KENTUCKY STATE UNIVERSITY Management’s Discussion and Analysis

June 30, 2012

Introduction

Management’s Discussion and Analysis of Kentucky State University’s (the University) financial statements provide an overview of the financial position and activities of the University for the year ended June 30, 2012, with comparative information for the year ended June 30, 2011 and selected information for the year ended June 30, 2010. This discussion has been prepared by management and should be read in conjunction with the financial statements and the notes thereto, which follow this section. The financial statements and related notes and this discussion and analysis are the responsibility of management.

Kentucky State University is a Commonwealth of Kentucky coeducational institution for higher education. The University's mission is to build on its legacy of achievement as a historically black, liberal arts, and 1890-grant university, afford access to and prepare a diverse student population of traditional and non-traditional students to compete in a multifaceted, ever-changing global society by providing student-centered learning while integrating teaching, research, and service through high-quality undergraduate and select graduate programs. Kentucky State University is committed to keeping relevant its legacy of service by proactively engaging the community in partnerships on civic projects driven by the objective of positively impacting the quality of life of the citizens of the Commonwealth.

Basis of Presentation

The annual financial report and statements include the University and Kentucky State University Foundation, a component unit of the University. Kentucky State University Foundation, Inc. (the “Foundation”) is a not-for-profit Kentucky corporation which was established to receive, invest and expend funds to promote and implement educational and developmental activities at Kentucky State University (the “University”). The Foundation is managed by a Board of Trustees independent from that of the University. The Foundation is supported primarily through contributions from alumni.

Financial Highlights

• The University's financial position at June 30, 2012, reflected total assets of $134.7 million and total liabilities of $17.6 million. Total net assets were $117.1 million. Financial operations were in accordance with revenue expectations and the approved budget plan.
• Total assets increased $1.6 million or 1.2%, primarily due to increases in student accounts, grant and loans receivables, capital assets and investments. Total liabilities increased by $514 thousand or 3.0% primarily due to a decrease in bond and lease obligations, a decrease in compensated absences, and an increase in accounts payable and accrued liability. Total net assets increased $1.1 million.