Transcription
UNIVERSITY OF SOUTH CAROLINA - UPSTATEREPORT ON FINANCIAL STATEMENTSFOR THE YEAR ENDEDJUNE 30, 2016
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 FlowsNon-Governmental Discretely Presented Component Units – Statements ofFinancial PositionNon-Governmental Discretely Presented Component Units – Statements of ActivitiesNotes to the Financial Statements101112141516REQUIRED SUPPLEMENTARY INFORMATIONSchedule of the Campus’ Proportionate Share of the Net Pension LiabilitySchedule of the Campus’ ContributionsINDEPENDENT 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 STANDARDS434445
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 units 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, 2016, 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 the USC Upstate Capital Development Foundationwhich represent 100 percent of the assets, net assets, and revenues of the Campus' aggregate discretelypresented component units. Those statements were audited by other auditors whose reports have beenfurnished to us, and our opinion, insofar as it relates to the amounts included for the Campus are based solelyon the reports of the other auditors. We conducted our audit in accordance with auditing standards generallyaccepted in the United States of America and the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States of America. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free from material misstatement. The financial statements of the USC UpstateFoundation and the USC Upstate Capital Development Foundation were not audited in accordance withGovernment Auditing Standards, issued by the Comptroller General of the United States of America.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.Elliott Davis Decosimo www.elliottdavis.com
OpinionsIn 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 units of the Campus as of June 30, 2016, 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, and the Schedule ofthe Campus’ Contributions, as listed in the Table of Contents, be presented to supplement the basic financialstatements. Such information, although not a part of the basic financial statements, is required by theGovernmental Accounting Standards Board (GASB), who considers it to be an essential part of financial reportingfor placing the basic financial statements in an appropriate operational, economic, or historical context. We andother auditors have applied certain limited procedures to the required supplementary information inaccordance with auditing standards generally accepted in the United States of America, which consisted ofinquiries of management about the methods of preparing the information and comparing the information forconsistency with management's responses to our inquiries, the basic financial statements, and other knowledgewe obtained during our audit of the basic financial statements. We do not express an opinion or provide anyassurance on the information because the limited procedures do not provide us with sufficient evidence toexpress 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 November 17, 2016,on our 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 CarolinaNovember 17, 20162
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 thefiscal year 2016. Management’s Discussion and Analysis provides an overview and analysis of the Campus’financial activities for the fiscal year ended June 30, 2016, with comparative information for the fiscal year endedJune 30, 2015. This information should be read in conjunction with the financial statements and accompanyingfootnotes that follow this section. Condensed fiscal year 2016 and 2015 operations and financial position datawill be presented 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 ofthe improvement or erosion of the Campus’ financial health when considered with non-financial facts such asenrollment levels and the condition of the facilities.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 reportingperiod. 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 afuture reporting 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.3
