1. No category

Municipal Secondary Market Disclosure
Information Cover Sheet
This cover sheet should be sent with all submissions made to the Municipal Securities Rulemaking Board, Nationally Recognized
Municipal Securities Information Repositories, and any applicable State Information Depository, whether the filing is voluntary or
made pursuant to Securities and Exchange Commission rule 15c2-12 or any analogous state statute.
See www.sec.gov/info/municipal/nrmsir.htm for list of current NRMSIRs and SIDs
___________________________________________________________
IF THIS FILING RELATES TO A SINGLE BOND ISSUE:
Provide name of bond issue exactly as it appears on the cover of the Official Statement (please include name of state where issuer
is located):
__________________________________________________________
__________________________________________________________
_Not Applicable____________________________________________
__________________________________________________________
__________________________________________________________
Provide nine-digit CUSIP* numbers if available, to which the information relates:
__________________________________________________________
__________________________________________________________
_Not Applicable____________________________________________
__________________________________________________________
__________________________________________________________
___________________________________________________________
IF THIS FILING RELATES TO ALL SECURITIES ISSUED BY THE ISSUER OR ALL SECURITIES OF A
SPECIFIC CREDIT OR ISSUED UNDER A SINGLE INDENTURE:
Issuer’s Name (please include name of state where Issuer is located):
Other Obligated Person’s Name (if any):
University of Alaska
Alaska
N/A
(Exactly as it appears on the Official Statement Cover)
Provide six-digit CUSIP* number(s), if available, of Issuer:
914046
*(Contact CUSIP ’s Municipal Disclosure Assistance Line at 212.438.6518 for assistance with obtaining the proper CUSIP numbers.)
TYPE OF FILING:
_X_Electronic (number of pages attached)
69 N/A Paper (number of pages attached)
If information is also available on the Internet, give URL:
http://www.alaska.edu/finance/debt/
A. _X_ Annual Financial Information and Operating Data pursuant to Rule 15c2-12
(Financial information and operating data should not be filed with the MSRB.)
Fiscal Period Covered: July 1, 2003 through June 30, 2004
B. _X_ Audited Financial Statements or CAFR pursuant to Rule 15c2-12
Fiscal Period Covered: July 1, 2003 through June 30, 2004
C. __ Notice of a Material Event pursuant to Rule 15c2-12 (Check as appropriate)
1. __ Principal and interest payment delinquencies
2. __ Non-payment related defaults
3. __ Unscheduled draws on debt service reserves
reflecting fınancial diffıculties
4. __ Unscheduled draws on credit enhancements
reflecting fınancial diffıculties
5. __ Substitution of credit or liquidity providers, or
their failure to perform
6. __ Adverse tax opinions or events affecting the tax
exempt status of the security
7. __ Modifıcations to the rights of security holders
8. __ Bond calls
9. __ Defeasances
10. __ Release, substitution, or sale of property
securing repayment of the securities
11. __ Rating changes
D. __
Notice of Failure to Provide Annual Financial Information as Require
E. __
Other Secondary Market Information (Specify):
I hereby represent that I am authorized by the issuer or obligor or its agent to distribute this
information publicly:
Issuer Contact:
Dissemination Agent Contact, if any:
Name
John L. Dickinson________ Title Assistant Vice President for Finance
Employer
University of Alaska_________________________________________
Address
910 Yukon Drive, Suite 207 City Fairbanks State AK Zip 99775
Telephone
(907) 474-5012__________ Fax
(907) 474-5140_______________
Email Address [email protected] Issuer Web Site Address www.alaska.edu/finance/debt
Dissemination Agent Contact, if any:
Name
_______________________ Title ______________________________
Employer
__________________________________________________________
Address
_______________________ City _________ State ____ Zip ______
Telephone
_______________________ Fax ______________________________
Email Address
Relationship to Issuer
Obligor Contact, if any:
Name
_______________________ Title _____________________________
Employer
__________________________________________________________
Address
_______________________ City __________ State ____ Zip ______
Telephone ________________________ Fax ______________________________
Email Address _______________________ Obligor Web site Address _____________
Investor Relations Contact, if any:
Name
_______________________ Title ________________________________
Telephone _______________________ Email Address ________________________
Butrovich Building
910 Yukon Drive, Suite 207
PO Box 755120
Fairbanks, AK 99775-5120
http://www.alaska.edu/finance/debt/
John L. Dickinson
Assistant Vice President for Finance
Phone: (907) 474-5012
Fax: (907) 474-5140
[email protected]
November 12, 2004
Bloomberg Municipal Repository
100 Business Park Drive
Skillman, New Jersey 08558
Phone:(609) 279-3225
Fax:(609) 279-5962
Email: [email protected]
DPC Data Inc.
One Executive Drive
Fort Lee, NJ 07024
Phone:(201) 346-0701
FT Interactive Data
Attn: NRMSIR
100 William Street
New York, NY 10038
Phone:(212) 771-6999
Fax:(212) 771-7390
Email: [email protected]
Fax:(201) 947-0107
Email: [email protected]
Standard & Poor’s Security Evaluators, Inc. Phone: (212) 438-4595
Fax: (212) 438-3975
55 Water Street
Email: [email protected]
45th Floor
New York, NY 10041
RE:
Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
$10,000,000 University of Alaska General Revenue Bonds, 1997 Series G
$ 9,820,000 University of Alaska General Revenue Bonds, 1998 Series H
$14,295,000 University of Alaska General Revenue Bonds, 1999 Series J
$33,515,000 University of Alaska General Revenue Bonds, 2002 Series K
$ 9,970,000 University of Alaska General Revenue Bonds, 2002 Series L
$11,070,000 University of Alaska General Revenue Bonds, 2002 Series M
Six-digit CUSIP relating to all of the above CUSIP 914046
To whom it may concern:
I am pleased to provide this Annual Report consistent with the requirements of Sections 4,
Section 5, and other relevant sections of the Disclosure Certificates associated with the above
referenced general revenue bonds.
RE: RE: Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
November 12, 2004
Page 2 of 7
Regarding Section 4 of the Continuing Disclosure Certificate:
The annual audited financial statements for (1) University of Alaska, (2) University of Alaska
Foundation, and (3) University of Alaska and University of Alaska Foundation Consolidated
Fund are enclosed and hereby incorporated by reference.
The financial information and operating data generally of the type included in the final official
statements for the general revenue bonds referenced above is enclosed and hereby incorporated
by reference. For General Revenue Bonds Series H, J, K, L and M the Tables identified as
Tables 5, 6, 7, 8, 9, and 11 contain the same information as contained in Tables 4, 5, 6, 7, 8 and
10 of the Official Statement for the General Revenue Bonds Series G.
Regarding Section 5 of the Continuing Disclosure Certificate:
There are no Listed Events that would require notice. There have been no other events,
significant or otherwise, that would constitute material information for owners of Bonds.
Current information is also available at: http://www.alaska.edu/finance/debt/
Should you have any questions, please do not hesitate to contact me at the above address.
Sincerely,
John L. Dickinson
Assistant Vice President for Finance
Enclosures:
PDF pages
3-7
9-44
46-61
62-69
Tables depicting financial information and operating data (as pages 3-7)
University of Alaska financial statements, June 30, 2004
UA Foundation financial statements, June 30, 2004
UA and UA Foundation Consolidated Fund financial statements, June 30, 2004
RE: RE: Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
November 12, 2004
Page 3 of 7
Table 2
UNIVERSITY OF ALASKA
Revenues Pledged to General Revenue Bonds(1)
For Fiscal Years Ending June 30, 1999 to 2004
($s in 000's)
Student Fees
Recovery of Indirect Costs
Sales and Services of Educational Depts.
Other Sources, Net of Gifts(2)
Total Auxiliary Enterprises
TOTAL
1999
$ 48,677
14,644
3,656
10,622
28,356
2000
$ 48,625
16,091
3,381
12,763
29,561
2001
$ 45,721
18,606
3,798
12,994
27,542
2002
$48,887
22,689
3,677
11,237
29,685
$105,955
$110,421
$108,661
$116,175
2003
$ 54,569
26,545
3,681
11,739
32,283
2004
$ 61,496
29,724
3,415
12,327
34,605
$128,817 $141,567
(1)
Consistent with the terms of the Trust Indenture, all revenues generated from the sources identified in the table
are Revenues that secure the University's General Revenue Bonds.
(2)
Gifts are excluded as Revenues pledged for payment of General Revenue Bonds.
Balance of page left blank intentionally
RE: RE: Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
November 12, 2004
Page 4 of 7
Table 3
UNIVERSITY OF ALASKA
Combined Debt Service on General Revenue Bonds and Other Indebtedness
Outstanding
Fiscal
Revenue
Other
Year
Bonds
Indebtedness(1)
Total
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
$
7,036,037
6,972,616
6,971,700
6,974,938
6,232,443
6,211,220
6,216,082
6,222,383
6,219,122
5,829,187
5,700,724
5,705,082
5,713,245
5,709,699
5,351,719
5,349,179
5,355,229
5,349,723
5,113,782
3,736,891
2,885,799
2,883,782
2,880,542
2,886,015
1,475,964
638,357
639,687
$ 132,261,147
$
2,107,930
1,992,194
1,917,851
1,876,910
1,753,552
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,733,192
1,734,612
$ 35,647,737
$
9,143,967
8,964,810
8,889,551
8,851,848
7,985,995
7,944,412
7,949,274
7,955,575
7,952,314
7,562,379
7,433,916
7,438,274
7,446,437
7,442,891
7,084,911
7,082,371
7,088,421
7,082,915
6,846,974
5,471,503
2,885,799
2,883,782
2,880,542
2,886,015
1,475,964
638,357
639,687
$ 167,908,884
(1) Other indebtedness consists primarily of $1.733 million of annual debt service on $27.7 million of an
outstanding note payable to the Alaska Housing Finance Corporation (AHFC). The remaining amount
is debt service on $0.9 million of outstanding installment contracts, due annually through Fiscal Year
2009.
RE: RE: Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
November 12, 2004
Page 5 of 7
Table 5
UNIVERSITY OF ALASKA
On Campus Fall Enrollment
Head Count
Fall
1996
1997
1998
1999
2000
2001
2002
2003
Undergraduate
30,451
29,645
29,515
28,683
28,848
28,978
31,549
31,828
Graduate
1,466
1,539
1,591
1,566
1,632
1,647
1,967
2,072
Total
31,917
31,184
31,106
30,249
30,480
30,625
33,516
33,900
Full-Time Equivalent
Total Annual
UnderCredit Hours
graduate Graduate
Total
Taken
14,879
848
15,727
232,007
14,379
957
15,336
225,736
14,068
865
14,933
219,468
13,978
806
14,784
216,983
14,099
840
14,939
219,265
14,505
869
15,374
226,165
15,507
1,118
16,625
243,770
16,165
1,154
17,319
254,487
The University has an open enrollment policy and will admit into its baccalaureate program all students with a high
school diploma and an overall grade point average of 2.0. Table 6 shows the number of applications accepted and
the number of students enrolled for the fall semesters. Numbers have been restated to clarify freshman versus first
year enrollment data.
Table 6
UNIVERSITY OF ALASKA
Student Enrollment
Fall
Semester
Applications
Received
Accepted
Percent
Accepted
Students
Enrolled
Percent
Enrolled
Freshman Student Enrollment
1999
3,450
2000
3,737
2001
4,146
2002
4,412
2003
5,106
Transfer Student Enrollment
2,690
2,873
3,075
3,221
3,386
78.0%
76.9%
74.2%
73.0%
66.3%
2,293
2,455
2,578
2,679
2,837
85.2%
85.5%
83.8%
83.2%
83.8%
1999
1,873
2000
2,087
2001
2,267
2002
2,245
2003
2,622
Total Undergraduate Student Enrollment
1,410
1,536
1,625
1,674
1,769
75.3%
73.6%
71.7%
74.6%
67.5%
1,150
1,253
1,303
1,315
1,400
81.6%
81.6%
80.2%
78.6%
79.1%
1999
5,323
2000
5,824
2001
6,413
2002
6,657
2003
7,728
Total Graduate Student Enrollment
4,100
4,409
4,700
4,895
5,155
77.0%
75.7%
73.3%
73.5%
66.7%
3,443
3,708
3,881
3994
4,237
84.0%
84.1%
82.6%
81.6%
82.2%
467
453
543
518
527
46.2%
45.3%
46.8%
45.4%
40.9%
411
412
484
458
464
88.0%
90.9%
89.1%
88.4%
88.0%
1999
2000
2001
2002
2003
1,010
1,000
1,160
1,140
1,289
RE: RE: Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
November 12, 2004
Page 6 of 7
Table 7
UNIVERSITY OF ALASKA
Student Tuition per Credit Hour
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
$ 81
73
$ 84
75
$ 87
77
$ 90
79
$ 93
82
$ 102
90
$ 112
99
Undergrad upper div, nonresident
Undergrad lower div, nonresident
235
227
243
234
251
241
259
248
267
256
293
281
330
231
Graduate, resident
Graduate, nonresident
162
316
167
326
172
336
178
347
184
358
202
393
222
453
Student Classification
Undergrad upper div, resident
Undergrad lower div, resident
In September 2003 the Regents approved a 10% increase in tuition for resident and non-resident students for the
2004-2005 academic year, plus an additional 10% surcharge for the non-resident students. The Regents also
approved a policy change that extends from one to two years the time a student would need to be physically present
in Alaska before qualifying for instate tuition. Currently registered students will continue under the policy that was
in effect at the time of their registration.
Table 8
UNIVERSITY OF ALASKA
Average Annual Full-Time Student Tuition and Fees*
Student Classification
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
Undergraduate, resident
Undergraduate, nonresident
Graduate, resident
Graduate, nonresident
$3,178
7,798
4,757
8,452
$3,313
8,083
4,936
8,752
$3,420
8,340
5,088
9,024
$3,477
8,547
5,214
9,270
$3,597
8,817
5,388
9,564
$3,850
9,580
5,818
10,402
$4,355
11,285
6,518
12,062
*Assumes fees at Fairbanks. Tuition is based on 15 credit hours per semester, with one half taken at the lower
division rate and the other half taken at the upper division rate. The above table sets forth the average annual
student tuition and registration fees for full-time students for the academic years indicated. Unless otherwise stated,
figures reflect fees at the University of Alaska Fairbanks campus, which provide the substantially higher fees
associated with resident population, health insurance, health services, recreation facilities, and a more active student
government. In FY 03-04, average annual fees at Fairbanks were $725, compared to $352 at Anchorage.
