EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
ANNUAL FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT AS OF AND FOR THE YEAR ENDED JUNE 30, 2016
INDEPENDENT AUDITOR’S REPORT
Board of Regents
Regional University System of Oklahoma
Oklahoma City, Oklahoma
Report on the Financial Statements
We have audited the accompanying financial statements of East Central University (the “University”), a department of the Regional University System of Oklahoma (“RUSO”), which is a component unit of the State of Oklahoma, and its discretely presented component unit, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the University’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the University’s discretely presented component unit, the East Central University Foundation, Inc. (the “Foundation”). Those financial statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Foundation, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of the Foundation were audited by other auditors and were not audited in accordance with Governmental Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, based on our audit and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the respective financial position of the University and its discretely presented component unit as of June 30, 2016, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note A, the financial statements of the University are intended to present the financial position, the changes in financial position, and, where applicable, cash flows of only that portion of RUSO that is attributable to the transactions of the University. They do not purport to, and do not present fairly the financial position of the RUSO as of June 30, 2016, the changes in its financial position, or its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Correction of an Error
In 2015 and previous years, the Foundation did not record pledges receivable and related income for its receipt of written multi-year agreements for cash contributions from donors. As discussed in Note M to the financial statements, the Foundation’s net position at June 30, 2015 has been restated to correct this error. Our opinion is not modified with respect to this matter.
Other Matters
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the University’s financial statements. The management’s discussion and analysis, which is the responsibility of management, is presented for purposes of additional analysis and is not a required part of the financial statements. The management’s discussion and analysis has not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 21, 2016, 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, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance.
October 21, 2016
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
OVERVIEW OF FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS
East Central University (the “University”) presents its financial statements for fiscal year 2016. Presented separately from the University are the financial statements of East Central University Foundation, Inc. (“the Foundation”). The Foundation is a discretely presented component unit of East Central University and has trustees that are independently elected. The Foundation also issues its financial statements in a separate report. Emphasis of discussions concerning these statements will be for the 2016 fiscal year data in comparison with the 2015 fiscal year data. While the 2015 data is not a part of the financial statements, significant fluctuations between the 2016 and 2015 data will be discussed. The Foundation’s statements will not be a part of this discussion and analysis. The three financial statements, prepared in accordance with Governmental Accounting Standards Board (“GASB”) principles, are the Statement of Net Position; the Statement of Revenues, Expenses, and Changes in Net Position; and the Statement of Cash Flows. Since changes reflected in the Statement of Cash Flows will be discussed in the analysis of the other two statements, the Statement of Cash Flows will not be presented in this discussion and analysis. Dollar amounts presented in table and graph formats are in thousands of dollars, and those presented in the discussion are rounded to thousands. This discussion and analysis of the University’s financial statements is designed to assist the readers in understanding the accompanying financial statements and to summarily quantify the status, sources, and uses of resources. The University will also utilize these statements in conjunction with prior year data to focus on trends and establish benchmark comparisons.
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENT OF NET POSITION
The Statement of Net Position presents the Assets (current and non-current), Deferred Outflows of Resources, Liabilities (current and non-current), Deferred Inflows or Resources and Net Position (assets plus deferred outflows minus liabilities minus deferred inflows) at the end of the fiscal year. The purpose of the Statement of Net Position is to allow readers of the financial statements to determine the assets available to continue the operations of the University. They are also able to determine how much the University owes vendors, investors, and lending institutions. Finally, the Statement of Net Position provides a picture of the net position and their availability for expenditure by the University. The change in net position is an indicator of the overall financial condition of the University.
Net position is divided into three major categories. The first category, Net Investment in Capital Assets, provides the institution’s equity in property, plant, and equipment owned by the University and is recorded at historical cost less accumulated depreciation. The next category, RestrictedExpendable Net Position, measured in current value, is 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 Position, also measured in current value. Unrestricted assets are available to the institution for any lawful purpose of the institution.
