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UNIVERSITY OF SOUTH CAROLINA - UpstateREPORT ON FINANCIAL STATEMENTSFOR THE YEAR ENDEDJUNE 30, 2020
UNIVERSITY OF SOUTH CAROLINA - UpstateCONTENTSPAGEINDEPENDENT AUDITOR'S REPORT1MANAGEMENT'S DISCUSSION AND ANALYSIS3BASIC FINANCIAL STATEMENTSStatement of Net PositionStatement of Revenues, Expenses and Changes in Net PositionStatement of Cash FlowsNongovernmental Discretely Presented Component Units – Statements ofFinancial PositionNongovernmental Discretely Presented Component Units – Statements of ActivitiesNotes to the Financial Statements121314161718REQUIRED SUPPLEMENTARY INFORMATIONSchedule of the Campus’ Proportionate Share of the Net Pension LiabilitySchedule of the Campus’ Contributions Related to the Pension LiabilitySchedule of the Campus’ Proportionate Share of the Net OPEB LiabilitySchedule of the Campus’ Contributions Related to the OPEB LiabilityINDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROLOVER FINANCIAL REPORTING AND ON COMPLIANCE ANDOTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS4546474849
Independent Auditor's ReportThe Board of TrusteesUniversity of South CarolinaColumbia, South CarolinaReport on Financial StatementsWe have audited the accompanying financial statements of the business‐type activities and the aggregatediscretely presented component unit of the University of South Carolina ‐ Upstate (the Campus), a campus ofthe University of South Carolina, as of and for the year ended June 30, 2020, and the related notes to thefinancial statements, which collectively comprise the Campus’ basic financial statements as listed in the table ofcontents.Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordance with accounting principles generally accepted in the United States of America; this includes thedesign, implementation, and maintenance of internal control relevant to the preparation and fair presentationof financial statements that are free from material misstatement, whether due to fraud or error.Auditor's ResponsibilityOur responsibility is to express opinions on these financial statements based on our audit. We did not audit thefinancial statements of the USC Upstate Foundation and Supporting Organization which represent 100 percentof the assets, net assets, and revenues of the Campus' aggregate discretely presented component units. Thosestatements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar asit relates to the amounts included for the Campus are based solely on the reports of the other auditors. Weconducted our audit in accordance with auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatement. Thefinancial statements of the USC Upstate Foundation and Supporting Organization were not audited inaccordance with Government Auditing Standards, issued by the Comptroller General of the United States.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, weexpress no such opinion. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinions.elliottdavis.com1
OpinionIn our opinion, based on our audit and the report of other auditors, the financial statements referred to abovepresent fairly, in all material respects, the respective financial position of the business‐type activities and theaggregate discretely presented component unit of the Campus as of June 30, 2020, and the respective changesin financial position and, where applicable, cash flows thereof for the year then ended in accordance withaccounting principles generally accepted in the United States of America.Required Supplementary InformationAccounting principles generally accepted in the United States of America require that Management's Discussionand Analysis, the Schedule of the Campus’ Proportionate Share of the Net Pension Liability, the Schedule of theCampus’ Contributions Related to the Pension Liability, the Schedule of the Campus’ Proportionate Share of theNet OPEB Liability, and the Schedule of the Campus’ Contributions Related to the OPEB Liability, as listed in theTable of Contents, be presented to supplement the basic financial statements. Such information, although not apart of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), whoconsiders it to be an essential part of financial reporting for placing the basic financial statements in anappropriate operational, economic, or historical context. We and other auditors have applied certain limitedprocedures to the required supplementary information in accordance with auditing standards generallyaccepted in the United States of America, which consisted of inquiries of management about the methods ofpreparing the information and comparing the information for consistency with management's responses to ourinquiries, the basic financial statements, and other knowledge we obtained during our audit of the basicfinancial statements. We do not express an opinion or provide any assurance on the information because thelimited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.Other Reporting Required by Government Auditing StandardsIn accordance with Government Auditing Standards, we have also issued our report dated October 23, 2020, onour consideration of the Campus’ internal control over financial reporting and on our tests of its compliancewith certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance andthe results of that testing, and not to provide an opinion on internal control over financial reporting or oncompliance. That report is an integral part of an audit performed in accordance with Government AuditingStandards in considering the Campus’ internal control over financial reporting and compliance.Columbia, South CarolinaOctober 23, 20202
