeds from the line-of-credit
have been used to cover the expenditures in building the athletic facility and matures
in October, 2010. The Foundation has $401,194 and $497,656 outstanding at June 30,
2010 and 2009, respectively. The Foundation intends to repay the outstanding
balance with pledges for the athletic facility from donors.
In a separate agreement, the University has agreed to pay all interest accruing on the
note and has agreed to repay the obligation in the event that construction costs exceed
the pledges received from donors.
(B) A $140,000 line-of-credit with interest at 3.25%. The proceeds from the line-of-credit
have been used to cover the expenditures in building the three sculptures of the
University’s mascot “The Ranger”, and matures December 21, 2010. The Foundation
has $115,000 and $140,000 outstanding at June 30, 2010 and 2009, respectively. The
Foundation intends to repay the outstanding balance with pledges for the sculpture
from donors.
Interest expenses incurred and paid for the year ended June 30, 2010, was $6,583.
RELATED PARTY TRANSACTIONS
Based upon an exchange of service agreement, the College provides the Foundation with
the necessary office space at no cost to the Foundation. In exchange, the College received
scholarships, funds for capital improvements, and other services from the Foundation.
The value of such services has been determined by management to be insignificant and is,
therefore, not recorded on the financial statements as in-kind contributions.
FAIR VALUE MEASUREMENTS
The Foundation uses quoted market prices to determine the fair value of and asset or
liability when available. If quoted market prices are not available, the Foundation
determines fair value using valuation techniques that use market-based or independently-sourced
market data, such as interest rates.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
48
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
The following methods and assumptions were used to estimate the fair value of assets and
liabilities in the financial statements.
Cash and Cash Equivalents: The carrying amount approximates the fair value due to the
short maturity of such amounts.
Investments: Investments in cash and cash equivalents, publicly traded securities, and
mutual funds are stated at market value based on quoted market prices. Investments
common trust funds, certificates of deposit, government agency bonds, and mortgage-backed
securities are stated at market price as determined by the fund manager or quoted
market prices in non-active markets. Other investments are stated at fair value based
upon current market conditions and other factors deemed relevant to the valuation as
provided by the independent valuation specialist and or Foundation management.
Pledges and Accounts Receivable: The carrying amount of receivables is based on the
discounted value of expected future cash flows, which approximate fair value.
Other Assets: Remaining financial instruments are carried at cost, witch approximates
fair value.
Accounts Payable and Other Liabilities: The carrying amount approximates fair value
due to the short maturity of those amounts.
Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date.
The fair value hierarchy requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The three levels of
inputs that may be used to measure fair value are:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other the Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market date for
substantially the full term of the asset or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
49
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
The following table presents the fair value measurements of assets and liabilities
recognized in the accompanying financial statements at fair value on a recurring basis and
the level within the fair market value hierarchy in which the fair value measurements fall
at June 30, 2010.
Level 1 Level 2 Level 3 Total
Uninvested cash $ 396,219 $ - $ - $ 396,219
Certificates of deposits - 231,009 - 231,009
Equity securities 5,427,844 - - 5,427,844
Corporate and other bonds - 2,296,784 - 2,296,784
U.S. government securities - 97,140 - 97,140
Mutual funds 780,778 - - 780,778
Managed futures 422,249 - - 422,249
$ 7,027,090 $ 2,624,933 $ - $ 9,652,023
Level 1 Level 2 Level 3 Total
Uninvested cash $ 204,019 $ - $ - $ 204,019
Certificates of deposits - 354,000 - 354,000
Equity securities 4,636,126 - - 4,636,126
Corporate and other bonds - 2,387,435 - 2,387,435
U.S. government securities - 99,960 - 99,960
Mutual funds 415,816 - - 415,816
Managed futures 439,751 - - 439,751
$ 5,695,712 $ 2,841,395 $ - $ 8,537,107
As of June 30, 2009
As of June 30, 2010
The following is a description of methodologies used for instruments measured at fair
value on a recurring basis:
Investments: Where quoted market prices are available in an active market, investments are
classified within Level 1 of the valuation hierarchy. Level 1 investments include equity
securities, mutual funds, and money market funds. If quoted market prices are not
available, then fair values are estimated by using pricing models, quoted prices of
securities with similar characteristics or discounted cash flows.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
50
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Investments--Continued: Level 2 investments include equity securities with similar
characteristics or discounted cash flows. Level 2 investments include equity securities,
corporate and other bonds, U.S. government securities, marketable alternative assets,
inflation hedging and opportunistic and other investments. In certain cases where Level 1
or Level 2 inputs are not available, investments are classified within Level 3 of the
hierarchy and include corporate and other bonds and marketable and nonmarketable
alternative assets.