UNIVERSITY OF SOUTH CAROLINA - UPSTATEManagement’s Discussion and Analysis(Unaudited)From the data presented, readers of the Statement of Net Position are able to determine the assets available tocontinue the 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 andits availability for 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 equipmentowned by the institution. Restricted net position a. Nonexpendable restricted net position consists solely of the Campus’ permanent endowmentfunds and 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.Summary of Net Position2016ASSETSCurrent assetsCapital assets, netOther noncurrent assets Total assetsDEFERRED OUTFLOWS OF RESOURCESDeferred loss on debt refundingDeferred outflows related to net pension liabilityTotal deferred outflows of resourcesLIABILITIESCurrent liabilitiesNoncurrent liabilitiesTotal liabilitiesDEFERRED INFLOWS OF RESOURCESDeferred inflows related to net pension liabilityNET POSITIONNet investment in capital assetsRestricted - nonexpendableRestricted - expendableUnrestrictedTOTAL NET POSITION36,541,72474,250,1441,113,318 31,257,52576,804,3711,140,917 97%0.00%14.33%-6.63%3,446,253-34.00%(6,689,922)4 7,935171,4517,634,722(38,344,030) Increase(Decrease)2015 2.47%
UNIVERSITY OF SOUTH CAROLINA - UPSTATEManagement’s Discussion and Analysis(Unaudited) Current assets increased 5.3 million primarily due to increased cash and cash equivalents as a result ofincreases in net tuition and fee revenue and capital appropriations. Capital assets decreased 2.5 million primarily due to the annual depreciation. Current liabilities increased 1.2 million due to the following:ooNoncurrent liabilities increased due to the following:o 2.6 million decrease in bonds payable as a result of annual debt service payments.o 5.6 million increase in the Campus’s proportionate share of the State’s net pension liability. SeeNotes 1 and 5 for more information.Assets, Deferred Outflows, Liabilities, Deferred Inflows and Net Position 140,000,000 120,000,000 124,894,809 60,000,000 114,758,634 80,000,000 124,129,177 100,000,000 117,439,255 374,000 increase in accounts payable as a result of timing in insurance and utility invoicepayments. 452,000 increase in current portion of bonds payable due to scheduled changes in principalpayments. 40,000,000 20,000,000 0 (6,689,922) (10,136,175)- 20,000,0002016Total Assets & Deferred Outflows20162015Total Liabilities & Deferred Inflows52015Total 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 andexpenses incurred during the year. Activities are reported as either operating or nonoperating. A publicuniversity’s dependency on state aid and gifts will result in operating deficits. GASB requires state appropriationsand gifts to be classified as nonoperating revenues. The utilization of long-lived assets, referred to as CapitalAssets, is reflected in the financial statements as depreciation, which amortizes the cost of an asset over itsexpected 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 servicesprovided in return for the operating revenues, and to carry out the mission of the Campus. Nonoperating revenuesare revenues received for which goods and services are not provided. State capital appropriations and capitalgrants and gifts are considered neither operating nor nonoperating revenues.6
UNIVERSITY OF SOUTH CAROLINA - UPSTATEManagement’s Discussion and Analysis(Unaudited)Summary of Revenues, Expenses and Changes in Net Position2016OPERATING 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 547)9,813300,935137,954 028 0.75%-3.41%-40.91%-4.69%-90.24%Total operating TING REVENUESState appropriationsFederal grantsGiftsInvestment incomeEndowment 051,3207832.58%3.23%5.46%72.92%153.53%Total nonoperating revenues22,833,18222,130,213702,9693.18%Total G EXPENSESSalaries and wagesFringe benefitsServices and suppliesUtilitiesScholarships and fellowshipsDepreciation 5(140,700)-6.40%76,373,09873,592,474Total operating expensesNONOPERATING EXPENSESLoss on disposal of capital assetsInterest on capital asset related debtTotal nonoperating expensesTotal expensesOther revenues and transfers999,155Change in net positionNet position, beginning of year, as originally 36,175) 1,686,3151,048,541-Net position, beginning of year, as restated3.78%3,446,253RestatementNET POSITION, END OF YEAR(687,160)2,780,624(6,689,922)7 (10,136,175)
UNIVERSITY OF SOUTH CAROLINA - UPSTATEManagement’s Discussion and Analysis(Unaudited)Revenues, Expenses and Changes in Net PositionFor the year ended June 30, 2016 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: An increase of 2.8 million in total operating revenues is due to the following:An increase of 2.2 million in student tuition and fees, net of scholarship allowance, is primarily due to a2.90% tuition and required fees increase accompanied by a slight increase in enrollment and an increasein scholarship allowance.o The 421,000 increase in state grants and contracts is attributed to an increase in scholarships due to anincrease in eligible scholarship recipients.o 1.5 million increase in sales and services of educational activities, offset by 1.3 million decrease inother operating revenues due to revenue reclassification.Operating expenses increased 2.9 million, or 4.09%, over the prior year due to:o 8