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENTS OF NET POSITION--Continued
The increase in capital assets of approximately $6,718,000 was due to several renovations and capital projects on the East Central University campus. The construction of Chickasaw Plaza in the amount of approximately $1,924,000 at Norris Field and Koi Ishto Stadium was one of these projects. Chickasaw Plaza will serve as the grand entrance into the football stadium and will feature two ticket booths flanking the wide gate. Inside the gate will be a new concession stand, spirit shop and restrooms. At June 30, 2016, this project was ongoing. The increase is also due to informational technology upgrades in the amount of approximately $726,000. This upgrade will provide improved wireless connections to most buildings on the campus. A project was initiated during 2015 to improve energy conservation throughout the campus. The amount spent on this project during 2016 was approximately $5,319,000. These projects were still ongoing at June 30, 2016. A new residence hall and an acoustical shell were initiated in 2016 and are still ongoing at June 30, 2016 in the amounts of approximately $541,000 and $271,000 respectively. Parking lots in the amount of approximately $169,000 were constructed in 2016. An amount of approximately $343,000 was spent completing the Education Building during 2016. The Education Building renovation was completed and moved out of CIP during 2016 at a cost of $4,044,000. Other capital purchases in the amount of $988,000 also led to the increase. Accumulated depreciation of $3,563,500 reduces the overall increases.
Total current liabilities decreased due to the approximate $2,082,000 decrease in accounts and scholarships payable, the largest portion of this decrease is an approximate $2,022,000 decrease in payables related to construction in progress projects such as improvements to Norris Field, information technology upgrades, energy conservation upgrades and Education Building renovation.
The approximate $1,341,000 decrease in net investment in capital assets is mainly due to new debt related to the ODFA 2015A Master Lease Obligation. The increase in unrestricted net position of $4,198,000 is the result of the capital projects described above, the related debt, and conservative spending.
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
Another measure of an institution’s fiscal stability is how operating revenues compare to operating expenses. Operating revenues are earned in exchange for providing goods and services, and operating expenses are incurred in the normal operations of the University. While public institutions will not normally have an excess of operating revenues over operating expenses (State Appropriations, some federal and state grants, gifts, and investment income are required to be reported as non-operating Revenues by GASB principles), the excess of operating revenues and non-operating revenues over expenses is normally an indication of the University’s ability to operate within its available resources.
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION--Continued
June 30, (Thousands of Dollars) Years Ended
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION--Continued
The University experienced a slight increase in enrollment during fiscal years 2015 and 2016 but had an approximate increase in tuition and fees of 5.0%. This resulted in an increase in tuition, fee, housing, and food service revenues of approximately $1,051,000 from fiscal year 2015. Operating grants and contracts decreased by approximately $135,000 mainly due a reduction in PELL and Direct Lending which have had changes in the qualification rules and award amounts.
Compensation expense has decreased from last year approximately $1,529,000 which is mainly due to cuts in expenses due to decreases in state appropriations throughout 2016 due to state revenue failures. Other operating expense decreased approximately $1,299,000 partially due to the change in the amount of the scholarship allowance and the fee waivers.
Non-Operating Revenues (Expenses) have decreased approximately $3,860,000; this is mainly due to the reduction in state appropriations. Overall, the University realized a $2,328,000 growth in net position which is basically due to the institution’s ability to cut back on expenses based on the lingering predictions of decreased state revenues.
The major sources of revenues and expenditures (operating and non-operating) by the financial statement categories are summarized in the charts on the next page (in thousands of dollars).
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION--Continued REVENUES
Grants and contract revenues
State appropriations
Tuition, fees, housing, food service
Other revenues
Compensation
Contractual services
Depreciation
Supplies and Materials
Other expense, including scholarships
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)--Continued
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
STATEMENT OF CASH FLOWS
The Statement of Cash Flows provides information about the University’s financial results by reporting the major sources and uses of cash and cash equivalents. Cash flows from operating activities show the net cash used by the operating activities of the University. Cash flows from noncapital financing activities consist primarily of revenue sources that fund operations but are considered non-operating activities by definition. Cash flows from capital activities include capital asset and related long-term debt activities. Cash flows from investing activities show the proceeds and uses of cash related to purchasing or selling investments and related investment earnings thereon. The University’s Statement of Cash Flows is presented on pages 15 and 16 of the financial statements.