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)OVERVIEW OF THE FINANCIAL STATEMENTS AND FINANCIAL ANALYSISThe University of South Carolina – Upstate (the Campus) is pleased to present its financial statements for the fiscalyear 2020. Management’s Discussion and Analysis provides an overview and analysis of the Campus’ financialactivities for the fiscal year ended June 30, 2020, with comparative information for the fiscal year ended June 30,2019. This information should be read in conjunction with the financial statements and accompanying footnotesthat follow this section. Condensed fiscal year 2020 and 2019 operations and financial position data will bepresented in this section in order to illustrate certain increases and decreases. However, the emphasis ofdiscussions about these statements will be on current year data. This discussion will not include the discretelypresented component units, USC Upstate Foundation and USC Upstate Capital Development Foundation.This report includes a series of financial statements, prepared in accordance with the Governmental AccountingStandards Board (GASB) Codification Sections 2100-2900, Financial Reporting, and Co5, Colleges andUniversities. The financial statements presented focus on the financial condition of the Campus, the results ofoperations, and cash flows of the Campus as a whole.There are three financial statements presented: the Statement of Net Position; the Statement of Revenues,Expenses and Changes in Net Position; and, the Statement of Cash Flows. These statements present financialinformation in a format similar to that used by private corporations. The Campus’ net position is one indicator of theimprovement or erosion of the Campus’ financial health when considered with non-financial facts such as enrollmentlevels and the condition of the facilities.The 2019 Novel Coronavirus (COVID-19) has impacted the physical and financial health of the Campus, requiringextensive planning to mitigate and respond to potential and real impacts on campus. In March 2020, the Campusestablished a COVID-19 Response Team, comprised of members of the Leadership and Incident Managementteams to ensure consideration of all aspects of campus operations, including public health, admissions andenrollment, academics and research, communications and marketing, finance, and athletics. The groups werecharged with reviewing existing policies and operating procedures and developing new protocols for managingCOVID-19’s impacts on campus. Early in the summer, members of the Response Team crafted a “Safe Start” planfor Fall 2020, followed by a comprehensive Campus Reopening and Mitigation Plan that addressed nearly everyfunction on campus. The Response Team tracked and provided critical data to support financial decisions and longterm sustainability of the Campus. The plan was guided by the following principles: to ensure the health, safety andwelfare of faculty, staff and students, to mitigate the risk of spread of COVID-19 within the campus community, tomaintain academic excellence and campus operations, and to prepare the campus for the safe return of studentsto our classrooms and residence halls.The COVID-19 fiscal impact during fiscal year 2020 was primarily in two areas: 1) refunds given to students forhousing and dining and 2) costs for personal protective equipment (PPE), cleaning and sanitation and virus testingand tracing. Refunds to students were 1.5 million for the Campus, and mitigation costs exceeded 1.0 million.The Campus addressed this impact by implementing travel restrictions, spending and hiring freezes, and significantreductions in fiscal year 2021 operating budgets. Federal CARES Act funds as well as FEMA Disaster Relief fundsare available to mitigate some of the refunds and additional costs.3
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)STATEMENT OF NET POSITIONThe Statement of Net Position presents the assets, liabilities, deferred outflows/inflows and net position of theCampus as of the end of the fiscal year. The purpose of the Statement of Net Position is to present to the readersof the financial statements a fiscal snapshot of the Campus. The Statement of Net Position presents end-of-yeardata concerning the following: Assets - Property that we own and what we are owed by others. Deferred Outflows of Resources - Consumption of net position that is applicable to a future reporting period. Liabilities - What we owe to others and have collected from others before we have provided the service. Deferred Inflows of Resources - Acquisition of net position by the government that is applicable to a futurereporting period. Net Position - The difference between (a) assets and deferred