Table 9
UNIVERSITY OF ALASKA
Annual Student Room and Board and Other Educational Costs
Academic Year 1998-99
$4,250
Room and Board
3,828
Tuition Fees, Books & Supplies
$8,078
Combined Cost
1999-00 2000-01
$4,550
$4,610
3,963
4,070
$8,513
$8,680
2001-02
$4,770
4,127
$8,897
2002-03 2003-04
$4,770
$5,130
4,247
4,430
$9,017
$9,560
2004-05
$ 5,210
4,955
$10,165
The annual cost of room and board and the total educational costs for two semesters for a resident undergraduate
student taking 15 credits of lower division (100 and 200 level) courses are shown in Table 9. The figure is based on
double-room, double-occupancy in a campus residence hall at the University of Alaska Fairbanks.
RE: RE: Annual Report to NRMSIR’s Relating to Continuing Disclosure Certificate
November 12, 2004
Page 7 of 7
Table 11
UNIVERSITY OF ALASKA
Summary of State Appropriations (1)
Fiscal Year Ending June 30
(in $ 000’s)
2000
2001
2002
2003
2004
2005
$174,773
3,393(1)
201
$181,339
$198,426
$207,929
$212,514
$228,065
7,311
3,170
3,207
Total
Capital:
Capital Expenditures - New
Revitalization, Facility Renewal,
Deferred Maintenance
Separate/Special Legislation
$178,367
$188,650
$201,596
$211,136
$217,745
$232,599
$ 3,450
$ 44,500
$ 13,000
$ 1,650
$
$
-
22,288
2,636
16,215
450
Total
$ 3,450
$ 69,424
$ 29,665
Operating:
General Operating Bill (1)
Supplementals (3)
Separate/Special Legislation
5,231(4)
3,641
450
62,454(2)
$ 64,104
-
4,534
$
4,091
-
450
$
450
1) Except as noted, amounts represent original authorized amounts. Sources of State
appropriations include the State General Fund, Mental Health Trust funds, and Alaska
Housing Finance Corporation funds. Appropriations exclude receipt authority for other
sources such as the Bonds, federal grants and contracts that may be used for operating
activity, purchase of capitalized equipment or capital construction. The General Operating
Bill has been restated to exclude Mental Health Trust funds that are now shown in the
Separate/Special Legislation category.
2) Fiscal 2003 capital appropriations include $61.7 million that is being provided to the
University as a result of the $230 million in State of Alaska general obligation bonds that
the voters authorized in November, 2002 and that the State issued in April, 2003.
3) Supplementals have been restated to correctly reflect the year for which funding was made
available and amounts were actually expended to complete the supplemental efforts.
4) Restated to include $1.413 million in appropriations for a portion of the debt service on the
Series K Bonds. Section 14.40.257 of the Alaska Statutes provides that the Legislature may
annually reimburse the University for principal and interest on $19.47 million of the
principal amount of its Series K Bonds. Fiscal Year 2004 was the first year that the
University was eligible for this appropriation. The restated amount also includes special
two-year appropriations received at the end of the Fiscal Year 2004 totaling $0.698 million.
For General Revenue Bonds Series H, J, K, L and M, the Tables identified above as Tables 5, 6, 7, 8, 9,
and 11 contain the same information as contained in Tables 4, 5, 6, 7, 8 and 10 of the Official Statement
for the General Revenue Bonds Series G.
This page intentionally left blank
UNIVERSITY OF ALASKA
(A Component Unit of the State of Alaska)
Financial Statements
June 30, 2004 and 2003
(With Independent Auditors' Report Thereon)
University of Alaska
(A Component Unit of the State of Alaska)
Financial Statements
June 30, 2004 and 2003
Table of Contents
Page
Management’s Discussion and Analysis
1
Independent Auditors’ Report
9
University of Alaska Statements of Net Assets
11
University of Alaska Foundation Statements of Financial Position
13
University of Alaska Statements of Revenues, Expenses and Changes in Net Assets
15
University of Alaska Foundation Statements of Activities
16
University of Alaska Statements of Cash Flows
18
Notes to Financial Statements
20
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
Introduction
The following discussion and analysis provides an overview of the financial position and
activities of the University of Alaska (university) for the years ended June 30, 2004 (fiscal year
2004) and June 30, 2003 (fiscal year 2003), with selected comparative information for the year
ended June 30, 2002. This discussion has been prepared by management and should be read in
conjunction with the financial statements including the notes thereto, which follow this section.
Using the Financial Statements
The university’s financial report includes the basic financial statements of the university and the
financial statements of the University of Alaska Foundation (foundation), a legally separate, non
profit component unit. The three basic financial statements of the university are: the Statement
of Net Assets, the Statement of Revenues, Expenses and Changes in Net Assets and the Statement
of Cash Flows. These statements are prepared in accordance with generally accepted accounting
principles and Governmental Accounting Standards Board (GASB) pronouncements. The
university is presented as a business-type activity as prescribed by GASB Statement No. 35,
Basic Financial Statements - and Management’s Discussion and Analysis – for Public Colleges
and Universities. The statement establishes standards for external financial reporting for public
colleges and universities and classifies resources into three net asset categories – unrestricted,
restricted, and invested in capital assets, net of related debt.
Commencing in fiscal year 2004, the University of Alaska Foundation is presented as a
component unit of the university in accordance with GASB Statement No. 39, Determining
Whether Certain Organizations Are Component Units. The university’s fiscal year 2003
financial statements have been restated to conform to the requirements of GASB Statement No.
39. The foundation’s financial statements include the Statement of Financial Position and the
Statement of Activities and these statements are presented as originally audited according to
generally accepted accounting principles and Financial Accounting Standards Board (FASB)
pronouncements.
The foundation was established to solicit donations and to hold and manage such assets for the
exclusive benefit of the university. Resources managed by the foundation and distributions made
to the university are governed by the foundation’s Board of Trustees (operating independently
and separately from the university’s Board of Regents). The component unit status of the
foundation indicates that significant resources are held by the foundation for the sole benefit of
the university. However, the university is not accountable for, nor has ownership of, the
foundation’s resources.
Statement of Net Assets
The Statement of Net Assets presents the financial position of the university at the end of the
fiscal year and includes all assets and liabilities of the university. The difference between total
assets and total liabilities (net assets) is one indicator of the financial condition of the university,
while the change in net assets is an indicator of whether the financial condition has improved or
declined during the year. A summarized comparison of the university’s assets, liabilities and net
assets at June 30, 2004, 2003 and 2002 follows (in thousands):
1
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
2004
Assets:
Current assets
Other assets
Capital assets, net of depreciation
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets
Invested in capital assets, net of debt
Restricted – expendable
Restricted – nonexpendable
Unrestricted
Total net assets
$
2003
2002
109,721
182,960
760,757
1,053,438
$ 107,186
173,719
703,855
984,760
$ 89,340
154,987
651,268
895,595
69,631
133,576
203,207
74,547
127,699
202,246
62,551
98,412
160,963
648,016
36,591
111,142
54,482
$ 850,231
602,274
31,102
108,303
40,835
$ 782,514
564,771
32,631
100,716
36,514
$ 734,632
The financial position of the university improved during fiscal year 2004. This is primarily
evidenced by the overall growth in net assets of $67.7 million, or 8.7 percent. Unrestricted net
assets, a common indicator of financial strength or flexibility, increased 33.4 percent to $54.5
million at June 30, 2004. Other indicators of an improved financial position include an increase
in working capital, reduced accounts receivable, and growth in endowment investments. Despite
new general revenue bond issues of $21.0 million, reductions in accounts payable and
consumption of advanced capital appropriations resulted in total liabilities increasing by only
$1.0 million. Each of these changes is discussed in more detail in the sections that follow.
Working capital (current assets less current liabilities) over the past year increased from $32.6
million to $40.1 million. Working capital at year end represents 27 days of operating expenses,
as compared to 23 days in 2003. The improvement can be attributed primarily to the increase in
tuition revenue.
Net accounts receivable decreased 23 percent, from $74.9 million at June 30, 2003 to $58.0
million at June 30, 2004. The decrease is primarily due to capital project receivables decreasing
by $10.6 million to $11.7 million at June 30, 2004. The other components of accounts receivable
consist of those from operations, such as tuition and fees and sponsored programs (primarily
research). Days of operating revenue in accounts receivable from operations decreased from 70
in 2003 to 56 in 2004. Management is continuing to work on improving the billing and collection
process. See Note 4 of the financial statements for accounts receivable detail.
The decrease in accounts payable from $20.7 million at June 30, 2003 to $13.2 million at June 30,
2004 is a reflection of the decrease in capital construction activity in process at year end. At June
30, 2004, construction activity constituted about half, or $6.7 million, of the accounts payable
balance and in the prior year it represented $10.4 million. The remaining accounts payable
balance represents amounts due for recurring supplies and services for operations.
Capital appropriations advanced from the state prior to expenditure totaled $8.6 million at June
30, 2004, down from $14.7 million at June 30, 2003. This decrease was primarily due to the
2
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
expenditure of $5.5 million for the Hutchison Career Center expansion and renovation, which
was nearly complete at June 30, 2004. Further discussion of capital activity is in the Capital and
Debt Activities section that follows.
Unrestricted net assets increased $13.6 million from June 30, 2003 to June 30, 2004. At year end,
$37.9 million of the $54.5 million total is designated by the Board of Regents for specific
purposes or otherwise limited by contractual agreements with external parties. See Note 2 of the
financial statements for a detailed list of these designations.
Fiscal Year 2003 Comparisons (Statement of Net Assets)
For comparative purposes, significant comments about changes between 2002 and 2003 that were
noted in fiscal year 2003 Management’s Discussion and Analysis are summarized below:
Major changes from 2002 to 2003 on the Statement of Net Assets include those with accounts
receivable, working capital and accounts payable. Net accounts receivable increased 19 percent,
from $62.9 million at June 30, 2002, to $74.9 million at June 30, 2003. The growth was
primarily due to the increase in receivables from cost reimbursable construction contracts, which
grew from $8.9 million in 2002 to $22.3 million in 2003. Working capital (current assets less
current liabilities) increased from $26.8 million at June 30, 2002 to $32.6 million at June 30,
2003. Working capital at June 30, 2003 represented 23 days of operating expenses, as compared
to 20 days in 2002. The improvement could be attributed to a reduced level of spending in
anticipation of increases in benefit rates for health care and anticipation of less growth in annual
state appropriations in future years. The increase in accounts payable from $10.8 million at June
30, 2002 to $20.7 million and June 30, 2003 was a reflection of the significant capital
construction activity in process at June 30, 2003. Accounts payable for construction activity
constituted about half, or $10.4 million, of the accounts payable balance at June 30, 2003.
Statement of Revenues, Expenses and Changes in Net Assets
The Statement of Revenues, Expenses and Changes in Net Assets presents the results of
operations for the university as a whole. Revenues, expenses and other changes in net assets are
reported as either operating or nonoperating. Significant recurring sources of university revenue,
such as state appropriations and investment earnings, are defined by GASB Statement No. 35 as
nonoperating. A summarized comparison of the university’s revenues, expenses and changes in
net assets for the years ended June 30, 2004, 2003 and 2002 follows (in thousands):
2004
2003
2002
Operating revenues
Operating expenses
Operating loss
Net nonoperating revenues
Loss before other revenues,
expenses, gains, or losses
Other revenues, expenses, gains or losses
Increase (decrease) in net assets
$ 299,677
(549,236)
(249,559)
230,706
$ 275,126
(528,148)
(253,022)
221,264
$ 244,303
(497,054)
(252,751)
195,723
(18,853)
86,570
67,717
(31,758)
79,640
47,882
(57,028)
44,556
(12,472)
Net assets at beginning of year
Net assets at end of year
782,514
$ 850,231
734,632
$ 782,514
747,104
$ 734,632
3
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
The Statement of Revenues, Expenses and Changes in Net Assets reflects an overall increase in
net assets of 8.7 percent, or $67.7 million. The primary factor for the increase in net assets is
attributed to $86.6 million revenue recognized from capital funding sources, such as state capital
appropriations. Revenue from capital sources is generally recognized as expenditures for capital
projects occur. Fiscal year 2004 represents a year of significant capital construction activity as
discussed further in the Capital and Debt Activities section which follows.
Student enrollment and tuition rate increases for the 2003-2004 academic year provided for gross
student tuition and fee revenue of $67.8 million in fiscal year 2004 as compared to $59.8 million
in fiscal year 2003. This was due in large part to a 10 percent increase in tuition rates for
academic year 2003-2004. Student full-time equivalent enrollment for Fall 2003 was 17,319, a
4.2 percent increase from the prior Fall period.
Endowment proceeds and investment income contributed positively to the increase in net assets
by providing $16.2 million in 2004 as compared to $11.8 million in 2003. A significant
component of these amounts is investment income, generated from the endowment principal.
Total return from the endowment was approximately 14 percent, or $10.6 million, in 2004 as
compared to a 1 percent return, or $0.9 million, in the prior year. The other major component in
this category is yield from, or sales of, trust land, timber and mineral interests, the net proceeds of
which are required to be deposited to the land grant endowment trust fund. These sources
generated revenue of $5.6 million in 2004 as compared to $10.9 million in 2003. The decrease
was primarily due to poor market conditions for timber production leading to decreased timber
sales.
State of Alaska general fund appropriations continue to be the single major source of revenue for
the university, providing $217.7 million in 2004, as compared to $211.2 million in 2003.
Historically, the Legislature has funded the university at an amount equal to or above the prior
period’s appropriation.
A comparison of operating and nonoperating revenues by source for fiscal year 2004, 2003 and
2002 follows:
Operating and Nonoperating Revenues (excluding capital) by Year
40.7%
42.2%
45.2%
State appropriations
27.6%
26.2%
25.5%
Government grants and contracts
11.5%
10.9%
11.0%
Tuition and fees, net
Private grants and contracts
4
6.8%
7.7%
7.9%
Auxiliary enterprises, net
6.5%
6.5%
6.7%
Other
6.9%
6.5%
3.9%
FY2004 (total revenue = $535.3 million)
FY2003 (total revenue = $500.4 million)
FY2002 (total revenue = $446.3 million)
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
Revenues from federal and other sources for sponsored research and education-related programs
increased 9 percent, from $169.9 million in 2003 to $184.4 million in 2004. Facility and
administrative cost recovery provided $29.7 million in 2004 as compared to $26.5 million in
2003. This increased funding enables the university to expand existing programs and start new
programs, like those in fisheries, data analysis and basic research. In addition to supporting new
programs, facility and administrative cost recovery reimburses the university for facilities and
administrative costs necessary to operate and support sponsored programs, and provides cash
flow to service debt on, and renew, research facilities.