ECONOMIC OUTLOOK
During the 2016 fiscal year, the University operated within its available resources, as total revenues exceeded total expenses by approximately $2,328,000. In fiscal year 2016, tuition, fees, housing, and food service revenue accounted for 40% of the University’s total revenue. The fall 2016 semester shows a slight decrease in enrollment, and the State Regents approved a 9.9% increase in tuition and fees for the 2016-2017 school years.
State appropriations were approximately 24% of total revenues for fiscal year 2016. State appropriations to the University are expected to remain flat or decrease; therefore, total state appropriations are not expected to be returned to the fiscal year ending 2009 level. Therefore, the University will continue to feel a negative impact from this financial source.
Grant and contract revenues currently represent 27% of total revenues for fiscal year 2016. Changes in the student loan and grant programs continue to occur during fiscal year 2016. Grant and contract resources have been negatively impacted by the national economic down-turn.
The University has prepared contingency plans and continues to operate using a conservative spending plan due to the decrease in state appropriations in the past years and the national economic status.
STATEMENT OF NET POSITION
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
ASSETS
CURRENT ASSETS
1,194,431
1,933,880
3,170,216
DEFERRED OUTFLOWS OF RESOURCES
STATEMENT OF NET POSITION--Continued
EAST CENTRAL UNIVERSITY A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
DEFERRED INFLOWS OF RESOURCES
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
EAST CENTRAL UNIVERSITY A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
OPERATING REVENUES
Student tuition and fees, net of scholarship discounts and allowances of $10,353,248
and food service (revenues of $4,689,155 pledged as security on ODFA 2014 bonds).6,954,626
OPERATING EXPENSES
STATEMENT OF CASH FLOWS
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees 17,323,332 $
(26,711,227)
NET CASH USED IN OPERATING ACTIVITIES(25,359,140)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
CASH FLOWS
NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES28,837,580
INVESTING ACTIVITIES
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Cash
NET CASH USED IN CAPITAL AND RELATED FINANCING ACTIVITIES(1,335,661)
NET INCREASE (DECREASE) IN CASH EQUIVALENTS2,259,602
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 21,765,304
CASH AND CASH EQUIVALENTS, END OF YEAR24,024,906 $ (Continued)
STATEMENT OF CASH FLOWS--Continued
EAST CENTRAL UNIVERSITY A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
Year Ended June 30, 2016
RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES
Operating loss(28,956,765) $
Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation3,563,503
Loss on the disposal of capital assets495 Changes in assets and liabilities:
NONCASH INVESTING, NONCAPITAL FINANCING AND CAPITAL AND RELATED FINANCING ACTIVITIES
RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENTS OF
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization: East Central University (the “University”) is a regional University operating under the jurisdiction of the Regional University System of Oklahoma (“RUSO” or the “System”) and the Oklahoma State Regents for Higher Education.
Reporting Entity: East Central University is one of six institutions of higher education in Oklahoma that comprise part of RUSO, which in turn is part of the Higher Education component unit of the State of Oklahoma.
The Board of Regents has constitutional authority to govern, control and manage the Regional University System of Oklahoma; which consist of six institutions and an administrative office. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, acquire and take title to real and personal property in its name, appoint or hire all necessary officers, supervisors, instructors, and employees for member institutions.
East Central University is considered a department of the System for financial reporting purposes and is included in the System’s financial reporting entity.
Discretely Presented Component Units: East Central University Foundation, Inc. (the “Foundation”) is a component unit of the University under GASB 39 that is discretely presented with the financial statements of the University. The University is the beneficiary of the Foundation, a separate legal entity with their own Boards of Trustees. The Foundation is organized for the benefit of the University, and its faculty, student body, and programs. The purposes for which the Foundation is organized are exclusively scientific, literary, charitable, educational, and artistic for the benefit the University. Additional and selected disclosures for the Foundation are located in this report beginning with Note M. A complete report of the Foundation’s financial statements and footnotes can be requested form the Foundation’s director.