UNIVERSITY OF SOUTH CAROLINA - UPSTATEManagement’s Discussion and Analysis(Unaudited) oSalaries and fringe benefits increased 1.4 million due to the addition of faculty and staff as well asincreases in employer retirement contributions and health insurance. Additional increases in fringebenefits were due to changes in the related net pension liability.oServices and supplies increased 1.6 million due to increases in information technology equipmentpurchases.Other revenues increased 1.7 million due to additional state capital appropriations.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 ADMINISTRATIONDuring the year, various minor projects were continued or completed on the Campus.The Campus indebtedness consists of bonds payable of 51.4 million. During the current year, 570,000 inGeneral Revenue Refunding bonds were issued to partially refund the Series 2005B General Revenue bonds.For more detailed information on capital asset and debt activity please refer to Note 4 – Capital Assets and Note 9– Bonds and Notes Payable in the Notes to the Financial Statements.ECONOMIC OUTLOOKThe economic position of the Campus continues to be loosely tied to that of the State of South Carolina (theState) as evidenced by the Campus’ sustained financial performance despite significant reductions in stateappropriations from 2008 to 2012. The Campus received additional state funding to begin the 2017 fiscal year tosupport a portion of state employee health insurance increases and provide parity funding to address the basestate funding per student inequities.The State finished the 2016 fiscal year on a positive note with full funding of the State’s Rainy Day Fund at 5% ofthe prior year’s General Fund Revenues and also fully funded the Capital Reserve Account at 2% of the prioryear’s General Fund Revenues. The Campus is a beneficiary of the eighth straight year of state surpluses, asexcess lottery proceeds totaling 56,501 were made available for operations and critical equipment replacementsin 2016.9
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Net PositionAs of June 30, 2016ASSETSCurrent assets:Cash and cash equivalentsRestricted - cash and cash equivalentsAccounts receivable, netInventoriesFunds due from others Total current ,541,724Noncurrent assets:Restricted - cash and cash equivalentsInvestmentsRestricted - federal student loans receivableCapital assets, net of accumulated depreciation229,54866,451817,31974,250,144Total noncurrent assets75,363,462Total assets111,905,186DEFERRED OUTFLOWS OF RESOURCESDeferred loss on debt refundingDeferred outflows related to net pension liability373,2225,160,847Total deferred outflows of resources5,534,069LIABILITIESCurrent liabilities:Accounts payableRetainage payable - current portionAccrued interest payableAccrued payroll and related liabilitiesAccrued compensated absences - current portionCapital lease obligations - current portionBonds payable - current portionUnearned revenuesDepositsOther liabilitiesFunds held for 823,4551,351,59950,2512,1657,578Total current liabilities7,371,006Noncurrent liabilities:Accrued compensated absencesFederal loan liabilityCapital lease obligationsBonds payableNet pension Total noncurrent liabilities116,193,553Total liabilities123,564,559DEFERRED INFLOWS OF RESOURCESDeferred inflows related to net pension liability564,618NET POSITIONNet investment in capital assetsRestricted for:NonexpendableExpendableScholarships, research, instruction, and otherLoansCapital projectsDebt 6,874,7722,249(38,344,030)Total net positionSee Notes to the Financial Statements 10(6,689,922)
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Revenues, Expenses and Changes in Net PositionFor the year ended June 30, 2016OPERATING REVENUESStudent tuition and fees ( 2,727,400 pledged for bonds)Less: 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 enterprises ( 2,664,400 pledged for bonds)Less: scholarship allowanceInterest collected on student loansOther feesOther operating revenues Total operating revenues55,987,014OPERATING EXPENSESSalaries and wagesFringe benefitsServices and suppliesUtilitiesScholarships and fellowshipsDepreciation 4,9073,234,919Total operating expenses74,313,763Operating loss(18,326,749)NONOPERATING REVENUES (EXPENSES)State appropriationsFederal grantsGiftsInvestment incomeEndowment incomeLoss on disposal of capital assetsInterest on capital asset related (2,053,674)Net nonoperating revenues20,773,847Income before other revenues2,447,098State capital appropriationsTransfers (to)/from other campuses, net502,927496,228Change in net position3,446,253NET POSITION, BEGINNING OF YEAR(10,136,175)NET POSITION, END OF YEARSee Notes to the Financial Statements 11(6,689,922)