A comparison of operating expenses by functional and natural classification for selected fiscal
years follows (see Note 16 of the financial statements for more information):
Fiscal Year 2004
Functional Classification
Student aid
2%
Academic
support 7%
Public service
5%
Student
services 6%
Research 21%
Instruction
26%
Depreciation
11%
Instruction
Student Services
Student Aid
Academic Support
Public Service
Research
Operations and Maintenance
Institutional Support
Auxiliary Enterprises
Depreciation
Auxiliary
enterprises 6%
Operations
and
maintenance
7%
Institutional
support 9%
Operating Expenses
Functional Classification (in millions)
FY2004
FY2003
FY2002
$144.1 26.2%
$134.2
25.4%
$124.0
24.9%
33.0
6.0%
31.3
5.9%
28.7
5.8%
13.0
2.4%
10.4
2.0%
9.4
1.9%
37.1
6.8%
34.3
6.5%
30.4
6.1%
26.2
4.8%
25.0
4.7%
22.3
4.5%
112.0
20.4%
107.6
20.4%
97.2
19.6%
39.2
7.0%
40.3
7.7%
42.2
8.5%
50.3
9.2%
53.5
10.1%
56.1
11.3%
33.8
6.2%
31.8
6.0%
28.9
5.8%
60.5
11.0%
59.7
11.3%
57.8
11.6%
$528.1 100.0%
$497.0 100.0%
$549.2 100.0%
5
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
Fiscal Year 2004
Natural Classification
Contractual
services 19%
Salaries and
employee
benefits 58%
Supplies and
materials
10%
Student aid
2%
Depreciation
11%
Salaries and Employee Benefits
Contractual Services
Supplies and Materials
Student Aid
Depreciation
Operating Expenses
Natural Classification (in millions)
FY2004
FY2003
FY2002
$319.2 58.1%
$300.9
57.0%
$275.4
55.4%
102.1
18.6%
105.3
19.9%
100.8
20.3%
54.4
9.9%
51.8
9.8%
53.6
10.8%
13.0
2.4%
10.4
2.0%
9.4
1.9%
60.5
11.0%
59.7
11.3%
57.8
11.6%
$528.1 100.0%
$497.0 100.0%
$549.2 100.0%
Fiscal Year 2003 Comparisons (Statement of Revenues, Expenses and Changes in Net Assets)
For comparative purposes, significant comments about changes between 2002 and 2003 that were
noted in fiscal year 2003 Management’s Discussion and Analysis are summarized below:
The Statement of Revenues, Expenses and Changes in Net Assets reflected an overall increase in
net assets of 6.5 percent, or $47.9 million, from 2002 to 2003. The significant factors affecting
the fiscal year 2003 increase in net assets included $79.6 million revenue recognized from capital
funding sources, such as state capital appropriations and bond proceeds, which exceeded
depreciation expense of $59.7 million. Endowment proceeds and investment income also
contributed positively to the increase in net assets by providing $11.8 million in 2003 as
compared to a loss of $1.8 million in 2002. Total return from the consolidated fund was
approximately 1 percent in 2003 as compared to a loss of 7 percent in 2002.
6
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
Other major revenue sources include state general fund appropriations, sponsored programs and
tuition revenue. State general fund appropriations increased to $211.2 million in 2003, as
compared to $201.6 million in 2002. Sponsored program revenue, primarily from research and
education related programs, increased 14 percent, from $148.8 million in 2002 to $169.9 million
in 2003. Facility and administrative cost recovery provided $26.5 million in 2003 as compared to
$22.7 million in 2002. Student enrollment and tuition rate increases for the 2002-2003 academic
year provided for gross student tuition and fee revenue of $59.8 million in fiscal year 2003 as
compared to $54.2 million in fiscal year 2002. Student full-time equivalent enrollment for Fall
2002 was 16,624, an 8.1 percent increase from the prior Fall period. Tuition rates increased 3.2
percent for academic year 2002-2003, roughly equal to the estimated inflationary impact on the
costs of providing higher education.
Capital and Debt Activities
The University of Alaska has continued to modernize various facilities and to build new facilities
to address emerging state needs. Net capital additions totaled $110.8 million in 2004, as
compared with $104.2 million in 2003 and $50.1 million in 2002. These capital additions
primarily comprise replacement, renovation and new construction of academic and research
facilities, as well as investments in equipment and information technology. At June 30, 2004,
$57.7 million remains unexpended from current and prior year capital appropriations and general
revenue bond proceeds, of which $20.8 million is committed to existing construction contracts.
The balance is for projects still in design or preconstruction, or is held for contingencies for work
in progress. At June 30, 2004, $9.6 million in private gifts and grants for construction of the
University of Alaska Museum addition and renovation remain unexpended. Such gifts, held by
the University of Alaska Foundation, will be received by the university on a reimbursement basis
during the museum construction.
Construction in progress at June 30, 2004 totaled $72.1 million. Major new facility construction
in progress at year end includes the University of Alaska Museum addition and renovation in
Fairbanks, the Hutchison Career Center renovation and expansion in Fairbanks, and the
University of Alaska Southeast Joint Readiness Center in Juneau.
At June 30, 2004, total debt outstanding was $113.1 million, comprised of $84.4 million in
general revenue bonds, $27.8 million in notes payable, and $0.9 million in lease finance
contracts. In December 2003, Moody's Investors Service affirmed its previous university credit
rating of A1 with stable outlook. In December 2003, Standard & Poor’s affirmed its rating of
AA- for bonds backed by its broad general revenue pledge. The University has maintained these
ratings since its general revenue issues were first rated in 1992.
The university had two general revenue bond issues in 2004 totaling $21,040,000. The Series L
bond issue totaled $9,970,000 and matures on October 1, 2030, bearing interest at rates ranging
from 3 percent to 4.7 percent. Series L bond proceeds totaling $7,780,000 are being used for
capital improvement projects, while the remaining $2,190,000 was used to redeem all of 1993
Series F general revenue bonds. The Series M bond issue totaled $11,070,000. The bonds
mature on October 1, 2028 and bear interest at rates ranging from 3.25 percent to 4.75 percent.
Series M bond proceeds totaling $8,680,000 are being used for capital improvement projects and
acquisition of real estate, and the remaining $2,390,000 was used to refinance a deed of trust note
originally issued for the purchase of two buildings located in Anchorage.
7
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Unaudited – see accompanying accountants’ report)
Bonds were issued in prior years to finance construction of student residences at three campuses,
the West Ridge Research Building, a student recreation center, a research facility to house the
International Arctic Research Center, the acquisition and renovation of several properties adjacent
to the university’s campuses, additions to the university’s self-operated power, heat, water and
telephone utility systems in Fairbanks, and to refund previously issued general revenue bonds and
other contractual obligations in order to realize debt service savings.
The university has traditionally utilized both tax exempt and non-tax exempt equipment lease
financings to provide for its capital needs or to facilitate systematic renewals. Short-term lines of
credit are available to provide interim cash flow financing for facilities intended to be funded
with general revenue bond proceeds.
Other Economic and Financial Conditions
The following is a description of currently known facts, decisions, or conditions that are expected
to have a significant effect on the financial position (net assets) or results of operations (revenues,
expenses, and other changes in net assets) of the university.
At their September 2003 meeting, the Board of Regents approved a 10 percent increase in tuition
for resident students (20 percent for non-residents) for the 2004 - 2005 academic year. During
Spring semester 2005, the administration will institute a network charge equal to 2 percent of
tuition that will be used to fund information technology network access and maintenance. At
their September 2004 meeting, the Board of Regents approved a 10 percent increase in tuition for
the 2005 – 2006 academic year.
Substantially all regular university employees participate in either the State of Alaska Public
Employees’ Retirement System (PERS), the State of Alaska Teachers’ Retirement System (TRS),
or the University of Alaska Optional Retirement Plan (ORP). Based on actuarial studies
completed as of June 30, 2003, the university’s funded ratio (actuarial value of plan assets to
actuarial accrued liability) for PERS was 75 percent. Unlike PERS, TRS does not maintain
individual employer funded ratios, however, the overall TRS funded ratio as actuarially
determined at June 30, 2003 was 64 percent. The low funded ratios can be attributed primarily to
rising health care costs for plan participants and declines in investment returns in prior years. In
April 2004, the PERS and TRS boards set the university’s contribution rates for fiscal year 2006
at 15.58 percent and 21.0 percent of applicable gross pay for PERS and TRS, respectively. This
is an increase from fiscal year 2005 rates of 10.58 percent and 16.0 percent. See Note 12 of the
financial statements for more information regarding pension plans.
For fiscal year 2005, state appropriations for operations and debt service reimbursement total
$232.6 million, and include an $11.7 million incremental increase from the prior year to meet the
rising cost of the PERS and TRS employer contributions and other salary increases. Ongoing
state budget requests include funding for the fiscal year 2006 rise in the retirement plans’
employer contribution rates in addition to a 5 percent increase from base state funding. The level
of annual state appropriation funding is conditional upon the legislative process, which is directly
influenced by current economic conditions and other factors. The university continues to seek
additional revenues from sources other than state appropriations, to decrease its reliance on state
appropriations as a percent of total revenue.
8
KPMG LLP
Suite 600
701 West Eight Avenue
Anchorage, AK 99501
Telephone 907 265 1200
Fax
907 265 1296
Independent Auditors’ Report
The Board of Regents
University of Alaska:
We have audited the accompanying basic financial statements of the University of Alaska (University), a
component unit of the State of Alaska, as of and for the years ended June 30, 2004 and 2003 as listed in the
table of contents. These financial statements are the responsibility of the university’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America and Government Auditing Standards issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the University of Alaska at June 30, 2004 and 2003, and the changes in its financial
position and its cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
As discussed in note 1 to the financial statements effective July 1, 2002, the University of Alaska adopted
Governmental Accounting Standards Board (GASB) Statement No. 39, Determining Whether Certain
Organizations Are Component Units.
In accordance with Government Auditing Standards, we have also issued our report dated
September 30, 2004 on our consideration of the University of Alaska’s internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to provide
an opinion on the internal control over financial reporting or on compliance. That report is an integral part
of an audit performed in accordance with Government Auditing Standards and should be considered in
assessing the results of our audit.
The Management’s Discussion and Analysis, on pages 1 through 8 is not a required part of the basic
financial statements but is supplementary information required by accounting principles generally accepted
in the United States of America. We have applied certain limited procedures, which consisted principally
of inquiries of management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion on it.
September 30, 2004
KPMG LLP, a U.S. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
9
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10
UNIVERSITY OF ALASKA
(A Component Unit of the State of Alaska)
Statements of Net Assets
June 30, 2004 and 2003
(in thousands)
Assets
Currents assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowance
of $3,990 in 2004 and $4,118 in 2003
Other assets
Inventories
2004
$
Total current assets
Noncurrent assets:
Restricted cash and cash equivalents
Notes receivable
Endowment investments
Endowed land and other assets
Long-term investments
Assets held in trust
Capital assets, net of accumulated depreciation
of $493,386 in 2004 and $439,489 in 2003
Total noncurrent assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Accrued expenses
Accrued payroll
Deferred revenue
Accrued annual leave
Deferred lease revenue - current portion
Long-term debt - current portion
Insurance and risk management
Deposits from students and others
41,815
1,231
2003
$
22,147
1,215
57,974
640
8,061
74,926
1,254
7,644
109,721
107,186
19,164
5,212
93,834
38,358
20,694
5,698
21,577
5,802
81,579
38,953
20,350
5,458
760,757
703,855
943,717
877,574
1,053,438
984,760
13,246
4,156
13,563
3,553
8,152
1,281
4,855
18,591
2,234
20,677
3,576
11,486
3,331
7,968
1,281
4,354
19,421
2,453
Total current liabilities
Noncurrent liabilities:
Capital appropriation advances
Deferred lease revenue
Long-term debt
Security deposits and other liabilities
69,631
74,547
8,633
11,209
108,239
5,495
14,684
12,490
95,961
4,564
Total noncurrent liabilities
133,576
127,699
203,207
202,246
648,016
602,274
1,512
259
4,843
2,925
3,092
23,960
111,142
54,482
850,231
1,551
716
5,463
3,584
3,283
16,505
108,303
40,835
782,514
Total liabilities
Net Assets
Invested in capital assets, net of related debt
Restricted:
Expendable:
Restricted funds
Student loan funds
Education Trust of Alaska
Capital projects
Debt service
Endowment
Nonexpendable
Unrestricted (see Note 2)
Total net assets
$
$
The accompanying notes are an integral part of the financial statements.
11
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12
UNIVERSITY OF ALASKA FOUNDATION
(A Component Unit of the University of Alaska)
Statements of Financial Position
June 30, 2004 and 2003
(in thousands)
2004
Assets
Cash and cash equivalents
Interest receivable
Short term investments
Contributions receivable
Escrows receivable
Inventory
Other assets
Remainder trust receivable
Pooled endowment funds
Other long term investments
Total assets
2003
$
3,662
281
48
7,621
621
74
410
391
69,246
46,658
$
2,802
270
8,499
692
78
434
407
55,386
47,362
$
129,012
$
115,930
$
3,631
36
158
1,000
4,825
$
1,617
5
172
1,000
2,794
Liabilities
Due to the University of Alaska
Other liabilities
Remainder trust obligations
Term endowment liability
Total liabilities
Net Assets
Unrestricted
Temporarily restricted
Permanently restricted
Total net assets
Total liabilities and net assets
29,439
50,962
43,786
124,187
$
129,012
25,943
47,579
39,614
113,136
$
The accompanying notes are an integral part of the financial statements.