The Foundation is a private nonprofit organization that reports under the Financial Accounting Standards Board (“FASB”) standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation’s financial information in the University’s financial reporting entity for these differences.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
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 position classified between current and noncurrent assets and liabilities and deferred outflow and inflows, a statement of revenues, expenses and changes in net position, 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 department of 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.
Cash Equivalents: For purposes of the statement 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 position.
Restricted Cash and Investments: Cash and investments that are externally restricted to make debt service payments, maintain sinking or reserve funds, or to purchase capital or other noncurrent assets are classified as restricted assets in the statement of net position.
Accounts and Grants 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. Grants receivable 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 grant and contracts. Accounts and grants receivable are recorded net of estimated uncollectible amounts.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Capital Assets: Capital assets are recorded at cost at the date of acquisition, or fair 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 $2,500 or more and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 30 years for infrastructure and land improvements, and 5 to 10 years for library materials and equipment. Depreciation expense includes amortization of assets held under capital lease obligations.
Unearned Revenue: Unearned 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. Unearned revenues also include amounts received from grant and contract sponsors and vendors 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 compensated absences in the statement of net position and as a component of compensation and benefit expense in the statement of revenues, expenses, and changes in net position.
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.
Deferred Outflows of Resources: Deferred outflows are the consumption of net position by the University that is applicable to a future reporting period. At June 30, 2016, the University’s deferred outflows of resources were comprised of deferred charges on capital lease restructure.
Deferred Inflows of Resources: Deferred inflows are the acquisition of net position by the University that is applicable to a future reporting period. At June 30, 2016, the University’s deferred inflows of resources were comprised of deferred gain on capital lease restructure.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Net position: The University’s net position is classified as follows:
Net investment in capital assets: 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 position - expendable: Restricted expendable net position include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties or enabling legislation.
Unrestricted net position: Unrestricted net position 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.
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.
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; and (3) certain grants and contracts.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, student aid revenues, and other revenue sources that are defined as nonoperating revenues by GASB No. 9 Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting and GASB No. 34, such as state appropriations, governmental, and other pass through grants and investment income.
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 statement of revenues, expenses, and changes in net position. 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.
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. The University deposits its funds with the Office of the State Treasurer (OST). Oklahoma statutes require OST to ensure that all state funds either be insured by Federal Deposit Insurance, collateralized by securities held by the cognizant Federal Reserve Bank, or invested in U.S. government obligations. The University’s deposits with the State Treasurer are pooled with the funds of other State agencies and then, in accordance with statutory limitations, placed in financial institutions or invested as the Treasurer may determine, in the State’s name.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE
B--DEPOSITS AND INVESTMENTS--Continued
Of the $24,024,906 in cash and cash equivalents on deposit with the State Treasurer as of June 30, 2016, $17,142,804 represent amounts held within OK INVEST, an internal investment pool. 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 State Treasurer establish the primary objectives and guidelines governing the investment of funds in OK INVEST. Safety, liquidity, and return on investment are the objectives that establish the framework for the day to day OK INVEST management with an emphasis on safety of the capital and the probable income to be derived and meeting the State’s daily cash flow requirements. Guidelines in the State Treasurer’s Investment Policy address credit quality requirements, diversification percentages and the types and maturities of allowable investments. The specifics regarding these policies can be found on the State Treasurer’s website at http://www. ok.gov/treasurer/ After evaluation of the use and purpose of the University’s participation in the internal investment pool, the amount on deposit with OK INVEST is treated as demand accounts and reported as cash equivalents.
Investments: Investment credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Generally, the University’s investments are managed by the State Treasurer. In accordance with state statutes, the State Treasurer may only purchase and invest in (a) 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. 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.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE
B--DEPOSITS AND INVESTMENTS—Continued
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, 2016, none of the University’s investments were subject to custody credit risk.
