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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS July 27, 2012 FINANCE AND BUSINESS MEETING INDEX

B1 Minutes of June 4, 2012 meeting

B2 Executive Summary Report

B3 Fiscal 2012 Budget vs Actual

B4 Fiscal 2012 Financials (unaudited)

B5 Human Resource Services Report

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KENTUCKY STATE UNIVERSITY Regular Meeting of the Finance and Business Committee Board of Regents 10 am, July 27, 2012 Board Room, Academic Service Building Frankfort, Kentucky

Regent ___, Presiding

AGENDA

Call to Order

Roll Call

Opening Remarks

Approval of June 4, 2012 Minutes

Chairperson

Mrs. Lillian Graham

Chairperson

Executive Summary Report

Action Items

Mrs. Alice Johnson

- None

VII. Informational Items

2012 Budget vs Actual

2012 Financial Statements (unaudited)

Human Resources Services Report

Discussion

The quick brown fox jumps over the lazy dog.

Chairperson

Adjourn

Chairperson

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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B1

To: Board of Regents Finance and Business Committee Date: July 27, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Finance and Business Committee Meeting Minutes June 4, 2012

Reason for Consideration: Action Item Enclosures: Yes

Background:

The minutes of the June 4, 2012 meeting must be approved.

Recommendation:

Approval of the minutes of the meeting on June 4, 2012

Initiator:	Alice B. Johnson Vice President for Finance and Business Affairs
Board Action Date:	July 27, 2012
Effective Date:	July 27, 2012

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MINUTES

Kentucky State University Finance and Business and Audit Committee Joint Meeting Board of Regents Finance and Business Committee – Audit Committee 11:30a.m., June 4, 2012 Frankfort, Kentucky

I. Call to Order

Regent Whitehead called the meeting to order at 11:31 a.m. on June 4, 2012.

II. Roll Call

Regent Whitehead asked for the roll call, which was recorded as follows:

Regent David Guarnieri, absent

Regent Chuck Whitehead, present

Regent Ron Banks, present

Regent Mindy Barfield, absent

Regent Karen Bearden, present

Regent Syamala Reddy, absent

Regent Phyllis Williams, absent

Regent Lavaughn Henry, present

Mrs. Johnson, present

A quorum was declared.

III. Approval of Minutes

Action: Motion to approve the minutes from the April 27, 2012 Finance and Business Committee and Audit Committee meeting was made by Regent Whitehead. The minutes were approved as presented. Regent Whitehead recognized Mrs. Johnson to carry the discussion forward.

IV. Vice President's Report

Fiscal 2013 Financial Plan

Vice President Johnson gave an overview of the FY2013 Financial Plan. She stated that due to a deficit that had to be addressed, the Financial Plan was reexamined. She also stated that a lot of scrutiny was applied to several items in the budget in order to present to the Board a balanced budget.

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Action:

Motion to approve the Fiscal 2013 Financial Plan as submitted was made by Regent Henry and seconded by Regent Whitehead. The motion passed.

V. Adjournment

Motion for adjournment of the Finance and Business and Audit Committee meeting was made by Regent Whitehead. The meeting adjourned at 11:45am.

Submitted by:

Approved by:

Alice B. Johnson Vice President for Finance and Business Kentucky State University

Chair

Finance and Business Committee Board of Regents Kentucky State University

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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B2

To: Board of Regents Finance and Business Committee Date: July 27, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Executive Summary

Reason for Consideration: Informational Item Enclosures: Yes

Background:

Recommendation:

Initiator:	Alice B. Johnson Vice President for Finance and Business Affairs
Board Action Date:	July 27, 2012
Effective Date:	July 27, 2012

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Kentucky State University Finance and Business Committee Meeting July 27, 2012

Fiscal 2012 Audit

Fiscal 2012 audit activities began in May with planning and preliminary scheduling with Dean Dorton Allen & Ford. An update will be provided at the meeting.

Fiscal 2012 Budget vs Actual

For fiscal 2012, planned budget results were achieved meeting targeted spending goals. Please refer to item B3 for a description of preliminary, unaudited results.

KSU is projected to end fiscal year operations with a $2.4 spending surplus.