115,930
13
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14
UNIVERSITY OF ALASKA
(A Component Unit of the State of Alaska)
Statements of Revenues, Expenses and Changes in Net Assets
For the Years Ended June 30, 2004 and 2003
(in thousands)
2004
Operating revenues
Student tuition and fees
less tuition allowances
$
67,756
(6,260)
2003
$
59,825
(5,256)
61,496
133,897
10,520
3,313
36,641
2,758
705
3,415
54,569
115,996
11,775
3,547
38,617
2,214
705
3,681
34,605
12,327
32,283
11,739
299,677
275,126
144,115
37,095
112,013
26,216
33,002
39,184
50,290
13,052
33,786
60,483
549,236
134,192
34,279
107,615
24,967
31,323
40,291
53,529
10,441
31,827
59,684
528,148
(249,559)
(253,022)
217,745
1,674
16,187
(3,394)
(1,506)
211,152
2,411
11,745
(2,936)
(1,108)
Net nonoperating revenues
230,706
221,264
Loss before other revenues, expenses, gains or losses
(18,853)
(31,758)
86,570
79,640
67,717
47,882
782,514
850,231
734,632
782,514
Federal grants and contracts
State grants and contracts
Local grants and contracts
Private grants and contracts
Federal appropriations
Local appropriations
Sales and services, educational departments
Sales and services, auxiliary enterprises, net of tuition allowances
of $1,298 in 2004 and $1,151 in 2003
Other
Total operating revenues
Operating expenses
Instruction
Academic support
Research
Public service
Student services
Operations and maintenance
Institutional support
Student aid
Auxiliary enterprises
Depreciation
Total operating expenses
Operating loss
Nonoperating revenues (expenses)
State appropriations
Investment earnings
Endowment proceeds and investment income
Interest on debt
Other nonoperating expenses
Capital appropriations, grants and contracts
Net increase in net assets
Net assets
Net assets - beginning of year
Net assets - end of year
$
The accompanying notes are an integral part of the financial statements.
$
15
UNIVERSITY OF ALASKA FOUNDATION
(A Component Unit of the University of Alaska)
Statements of Activities
For the Years Ended June 30, 2004 and 2003
(in thousands)
Unrestricted
Temporarily
Restricted
Permanently
Restricted
$
$
$
2004
Revenues, gains and other support
Contributions
Investment income
Net realized and unrealized investment gains (losses)
Other revenues
Actuarial adjustment of remainder trust obligations
Gains (losses) on disposition of other assets
Transfers from the University of Alaska
Net assets released from restriction
Total revenues, gains and other support
1,317
1,401
1,752
5
11,360
8,833
1,514
4,216
124
96
1
(11,360)
4,016
(25)
(1)
142
-
$
14,166
2,915
5,968
129
(25)
95
143
-
15,835
3,424
4,132
23,391
282
12,058
-
-
282
12,058
12,340
-
-
12,340
3,495
3,424
4,132
11,051
41
41
-
Expenses and distributions
Operating expenses
Distributions for the benefit of the University of Alaska
Total expenses and distributions
Excess of revenues over expenses
Transfers between net asset classes
-
Total transfers
-
Increase (decrease) in net assets
Net assets, beginning of year
Net assets, end of year
16
(41)
(41)
$
-
3,495
3,383
4,173
11,051
25,944
47,578
39,614
113,136
29,439
$
50,961
$
The accompanying notes are an integral part of the financial statements.
43,787
$
124,187
Unrestricted
Temporarily
Restricted
Permanently
Restricted
$
$
$
$
1,200
1,485
(144)
9
92
9,553
10,183
993
719
90
(1)
24
(9,553)
1,983
4
(17)
-
2003
$
13,366
2,478
575
94
(18)
9
116
-
12,195
2,455
1,970
16,620
230
8,687
-
-
230
8,687
8,917
-
-
8,917
3,278
2,455
1,970
7,703
-
4,010
(4,010)
-
-
4,010
(4,010)
-
3,278
6,465
(2,040)
7,703
22,666
41,113
41,654
25,944
$
47,578
$
39,614
105,433
$
113,136
The accompanying notes are an integral part of the financial statements.
17
UNIVERSITY OF ALASKA
(A Component Unit of the State of Alaska)
Statements of Cash Flows
For the Years Ended June 30, 2004 and 2003
(in thousands)
2004
Cash flows from operating activities
Student tuition and fees, net
Grants and contracts
Sales and services, educational departments
Sales and services, auxiliary enterprises
Federal appropriations
Local appropriations
Other operating receipts
Payments to employees for salaries and benefits
Payments to suppliers
Payments to students for financial aid
$
$
53,911
171,403
3,680
32,666
2,214
705
10,418
(299,886)
(154,653)
(10,381)
Net cash used by operating activities
(182,782)
(189,923)
Cash flows from noncapital financing activities
State appropriations
Other revenue, net
Direct lending receipts
Direct lending payments
217,050
45
51,397
(51,815)
211,401
170
45,418
(45,920)
216,677
211,069
90,875
21,134
(4,392)
(122,016)
(4,486)
(4,002)
69,335
33,515
(3,885)
(102,479)
(3,650)
(3,302)
(22,887)
(10,466)
9,340
(10,466)
608
6,765
3,776
(9,137)
709
10,763
6,247
6,111
Net increase in cash and cash equivalents
17,255
16,791
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
43,724
60,979
26,933
43,724
Net cash provided by noncapital financing activities
Cash flows from capital and related financing activities
Capital appropriations, grants and contracts
Proceeds from issuance of capital debt
Redemption of general revenue bonds
Purchases of capital assets
Principal paid on capital debt and leases
Interest paid on capital debt and leases
Net cash used by capital and related financing activities
Cash flows from investing activities
Proceeds from sales and maturities of investments
Purchase of investments
Interest received on investments
Interest and other sales receipts from endowment assets
Net cash provided by investing activities
Cash and cash equivalents (current)
Restricted cash and cash equivalents (noncurrent)
Total cash and cash equivalents
18
61,900
190,920
3,415
34,554
2,758
705
11,046
(316,830)
(158,595)
(12,655)
2003
$
$
$
41,815
19,164
60,979
The accompanying notes are an integral part of the financial statements.
$
$
$
22,147
21,577
43,724
UNIVERSITY OF ALASKA
(A Component Unit of the State of Alaska)
Statements of Cash Flows
For the Years Ended June 30, 2004 and 2003
(in thousands)
Reconciliation of operating loss to net cash used by
operating activities:
Operating loss
Adjustments to reconcile operating loss to net cash used by
operating activities:
Depreciation expense
Changes in assets and liabilities:
Accounts receivable, net
Other assets
Inventories
Accounts payable
Accrued expenses
Accrued payroll
Deferred revenue
Accrued annual leave
Deferred lease revenue - current portion
Insurance and risk management
Deposits from students and others
Net cash used by operating activities
2004
2003
$ (249,559)
$ (253,022)
60,483
7,038
713
(417)
(2,401)
951
2,077
222
183
(1,281)
(830)
39
$ (182,782)
59,684
1,048
(40)
(738)
3,472
(236)
1,011
(148)
405
(1,281)
(157)
79
$ (189,923)
Noncash Investing, Capital and Financing Activities:
For the Year Ended June 30, 2004
Additions to capital assets include $5.5 million expended and capitalized but not paid for at year end.
The university purchased equipment through a lease purchase contract totaling $0.6 million.
Losses on equipment disposals totaled $0.5 million.
Interest expense on general revenue bond financed projects totaling $0.6 million was capitalized
during the year.
For the Year Ended June 30, 2003
Additions to capital assets include $7.7 million expended and capitalized but not paid for at year end.
The university purchased equipment through a lease purchase contract totaling $0.4 million.
Losses on equipment disposals totaled $0.8 million.
The State of Alaska transferred the Tanana Valley Campus Barnette Street facility to the university
with a fair market value of $2.7 million.
The accompanying notes are an integral part of the financial statements.
19
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
1.
Organization and Summary of Significant Accounting Policies:
Organization and Basis of Presentation:
The University of Alaska (university) is a constitutionally created corporation of the State of Alaska
which is authorized to hold title to real and personal property and to issue debt in its own name. The
university is a component unit of the State of Alaska for purposes of financial reporting. As an
instrumentality of the State of Alaska, the university is exempt from federal income tax under Internal
Revenue Code Section 115, except for unrelated business activities as covered under Internal Revenue
Code Sections 511 to 514.
The University of Alaska Foundation (foundation) is a legally separate, non profit component unit of
the university. The foundation was established to solicit donations and to hold and manage such assets
for the exclusive benefit of the university. Resources managed by the foundation and distributions
made to the university are governed by the foundation’s Board of Trustees. Commencing in fiscal year
2004, Governmental Accounting Standards Board (GASB) Statement No. 39, Determining Whether
Certain Organizations Are Component Units, requires the university to include the foundation as part
of its financial statements to better report resources benefiting the university. The university’s fiscal
year 2003 financial statements have been restated to conform to the requirements of GASB Statement
No. 39. The university is not accountable for, nor has ownership of, the foundation’s resources. The
foundation’s financial statements include the Statement of Financial Position and the Statement of
Activities and these statements are presented in their original audited format according to Financial
Accounting Standards Board (FASB) pronouncements.
In preparing the financial statements, management is required to make estimates that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the
statement of net assets. Actual results could differ from those estimates. The more significant
accounting and reporting policies and estimates applied in the preparation of the accompanying
financial statements are discussed below.
GASB Statement No. 35 establishes standards for external financial reporting for public colleges and
universities and requires that resources be classified for accounting and reporting purposes into the
following net asset categories:
•
Unrestricted Net Assets: Assets, net of related liabilities, which are not subject to externallyimposed restrictions. Unrestricted net assets may be designated for specific purposes by the
Board of Regents or may otherwise be limited by contractual agreements with outside parties.
•
Restricted Net Assets:
Expendable – Assets, net of related liabilities, which are subject to externally-imposed
restrictions that may or will be met by actions of the university and/or that expire with the
passage of time.
Non-expendable – Assets, net of related liabilities, which are subject to externally-imposed
restrictions requiring that they be maintained permanently by the university.
•
20
Invested in capital assets, net of related debt – Capital assets, net of accumulated
depreciation and outstanding principal balances of debt attributable to the acquisition,
construction or improvement of those assets.
NOTES TO FINANCIAL STATEMENTS
Summary of Significant Accounting Policies:
The accompanying financial statements have been prepared on the economic resources measurement
focus and the accrual basis of accounting. All significant intra-university transactions have been
eliminated. The university reports as a business type activity, as defined by GASB Statement No. 35.
Business type activities are those that are financed in whole or in part by fees charged to external
parties for goods or services.
The university has the option to apply all Financial Accounting Standards Board (FASB)
pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The university
has elected not to apply FASB pronouncements issued after the applicable date.
Cash and Cash Equivalents
All highly liquid investments, not held for long-term investment, with original maturities of three
months or less are reported as cash and cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or market.
Investments
Investments are stated at fair value. Investment securities are exposed to various risks, such as interest
rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is
at least reasonably possible that changes in the values of investment securities will occur in the near
term and that such changes could materially affect the amounts reported in the statement of net assets.
Long-term investments include those restricted by outside parties as to withdrawal or use for other than
current operations, or are designated for expenditure in the acquisition or construction of noncurrent
assets or held with an intent not to be used for operations.
Capital Assets
Capital assets are stated at cost when purchased and at fair value when donated. Equipment with a unit
value of less than $2,500 is not capitalized. Certain land and other resources acquired through land
grants and donated museum collections for which fair value at date of acquisition was not determinable
are reported at zero basis in the financial statements.
Depreciation is computed on a straight-line basis with useful lives of building and building components
ranging from 12 to 50 years, 10 to 35 years for infrastructure and other improvements, and 5 to 11 years
for equipment. Library and museum collections are not depreciated because they are preserved and
cared for and have an extraordinarily long useful life.
Endowments
Endowments consist primarily of the land grant endowment trust fund established pursuant to the 1929
federal land grant legislation and its related inflation proofing funds. AS 14.40.400 provides that the
net income from the sale or use of grant lands must be held in trust in perpetuity. At June 30, 2004 and
2003 the accumulated net earnings and appreciation on investments is $24.0 million and $16.5 million,
respectively. These amounts, which are recorded in the restricted expendable net asset category, are
available for expenditure in accordance with spending policies established by the Board of Regents in
its capacity as trustee. Alaska Statute 14.40.400 provides the Board of Regents with authority to
manage the endowments under the total return principles which are intended to preserve and maintain
the purchasing power of the endowment principal. The investable resources of the fund are invested in
the consolidated fund, a unitized investment fund. The annual spending allowance is currently based on
five percent of a five-year moving average of the invested balance. Withdrawals of net earnings
21
NOTES TO FINANCIAL STATEMENTS
appreciation to meet the spending allowance are limited to the unexpended accumulated net earnings of
the endowments.
Operating Activities
The university’s policy for defining operating activities as reported on the statement of revenues,
expenses and changes in net assets are those that generally result from exchange transactions such as
payments received for providing services and payments made for services or goods received. Certain
significant revenue streams relied upon for operations are recorded as non-operating revenues, as
defined by GASB Statement No. 35, including state appropriations and investment earnings.
Tuition Allowances
Student tuition and fee revenues and certain other revenues from students are reported net of tuition
allowances in the statement of revenues, expenses and changes in net assets. Tuition allowances are the
difference between the stated charge for tuition and room and board provided by the university and the
amount paid by the student and/or third parties making payments on the students’ behalf.
Lapse of State Appropriations
Alaska Statutes provide that unexpended balances of one-year appropriations will lapse on June 30 of
the fiscal year of the appropriation; however, university receipts in excess of expenditures may be
expended by the university in the next fiscal year. University receipts include student fees, donations,
sales, rentals, facilities and administrative cost recovery, auxiliary and restricted revenues. The
unexpended balances of capital appropriations lapse upon completion of the project or upon
determination that the funds are no longer necessary for the project.
2.
Unrestricted Net Assets:
At June 30, unrestricted net assets included the following (in thousands):
2004
Designated:
Auxiliaries
Working capital fund
Service centers
Renewal and replacement funds
Quasi-endowment funds
Employee benefit funds
Endowment earnings
Encumbrances
$
Total designated
Undesignated
Total unrestricted net assets
$
9,431
4,715
6,227
3,066
79
(1,065)
8,717
6,697
2003
$
9,529
4,715
4,473
2,578
79
(7,389)
7,108
7,159
37,867
16,615
28,252
12,583
54,482
$ 40,835
Unrestricted net assets include non-lapsing university receipts of $29.5 million at June 30, 2004. Nonlapsing university receipts of $24.2 million from 2003 were fully expended in 2004.
At June 30, 2004 and 2003, $38.9 million and $33.7 million, respectively, of auxiliary funds,
encumbrances and other unrestricted net assets were pledged as collateral for the university's general
revenue bonds, as calculated under the terms of the 1992 General Revenue Bonds Trust Indenture.
22
NOTES TO FINANCIAL STATEMENTS
3.