At June 30, 2016, the University had cash and cash equivalents totaling $2,300 as a part of the ODFA Lease program. These funds had a fair value of $2,300 at June 30, 2016. These funds are labeled Investments Held by Others on the University’s statement of net position.
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, nonpooled investments.
Custodial credit risk is not addressed by bond indentures. Interest rate risk in bond indentures provide that investments mature in no more than six to sixty months depending on the purpose of the funds and the requirements of the account in which the funds are deposited (i.e., construction, reserve, operations, and maintenance, etc.). Concentration of credit risk is not addressed.
At June 30, 2016, the University had restricted investments in bond funds amounting to $227,055. The investment funds had a fair market value of $227,055 at June 30, 2016. The invested bond funds are not subject to maturity dates and are due on demand.
The University, in association with various Trustees, has by law and in accordance with the trust indentures obtained various security and investment accounts to pay bond indebtedness and secure funds for said future payments. These funds are invested at the discretion of the Trustee, with no input from the University. Invested bond funds of $227,055 had an average credit rating of Aaa at June 30, 2016, according to Moody’s.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE B--DEPOSITS AND INVESTMENTS--Continued
The University implemented GASB Statement No. 72, Fair Value Measurement and Application, during the fiscal year ended June 30, 2016. The University categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.
The University has the following recurring fair value measurements as of June 30, 2016: • Money Market Mutual Funds of $229,355 are valued using quoted market prices (Level 1 inputs).
NOTE C ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
Accounts Receivable: Accounts receivable consisted of the following at June 30, 2016:
Other Receivable: During fiscal year 2013, the University entered into a seven year management agreement with the Texas Book Company. The Texas Book Company obtained the rights to operate the University book store and be compensated from the operations. The Texas Book Company is required to provide the University with an annual installment payment of $90,000, or 8% of gross sales, plus 10% of gross sales of $1,500,000, whichever is greater. As of June 30, 2016, the University has a receivable, related to the annual installment payments, in the amount of $270,000 for the remaining five years of the management agreement and an offsetting unearned revenue has been set up with the same remaining life.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE
D--CAPITAL ASSETS
Following are the changes in capital assets for the year ended June 30, 2016: Balance
Capital assets acquired with funds under capital lease programs are included in the above capital assets.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE
E--LONG-TERM LIABILITIES
Long-term liability activity for the year ended June 30, 2016, was as follows:
Revenue Bonds Payable:
Board of Regents of Oklahoma Colleges Student Housing Revenue Bonds, During 2015, the University refinanced the Board of Regents of Oklahoma Colleges Student Housing Revenue Bonds, Series 2003 with Oklahoma Development Finance Authority (“ODFA”) 2014 Revenue bonds. The original bond purpose was for construction and renovating certain Student Housing Facilities. The new bonds are due in annual installments varying from $160,000 to $315,000 plus semiannual interest ranging from 2% to 4.55%, with the final installment being due in the year 2034. The Bonds are secured by the revenues to be derived from the Student Housing and Food Services Department and all monies in funds and accounts held by the trustee bank and available for debt service payments. The refinancing resulted in a deferred outflow of resources that will be amortized over a period of twenty years, beginning in fiscal year 2015. As of June 30, 2016, the unamortized cost totaled $336,794.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE E--LONG-TERM LIABILITIES--Continued
Revenue Bonds Payable--Continued:
Future aggregate maturities of principal and interest requirements on the bonds payable at June 30, are as follows:
Year Ending June 30:
Capital Lease Obligations:
Oklahoma Development Finance Authority Master Lease Program
In 2011, the ODFA issued Bond Series 2011B to refund the Series 2002C Master Lease Revenue Bonds, originally issued for $5,880,000. Restricted funds held under the 2002 Bonds were applied to the outstanding 2002 Bonds and, together with monthly principal payments on the 2002 Bonds until the refunding transaction in November 2011, resulted in the outstanding liability of 2002 Bonds being approximately equal to the liability incurred under the 2011B Series. The lease agreement calls for monthly payments to ODFA in an amount that equal debt service requirements on the portion of the bonds used to finance the lease. The final payment on the lease is due December 1, 2022.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE E--LONG-TERM LIABILITIES--Continued
In 2014, ODFA issued the ODFA Master Lease Revenue Bonds, Series 2014C. The 2014C Bonds were issued to fund capital improvements at several state colleges and universities in Oklahoma. ODFA allocated the 2014C Bond proceeds to colleges and universities in the form of financing leases. East Central University’s portion of this allocation totaled $4,928,000. The proceeds from this lease will be used to fund improvements to the education building. The lease agreement calls for monthly payments to ODFA in an amount that equal debt service requirements on the portion of the bonds used to finance the lease, those amounts range from $26,867 to $29,564. The final payment on the lease is due May 15, 2034. As of June 30 2016, the University has $221,873 available for its intended purpose.