outflows of resources and (b) liabilities anddeferred inflows of resources.The Statement of Net Position is prepared under the accrual basis of accounting, where revenues and assets arerecognized when the service is provided and expenses and liabilities are recognized when others provide theservice to us, regardless of when cash is exchanged.From the data presented, readers of the Statement of Net Position can determine the assets available to continuethe operations of the institution. They are also able to determine how much the institution owes vendors, investors,and lending institutions. Finally, the Statement of Net Position provides a picture of the net position and its availabilityfor expenditure by the institution. Net position is divided into the following three major categories: Net investment in capital assets - Provides the institution’s equity in property, plant, and equipment ownedby the institution. Restricted net position a. Nonexpendable restricted net position consists solely of the Campus’ permanent endowment fundsand is only available for investment purposes.b. Expendable restricted net position is available for expenditure by the institution but must be spentfor purposes as determined by donors and/or external entities that have placed time or purposerestrictions on the use of the assets. Unrestricted net position – Represents resources available to the institution for any lawful purpose of theinstitution.4
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)Summary of Net Position2020ASSETSCurrent assetsCapital assets, netOther noncurrent assets 59,317,43465,115,569813,109Total assetsIncrease/(Decrease)2019 52,721,32867,934,1171,087,818 .15%-25.25%125,246,112121,743,2633,502,849DEFERRED OUTFLOWS OF RESOURCESDeferred loss on debt refundingDeferred outflows related to net OPEB liabilityDeferred outflows related to net pension 3.64%-15.59%Total deferred outflows of DEFERRED INFLOWS OF RESOURCESDeferred inflows related to net OPEB liabilityDeferred inflows related to net pension 49,78645.86%6.05%Total deferred inflows of nt liabilitiesNoncurrent liabilitiesTotal liabilitiesNET POSITIONNet investment in capital assetsRestricted - nonexpendableRestricted - expendableUnrestrictedTOTAL NET POSITION (55,616,719) (58,187,448) 2.88% Current assets increased 6.6 million primarily due to a 5.9 million increase in cash and cash equivalents.This increase in cash was primarily due to a reduction of expenses related to the campus closure because ofCOVID-19 and increased state appropriations. Capital assets decreased 2.8 million due to annual depreciation. Current liabilities decreased primarily due to:oDecrease in accounts payable of 547 thousand due to a reduction in services and suppliesexpenses at year end during the campus closure.oReduction in summer school unearned revenue of 136 thousand primarily related to the campusclosure.oReduction in accrued payroll liabilities due to fewer summer courses.5
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited) Noncurrent liabilities increased 1.9 million due to a 4.9 million increase in the Campus’ proportionate shareof the State’s net pension and other post-employment benefits liabilities offset by a 2.6 million decrease inbonds payable due to regular scheduled debt service payments. See Note 5, Pension Plans, Note 6,Postemployment and Other Employee Benefits and Note 10, Long-Term Liabilities for more information. Considering the Campus’ financial position excluding the pension and OPEB liabilities, the unrestricted netposition increased by 7.5 million, a 10.0% increase over 2019.Assets, Deferred Outflows, Liabilities, Deferred Inflows and Net Position 250,000,000 200,000,000 197,991,464 139,804,016 50,000,000 201,051,855 100,000,000 145,435,136 150,000,000 0 (55,616,719) (58,187,448)- 50,000,000- 100,000,0002020Total Assets & Deferred Outflows20202019Total Liabilities & Deferred Inflows62019Total Net Position
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITIONThe Statement of Revenues, Expenses and Changes in Net Position presents the revenues earned and expensesincurred during the year. Activities are reported as either operating or nonoperating. A public university’sdependency on state aid and gifts will result in operating deficits. GASB requires state appropriations and gifts tobe classified as nonoperating revenues. The utilization of long-lived assets, referred to as Capital Assets, is reflectedin the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life.Changes in net position as presented on the Statement of Net Position are based on the activity presented in theStatement of Revenues, Expenses and Changes in Net Position. The purpose of the statement is to present therevenues received by the Campus, both operating and nonoperating, and the expenses paid by the Campus,operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by theinstitution.Operating revenues are received for providing goods and services to the various customers and constituencies ofthe Campus. Operating expenses are those expenses paid to acquire or produce the goods and services providedin return for the operating revenues, and to carry out the mission of the Campus. Nonoperating revenues arerevenues received for which goods and services are not provided. State capital appropriations and capital grantsand gifts are considered neither operating nor nonoperating revenues.7