Cash and Investments:
Alaska Statutes and Board of Regents’ policy provide the university with broad authority to invest
funds. GASB requires that bank balances and investment securities be disclosed or classified by
category of credit risk as follows:
Deposits: Insured or collateralized with securities held by the university or its agent in the name of the
university (category 1); collateralized with securities held by the pledging financial institution's trust
department or agent in the name of the university (category 2); uncollateralized including collateralized
balances for which securities are held by the pledging financial institution or by its trust department or
agent but not in the name of the university (category 3).
Investment Securities: Insured or registered, with securities held by the university or its agent in
name of the university (category 1); Uninsured and unregistered, with securities held by
counterparty's (another party to the transaction, i.e. seller or dealer) trust department or agent in
name of the university (category 2); Uninsured and unregistered, with securities held by
counterparty's trust department or agent but not in the name of the university (category 3).
2004
2003
Book
Deposits (in thousands):
Insured or collateralized (Category 1):
Demand deposits
Time deposits
Uncollateralized (Category 3):
Demand deposits
Time deposits
Total deposits
Investment securities:
Insured and registered (Category 1)
Common stock
$
Bank
329
100
$
1,636
4,100
Other deposits and investments:
Money market funds
Commonfund, short and intermediate term funds
Commonfund, absolute return fund
Funds held by others:
Endowment funds
Bond proceeds and redemption funds
Total other deposits and investments
Book
319
100
$
Bank
304
100
$
302
100
11,683
4,100
(16,721)
4,100
736
4,100
$ 6,165 $ 16,202
$ (12,217)
$ 5,238
$
Uninsured and unregistered (Category 3)
Repurchase agreements
Total investment securities
the
the
the
the
2
$
7,268
2
16,399
$
7,270
$
16,401
$
62
41,729
13,400
$
120
35,227
12,816
91,822
16,290
79,555
14,966
$ 163,303
$ 142,684
Deposits reported in Category 1 by the university were insured by federal depository insurance.
Deposits and investments reported in Category 3 were secured under a tri-party agreement with Bank of
New York to hold the collateral for the benefit of the university; however, the securities are not held in
the name of the university. At June 30, 2004 and 2003, securities with an estimated fair value of $24.0
million and $26.4 million were held as collateral under the tri-party agreement. Time deposits consist
23
NOTES TO FINANCIAL STATEMENTS
of a non-interest bearing deposit in the amount of $4.2 million maintained as a compensating balance in
exchange for banking services.
Repurchase agreements represent overnight investments secured under tri-party agreements with
various bank trust departments to hold the collateral for the benefit of the university; however, the
securities are not held in the name of the university. The Commonfund is a not-for-profit provider of
pooled multi-manager investment vehicles for colleges and universities. Endowment funds are
managed by the University of Alaska Foundation under a consolidated fund agreement. Bond proceeds
and related redemption funds are held by bank trustees in accordance with debt covenants.
Certain funds held in trust for the benefit of the university are not included in the financial statements as
the university has only limited control over their administration. These funds are in the custody of
independent fiduciaries and at June 30, 2004 and 2003, had an estimated fair value of approximately
$6.9 million and $6.5 million, respectively.
4.
Accounts Receivable:
Accounts receivable consisted of the following at June 30, 2004 and 2003 (in thousands):
June 30, 2004
Student tuition and fees
Sponsored programs
Auxiliary services and other operating activities
Capital appropriations, grants and contracts
State operating appropriation
Gross
Allowance
6,911
42,032
632
11,693
696
$ (1,669)
(2,168)
(153)
-
$
$ 61,964
$ (3,990)
$ 57,974
$
6,718
49,014
1,009
22,302
1
$ (1,368)
(2,600)
(150)
-
$
$ 79,044
$ (4,118)
$ 74,926
$
Net
5,242
39,864
479
11,693
696
June 30, 2003
Student tuition and fees
Sponsored programs
Auxiliary services and other operating activities
Capital appropriations, grants and contracts
State operating appropriation
5.
5,350
46,414
859
22,302
1
Assets Held in Trust:
Assets held in trust include operating funds of the Education Trust of Alaska (Trust). The Trust was
established pursuant to state statute on April 20, 2001 by the Board of Regents to facilitate
administration of the state’s Internal Revenue Code (IRC) Section 529 College Savings Program. The
program is a nationally marketed college savings program developed in accordance with IRC Section
529 and includes the resources of the university’s former Advance College Tuition (ACT) Program.
Participant account balances of approximately $1,217 million and $714 million at June 30, 2004 and
2003, respectively, are not included in the financial statements.
Assets of the Trust are invested in various mutual funds at the direction of T. Rowe Price Associates,
Inc., the program manager. The net assets of the Trust, which include a reserve for University of
Alaska (UA) Tuition Value Guarantees, are available for payment of program administrative costs,
benefits and other purposes of the Trust. Based on actuarial studies, management estimates reserve
requirements for the UA Tuition Value Guarantees to be approximately $860,000 and $950,000 at June
30, 2004 and 2003, respectively.
24
NOTES TO FINANCIAL STATEMENTS
6.
Endowed Land and Other Assets:
Endowed land and other assets consist of real property and timber and other rights. By Acts of
Congress in 1915 and 1929, approximately 110,000 acres of land was granted to the territory of Alaska
to be held in trust for the benefit of the university. The lands were managed by the territory, and later
the state of Alaska. In accordance with a 1982 agreement, the lands were subsequently transferred to
the Board of Regents, as trustee. In 1982 and 1988 certain state lands including timber and other rights
were transferred to the trust as replacement for lands disposed of or adversely affected during the period
of administration by the territory and the state. These lands and property interests were recorded at
their fair value as of the date of transfer. The net proceeds from timber, land and other rights are
deposited in the land grant endowment trust fund described under Endowments in Note 1 above. At
June 30, 2004 and 2003, approximately 84,000 and 86,000 acres, respectively, were held in trust at no
basis because fair value at the date of transfer was not determinable.
7.
Capital Assets:
A summary of capital assets follows (in thousands):
Balance
July 1, 2003
Capital assets not depreciated
Land
Construction in progress
Library and museum collections
Other capital assets
Buildings
Infrastructure
Equipment
Leasehold improvements
Other improvements
Total
Less accumulated depreciation:
Buildings
Infrastructure
Equipment
Leasehold improvements
Other improvements
Total accumulated depreciation
Capital assets, net
$
25,949
94,212
47,917
Additions
$
Reductions
Balance
June 30, 2004
1,332
81,452
1,729
$
103,541
-
$
27,281
72,123
49,646
755,084
33,514
161,503
4,845
20,320
102,265
34,213
449
7,100
-
857,349
33,514
188,616
4,845
20,769
1,143,344
221,440
110,641
1,254,143
304,452
21,191
100,250
1,857
11,739
38,786
1,189
19,189
242
1,077
6,586
-
343,238
22,380
112,853
2,099
12,816
439,489
60,483
6,586
493,386
$ 703,855
$ 160,957
$ 104,055
$ 760,757
25
NOTES TO FINANCIAL STATEMENTS
Balance
July 1, 2002
Capital assets not depreciated
Land
Construction in progress
Library and museum collections
Other capital assets
Buildings
Infrastructure
Equipment
Leasehold improvements
Other improvements
$
24,303
52,942
46,347
1,799
82,007
1,570
$
153
40,737
-
26
25,949
94,212
47,917
755,084
33,514
161,503
4,845
20,320
1,039,127
153,986
49,769
1,143,344
262,875
19,648
93,319
1,615
10,402
41,620
1,543
14,942
242
1,337
43
8,011
-
304,452
21,191
100,250
1,857
11,739
387,859
59,684
8,054
439,489
$ 651,268
$ 94,302
$ 41,715
$ 703,855
Debt service requirements at June 30, 2004 were as follows (in thousands):
2005
2006
2007
2008
2009
2010-2014
2015-2019
2020-2024
2025-2029
2030-2031
$
43
1
8,835
-
Long-term Debt:
Year ended
June 30,
Balance
June 30, 2003
40,368
27,872
370
Total accumulated depreciation
8.
$
Reductions
714,759
33,515
142,466
4,845
19,950
Total
Less accumulated depreciation:
Buildings
Infrastructure
Equipment
Leasehold improvements
Other improvements
Capital assets, net
Additions
Principal
$
4,855
4,823
4,899
5,023
4,314
23,401
25,491
27,663
11,405
1,220
$
113,094
Interest
$
4,289
4,142
3,990
3,829
3,672
15,963
11,355
5,910
1,607
58
$ 54,815
Total
$
9,144
8,965
8,889
8,852
7,986
39,364
36,846
33,573
13,012
1,278
$ 167,909
NOTES TO FINANCIAL STATEMENTS
Long-term debt consisted of the following at June 30, 2004 and 2003 (in thousands):
Note payable – capital construction 1.826% assisted note
to the Alaska Housing Finance Corporation (AHFC) to
finance construction of Anchorage campus housing,
payable beginning August 1999 to February 2024. In
1996, the university entered into an agreement with AHFC
to borrow a total of $33 million, of which $30 million was
issued on an assisted basis with interest at 1.826% and an
additional $3 million issued on an unassisted basis at 6.0%
Note payable – quasi-endowment funds 5.0% note to
finance purchase of two buildings located on University
Lake Drive in Anchorage, refinanced in 2004 with
issuance of Series M revenue bonds
2004
2003
$
$ 28,831
27,734
-
2,357
Revenue bonds payable 1.40% to 5.90% general revenue
bonds due serially to 2031, secured by a pledge of
unrestricted current fund revenue generated from tuition,
fees, recovery of facilities and administrative costs, sales
and services of educational departments, miscellaneous
receipts and auxiliaries
84,430
68,465
Installment contracts 1.94% to 5.44% installment contracts
for the purchase of air traffic control simulation equipment
and vehicles due in quarterly installments through June
2008
930
662
$ 113,094
$ 100,315
On December 9, 2003, the university issued Series L general revenue bonds totaling $9,970,000. The
bonds mature on October 1, 2030 and bear interest at rates ranging from 3 percent to 4.7 percent.
Series L bond proceeds totaling $7,780,000 are being used for capital improvement projects, while the
remaining $2,190,000 was used to redeem all of 1993 Series F general revenue bonds. The current
refunding results in an economic gain of approximately $29,000 and total debt service payments over
four years decrease $51,000.
On January 8, 2004, the university issued Series M general revenue bonds totaling $11,070,000. The
bonds mature on October 1, 2028 and bear interest at rates ranging from 3.25 percent to 4.75 percent.
Series M bond proceeds totaling $8,680,000 are being used for capital improvement projects and
acquisition of real estate, and the remaining $2,390,000 was used to refinance a deed of trust note
originally issued for the purchase of two buildings located in Anchorage.
In fiscal year 2004, the state reimbursed the university for debt service of $1,412,928 on Series K
general revenue bonds. Subject to annual appropriation, the state will reimburse the university for
principal and interest on $20,400,000 of the remaining bond principal. Annual debt service on this
portion of the bonds is approximately $1.4 million.
27
NOTES TO FINANCIAL STATEMENTS
In prior years, the university defeased housing system revenue bonds and certain general revenue bonds
by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service
payments on the old bonds. Trust assets and related liabilities for the defeased bonds are not included
in the university’s financial statements. At June 30, 2004 and 2003, outstanding defeased bonds were
$0.4 million and $0.6 million, respectively.
Under the terms of the 1992 General Revenue Bonds Trust Indenture, the university is required to
maintain a reserve account with a trustee at an amount equal to one-half of the maximum annual debt
service. The balance in the reserve account at June 30, 2004 and 2003 was $3.6 million and $3.1
million, respectively. The reserve balance at June 30, 2004 includes a reserve fund policy, purchased
with the issuance of Series L, totaling $0.6 million.
9.
Deferred Lease Revenue:
In fiscal year 1997, the university entered into an agreement to construct a facility and establish the
International Arctic Research Center (IARC). The university received $19,215,000 through a Japanese
non-profit corporation to support the construction of the IARC in exchange for a commitment to
provide research facilities to various Japanese research organizations and agencies for a period of 25
years, including lease extensions. The Japanese research organizations began occupying the IARC in
fiscal year 1999. The deferred lease revenue at June 30, 2004 is $12,489,750 and is reduced at the rate
of $1,281,000 per year with a corresponding increase to other operating revenue.
10.
Long-term Liabilities:
Long-term liability activity was as follows (in thousands):
Amounts
Balance
Balance
due within
July 1, 2003 Additions Reductions June 30, 2004 one year
Capital appropriation advances
Deferred lease revenue
Long-term debt
Security deposits and other liabilities
$ 14,684 $ 7,282
13,771
100,315
21,658
4,564
931
$ 13,333
1,281
8,879
-
$
8,633
12,490
113,094
5,495
$ 133,334 $ 29,871
$ 23,493
$ 139,712
$
1,281
4,855
-
$ 6,136
Amounts
Balance
Balance
due within
July 1, 2002 Additions Reductions June 30, 2003 one year
Capital appropriation advances
Deferred lease revenue
Long-term debt
Security deposits on other liabilities
28
$
8,946 $ 6,949
15,051
73,929
33,921
5,670
113
$ 1,211
1,280
7,535
1,219
$ 14,684
13,771
100,315
4,564
$
1,281
4,354
-
$ 103,596 $ 40,983
$ 11,245
$ 133,334
$ 5,635
NOTES TO FINANCIAL STATEMENTS
11.
Capital Appropriations and Construction Commitments:
Major construction projects of the university are funded primarily by State of Alaska appropriations and
university revenue bonds. The appropriations are financed through state-issued general obligation
bonds or capital project bonds issued by the Alaska Housing Finance Corporation, a component unit of
the State of Alaska, while other appropriations are received directly from the state or state agencies.
Unexpended and unbilled capital funds appropriated by the State of Alaska in prior years, which are not
reflected as appropriation revenue or receivables on the university’s books at June 30, 2004, totaled
$47.5 million. In addition, unexpended proceeds of university-issued general revenue bonds designated
for construction projects totaled $10.2 million at June 30, 2004.
Construction commitments at June 30, 2004 aggregated $20.8 million. At June 30, 2004, the university
had received $8.6 million from State of Alaska capital appropriations and other sources in advance of
expenditures.
12.
Pension Plans:
Substantially all regular employees participate in either the State of Alaska Public Employees'
Retirement System (PERS), an agent multiple-employer public employees' retirement system, the State
of Alaska Teachers' Retirement System (TRS), a cost-sharing multiple-employer plan, or the University
of Alaska Optional Retirement Plan (ORP), a single-employer defined contribution plan. In addition,
substantially all regular employees and faculty classified as temporary participate in the University of
Alaska Pension Plan, a supplemental single-employer defined contribution plan. None of the retirement
systems or plans own any notes, bonds or other instruments of the university.