Fiscal 2012 Financial Statements (unaudited)

For fiscal 2012, unaudited financials are presented in item B4 indicating a reduction in net assets of $2.5 million. This reduction reflects unaudited changes in net assets after accruals have been recorded.

As stated previously, this planned reduction was anticipated and budgeted results were achieved. Future revenue increases coupled with cost reductions for fiscal 2013 are planned to replace to restore budgeted spending imbalances in the current biennium.

Staffing Changes

The following professional staff changes have occurred in the Division of Finance and Business

Resignation: Director of Budget Planning and Policy, Claudine Gee, April 27, 2012

Resignation: Director of Accounting, Douglas Allen, June 11, 2012

Hiring: Data Operations/Compliance Specialist, Delandual Conwell, June 1, 2012

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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B3

To: Board of Regents Finance and Business Committee Date: July 27, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Budget vs. Actual June 2012

Reason for Consideration: Informational Item Enclosures: Yes

Background: Revenues and expenses are presented for the Educational and General Fund (E&G), Auxiliary Fund, Land Grant and Action Agenda Funds. Budget vs. Actual does not include restricted grants and contracts.

The summary of operations presented below is to assist in understanding the results reflected in the budget vs. actual report as of June 2012.

The state appropriates funds for Land Grant as required by the U.S. Department of Agriculture. Land Grant, Action Agenda and Auxiliary Funds are not available to the University for discretionary spending.

Revenue

State appropriations are received in installments of 30% (July), 25% (October), 25% (January) and 20% (April) of each year. At June 2012, $24.66 million of appropriations have been received. In FY11, $486,800 represents FY12 appropriations advanced in FY11 as required by the state. Institutions were required to spend FY12 tuition and fee revenue to offset the advance in FY11.

Student Tuition and Fees has been posted for Fall 2011 and Spring 2012 enrollment. Auxiliary revenues represent housing and board for resident students enrolled for Fall 2011 and Spring 2012. Student tuition and fees revenue amounts may decrease for the Spring 2012 semester due to student withdrawals after they have enrolled and year-end adjustments.

Other revenue includes athletic income, indirect cost recovery, facility rentals, interest income, state funding for Regional Stewardship and a budgeted fund balance offset. As of June 2012, $431,978 has been received for Regional Stewardship. Budget variance primarily reflects the effect of the budgeted fund balance spend in FY12.

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Expense

Salaries and benefits expenses are at 93.04% of budget. This variance is considered normal.

Supplies, Travel, Communications and Services were expended at a level appropriate for the percent of fiscal year expired. These expenses are incurred more heavily during the academic year. Services include utilities and other services used for fall semester preparation. This variance is considered normal.

Interdepartmental Costs may reflect reductions in expenses which are due to timing in recording journal entries. Fixed Costs include maintenance agreements that require payment in full at the beginning of the service agreement; therefore, these expenses are not incurred evenly over the fiscal year. This variance is considered normal.

Student Aid should be recorded consistent with Tuition and Fees. Student Aid is typically recorded as students complete the registration process and aid awarded is accepted and posted to student accounts. This variance is considered normal.

Transfers include debt service obligations and internal reallocations. Transfers are typically recorded at the beginning of the fiscal year. This variance is considered normal.

Recommendation:

Initiator:	Tao-fen Bi Budget Analyst, Budget Policy & Planning
Board Action Date:	July 27, 2012
Effective Date:	July 27, 2012