ENDOWMENTS
The Foundation endowments consist of approximately 140 individual funds established
for a variety of purposes. As required by generally accepted accounting principles
(GAAP), net assets associated with endowment funds, including funds designated by the
Board of Directors to function as endowments, are classified and reported based upon the
existence or absence of donor-imposed restrictions.
Interpretation of Relevant Law: In accordance with the requirements of FAS 117-1, and the
Oklahoma Uniform Prudent Management of Institutional Funds Act (OUPMIFA), the
Foundation will report the market value of an endowment as perpetual in nature. As a
result, the Foundation classifies as permanently restricted (1) the original value of gifts
donated to the endowment, (2) the original value of subsequent gifts donated to the
endowment, (3) all realized and unrealized gains and losses of the endowment, and (4)
less any income distribution in accordance with the spending policy which will be
classified as temporarily restricted. In accordance with OUPMIFA, the Foundation
considers the following factors in making a determination to appropriate or accumulate
donor-restricted endowment funds:
(1) The duration and preservation of the fund;
(2) The purpose of the foundation and the donor-restricted endowment fund;
(3) General economic conditions;
(4) The possible effect of inflation and deflation;
(5) The expected total return from income and the appreciation of investments;
(6) Other resources of the foundation;
(7) The investment policies of the foundation.
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
51
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Return Objectives and Risk Parameters: The Foundation has adopted investment and
spending policies for endowment assets that attempt to provide a predictable stream of
funding to programs supported by the endowment while seeking to maintain the
purchasing power of the endowment assets. Under this policy, as approved by the Board
of Directors, the endowment assets are invested in a manner that is intended to produce
results which generate a dependable, increasing source of income and appreciation while
assuming a moderate level of investment risk. The Foundation expects its endowment
funds, over time, to provide an average rate of return of approximately 10% annually.
Actual returns in any given year may vary from this amount.
Strategies Employed for Achieving Objectives: To satisfy its long-term rate of return
objectives, the Foundation relies on a total return strategy in which investment returns are
achieved through both capital appreciation (realized and unrealized) and current yield
(interest and dividends). The Foundation targets a diversified asset allocation that places
a greater emphasis on equity-based investments to achieve its long-term return objectives
while reducing risk to acceptable levels.
Spending Policy and How the Investment Objectives Relate to Spending Policy: The Foundation
has a policy of appropriating for distribution each year the equivalent of up to 5% of its
endowment fund’s fair value as of the immediately preceding July 1. In establishing this
policy, the Foundation considered the long-term expected return on its endowment.
Accordingly, over the long term, the Foundation expects the current spending policy to
allow its endowment to grow at an average of 1.16% annually. This is consistent with the
Foundation’s objective to maintain the purchasing power of the endowment assets held in
perpetuity or for a specified term as well as to provide additional real growth through
new gifts and investment return.
Endowment Net Asset Composition by Type of Fund as of June 30, 2010:
Temporarily Permanently
Unrestricted Restricted Restricted
Donor-restricted endmowment funds $ (1,786,783) $ 1,023,329 $ 12,009,147
Board-designated endowment funds - - 99,517
Total endowment funds $ (1,786,783) $ 1 ,023,329 $ 1 2,108,664
NOTES TO FINANCIAL STATEMENTS--Continued
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
52
NOTE M--NORTHWESTERN OKLAHOMA STATE UNIVERSITY FOUNDATION, INC AND
ALUMNI ASSOCIATION--Continued
Endowment Net Asset Composition by Type of Fund as of June 30, 2009:
Temporarily Permanently
Unrestricted Restricted Restricted
Donor-restricted endmowment funds $ (2,718,988) $ 1,575,909 $ 11,566,281
Board-designated endowment funds - - 99,517
Total endowment funds $ (2,718,988) $ 1 ,575,909 $ 1 1,665,798
Changes in Endowment Net Assets for the year ending June 30, 2010:
Temporarily Permanently
Unrestricted Restricted Restricted
Endowment net assets - beginning $ (2,718,988) $ 1,575,909 $ 11,665,798
Investment return 1,139,815 6 55,973 -
Contributions - 1 ,270,547 442,866
Appropriations for expenditures (207,610) (2,479,100) -
Total endowment funds $ (1,786,783) $ 1 ,023,329 $ 1 2,108,664
Changes in Endowment Net Assets for the years ending June 30, 2009:
Temporarily Permanently
Unrestricted Restricted Restricted
Endowment net assets - beginning $ - $ 1 ,159,781 $ 11,333,373
Investment return (2,578,694) 8,720 2 1,541
Contributions - 9 26,151 310,884
Appropriations for expenditures (140,294) (518,743) -
Total endowment funds $ (2,718,988) $ 1 ,575,909 $ 1 1,665,798
RESTATEMENTS
The 2009 financial statements have been restated to apply the effects of FSP 117-1.