Defined Benefit Plans:
State of Alaska Public Employees’ Retirement System (PERS)
Plan Description
The university contributes to PERS, a defined benefit, agent multiple-employer public employee
retirement system established and administered by the State of Alaska (State). PERS provides pension,
postemployment health care, death and disability benefits to eligible participants. Benefit and
contribution provisions are established by State law and may be amended only by the State Legislature.
Each fiscal year, PERS issues a publicly available financial report which includes financial statements
and required supplementary information. That report may be obtained by writing to the State of
Alaska, Department of Administration, Division of Retirement and Benefits, P.O. Box 110203, Juneau,
Alaska, 99811-0203 or by calling (907)465-4460.
Funding Policy and Annual Pension Cost
Employee contribution rates are 7.5% for peace officers and firefighters and 6.75% for other
employees, as required by State statute. The funding policy for PERS provides for periodic employer
contributions at actuarially determined rates that, expressed as a percentage of annual covered payroll,
are sufficient to accumulate the assets to pay benefits when due.
29
NOTES TO FINANCIAL STATEMENTS
The university’s annual pension cost for the current year and related information is as follows:
Postemployment
healthcare
Pension
Contribution rates:
Employee:
Peace officers and firefighters
Other employees
Employer
Annual pension cost
Contributions made
5.27%
4.74%
3.92%
$4,729,156
$4,729,156
Actuarial assumptions:
Inflation rate
Investment return
Projected salary increase:
Inflation
Productivity and merit:
Peace officers and firefighters
Others
Health cost trend
Total
2.23%
2.01%
1.66%
7.50%
6.75%
5.58%
$2,002,717
$2,002,717
$6,731,823
$6,731,823
3.50%
8.25%
Same
Same
3.50%
N/A
2.50%
2.00%
N/A
N/A
N/A
12.0%
The actuarial valuation date was June 30, 2003. The projected unit cost credit method is used and the
initial unfunded accrued liability and future gains/losses are amortized as a 25-year fixed period level
percentage of pay. Effective June 30, 2002, the asset valuation method recognizes 20 percent of the
investment gain or loss in each of the current and preceding four years. This method will be phased in
over the next five years.
During 2004, the annual required contribution (ARC) and the amount contributed by the university for the
annual pension cost (APC) was $6,731,823. The university has fully funded its pension obligation;
therefore, no net pension obligation (NPO) existed at fiscal year end.
Three year trend information follows:
Pension:
Postemployment
Healthcare:
Year
ended
June 30
APC
Employer
contribution
rate
Percentage
of APC
contributed
NPO
2002
2003
2004
3,006,906
3,306,428
4,729,156
2.90%
2.90%
3.92%
100%
100%
100%
-
2002
2003
2004
1,219,245
1,340,695
2,002,717
1.18%
1.18%
1.66%
100%
100%
100%
-
In the current fiscal year, the University determined, in accordance with provisions of GASB Statement
No. 27, Accounting for Pensions by State and Local Governmental Employers (GASB 27), that no
pension liability existed to PERS and there were no previously reported liabilities to PERS.
30
NOTES TO FINANCIAL STATEMENTS
Pension and Postemployment Healthcare Benefits
(in thousands)
Actuarial
value
of plan
assets
Actuarial
accrued
liability
(AAL)
(Unfunded)
overfunded
actuarial
accrued
liability
(UAAL)
2001
360,222
2002
301,429
2003
313,807
Postemployment healthcare benefits:
2001
152,517
2002
183,143
2003
209,738
Total:
2001
512,739
2002
484,572
2003
523,545
331,693
402,604
419,463
28,529
(101,175)
(105,656)
109%
75%
75%
93,210
102,892
113,096
N/A
98%
93%
140,438
244,615
280,355
12,079
(61,472)
(70,617)
109%
75%
75%
93,210
102,892
113,096
N/A
60%
62%
472,131
647,219
699,818
40,608
(162,647)
(176,273)
109%
75%
75%
93,210
102,892
113,096
N/A
84%
81%
Actuarial
valuation
year ended
June 30
Funded
ratio
UAAL as a
percentage
of
Covered covered
payroll
payroll
Pension benefits:
State of Alaska Teachers’ Retirement System (TRS)
Plan Description
TRS provides pension, postemployment health care, death and disability benefits to participants.
Benefit and contribution provisions are established by State law and may be amended only by the State
Legislature.
Each fiscal year, TRS issues a publicly available financial report which includes financial statements
and required supplementary information. That report may be obtained by writing to the State of
Alaska, Department of Administration, Division of Retirement and Benefits, P.O. Box 110203, Juneau,
Alaska, 99811-0203 or by calling (907) 465-4460.
Funding Policy
Employees contribute 8.65% of their base salary as required by State statute. The funding policy for
TRS provides for periodic employer contributions at actuarially determined rates that, expressed as
percentages of annual covered payroll, are sufficient to accumulate sufficient assets to pay benefits
when due. During fiscal year 2004, required employee and employer contribution rates were 8.65%
and 12%, respectively. The amounts contributed to TRS by the university during the years ended June
30, 2004, 2003 and 2002 were $4,860,511, $4,281,511, and $4,196,154, respectively, equal to the
required employer contributions for each year.
Defined Contribution Plans:
University of Alaska Optional Retirement Plan (ORP)
Faculty classified as regular and certain administrators may make a one-time election to participate in
the ORP as an alternative to participation in PERS or TRS. The ORP is an employer funded defined
contribution plan which operates in conjunction with a companion mandatory tax-deferred annuity
plan. ORP participants are required to make employee contributions to one of the plan's authorized tax-
31
NOTES TO FINANCIAL STATEMENTS
deferred annuity programs at a rate equivalent to the TRS employee contribution rate of 8.65%. The
university makes matching employer contributions to one of the plan's authorized employee-selected
annuity providers or investment managers at a rate equal to the three-year moving average of the TRS
employer contribution rates (11.33% for FY04 and 11.33% for FY03). In fiscal year 2004 and 2003,
the university's total covered payroll for the ORP plan was approximately $50.9 million and $46.5
million, respectively. The amounts contributed to ORP by the university during the years ended June
30, 2004, 2003 and 2002 were $5,761,999, $5,266,348, and $4,729,946, respectively. At June 30, 2004
and 2003, plan assets (participants' accounts attributable to employer contributions) had a net value of
approximately $48.3 million and $38.6 million, respectively. Each participant is 100% vested at all
times.
University of Alaska Pension Plan (Pension)
In addition to the other retirement plans, substantially all regular employees and faculty classified as
temporary participate in the Pension plan which was established effective January 1, 1982, when the
university withdrew from the federal social security program. Effective January 1, 2004, employer
contributions for regular employees were 7.65% of covered wages up to a maximum of $42,000 and
$87,900 for certain faculty classified as temporary. The plan provides for employer contributions to be
invested in accordance with participant-directed investment elections to the plan's fixed income and/or
equity funds. Each participant is 100% vested at all times.
In 2004 and 2003, the university's total covered payroll for the Pension plan was approximately $165.2
million and $160.9 million, respectively. The university's costs to fund and administer the plan
amounted to approximately $12.7 million, or 7.66% of covered payroll. At June 30, 2004 and 2003,
plan assets (participants' accounts) had a net value of approximately $246.3 million and $214.5 million,
respectively.
13.
Insurance and Risk Management:
The university is exposed to a wide variety of risks including property loss, bodily and personal injury,
intellectual property, errors and omissions, aviation and marine. Exposures are handled with a
combination of self-insurance, commercial insurance, and membership in a reciprocal risk retention
group. The university is self-insured up to the maximum of $2 million per occurrence for casualty
claims and $250,000 for property claims. Commercial carriers provide coverage in excess of these
amounts. Health care, workers’ compensation and unemployment claims are fully self-insured.
Liabilities have been established to cover estimates for specific reported losses, estimates for unreported
losses based upon past experience modified for current trends, and estimates of expenses for
investigating and settling claims.
Changes in applicable liability amounts follow (in thousands):
Balance
July 1, 2003
Health
General liability
Workers’ compensation
Unemployment
32
Provision
for Claims
Claims
Payment
6,928
8,176
4,180
137
$ 34,127
189
1,645
620
$ (34,550)
(1,098)
(1,139)
(624)
$
$ 19,421
$ 36,581
$ (37,411)
$ 18,591
$
Balance
June 30, 2004
6,505
7,267
4,686
133
NOTES TO FINANCIAL STATEMENTS
Balance
July 1, 2002
Health
General liability
Workers’ compensation
Unemployment
14.
Provision
for Claims
Claims
Payment
7,563
7,885
4,012
118
$ 28,518
724
1,463
544
$ (29,153)
(433)
(1,295)
(525)
$
$ 19,578
$ 31,249
$ (31,406)
$ 19,421
$
Balance
June 30, 2003
6,928
8,176
4,180
137
Commitments and Contingencies:
Amounts received and expended by the university under various federal and state grants, contracts and
other programs are subject to audit and potential disallowance. From time to time the university is
named as a defendant in legal proceedings or cited in regulatory actions related to the conduct of its
operations. In the normal course of business, the university also has various other commitments and
contingent liabilities which are not reflected in the accompanying financial statements. In the opinion
of management, the university will not be affected materially by the final outcome of any present legal
proceedings, environmental investigations, audit adjustments, or other commitments and contingent
liabilities.
15.
University of Alaska Foundation:
The University of Alaska Foundation (foundation) is a legally separate, non profit organization formed
in 1974 to solicit donations for the exclusive benefit of the University of Alaska. During 2004 and
2003, the university transferred $142,544 and $115,157, respectively, to the foundation. For the same
periods, distributions and expenditures by the foundation for the benefit of the university totaled $12.1
million and $8.7 million, of which $11.9 million and $8.5 million were direct reimbursements to the
university. At June 30, 2004 and 2003 the foundation owed the university $3.6 million and $1.6
million, respectively, primarily for reimbursement of museum construction expenditures and other grant
and contract and scholarship expenditures. The university provides in-kind administrative and
accounting support for the foundation, the costs of which are included as expenditures in the
university's financial statements.
The investable resources of the university’s land grant endowment trust fund and the foundation’s
pooled endowment funds are combined into a consolidated fund (fund) for investment purposes. At
June 30, 2004 and 2003, the fair value of the fund was $161.1 million and $134.9 million, respectively.
The university’s share of this fund was $91.8 million and $79.6 million, which is reflected in
endowment investments. The fund is managed by the foundation’s investment committee and treasurer
on a total return basis in accordance with an investment policy approved by the Board of Regents. The
net assets and related activity for the university’s land grant endowment trust’s investment in the fund is
reflected in the university’s financial statements.
33
NOTES TO FINANCIAL STATEMENTS
16.
Functional Classifications with Natural Classifications:
The university’s operating expenses by natural classification were as follows (in thousands):
Year ended June 30, 2004
Compensation Contractual Supplies &
& Benefits
Services
Materials
Instruction
$ 116,128
Academic support
27,307
Research
70,009
Public service
17,179
Student services
23,787
Operations and
maintenance
19,877
Institutional support
37,444
Student aid
Auxiliary enterprises
7,438
Depreciation
$ 19,108
5,575
32,226
7,502
6,894
$ 8,501
4,144
9,653
1,546
2,303
7,567
9,321
13,897
-
11,135
3,271
12,160
-
$ 319,169
$ 102,090
$ 52,713
Other
$
Student
Aid
378 $
69
125
(11)
18
605
254
291
-
-
Depreciation
$
13,052
-
Total
- $ 144,115
37,095
- 112,013
26,216
33,002
60,483
39,184
50,290
13,052
33,786
60,483
$ 1,729 $ 13,052 $ 60,483 $ 549,236
Year ended June 30, 2003
Compensation Contractual Supplies &
& Benefits
Services
Materials
34
Instruction
$ 106,998
Academic support
24,404
Research
63,465
Public service
15,418
Student services
22,019
Operations and
maintenance
20,468
Institutional support
40,655
Student aid
Auxiliary enterprises
7,427
Depreciation
$ 18,957
5,162
35,726
8,301
7,178
$ 7,882
4,655
8,415
1,228
2,145
8,452
9,136
12,344
-
10,758
3,852
11,865
-
$ 300,854
$ 105,256
$ 50,800
Other
$
Student
Aid
355 $
58
9
20
(19)
613
(114)
191
-
10,441
-
Depreciation
$
Total
- $ 134,192
34,279
- 107,615
24,967
31,323
59,684
40,291
53,529
10,441
31,827
59,684
$ 1,113 $ 10,441 $ 59,684 $ 528,148
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UNIVERSITY OF ALASKA FOUNDATION
Financial Statements
June 30, 2004 and 2003
(With Independent Auditor’s Report Thereon)
UNIVERSITY OF ALASKA FOUNDATION
Table of Contents
Page
Statements of Financial Position
1
Statements of Activities
2
Statements of Cash Flows
4
Notes to Financial Statements
6
KPMG LLP
Suite 600
701 West Eighth Avenue
Anchorage. AK 99501
IndependentAuditors' Report
The Board of Trustees
University of Alaska Foundation:
We have audited the accompanying statements
as of June 30, 2004 and 2003, and the related
ended.
These financial statements are the
management. Our responsibility is to express
audits.
of financial position of the University of Alaska Foundation
statements of activities and cash flows for the years then
responsibility of the University of Alaska Foundation's
an opinion on these financial statements based on our
We conducted our audits in accordance with auditing standards generally accepted in the United States
America. These standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the University of Alaska Foundation at June 30, 2004 and 2003, and the changes in its
net assets and its cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
September 10, 2004
UNIVERSITY OF ALASKA FOUNDATION
STATEMENTS OF FINANCIAL POSITION
June 30, 2004 and 2003
Assets
2004
Cash and cash equivalents
Interest receivable
Short term investments
Contributions receivable
Escrows receivable
Inventory
Other assets
Remainder trust receivable
Pooled endowment funds
Other long term investments
Total assets
$
3,662,289
280,966
47,850
7,620,851
620,741
73,714
410,663
391,217
69,246,303
46,657,579
$
129,012,173
$
3,630,665
36,476
158,412
1,000,000
2003
$
2,801,684
270,403
8,498,955
692,426
77,737
433,805
407,399
55,385,807
47,361,970
$ 115,930,186
Liabilities
Due to the University of Alaska
Other liabilities
Remainder trust obligations
Term endowment liability
Total liabilities
$
1,616,707
5,429
172,102
1,000,000
4,825,553
2,794,238
29,438,405
50,961,840
43,786,375
25,943,362
47,578,633
39,613,953
124,186,620
113,135,948
129,012,173
$ 115,930,186
Net Assets
Unrestricted
Temporarily restricted
Permanently restricted
Total net assets
Total liabilities and net assets
$
The accompanying notes are an integral part of the financial statements.