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	Approved Budget	Revised Budget	YTD Actual Activity	YTD Actual % of Revised Budget	% Expired	Variance	YTD ACTUAL BY FUND GROUP
	Approved Budget	Revised Budget	YTD Actual Activity	YTD Actual % of Revised Budget	% Expired	Variance	Education & General	Auxiliary	Land Grant & Action Agenda
Revenues
State Appropriations	25,146,800	25,146,800	24,660,001	98.06%	100.00%	-1.94%	18,389,069	0	6,270,932
Student Tuition & Fees	22,213,287	22,213,287	23,585,338	106.18%	100.00%	6.18%	23,585,338	0	0
Auxiliaries	6,516,120	6,516,120	6,850,087	105.13%	100.00%	5.13%	0	6,850,087	0
Other	4,778,700	4,778,700	1,359,739	28.45%	100.00%	-71.55%	1,359,739	0	0
Revenues Total	58,654,907	58,654,907	56,455,165	96.25%	100.00%	-3.75%	43,334,146	6,850,087	6,270,932
Expenditures
Salaries/Wages/Benefits	31,334,968	32,752,585	30,471,897	93.04%	100.00%	-6.96%	26,473,832	1,183,966	2,814,099
Supplies & Other	3,119,057	3,039,440	1,759,877	57.90%	100.00%	-42.10%	1,067,420	325,639	366,818
Travel	1,627,069	1,524,772	1,211,994	79.49%	100.00%	-20.51%	1,082,183	654	129,157
Communications	603,134	494,734	495,174	100.09%	100.00%	0.09%	460,577	18,435	16,162
Services	9,491,199	8,696,516	7,598,683	87.38%	100.00%	-12.62%	3,825,176	3,490,930	282,577
Interdepartmental	409,914	262,468	(26,996)	-10.29%	100.00%	-110.29%	95,078	(183,117)	61,043
Fixed Costs	3,428,088	4,623,181	3,621,459	78.33%	100.00%	-21.67%	3,223,535	185,535	212,389
Student Aid	4,693,994	4,523,848	5,105,701	112.86%	100.00%	12.86%	4,785,877	319,824	0
Capital	1,314,371	147,184	1,343,430	912.75%	100.00%	812.75%	341,321	361,782	640,327
Expenditures Total	56,021,794	56,064,728	51,581,218	92.00%	100.00%	-8.00%	41,354,999	5,703,648	4,522,572
Surplus (Deficit) before Transfers	2,633,113	2,590,179	4,873,947				1,979,147	1,146,440	1,748,360
Mand & Nonmandatory Transfers	2,633,113	2,590,179	2,428,408	90.08%	100.00%	-9.92%	1,549,469	859,312	19,627
Surplus (Deficit)	0	0	2,445,538				429,678	287,127	1,728,733

Budget vs. Actual Month Ending June 30, 2012

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E & G Budget vs. Operating Projection Through June 30, 2012

	Original Budget	Revised Budget	June 2012 YTD Activity Projection
Revenues
State Appropriations	25,146,800	25,146,800	24,660,001
Student Tuition & Fees	22,213,287	22,213,287	23,585,338
Auxiliaries	6,516,120	6,516,120	6,850,087
Other	4,778,700	4,778,700	1,359,739
Projected Revenues Total	58,654,907	58,654,907	56,455,165
Expenditures
Salaries/Wages & Benefits	31,334,968	32,752,585	30,471,897
Supplies & Other	3,119,057	3,039,440	1,759,877
Travel	1,627,069	1,524,772	1,211,994
Communications	603,134	494,734	495,174
Services	9,491,199	8,696,516	7,598,683
Interdepartmental	409,914	262,468	(26,996)
Fixed Costs	3,428,088	4,623,181	3,621,459
Student Aid	4,693,994	4,523,848	5,105,701
Capital	1,314,371	147,184	1,343,430
Projected Expenditures Total	56,021,794	56,064,728	51,581,219
Surplus (Deficit) before Transfers	2,633,113	2,590,179	4,873,947
Mandatory transfers	2,633,113	2,590,179	2,428,408
Projected Surplus (Deficit)	0	0	2,445,538
Noncash Expenses &Accruals
Depreciation			(4,393,703)
Bad Debt Expense			(400,000)
Accrued Liabilities - Compensated Abs			(200,000)
Accrued Liabilities - Payable to Vendors			(100,000)
Projected Change in Net Assets			(2,648,165)
Budgeted Fund Balance Spending FY12
FY12 Advance Appropriation in FY11			486,800
FY11 E&G and Plant Fund Balance			2,200,000
Total Fund Balance Spend			2,686,800
Budget vs. Actual Projection			38,635

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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B4

To: Board of Regents Finance and Business Committee Date: July 27, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Preliminary Unaudited Financial Statements- June 30, 2012

Reason for Consideration: Informational Item Enclosures: Yes

Background:

Interim Financial Statements are included as of June 30, 2012. A brief summary explanation of certain current assets and plant items follows:

Cash and cash equivalents total $27.6 million. This amount includes $18.3 million that is restricted for Land Grant and Action Agenda programs and $4.1 million that is restricted for plant purposes. The remainder is current operating cash that will be disbursed for current operations during the year.