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)Summary of Revenues, Expenses and Changes in Net Position2020OPERATING REVENUESStudent tuition and feesLess: scholarship allowanceFederal grants and contractsState grants and contractsLocal grants and contractsNongovernmental grants and contractsSales and services of educational and other activitiesSales and services of auxiliary enterprisesLess: scholarship allowanceInterest collected on student loansOther feesOther operating revenues Total operating revenuesIncrease/(Decrease)2019 8 TING EXPENSESSalaries and wagesFringe benefitsServices and suppliesUtilitiesScholarships and fellowshipsDepreciation (142,312)550,86424,880Total operating expenses89,818,59887,097,2952,721,303NONOPERATING EXPENSESLoss on disposal of capital assetsInterest on capital asset related NG REVENUESState appropriationsFederal grantsGiftsInvestment incomeEndowment incomeTotal nonoperating revenuesTotal revenuesTotal nonoperating expensesTotal expensesOther revenues and transfersChange in net positionNet position, beginning of yearNET POSITION, END OF YEAR (55,616,719)8 (58,187,448)2,465,617 6.82%15.44%-15.80%-6.82%34.53%0.74%3.12%2.78%
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)Revenues, Expenses and Changes in Net PositionFor the year ended June 30, 2020 100,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 RevenueExpensesIncrease in Net PositionNonoperating ExpensesOperating ExpensesOperating RevenuesNonoperating, Other Revenues and TransfersSome highlights of the changes in the Statement of Revenues, Expenses and Changes in Net Position are asfollows: A decrease of 1.5 million in total operating revenues is due to the following:oA decrease of 2.3 million in student tuition and fees, net of scholarship discounts and allowances, isprimarily due to an increase in scholarship and allowances. This was primarily due to federal CARES actstudent emergency grants. There was no tuition rate increase for the Campus for fiscal year 2020.oThe 2.7 million increase in federal grants and contracts is primarily due to federal CARES act funds of 2.0 million received for student emergency grants.oSales and services of auxiliary enterprises, net of scholarship allowance, decrease of 1.6 million or 21.9percent reflects student housing and dining refunds of 1.5 million due to campus closures related toCOVID-19, as well as loss of dining commissions and bookstore sales.9
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited) An increase of 2.7 million or 3.12 percent, in operating expenses is due to the following:oSalaries and fringe benefits increased 5.7 million due to the 2 percent salary increase for employees withannual salaries less than 100,000 and an 892 thousand increase in the fringe benefits adjustment for thechanges in net pension and OPEB liabilities over last fiscal year.oServices and supplies expense decreased 3.4 million primarily due to major projects and initiatives beingput on hold during the campus closure.STATEMENT OF CASH FLOWSThe final statement presented is the Statement of Cash Flows. The Statement of Cash Flows presents detailedinformation about the cash activity of the Campus during the year. The statement is divided into the following fiveparts. Operating Activities - the net cash provided by (used for) the operating activities of the institution. Noncapital Financing Activities - the cash received and spent for nonoperating, noninvesting, andnoncapital financing purposes. Capital and Related Financing Activities - the cash used for the acquisition and construction of capital andrelated items. Investing Activities - the purchases, proceeds, and interest received from investing activities. Reconciliation - reconciles the net cash provided by (used for) to the operating income (loss) reflected onthe Statement of Revenues, Expenses, and Changes in Net Position.CAPITAL ASSET AND DEBT ADMINISTRATIONThe change in capital assets was limited to a decrease due to depreciation.The Campus’ indebtedness consists of bonds payable of 43.8 million. There were no new bond issuances duringthe year.For more detailed information on capital asset and debt activity please refer to Note 4 – Capital Assets, Note 9 –Bonds Payable, and Note 10 Long-Term Liabilities in the Notes to the Financial Statements.10