1
UNIVERSITY OF ALASKA FOUNDATION
STATEMENTS OF ACTIVITIES
For the years ended June 30, 2004 and 2003
Temporarily
Restricted
Unrestricted
Permanently
Restricted
2004
Revenues, gains and other support
Contributions
$
1,317,502
Investment income
1,400,765
Net realized and unrealized investment gains (losses)
1,752,057
Other revenues
4,776
Actuarial adjustment of remainder trust obligations
Gains (losses) on disposition of other assets
Transfers from the University of Alaska
Net assets released from restriction
11,360,307
Total revenues, gains and other support
$
8,833,471
1,514,446
4,216,509
123,842
(155)
95,592
509
(11,360,307)
$
4,015,869
(25,642)
(540)
142,035
-
$
14,166,842
2,915,211
5,968,566
128,618
(25,797)
95,052
142,544
-
15,835,407
3,423,907
4,131,722
23,391,036
282,119
12,058,245
-
-
282,119
12,058,245
12,340,364
-
-
12,340,364
3,495,043
3,423,907
4,131,722
11,050,672
40,700
-
Expenses and distributions
Operating expenses
Distributions for the benefit of the University of Alaska
Total expenses and distributions
Excess of revenues over expenses
Transfers between net asset classes
Increase (decrease) in net assets
Net assets, beginning of year
Net assets, end of year
-
(40,700)
3,495,043
3,383,207
4,172,422
11,050,672
25,943,362
47,578,633
39,613,953
113,135,948
50,961,840
$ 43,786,375
$ 29,438,405
2
$
$
124,186,620
Temporarily
Restricted
Unrestricted
$
$
1,199,674
1,485,519
(143,991)
9,100
91,514
9,552,891
$
Permanently
Restricted
10,182,929
992,943
718,463
90,396
(644)
23,643
(9,552,891)
$
2003
1,982,857
4,500
(17,210)
-
$
13,365,460
2,478,462
574,472
94,896
(17,854)
9,100
115,157
-
12,194,707
2,454,839
1,970,147
16,619,693
229,917
8,687,250
-
-
229,917
8,687,250
8,917,167
-
-
8,917,167
3,277,540
2,454,839
1,970,147
7,702,526
-
4,010,069
(4,010,069)
-
3,277,540
6,464,908
(2,039,922)
7,702,526
22,665,822
41,113,725
41,653,875
25,943,362
$
47,578,633
$
39,613,953
105,433,422
$
113,135,948
The accompanying notes are an integral part of the financial statements.
3
UNIVERSITY OF ALASKA FOUNDATION
STATEMENTS OF CASH FLOWS
For the years ended June 30, 2004 and 2003
2004
2003
Cash flows from operating activities:
Contributions received
Investment income received
Distributions for the benefit of the University of Alaska
Cash paid for operating expenses
Other receipts
$
Net cash provided by operating activities
10,198,372
2,904,648
(9,895,569)
(241,479)
276,273
$
9,811,237
2,484,855
(8,361,311)
(229,917)
126,084
3,242,245
3,830,948
(6,603,175)
204,999
(7,046,548)
27,532
(6,398,176)
(7,019,016)
4,039,842
3,756
(27,062)
2,947,962
29,601
(36,831)
4,016,536
2,940,732
Cash flows from investing activities:
Net increase in investments
Receipts from disposition of assets
Net cash used by investing activities
Cash flows from financing activities:
Contributions restricted for permanent investment
Investment income on charitable remainder trusts
Payment of charitable remainder trust obligations
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
860,605
Cash and cash equivalents, beginning of year
(247,336)
2,801,684
Cash and cash equivalents, end of year
$
4
3,662,289
3,049,020
$
2,801,684
2004
2003
Reconciliation of change in net assets to net cash
provided by operating activities:
Change in net assets
Adjustments to reconcile change in net assets
to net cash provided by operating activities:
Contributions of non-cash assets
Net realized and unrealized investment gains
Gain on disposition of other assets
Non-cash operating expenses
Non-cash distributions to the University of Alaska
Non-cash transfers from the University of Alaska
Contributions restricted for permanent investment
Actuarial adjustment of remainder trust obligations
$
Changes in assets and liabilities:
(Increase) decrease in interest receivable
(Increase) decrease in contributions receivable
(Increase) decrease in inventory
Increase (decrease) in due to the University of Alaska
Increase (decrease) in other liabilities
Net cash provided by operating activities
$
11,050,672
7,702,526
(790,703)
(5,968,566)
(95,052)
8,284
150,324
(4,039,842)
25,797
(126,770)
(574,472)
(9,100)
67,887
(80,800)
(2,947,962)
17,854
(10,563)
861,007
4,409
2,013,958
32,520
6,393
(373,396)
3,378
252,909
(107,499)
3,242,245
The accompanying notes are an integral part of the financial statements.
5
$
$
3,830,948
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
1. Organization and Summary of Significant Accounting Policies
Organization
The University of Alaska Foundation (foundation) was established May 30, 1974 to solicit donations and to
hold and manage such assets for the exclusive benefit of the University of Alaska. The foundation is a taxexempt organization under Section 501(c)(3) of the Internal Revenue Code.
In preparing the financial statements, management is required to make estimates that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the
statement of financial position and revenue and expenses for the period. Actual results could differ from
those estimates. The more significant accounting and reporting policies and estimates applied in the
preparation of the accompanying financial statements are discussed below.
Basis of Presentation
These financial statements are prepared on the accrual basis of accounting and focus on the foundation’s
resources and activities as a whole. Net assets and revenues, expenses, distributions, gains and losses are
classified based on the existence or absence of donor-imposed or other external restrictions. Accordingly,
net assets of the foundation and changes therein are classified and reported as follows:
Unrestricted net assets - Assets, net of related liabilities, which are not subject to donor-imposed or
other external restrictions.
Temporarily restricted net assets - Assets, net of related liabilities, which are subject to donorimposed or other external restrictions that may or will be met by actions of the foundation and/or the
passage of time and unconditional promises to give that are due in future periods and are not
permanently restricted.
Permanently restricted net assets - Assets, net of related liabilities, which are subject to donorimposed or other external restrictions and will be held in perpetuity by the foundation
Revenues are reported as increases in unrestricted net assets, unless use of the earnings is subject to
donor-imposed or other external restrictions. Gains and losses on investments and other assets and
changes in liabilities are reported as increases or decreases in unrestricted net assets, unless subject to
donor-imposed or other external restrictions. Expirations of temporary restrictions on net assets through
expenditure for the stipulated purpose or the passage of the stipulated time period are reported as
reclassifications between the applicable classes of net assets. Expenses and distributions are reported as
decreases in unrestricted net assets.
Basis of Accounting
The foundation maintains its accounts in accordance with the principles and practices of fund accounting.
Fund accounting is a procedure by which resources are classified for accounting purposes in accordance
with activities or objectives as specified by donors, with restrictions or limitations imposed by sources outside
the institution, or with directions issued by the governing board.
All investments, not held for long-term investment, with original maturities of three months or less are
reported as cash and cash equivalents.
6
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
1. Organization and Summary of Significant Accounting Policies, continued
Investments are stated at current fair value. Noncash assets are stated at cost basis. The carrying value of
donated assets other than marketable securities represents the fair value of the asset as determined by
independent appraisal or management’s estimate at the time of receipt or contribution. Inventories of
artworks and books for sale are stated at the lower of cost (first-in, first-out method) or market. Other
investments do not have a readily determinable fair value and are stated at cost. Income from other
investments is recognized when received. When, in the opinion of management, there has been a
permanent impairment in the asset value, the asset is written down to its fair value.
The net realized and unrealized appreciation (depreciation) in fair value of investments is reflected in the
statement of activities. Income and net gains on investments of endowment and similar funds are generally
reported as increases in permanently restricted net assets if the terms of the respective gift require that they
be added to the principal of a permanent endowment; as increases in temporarily restricted net assets if the
terms of the gift impose restrictions on the use of the income; or as increases in unrestricted net assets in all
other cases. Losses on the investments of a donor-restricted endowment fund reduce temporarily restricted
net assets to the extent that donor-imposed temporary restrictions on net appreciation of the fund have not
been met before the loss occurs. Any remaining losses are classified as underwater endowment losses and
reduce unrestricted net assets. Subsequent gains that restore the fair value of the assets of the endowment
fund to the required level are classified as increases in unrestricted net assets.
Contributions, including unconditional promises to give, are recognized as revenues in the period received.
Conditional promises to give are not recognized until the conditions on which they depend are substantially
met. Contributions of assets other than cash are recorded at their estimated fair value. Contributions
expected to be received one year or more in the future are discounted at a discount rate commensurate with
the risks involved. Amortization of discount is recorded as additional contribution revenue in accordance
with donor-imposed restrictions, if any, on the contributions. An allowance for uncollectible contributions
receivable is provided based upon management’s judgment including such factors as prior collection history,
type of contribution, and nature of fund-raising activity.
Contributions received for memorials or prospective endowments that have not yet met the minimum
requirements for acceptance as an endowment are accumulated in temporarily restricted accounts. The
accumulated contributions are transferred to permanently restricted endowment accounts when the minimum
requirements are fulfilled. If the requirements are not fulfilled, consistent with the conditions of acceptance,
the contributions are expended for the purpose received.
Reclassifications
Certain reclassifications have been made to prior period amounts in order to conform them to current period
presentation.
2. Cash and Cash Equivalents
Cash and cash equivalents consists of interest bearing funds of $3,662,289 and $2,801,684 at June 30,
2004 and 2003, respectively.
3. Short Term Investments
Short term investments consists of donated marketable securities valued at $47,850 and $-0- at June 30,
2004 and 2003, respectively.
7
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
4. Contributions Receivable
Unconditional promises to make contributions are included in the financial statements as contributions
receivable and revenue of the appropriate net asset category. Contributions receivable at June 30, 2004
and 2003 were recorded at the discounted present value of the future cash flows using a discount rate of 5%
through June 30, 2002 and 2.5% after that date. Contributions receivable are expected to be realized in the
following periods:
2004
In one year or less
Between one year and five years
$
Discount
Allowance for uncollectible accounts
$
6,512,182
1,193,785
7,705,967
(70,693)
(14,423)
7,620,851
2003
$
$
6,063,681
2,603,372
8,667,053
(165,752)
(2,346)
8,498,955
Included in contributions receivable was $4.1 million and $3.4 million at June 30, 2004 and 2003,
respectively, due pursuant to a charter agreement between certain oil companies and the State of Alaska.
The agreement provides that annually, these oil companies will designate an amount based on aggregate
net Alaska liquids production after royalty and the price for West Texas Intermediate crude oil for funding
charitable organizations and causes within Alaska. The agreement specifies that 30% of this amount be
given to the University of Alaska Foundation and the remainder to general community needs. Commitments
applicable to any periods subsequent to June 30, 2004 have not been formally communicated to the
foundation, nor are they reasonably estimable and are therefore not included in the accompanying financial
statements.
5. Escrows Receivable
The foundation’s escrows receivable are secured by deeds of trust from land sales, payable in monthly
installments including interest of 7.25% to 10%.
6. Real Property
Under a cooperative agreement with the University of Alaska, the net proceeds from the sale of gifted real
estate by the university, unless otherwise specified by the donor or the university president, will be
transferred to the foundation to be managed in accordance with donor intent. Proceeds transferred to the
foundation were $-0- and $91,514 for the years ended June 30, 2004 and 2003, respectively.
7. Remainder Trust Receivable
The foundation is the remainder beneficiary of a charitable remainder annuity trust managed by independent
trustees. The present value of estimated future benefits to be received when the trust assets are distributed
has been recorded by the foundation as a permanently restricted donation and as a receivable. The
remainder trust receivable is revalued annually and any resulting actuarial gain or loss is recorded as a
change in net assets.
8
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
8. Pooled Endowment Funds
Effective July 1, 1997, management of the university’s land grant trust fund was transferred from the State
Department of Revenue to the university. The foundation and the university agreed to consolidate the
foundation’s pooled endowment funds and the university’s land grant trust funds into a Consolidated Fund
(fund) for investment purposes. The foundation’s investment represents 43% and 41% of the total fund at
June 30, 2004 and 2003, respectively. The fund is managed by the foundation’s investment committee under
the "total return" concept of investment management intended to preserve and maintain the purchasing
power of the principal. The net assets and related activity for their respective investment in the fund are
reflected in the financial statements of the foundation and the university.
The fund uses a unitized system to account for each participant’s interest. Contributions to and withdrawals
from the fund result in an increase or decrease in the number of units owned and are based on the unit value
at the beginning of the month in which the contribution or withdrawal is made. Large additions to the fund are
initially invested in cash and cash equivalents and dollar-cost-averaged into the investment pool over a ten
month period. Investment income, fees and realized and unrealized gains and losses are distributed monthly
to participating funds on a per unit basis. Investment income net of fees increases the number of units
outstanding, while realized and unrealized gains and losses affect the per unit value.
The Consolidated Fund includes the following:
2004
Cash and cash equivalents
Fixed income securities
Equity securities
Alternative investments
Real estate partnerships and investment trusts
Other investments
Other
$
6,625,560
43,560,605
72,128,917
24,977,613
8,584,168
5,000,000
191,524
$ 161,068,387
2003
$
6,795,069
35,628,379
66,382,560
14,551,350
8,344,783
3,067,682
170,442
$ 134,940,265
Ownership of the net assets of the Consolidated Fund is as follows:
University of Alaska Foundation
University of Alaska
2004
2003
69,246,303
91,822,084
$ 161,068,387
$ 55,385,807
79,554,458
$ 134,940,265
$
Investment management, custodial and consulting fees for the foundation’s pooled endowment funds totaled
$118,788 and $117,512 for the years ended June 30, 2004 and 2003, respectively. These fees have been
included as reductions to investment income.