In 2015, ODFA issued the ODFA Master Lease Revenue Bonds, Series 2015A. The 2015A Bonds were issued to fund capital improvements at several state colleges and universities in Oklahoma. ODFA allocated the 2015A Bond proceeds to colleges and universities in the form of financing leases. East Central University’s portion of this allocation totaled $6,833,000. The proceeds from this lease will be used to fund improvements to campus buildings. The lease agreement calls for monthly payments to ODFA in an amount that equal debt service requirements on the portion of the bonds used to finance the lease, those amounts range from $19,923 to $39,167. The final payment on the lease is due May 15, 2034. As of June 30, 2016, the University has $19,033 available for its intended purpose.
During 2016, the University refinanced the Board of Regents of Oklahoma Colleges Fine Arts Center Revenue Bonds, Series 2005 (the “Bonds”) with Oklahoma Development Finance Authority (“ODFA”) Real Property 2015A. The original purpose was for constructing a Fine Arts Center for the amount of $5,000,000. The new debt is due in annual installments varying from $122,000 to $278,000 plus interest ranging from 3.70% to 4.50%, with the final installment being due in the year 2035. The refinancing resulted in a deferred outflow of resources that will be amortized over a period of eighteen years, beginning in fiscal year 2016. As of June 30, 2016, the unamortized cost totaled $432,753. The refinancing also resulted in an aggregate debt service difference for principal and interest between the original bond agreement and the refinanced bond agreement of $505,755 which also approximates the economic cost of the lease restructuring.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE E--LONG-TERM
LIABILITIES--Continued
In 2016, ODFA issued the ODFA Master Lease Revenue Bonds, Series 2015D. The 2015D Bonds were issued to fund capital improvements at several state colleges and universities in Oklahoma. ODFA allocated the 2016D Bond proceeds to colleges and universities in the form of financing leases. East Central University’s portion of this allocation totaled $1,000,000. The proceeds from this lease will be used to fund improvements to Norris Field. The lease agreement calls for monthly payments to ODFA in an amount that equal debt service requirements on the portion of the bonds used to finance the lease, those amounts range from $9,699 to $11,110. The final payment on the lease is due May 15, 2025. As of June 30, 2016, the University has $88,715 available for its intended purpose.
Oklahoma Capital Improvement Authority Leases
The University has various OCIA lease obligations that it has acquired over the years to fund several different projects. These obligations have various terms do to refinancing over the years. Lease payments to OCIA totaling $1,063,026 during the year ended June 30, 2016, were made by the State of Oklahoma on behalf of the University. These on-behalf payments have been recorded as restricted state appropriatio ns in the statement of revenues, expenses, and changes in net position.