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Cash FlowsFor the year ended June 30, 2016OPERATING ACTIVITIESStudent tuition and feesResearch grants and contractsSales and services of educational and other activitiesSales and services of auxiliary enterprisesStudent loans disbursedStudent 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 activities(14,277,824)NONCAPITAL FINANCING ACTIVITIESState appropriationsFederal grantsGiftsTransfers (to)/from other campuses, netFederal loan )Net cash provided by noncapital financing activities23,162,191CAPITAL AND RELATED FINANCING ACTIVITIESProceeds from capital debtState capital appropriationsPurchase and construction of capital assetsPrincipal paid on capital asset related debtInterest paid on capital asset related et cash used by capital and related financing activities(4,840,822)INVESTING ACTIVITIESInvestment incomeEndowment income126,4061,293Net cash provided by investing activities127,699Net increase/(decrease) in cash and cash equivalents4,171,244Cash and cash equivalents, beginning of year29,335,812Cash and cash equivalents, end of yearReconciliation of cash and cash equivalentsCash and cash equivalentsRestricted - cash and cash equivalents, currentRestricted - cash and cash equivalents, noncurrent 33,507,056 25,085,0248,192,484229,54833,507,056 See Notes to the Financial 4(774,318)12
UNIVERSITY OF SOUTH CAROLINA - UpstateStatement of Cash FlowsFor the year ended June 30, 2016Reconciliation of net operating loss to net cashused by operating activitiesOperating lossAdjustments to reconcile operating loss to net cashused by operating activities:Depreciation expenseAccrued benefits related to net pension liabilityStudent loans cancelledChange in current assets and liabilitiesAccounts receivable, netStudent loans receivableInventoriesPrepaid itemsAccounts payableAccrued payrollAccrued benefitsAccrued compensated absencesUnearned revenuesDepositsOther liabilitiesFunds held for and due from others 150,2511,439(896,093)Net cash used by operating activities (14,277,824) (5,661)NONCASH TRANSACTIONSLoss on disposal of capital assets, netSee Notes to the Financial Statements13
UNIVERSITY OF SOUTH CAROLINA - UpstateNon-Governmental Discretely Presented Component UnitsStatements of Financial PositionJune 30, 2016USC UpstateCapitalDevelopmentFoundationUSC UpstateFoundationASSETSCash and cash equivalentsInvestmentsAssets held in trustContributions receivable, netFixed assets, net of depreciationTotal assetsLIABILITIESBonds and notes payableOther liabilities 633,1528,869,195242,9271,979,369111,425 51,861259,480- 685,0139,128,675242,9271,979,369111,425 11,836,068 311,341 12,147,409 2,000,000104,723 227,107- 2,227,107104,723Total liabilitiesNET ASSETSUnrestrictedTemporarily restrictedPermanently restrictedTotal net assetsTotal liabilities and net assetsSee Notes to the Financial StatementsTotal 5,57911,836,06814 311,341 12,147,409
UNIVERSITY OF SOUTH CAROLINA - UpstateNon-Governmental Discretely Presented Component UnitsStatements of ActivitiesFor the year ended June 30, 2016USC UpstateCapitalDevelopmentFoundationUSC UpstateFoundationCHANGES IN UNRESTRICTED NET ASSETSRevenues, gains and other supportContributionsInvestment returns (losses)Net realized and unrealized gains (losses)Earned incomeOtherGain (loss) on disposal of assetsNet assets released from restrictions:Satisfaction of program restrictions 1,047,900Total revenues, gains and other supportExpensesScholarships and student assistanceProgram servicesSupporting servicesOther expensesTotal expensesExcess revenues over (under) expensesCHANGES IN TEMPORARILY RESTRICTED NET ASSETSContributionsOtherNet assets released from restrictions:Satisfaction of program 92,755,126(6,135,472)(6,729,184)(485,251)(485,251) 900,174146,721 Change in permanently restricted net assetsChange in net assets 15- 5)292,306-292,306-10,033,756NET ASSETS, END OF YEAR(6,620,723)(1,047,900)(302,411)NET ASSETS, BEGINNING OF YEAR1,047,900(3,974,058)(593,712)CHANGES IN
discretely presented component units of the University of South Carolina - Upstate (the Campus), a campus of the University of South Carolina, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Campus' basic financial statements as listed in the table of contents.
