KENTUCKY STATE UNIVERSITY Management's Discussion and Analysis

Introduction

June 30, 2015

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, 2015, with comparative information for the year ended June 30, 2014. 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 land-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 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, 2015, reflected total assets and deferred outflows of $124.3 million and total liabilities and deferred inflows of $112.8 million. Total net position was $11.5 million.
• Total assets and deferred outflows remained relatively constant from prior year. A $4.5 million decrease in total assets was offset by the increase of $4.3 million in deferred outflows. The decrease in total assets was primarily due to decreases in student accounts receivable (net of bad debt allowance), grant and loans receivables, and capital assets. Total liabilities and deferred inflows increased $98.4 million. Total liabilities increased by $93.2 million, while deferred inflows increased $5.1 million. The increase is primarily due to a change in accounting principle which required the accrual of net pension liabilities of $93.4 million. Total net position decreased $98.6 million. Decrease in net position before the cumulative effect in the change in accounting principle was $5.2 million. The cumulative effect of the change in accounting principle decreased net position by $93.3 million.