Future minimum lease payments under the University’s obligations to the OCIA and ODFA are as follows:
Year Ending June 30:
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE E LONG‐TERM LIABILITIES
Continued
Certain leases to finance the purchase of property are capitalized at the present value of future minimum lease payments. The original capitalized cost of all such property under capital lease as of June 30, 2016 is as follows:
Assets Under Capital Lease
Buildings47,833,799 $ Less: Accumulated Depreciation6,767,534 41,066,265 $
Unearned revenue: The University entered into a twenty year management agreement with the Professional Food Management, Inc. (“Chartwells”) in 2008. Chartwells obtained the right to operate the cafeteria and other food services for the University and to be compensated by the University. Chartwells invested approximately $2,150,000 on capital assets, fixtures, or improvements for the University’s dining and service facilities. However, if the agreement is terminated prior to completion (2028), the University must reimburse Chartwells for the unamortized portion of the capital assets. During 2015, another $237,000 was added for the addition of Papa John’s Pizza equipment. At June 30, 2016, the University has a liability for approximately $1,501,000 in the accompanying statement of net position. The amortization for the year ended June 30, 2016 was approximately $131,000.
In connection with the agreement with Texas Book Company, Texas Book Company agreed to renovate the University’s bookstore. Texas Book Company spent approximately $183,000 on capital assets, which becomes the University’s assets at the end of the lease of which $78,000 was still unamortized as of June 30, 2016. However, if the agreement is terminated prior to completion (7 years), the University must reimburse Texas Book Company for the unamortized portion of the capital assets. The asset is to be amortized over the 7 year term of the agreement. The annual amortization for fiscal year 2016 was $26,000.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE F--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 pension plan available to employees hired prior to July 1, 1995, and a defined contribution 403(b) plan. Personnel may also be eligible to participate in the Other Post-Employement Insurance (OPEB) plan, as described further in Note H. The University does not maintain the accounting records, hold the investments for, or administer these plans.
The accounting and financial reporting for OTRS , the SRA, and the OPEB plans are recorded at the reporting entity level in the Regional University System of Oklahoma financial statements. That report may be obtained by writing to the Regional University System of Oklahoma, 3555 N.W. 58th Street, Suite 320, Oklahoma City, Oklahoma 73112, or by calling (405) 924-8817.
All payments made to these plans by the University are accounted for as compensation expense in the accompanying financial statements.
Oklahoma Teachers’ Retirement System (OTRS)
Plan Description: The University contributes to the Oklahoma Teachers’ Retirement System (the “OTRS”), a cost-sharing multiple-employer defined benefit pension plan sponsored by the State of Oklahoma. The 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 operations of the Plan to the Board of Trustees of the OTRS. The OTRS does not provide for a cost of living adjustment. OTRS issues a publicly available financial report that can be obtained at www.ok.gov/OTRS.
Funding Policy: The University is required to contribute a fixed percentage of annual compensation on behalf of active members. The employer contribution rate of 8.55%, is applied to annual compensation, and is determined by state statute.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE F--RETIREMENT PLANS—Continued
Employees’ contributions are also determined by state statute. For all employees, the contribution rate was 7% of covered salaries and fringe benefits in 2016, 2015 and 2014. For compensation in excess of $25,000, the employee’s contributions are paid directly by the University to the OTRS.
The University’s contributions to the OTRS for the year ended June 30, 2016, 2015 and 2014 were approximately $3,798,000, $3,852,000, and $3,792,000, respectively. These contributions included the University’s statutory contribution and the share of the employees’ contribution paid directly by the University.
Defined Contribution 403(b) 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 year ended June 30, 2016.
Supplemental Retirement Annuity (SRA)
Plan Description: The University’s SRA plan is a single employer, defined benefit pension plan administered by the University’s Board of Regents. The SRA was established by the University’s Board of Regents to provide supplemental retirement and death benefits to University employees who were hired prior to July 1, 1995, or to those eligible employees’ beneficiaries. The authority to amend the SRA’s benefit provisions rests with the University’s Board of Regents. The SRA is included in the financial report of the Regional University’s System of Oklahoma reporting entity, and does not issue separate, stand-alone financial statements.
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.