REQUIRED SUPPLEMENTARY
INFORMATION
REQUIRED SUPPLEMENTARY INFORMATION--UNAUDITED
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
UAAL as a
Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered percentage of
Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll Covered Payroll
Date (a) (b) (b-a) (a/b) (c) (b-a)/(c)
6/30/2006 $ 585,188 $ 2,114,578 $ 1,529,390 27.7% $ 2,790,188 54.8%
6/30/2007 $ 599,508 $ 2,233,055 $ 1,633,547 26.8% $ 2,631,872 62.1%
6/30/2008 $ 645,180 $ 2,161,630 $ 1,516,450 29.8% $ 2,556,978 59.3%
6/30/2009 $ 674,591 $ 2,457,468 $ 1,782,877 27.5% $ 2,328,722 76.6%
6/30/2010 $ 837,245 $ 2,539,213 $ 1,701,968 33.0% $ 2,272,632 74.9%
UAAL as a
Actuarial Actuarial Value Actuarial Accrued Unfunded AAL Funded Covered percentage of
Valuation of Assets Liability (AAL) (UAAL) Ratio Payroll Covered Payroll
Date (a) (b) (b-a) (a/b) (c) (b-a)/(c)
6/30/2008 $ 186,000 $ 1,465,000 $ 1,279,000 12.7% $ 10,768,863 11.9%
6/30/2009 $ 266,191 $ 1,390,862 $ 1,124,671 19.1% $ 11,248,169 10.0%
6/30/2010 $ 348,724 $ 1,671,673 $ 1,322,949 20.9% $ 12,012,999 11.0%
The actuarial accrued liability is based on the projected unit credit cost method.
SCHEDULE OF FUNDING PROGRESS FOR OTHER POST EMPLOYMENT INSURANCE BENEFITS PLAN
SCHEDULE OF FUNDING PROGRESS FOR SUPPLEMENTAL RETIREMENT ANNUITY PLAN
53
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
Northwestern Oklahoma State University
Oklahoma City, Oklahoma
We have audited the financial statements of Northwestern Oklahoma State University (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 29, 2010. Our report was modified to
include a reference to other auditors. We conducted our audit in accordance with auditing
standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards issued by the Comptroller General
of the United States. Other auditors audited the financial statements of the Northwestern
Oklahoma State University Foundation, Inc. and Alumni Association (the “Foundation”), the
University’s discretely presented component unit, as described in our report on the University’s
financial statements. The financial statements of the Foundation were not audited accordance
with Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audits, 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 University’s financial statements will not be
prevented, or detected and corrected on a timely basis.
54
55
Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and was not designed to identify all deficiencies
in internal control over financial reporting that might be deficiencies, significant deficiencies or
material weaknesses. We did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses, as defined above.
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 test disclosed no
instances of non-compliance and other matters that are required to be reported under
Government Auditing Standards.
This report is intended solely for the information and use of the Board of Regents, management,
and federal awarding agencies and pass-through entities and is not intended to be, and should
not be, used by anyone other than these specified parties.
Oklahoma City, Oklahoma
October 29, 2010
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 on the
Schedule of Expenditures of Federal Awards
Board of Regents
Regional University System of Oklahoma
Northwestern Oklahoma State University
Oklahoma City, Oklahoma
Compliance
We have audited the compliance of Northwestern Oklahoma State University (the “University”)
with the types of compliance requirements described in the U.S. Office of Management and
Budget (OMB) Circular A-133 Compliance Supplement that are applicable to 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, Northwestern Oklahoma State University complied, in all material respects,
with the requirements referred to above that are applicable to each of its major federal
programs for the year ended June 30, 2010.