Beginning July 1, 2003, the calculation of the annual spending allowance is based on 4.5 percent of the fiveyear moving average of the December 31 market values of the endowment fund, not to exceed the
unexpended accumulated earnings of the fund at December 31. Previously, spendable earnings of the
pooled endowment funds was calculated at a rate of 5 percent of the five-year moving average.
9
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
9. Other Long Term Investments
Other long term investments include the following:
2004
Cash and cash equivalents
Fixed income securities
Equity securities
Alternative investments
Real estate partnerships and investment trusts
Other investments
$
4,624
44,167,379
419,714
515,862
50,000
1,500,000
$ 46,657,579
2003
$
195,666
44,827,445
265,341
498,026
50,000
1,525,492
$ 47,361,970
Investment custodial and management fees for other long term investments totaled $60,977 and $58,137 for
the years ended June 30, 2004 and 2003, respectively. These fees have been included as reductions to
investment income.
10. Split Interest Obligations
The foundation has established charitable remainder trust and charitable gift annuity plans. These plans
specify that donors may contribute assets to the foundation in exchange for the right to receive a fixed dollar
or fixed percentage annual return. The difference between the amount of the gift and the present value of the
liability for future payments, determined on an actuarial basis, is recognized as a contribution at the date of
the gift. The split interest obligations are revalued annually and any resulting actuarial gain or loss is
recorded as a change in net assets.
11. Term Endowment Liability
In July 1997 the foundation accepted a term endowment. Earnings from the endowment are restricted for
the maintenance of a student housing facility. The agreement with the donor requires the original principal of
the endowment to remain inviolate until April 30, 2020 at which time the original principal and the
unexpended earnings, if any, will be returned to the donor. The original principal of $1,000,000 is recorded
as a liability at June 30, 2004 and 2003.
10
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
12. Net Assets
Unrestricted net assets consisted of the following:
2004
Available for current operations - amounts not
designated by management for specific purposes or
subject to donor-imposed restrictions
$
2003
6,843,160
$ 7,736,979
11,059,868
9,908,129
Quasi endowments - corpus of board designated
endowment funds
8,821,693
7,633,848
Underwater endowment losses – investment losses on
donor restricted endowment funds in excess of net
appreciation
(143,650)
(1,275,454)
2,857,334
$ 29,438,405
1,939,860
$ 25,943,362
Restricted for specific purposes - spendable earnings of
endowment funds and other non-endowment net assets
subject to donor imposed restrictions
$ 27,147,773
$ 30,294,477
Unconditional promises to give – contributions
receivable in future periods that are not subject to donor
imposed restrictions
4,114,800
3,440,000
Quasi endowments - corpus of funds subject to donor
imposed restrictions designated by the board as
endowment funds
2,537,428
1,215,612
Endowments - corpus of term funded endowments
4,204,453
4,291,177
12,957,386
$ 50,961,840
8,337,367
$ 47,578,633
$ 43,530,768
$ 39,261,444
255,607
$ 43,786,375
352,509
$ 39,613,953
Designated for specific purposes - spendable earnings
of quasi endowment funds and amounts designated for
specific purposes by management
Unexpended endowment earnings - accumulated
earnings in excess of designated spending limits for
quasi endowment funds not subject to donor-imposed
restrictions
Temporarily restricted net assets consisted of the following:
Unexpended endowment earnings - accumulated
earnings in excess of designated spending limits for
endowment funds subject to donor-imposed restrictions
Permanently restricted net assets consisted of the following:
Endowments - corpus of endowment funds required by
donor to be invested in perpetuity
Charitable remainder trusts - annuity trusts and unitrusts
required by donor to be invested in perpetuity
11
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
13. Net Assets Released from Restriction
Net assets were released from donor restrictions by incurring expenses satisfying the restricted purpose,
collecting payment on unconditional promises to give or by occurrence of other events specified by donors.
14. Distributions for the Benefit of the University of Alaska
Distributions for the benefit of the University of Alaska, by functional classification, for the years ended June
30, 2004 and 2003 were as follows:
2004
University of Alaska Anchorage
Engineering
General
Liberal arts, human and rural development
Library
Management/business administration
Natural sciences, agriculture and land resources
Research
Student aid
$
University of Alaska Fairbanks
Engineering
General
KUAC radio and television
Liberal arts, human and rural development
Library
Management/business administration
Museum
Natural sciences, agriculture and land resources
Research
Student aid
University of Alaska Southeast
General
Library
Natural sciences, agriculture and land resources
Student aid
University of Alaska
General
Natural Sciences
Research
Student Aid
143,299
1,657,920
52,756
2,660
158,274
1,662
64,962
528,756
2,610,289
$
26,981
1,292,668
229,175
2,706
222,486
2,418
38,338
546,863
2,361,635
8,862
2,022,317
750,506
26,523
69,224
1,521
2,982,116
242,814
641,208
905,147
7,650,238
993
1,979,286
685,056
23,386
26,311
1,026
271,604
141,760
457,477
912,090
4,498,989
342,471
7,108
157,941
507,520
666,593
37,588
183
177,929
882,293
1,284,291
907
5,000
1,290,198
938,333
6,000
944,333
$ 12,058,245
12
2003
$
8,687,250
UNIVERSITY OF ALASKA FOUNDATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
15. Transfers from the University of Alaska
Transfers from the university to the foundation for the years ended June 30, 2004 and 2003 were as follows:
2004
$ 142,035
509
$ 142,544
Net proceeds from real estate lease
Net proceeds from real estate sales
Stampede Mine proceeds
Other
2003
$
91,514
23,643
$ 115,157
16. Assets Held in Trust By Others
The University of Alaska is a named beneficiary of The Bentley Family Trust which is managed by
independent trustees. In accordance with University of Alaska policy, the university’s interest in this trust will
accrue to the foundation. Distributions from the trust have been recorded by the foundation as unrestricted
income during the period the distributions were received. Management’s estimate of fair value of the
university’s undivided one-eighth (12.5%) interest in the trust was approximately $3.4 million at June 30,
2004 and 2003, respectively. Since neither the university nor the foundation have control over the trust
assets and cash flows cannot be reasonably estimated, the principal of the trust has not been recorded in
the accounts of the university or the foundation.
The foundation is a remainder beneficiary of The Metcalf Family Trust which is managed by an independent
trustee. Management’s estimate of fair value of the foundation’s undivided one-half (50%) interest in the
trust at June 30, 2004 and 2003 is approximately $0.4 and $0.3 million, respectively. Since the foundation
does not have control over the trust assets and cash flows cannot be reasonably estimated, the principal of
the trust has not been recorded in the accounts of the foundation.
The University of Alaska is a remainder beneficiary of The Anthony John Nordale Trust and The Anthony
John Nordale Reserve Trust. These trusts are managed by an independent trustee. In accordance with
University of Alaska policy, the university’s interest in these trusts will accrue to the foundation.
Management’s estimate of fair value of the university’s undivided one-half (50%) interest in the Anthony John
Nordale Trust at June 30, 2004 and 2003 is approximately $0.3 million. Management’s estimate of fair value
of the university’s undivided one-half (50%) interest in the Anthony John Nordale Reserve Trust at June 30,
2004 and 2003 is approximately $0.7 million and $0.6 million, respectively. Since neither the university nor
the foundation have control over the trust assets and cash flows cannot be reasonably estimated, the
principal of the trusts has not been recorded in the accounts of the university or the foundation.
17. Related Party Transactions
The university provides in-kind administrative and accounting support for the foundation. The cost of these
services is not included in these financial statements.
13
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
Financial Statements
June 30, 2004 and 2003
(With Independent Auditor’s Report Thereon)
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
TABLE OF CONTENTS
Page
Statements of Assets and Liabilities
1
Statements of Operations and Changes in Net Assets
2
Notes to Financial Statements
3
KPMG llP
Suite 600
701 West Eighth Avenue
Anchorage, AK 99501
IndependentAuditors' Report
The Board of Trustees
University of Alaska and University of Alaska
Foundation Consolidated Fund:
We have audited the accompanying statements of assets and liabilities of the University of Alaska and
University of Alaska Foundation Consolidated Fund as of June 30. 2004 and 2003, and the related
statements of operations and changes in net assets for the years then ended. These financial statements
are the responsibility of the University of Alaska and University of Alaska Foundation Consolidated Fund's
management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. These standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
financial position of the University of Alaska and University
June 30. 2004 and 2003, and the changes in its net assets
accounting principles generally accepted in the United States
September 10.2004
present fairly, in all material respects, the
of Alaska Foundation Consolidated Fund at
for the years then ended. in conformity with
of America.
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2004 and 2003
Assets
2004
Cash and cash equivalents
Fixed income securities
Equity securities
Alternative investments
Real estate partnerships and investment trusts
Other investments
Interest and dividends receivable
Due from the University of Alaska Foundation
$
Total assets
6,625,560
43,560,605
72,128,917
24,977,613
8,584,168
5,000,000
232,209
7,248
161,116,320
2003
$
6,795,069
35,628,379
66,382,560
14,551,350
8,344,783
3,067,682
110,080
60,362
134,940,265
Liabilities
Management fees payable
Total liabilities
47,933
-
47,933
-
Net Assets
University of Alaska
University of Alaska Foundation
Total net assets
91,822,084
69,246,303
79,554,458
55,385,807
$ 161,068,387
$ 134,940,265
The accompanying notes are an integral part of the financial statements
1
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
For the years ended June 30, 2004 and 2003
Investment Income
2004
Interest and dividend income
Operating income (losses) from alternative investments
Other investment income
$
Net investment income before expenses
2,790,479
79,035
505,776
2003
$
2,725,604
(138,013)
37,035
3,375,290
2,624,626
193,548
50,000
31,755
7,980
195,889
50,000
24,041
5,750
283,283
275,680
3,092,007
2,348,946
Net realized and unrealized investment gains (losses)
15,232,696
(1,051,107)
Net Increase in Net Assets Resulting from Operations
18,324,703
1,297,839
(4,264,674)
12,068,093
(4,044,489)
8,085,871
Net Increase in Net Assets
26,128,122
5,339,221
Net assets, beginning of year
134,940,265
129,601,044
Expenses
Management fees
Investment consulting fees
Custodial fees
Audit fees
Total expenses
Net investment income
Realized and Unrealized Investment Gains (Losses)
Distributions for endowment spending
Additional investments
Net assets, end of year
$
161,068,387
The accompanying notes are an integral part of the financial statements
11
$
134,940,265
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
1. Organization and Summary of Significant Accounting Policies
Organization
The Consolidated Fund (fund) was established July 1, 1997 to combine, for investment purposes,
certain assets of the University of Alaska (university) Endowment Trust Fund and the University
of Alaska Foundation (foundation) Pooled Endowment Fund. The fund is managed by the
foundation through its investment committee and treasurer.
The University Endowment Trust Fund, codified in Alaska Statute 14.40.400, is an endowment
trust fund. The source of the funding consists of income from the sale or lease of land granted to
the university by an Act of Congress approved January 21, 1929 and other gifts and bequests.
The Foundation Pooled Endowment Fund includes endowment and similar funds contributed to
the foundation that do not have specific investment restrictions. Earnings from the Pooled
Endowment Fund are for the support of the university, subject to donor imposed restrictions.
Investments of the fund may be held in the name of the foundation, the university, the fund, or
any fund or nominee as may be authorized by the foundation’s treasurer.
In preparing the financial statements, management is required to make estimates that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of
the date of the statements of assets and liabilities and operations for the period. Actual results
could differ from those estimates. The more significant accounting and reporting policies and
estimates applied in the preparation of the accompanying financial statements are discussed
below.
Basis of Accounting
The financial statements are prepared using the accrual basis of accounting.
Due to the endowment nature of the fund, all assets, including cash and cash equivalents, are
considered non-current assets held for long-term investment.
Investments that have a readily determinable fair value are stated at current fair value. The net
realized and unrealized appreciation (depreciation) in fair value of investments is reflected in the
statement of operations.
Other investments that do not have a readily determinable fair value are stated at cost. When, in
the opinion of management, there has been a permanent impairment in the asset value, the
asset is written down to its fair value. Income from other investments is recognized when
received.
3
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
1. Organization and Summary of Significant Accounting Policies, continued
The fund is managed under the “total return” concept of investment management intended to
preserve and maintain the purchasing power of the principal. This approach emphasizes total
investment return - traditional yield or investment income, and net realized and unrealized gains
and losses.
The fund uses a unitized system to account for each participant’s interest. Contributions to and
withdrawals from the fund result in an increase or decrease in the number of units owned and are
based on the unit value at the beginning of the month in which the contribution or withdrawal is
made. Large additions to the fund are initially invested in cash and cash equivalents and dollar –
cost-averaged into the investment pool over a ten month period. Investment income, fees and
realized and unrealized gains and losses are allocated monthly to participating funds on a per
unit basis. Investment income net of fees increases the number of units outstanding, while
realized and unrealized gains and losses affect the per unit value.
Reclassifications
Certain reclassifications have been made to prior period amounts in order to conform them to
current period presentation.
2. Asset Allocation
The asset allocation of the fund’s investments was as follows:
Cash and cash equivalents
Fixed income, domestic
Equities, domestic
Equities, foreign
Alternative investments
Real estate partnerships and investment trusts
Other investments
2004
2003
4.1%
27.1%
33.2%
11.6%
15.6%
5.3%
3.1%
5.0%
26.5%
37.5%
11.7%
10.8%
6.2%
2.3%
100%
100%
3. Commitments
The fund had commitments to make capital contributions to various alternative investments and
real estate investment trusts totaling $17 million and $23 million at June 30, 2004 and 2003.
4
UNIVERSITY OF ALASKA
and
UNIVERSITY OF ALASKA FOUNDATION
CONSOLIDATED FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 and 2003
4. Changes in Net Asset Balances
Changes in net asset balances by participant were as follows:
Foundation
Balance, July 1, 2002
$
55,700,993
University
$
73,900,051
Net decrease from operations
Distributions for endowment spending
Additional investments
409,843
(1,881,410)
1,156,381
887,996
(2,163,079)
6,929,490
Balance, June 30, 2003
55,385,807
79,554,458
Net increase from operations
Distributions for endowment spending
Additional net investments/withdrawals
7,649,450
(1,458,831)
7,669,877
10,675,253
(2,805,843)
4,398,216
Balance, June 30, 2004
$
69,246,303
$
91,822,084
5. Distributions
Distributions from the fund are based on policies established by each participant.
5
Total
$
129,601,044
1,297,839
(4,044,489)
8,085,871
134,940,265
18,324,703
(4,264,674)
12,068,093
$
161,068,387