Accounts receivable totaling $11.4 million includes the receivables from students, grants and loans. This amount includes $6 million in student accounts receivables, and $5.4 million that is grants and other accounts receivables.

Current liabilities of $9.2 million consist of accounts payable and accrued payroll liabilities. Accrued compensated absences total $2.1 million and Deferred Revenue totals $2.3 million.

As of June 2012, net assets reflect a $2.5 million decrease primarily due to federal grants and contract revenues.

The Statement of Cash Flows reflects a net decrease of $2 million at June 2012. Operations consumed $33.8 million of cash through June 2012.

Initiator:	Katherine Napier Associate Vice President for Business Operations
Board Action Date:	July 27, 2012
Effective Date:	July 27, 2012

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Kentucky State University Statement of Net Assets June 30, 2012 (Unaudited)

	FY 2012
ASSETS
Current assets
Cash and cash equivalents	27,649,764
Accounts, grants and loans receivable, net	10,647,294
Investments	-
Inventory and other current assets	846,364
Total current assets	39,143,422
Noncurrent assets
Accounts, grants and loans receivable, net	773,775
Investments	11,399,403
Capital assets, net	80,295,452
Total noncurrent assets	92,468,630
Total assets	131,612,052
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	3,547,611
Accrued compensated absences	2,150,976
Deferred revenue	2,293,030
Deposits	192,811
Other current liabilities	256,226
Bonds and capital lease obligations	767,784
Total current liabilities	9,208,438
Noncurrent liabilities
Bonds and capital lease obligations	7,904,835
Federal grants refundable	991,709
Total noncurrent liabilities	8,896,544
Total liabilities	18,104,982
NET ASSETS
Invested in capital assets, net of related debt	71,622,833
Restricted
Nonexpendable	9,642,500
Expendable	5,973,507
Unrestricted	26,268,230
Total net assets	113,507,070

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Addendum to Statement of Net Assets Components of Fund Balances - Disaggregated (Unaudited)
	June 30 2011	Actual YTD Activity	June 30 2012
Invested in Capital Assets, net of related debt	73,936,125	(2,313,292)	71,622,833
Restricted - Nonexpendable:
Endowments	8,594,513	1,047,987	9,642,500
Expendable:
Grants & Contracts	(689,996)	388,134	(301,862)
Endowments	1,541,194	(551,051)	990,143
Plant Renewal & Replacement	3,928,818	496,751	4,425,569
Capital Renewal Reserves	339,656	520,000	859,656
	5,119,673	853,833	5,973,506
Unrestricted:
Education & General	7,167,009	(1,683,993)	5,483,016
E&G Plant Reserve	2,500,000	(2,500,000)	-
Auxiliary	2,604,598	309,751	2,914,349
Land Grant Match	16,057,297	1,813,569	17,870,866
	11,640,769	(2,060,673)	26,268,231
Total Net Assets	115,979,215	(2,472,145)	113,507,070

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Kentucky State University Statement of Revenues, Expenses and Changes in Net Assets (By Function) Period Ending June 30, 2012 (Unaudited)

REVENUES	FY 2012
Operating Revenues
Student tuition and fees (gross)	23,348,005
Less: Scholarship allowances	(4,588,722)
Student tuition and fees (net of scholarships)	18,759,283
Federal grants and contracts	6,440,774
Federal appropriations	3,419,722
State and local grants and contracts	1,107,907
Nongovernmental grants and contracts	74,400
Auxiliary enterprises
Residence halls	3,306,895
Dining	3,255,868
Bookstore	125,000
Other auxiliaries	100,127
Other operating revenues	1,409,693
Total operating revenues	37,999,669
EXPENSES
Operating expenses
Educational and general
Instruction	13,719,538
Research	6,119,489
Public service	6,765,166
Academic support	4,013,732
Student services	7,146,854
Institutional support	11,389,312
Operation and maintenance of plant	5,470,300
Student aid	10,598,918
Depreciation	4,088,003
Auxiliary enterprises
Residence halls	2,398,972
Dining	2,842,084
Bookstore	-
Other auxiliaries	159,246
Depreciation	314,911
Total operating expenses	75,026,525
Operating income (loss)	(37,026,856)