UNIVERSITY OF SOUTH CAROLINA - UpstateManagement’s Discussion and Analysis(Unaudited)ECONOMIC OUTLOOKThe economic position of the Campus remains stable for the foreseeable future. As part of a state-supported highereducation institution, the Campus’ economic position is closely tied to the State of South Carolina. The Statefinished the 2020 fiscal year on a very positive note with full funding of the State’s Rainy-Day Fund at 5 percent ofthe prior year’s General Fund Revenues and fully funded the Capital Reserve Account at 2 percent of the prioryear’s General Fund Revenues. COVID-19 emerged as a dangerous public health crisis in March, and the damagegrew as many lives were being lost to the disease. Businesses closed, producing many layoffs. The impact of thison the statewide economy was severe and almost immediate, resulting in significant erosions in state tax revenues.The State experienced a revenue surplus of more than 672 million despite the impact of COVID-19. Individualincome taxes and sales tax revenues continue to be strong despite decreases due to COVID-19.For fiscal year 2021, the Campus had anticipated additional funding to support academic initiatives that promoteaccess and affordability through tuition mitigation for residents of South Carolina, however the State of SouthCarolina is operating under a continuing resolution for the foreseeable future. The Campus anticipates funding fromthe State to be flat due to COVID-19 when the funding plan for fiscal year 2021 is addressed.For fiscal year 2021, the Campus did not have a tuition increase.11
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Net PositionAs of June 30, 2020ASSETSCurrent assets:Cash and cash equivalentsRestricted - cash and cash equivalentsAccounts receivable, netInventoriesPrepaid itemsFunds due from others Total current 4259,317,434Noncurrent assets:Restricted - cash and cash equivalentsInvestmentsRestricted - federal student loans receivableCapital assets, net of accumulated depreciation311,09666,451435,56265,115,569Total noncurrent assets65,928,678Total assets125,246,112DEFERRED OUTFLOWS OF RESOURCESDeferred loss on debt refundingDeferred outflows related to net OPEB liabilityDeferred outflows related to net pension liability2,015,9258,407,2729,765,827Total deferred outflows of resources20,189,024LIABILITIESCurrent liabilities:Accounts payableRetainage payableAccrued interest payableAccrued payroll and related liabilitiesAccrued compensated absences - current portionBonds payable - current portionUnearned revenuesDepositsOther 62,8621,007,26493,7692,055Total current liabilities6,170,056Noncurrent liabilities:Accrued compensated absencesFederal loan liabilityBonds payableNet OPEB liabilityNet pension 380Total noncurrent liabilities186,906,218Total liabilities193,076,274DEFERRED INFLOWS OF RESOURCESDeferred inflows related to net OPEB liabilityDeferred inflows related to net pension liability7,102,829872,752Total deferred inflows of resources7,975,581NET POSITIONNet investment in capital assetsRestricted for:NonexpendableExpendableScholarships, research, instruction, and otherLoansCapital projectsDebt 216,522,644251,944(97,613,105)Total net position See Notes to the Financial Statements12(55,616,719)
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Revenues, Expenses and Changes in Net PositionFor the year ended June 30, 2020OPERATING REVENUESStudent tuition and fees ( 2,659,118 pledged for bonds)Less: scholarship discounts and allowancesFederal grants and contractsState grants and contractsLocal grants and contractsNongovernmental grants and contractsSales and services of educational and other activitiesSales and services of auxiliary enterprises ( 2,457,063 pledged for bonds)Less: scholarship allowanceInterest collected on student loansOther feesOther operating revenues Total operating revenues59,839,190OPERATING EXPENSESSalaries and wagesFringe benefitsServices and suppliesUtilitiesScholarships and fellowshipsDepreciation 5,9883,392,791Total operating expenses89,818,598Operating loss(29,979,408)NONOPERATING REVENUES (EXPENSES)State appropriationsFederal grantsGiftsInvestment incomeEndowment incomeLoss on disposal of capital assetsInterest on capital asset related (1,320,150)Net nonoperating revenues28,568,158Loss before other revenues(1,411,250)State capital appropriationsTransfers (to)/from other campuses, net3,517,555464,424Change in net position2,570,729NET POSITION, BEGINNING OF YEAR(58,187,448)NET POSITION, END OF YEAR See Notes to the Financial Statements13(55,616,719)
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Cash FlowsFor the year ended June 30, 2020OPERATING ACTIVITIESStudent tuition and feesResearch grants and contractsSales and services of educational and other activitiesSales and services of auxiliary enterprisesStudent loans collectedInterest collected on student loansInflows from federal direct student loansOutflows from federal direct student loansPayments to employees for servicesPayments to employees for benefitsPayments to suppliersPayments to students for scholarships and fellowshipsOther receiptsInflows from agency fundsOutflows from agency funds Net cash used by operating 96,559)(23,377,857)NONCAPITAL FINANCING ACTIVITIESState appropriationsFederal grantsGiftsTransfers to other campuses, netFederal loan liabilityNet cash provided by noncapital financing 98)29,306,662CAPITAL AND RELATED FINANCING ACTIVITIESState capital appropriationsPurchase and construction of capital assetsPrincipal paid on capital asset
presented component units, USC Upstate Foundation and USC Upstate Capital Development Foundation. This report includes a series of financial statements, prepared in accordance with the Governmental Accounting Standards Board (GASB) Codification Sections 2100-2900, Financial ReportingColleges and , and Co5, Universities.