56
57
Internal Control Over Compliance
The management of Northwestern Oklahoma State University is responsible for establishing
and maintaining effective internal control over compliance with the requirements of laws,
regulations, contracts, and grants applicable to federal programs. In planning and performing
our audit, we considered the University’s internal control over compliance with the
requirements that could have a direct and material effect on a major federal program in order to
determine our auditing procedures for the purpose of expressing our opinion on compliance
but not for the purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of the University’s
internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type
of compliance requirement of a federal program will not be prevented, or detected and
corrected, on a timely basis.
Our consideration of internal control over compliance 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 compliance that might be deficiencies, significant deficiencies or material
weaknesses. We did not identify any deficiencies in internal control over compliance that we
consider to be material weaknesses, as defined above.
Schedule of Expenditures of Federal Awards
We have audited the basic financial statements of the University as of and for the year ended
June 30, 2010, and have issued our report thereon dated October 29, 2010. Our audit was
performed for the purpose of forming an opinion on the basic financial statements taken as a
whole. The accompanying schedule of expenditures of federal awards is presented for
purposes of additional analysis as required by OMB Circular A-133 and is 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.
58
This report is intended solely for the use of the Board of Regents, management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used
by anyone other than these specified parties.
Oklahoma City, Oklahoma
October 29, 2010
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
Year Ended June 30, 2010
Pass-Through
Entity
CFDA Identification Amount
Number Number Expended
U.S. Department of Education
Student financial aid cluster
Federal Pell Grant Program 84.063 N/A $ 3,366,397
Federal Work Study Program 84.033 N/A 129,274
Federal Supplemental Education
Opportunity Grants 84.007 N/A 75,976
Federal Perkins Loan Program 84.038 N/A 40,561
Federal Family Education Loan Program 84.032 N/A 4,597,599
ACG 84.375 N/A 94,522
Smart Grant 84.376 N/A 31,144
Total student financial aid cluster 8,335,473
TRIO Program Cluster
Upward Bound 84.047A N/A 244,576
Upward Bound - Math & Science 84.047M N/A 304,559
Total TRIO Program cluster 549,135
State Fiscal Stabilization Fund-Education State
Grants (ARRA) 84.394 ARRA N/A 824,071
Total U.S. Department of Education 9,708,679
USDA Distance Learning & Telemedicine 10.855 N/A 161,152
Small Business Administration
Passed through Southeastern
Oklahoma State University
Small Business Development Center 59.037 1-7620-0038-17 175,396
National Science Foundation
Passed through Oklahoma State University
Oklahoma State alliance for Minority
Engineering and Technology 47.096 AA-5-64291 7,000
U.S. Department of Justice
Passed through East Central University
Violence Prevention Program 16.525 N/A 42,579
TOTAL EXPENDITURES OF FEDERAL AWARDS $ 10,094,806
See notes to schedule of expenditures of federal awards.
Federal Grantor/Pass-Through Grantor/Program Title
59
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
60
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The schedule of expenditures of federal awards includes the federal awards activity of
Northwestern Oklahoma State University (the “University”) and is presented on the accrual
basis of accounting. The information in this schedule is presented in accordance with the
requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations. Therefore, some amounts presented in the schedule may differ from amounts
presented in, or used in the preparation of, the basic financial statements.
NOTE B--FEDERAL FAMILY EDUCATION LOAN PROGRAM
The University participates in the Federal Family Education Loan Program (the “FFEL
Program”), CFDA number 84.032, which includes the Federal Stafford Loan Program and
Federal Parents Loans for Undergraduate Students. 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.
NOTE C--FEDERAL PERKINS LOANS
The University has $40,561 in Federal Perkins loans outstanding at June 30, 2010. These loan
balances outstanding are included as federal expenditures in the schedule of expenditures of
federal awards. During the year ended June 30, 2010, the University issued Perkins loans
totaling $6,000.
NOTE D--SUBRECIPIENTS
During the year ended June 30, 2010, the University did not provide any federal awards to
subrecipients.
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
NORTHWESTERN OKLAHOMA STATE UNIVERSITY
June 30, 2010
61
Section I--Summary of Auditors’ Results
Financial statements
Type of auditors’ report issued: Unqualified
Internal control over financial reporting:
 Material weakness(es) identified? yes X no
 Significant deficiency(ies) identified that are
not considered to be material weakness(es)? yes X none reported
Noncompliance material to financial statements noted? yes X no
Federal Awards
Internal control over major programs:
 Material weakness(es) identified? yes X no
 Significant deficiency(ies) identified t