The University’s contributions to the SRA for the years ended June 30, 2016, 2015, and 2014, were approximately $717,000, $755,000, and $866,000, respectively.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE
G--OTHER POST-EMPLOYMENT INSURANCE BENEFITS
Postemployment Healthcare Plan
Plan Description: The University’s postemployment healthcare plan is a single 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 of Oklahoma for not less than ten years immediately preceding the date of retirement; been a member of the OTRS during that time; and elected to receive a vested benefit under the provision of the Oklahoma Teachers’ Retirement System. As of June 30, 2014, there were 618 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. Prior to the establishment of the trust, the insurance benefits were accounted for on a payas-you-go basis so that premiums were made from current operating funds. The plan is included in the financial report of the Regional University System of Oklahoma reporting entity. That report may be obtained by writing to the Regional University System of Oklahoma, 3555 N.W. 58th Street, Suite 320, Oklahoma City, Oklahoma 73112, or by calling (405) 924-8817.
Funding Policy: The contribution requirements of the University are established and may be amended by the RUSO Board. The University is required to contribute the annual required contribution (“ARC”) of the employer in an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. For the year ended June 30, 2015 and 2016, the ARC is $166,000 and represents 1% of covered payroll. In 2015, RUSO went to a bi annual actuary of the plan.
The University’s contributions to the plan for the years ended June 30, 2016, 2015, and 2014, were approximately $250,000, $258,000, and $437,000, respectively, and beginning July 1, 2014, are accounted for as compensation expense in the accompanying financial statements.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE H--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 East Central University’s “New College Fund.” The University received approximately $1,036,000 during the year ended June 30, 2016, which is restricted to the construction or acquisition of buildings, equipment, or other capital items. These amounts are recorded as state appropriations restricted for capital purposes in the statement of revenues, expenses, and changes in net position. State law prohibits the distribution of any corpus of these funds to the beneficiaries. The cost basis of the total trust reserve for East Central University, held in trust by the commissioners of Land Office, was approximately $18,325,000 at June 30, 2016.
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 program. The state match amounts, plus any retained accumulated earnings, totaled approximately $4,063,000 at June 30, 2016, and is invested by the Oklahoma State Regents on behalf of the University.
The University is entitled to receive an annual distribution of 4.5% of the three-year average of the June 30th market values on these funds. As legal title of the State Regents matching endowment funds is retained by the Oklahoma State Regents, only the funds available for distribution, or approximately $343,000 at June 30, 2016, has been reflected as assets in the statement of net position.
EAST CENTRAL UNIVERSITY
A DEPARTMENT OF THE REGIONAL UNIVERSITY SYSTEM OF OKLAHOMA
June 30, 2016
NOTE I--RELATED PARTY TRANSACTIONS
The Foundation is a not-for-profit corporation organized for the purpose of receiving and administering gifts for the benefit of the University. Distributions of amounts held by the Foundation are subject to the approval of the Foundation’s Board of Trustees. The Foundation’s primary function is to provide assistance to students of the University in the form of scholarships and awards, and during 2016, the Foundation provided approximately $553,000 in scholarships to students. Additionally, the Foundation provides financial assistance to the faculty and staff of the University, as well as the University’s programs and projects, and during 2016, the Foundation provided approximately $2,297,000 in aid to programs, faculty, and staff. Many of the contributions received by the Foundation are designated by the donors to be used for specific purposes or by specific departments. In these instances, the Foundation serves essentially as a conduit. Contributions that are not designated are used where the need is considered the greatest, as determined by the Foundation.
The East Central University Gas Authority was created in 1963 to operate the natural gas pipeline system on campus. The authority is inactive and the University handles the gas lines if needed.
NOTE J--COMMITMENTS AND CONTINGENCIES
The University conducts certain programs pursuant to various grants and contracts that are subject to audit by federal and state agencies from various sources of the University. 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 Direct Student Loan Program (Direct Lending Program). The Direct Lending Program requires the University to draw down cash from the U.S. Department of Education, as well as perform certain administrative functions under the Direct Lending Program. For the year ended June 30, 2016, approximately $13,036,049 of Direct Lending Program loans was 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, 2016, will not have material adverse impact to the University.