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Kentucky State University Statement of Revenues, Expenses and Changes in Net Assets (By Function) Period Ending June 30, 2012 (Unaudited)

NONOPERATING REVENUES (EXPENSES)
State appropriations	25,555,415
Federal Grants and Contracts	7,654,779
Gifts	250,118
Investment income (net of investment expense)	676,399
Interest on capital asset-related debt	(379,855)
Other nonoperating revenues (expenses)	691,303
Net nonoperating revenues	34,448,159
Income (loss) before other revenues, expenses, gains or losses	(2,578,697)
Endowment Gifts	106,552
Capital appropriations	-
Increase (decrease) in net assets	(2,472,145)
Net assets, beginning of year	115,979,215
Beginning balance adjustments	-
Net assets, end of year	113,507,070

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Kentucky State University Statement of Cash Flows Period Ending June 30, 2012 (Unaudited)

	FY 2012
Cash flows from operating activities
Tuition and fees	16,441,532
Grants and contracts	10,665,091
Payments to suppliers	(32,017,323)
Payments to employees	(36,340,123)
Loans issued to students	(230,989)
Collection of loans issued to students	199,825
Auxiliary enterprises:
Residence halls and dining	6,562,763
Bookstore	125,000
Other auxiliaries	100,127
Other receipts	1,246,520
Net cash from operating activities	(33,776,965)
Cash flows from noncapital financing activities
State appropriations	25,555,415
Federal Grants and Contracts	7,654,779
Gifts for other than capital purposes	356,670
Student organization agency receipts	191,360
Student organization agency disbursements	(73,544)
Other receipts (payments)	691,304
Net cash from noncapital financing activities	34,375,984
Cash flows from capital financing activities
Capital appropriations	-
Purchases of capital assets	(1,321,838)
Proceeds from capital debt	-
Principal paid on capital debt	(767,783)
Interest paid on capital debt	(379,855)
Net cash flows from capital financing activities	(2,469,476)
Cash flows from investing activities
Interest received on investments	227,955
Investment expenses	(69,435)
Proceeds from sale of investments	(1,106,216)
Purchases of investments	769,727
Net cash flows from investing activities	(177,969)
Net increase (decrease) in cash and cash equivalents	(3,170,226)
Cash and cash equivalents at beginning of year	29,623,196
Cash and cash equivalents at end of year	27,649,764

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Kentucky State University Statement of Cash Flows Period Ending June 30, 2012 (Unaudited)

Reconciliation of net operating loss to net cash from operating activities
Operating loss	(37,026,856)
Adjustments to reconcile operating income to net cash from operating activities:
Depreciation expense	4,402,914
Loss on disposal of capital assets	-
Changes in assets and liabilities:
Receivables, net	(3,021,087)
Inventory and prepaid expenses	269,021
Accounts payable and accrued liabilities	1,791,427
Accrued compensated absences	19,957
Other Liabilities	(284,270)
Deferred revenue	147,023
Net cash from operating activities	(33,776,965)

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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B5

To: Board of Regents Finance and Business Committee Date: July 27, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Human Resources Update

Reason for Consideration: Informational Item Enclosures: No

Background: Human Resource Services has initiated and implemented several significant projects for the University as described below:

Benefits open enrollment for the 2012/2013 benefit plan year was completed with multiple meetings as well as recordings of meetings posted on the Human Resources web page for employees unable to attend.

All changes to employee elective benefits resulting from the open enrollment were entered into the Enterprise Resource Planning (ERP) system.

Data collection and verification for the affirmative action plan continued.

Worked with Institutional Research to assign all job titles to Standard Occupational Codes (SOC) for external reporting purposes.

A contract was signed with an outside provider to provide employee benefit administration services for all University employees as well as providing administrative support.

Services include but are not limited to:

Employee call center:

Employee assistance with eligibility and claims questions;

New hire enrollment;

Data export report for upload to ERP; and

Monthly premium and contributions reconciliations.

Initiator:	Gary Meiseles Director of Human Resource Services
Board Action Date:	July 27, 2012
Effective Date:	July 27, 2012

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