Colorado State University System
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Colorado State University System Financial Statements and Independent Auditor’s Reports Financial Audit Years Ended June 30, 2017 and 2016 Compliance Audit Year Ended June 30, 2017 THIS PAGE LEFT BLANK INTENTIONALLY LEGISLATIVE AUDIT COMMITTEE Representative Tracy Kraft-Tharp – Representative Tim Neville – Chair Vice Chair Senator Kerry Donovan Representative Lori Saine Senator Cheri Jahn Senator Jim Smallwood Representative Dan Nordberg Representative Faith Winter OFFICE OF THE STATE AUDITOR STAFF Dianne E. Ray State Auditor Kerri Hunter Deputy State Auditor Marisa Edwards Contract Monitor BKD, LLP Contractor AN ELECTRONIC VERSION OF THIS REPORT IS AVAILABLE AT WWW.COLORADO.GOV/AUDITOR A BOUND REPORT MAY BE OBTAINED BY CALLING THE OFFICE OF THE STATE AUDITOR 303.869.2800 PLEASE REFER TO REPORT NUMBER 1716F-A WHEN REQUESTING THIS REPORT THIS PAGE LEFT BLANK INTENTIONALLY THIS PAGE LEFT BLANK INTENTIONALLY COLORADO STATE UNIVERSITY SYSTEM Table of Contents ....................................................................................................................................................... Page Report Summary ................................................................................................................................... 1 Recommendation Locator ..................................................................................................................... 3 Financial and Compliance Audit Report Section: Description of the Colorado State University System ..................................................................... 4 Audit Findings and Recommendations ............................................................................................ 8 Disposition of Prior Audit Recommendations ............................................................................... 12 Independent Auditor’s Report ........................................................................................................ 14 Management’s Discussion and Analysis (Unaudited) ................................................................... 17 Financial Statements: Statements of Net Position ..................................................................................................... 27 Statements of Fiducial Net Position - OPEB ......................................................................... 29 Statements of Revenues, Expenses and Changes in Net Position ......................................... 30 Statements of Changes in Fiduciary Net Position - OPEB .................................................... 32 Statements of Cash Flows ...................................................................................................... 33 Notes to Basic Financial Statements ...................................................................................... 36 Required Supplemental Information: Colorado State University System Schedule of Proportionate Share of the Net Pension Liability (Unaudited) ................................................................................................ 89 Colorado State University System Schedule of Contributions (Unaudited) .......................... 90 Colorado State University System Other Postemployment Benefits – Schedules of Funding Progress (Unaudited) ......................................................................... 91 Colorado State University System Other Postemployment Benefits – Schedule of Changes in the OPEB Liability and Related Ratios (Unaudited) ....................... 92 Colorado State University System Other Postemployment Benefits – Schedule of OPEB Contributions-Retiree Medical Subsidy for DCP Participants (Unaudited) ............................................................................................................................ 93 COLORADO STATE UNIVERSITY SYSTEM Table of Contents Page Colorado State University System Other Postemployment Benefits – Schedule of OPEB Contributions-Retiree Medical Subsidy for PERA Participants (Unaudited) ........................................................................................................ 94 Colorado State University System Other Postemployment Benefits – Schedule of OPEB Contributions-Retiree Umbrella Prescription Plan PERA Participants (Unaudited) ........................................................................................................ 95 Colorado State University System Other Postemployment Benefits – Schedule of OPEB Contributions-Self-Insured Long-Term Disability Income Replacement Plan (Unaudited) ................................................................................. 96 Colorado State University System Other Postemployment Benefits – Schedule of Investment Returns (Unaudited) ........................................................................ 97 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards................................................................................................. 98 Independent Auditor’s Audit Committee Communication .......................................................... 100 Revenue Bonds’ Earnings Requirements Section Independent Auditor’s Report on Bond Compliance ................................................................... 103 Revenue Bonds’ Earnings Requirement Schedules (Unaudited) ................................................. 104 COLORADO STATE UNIVERSITY SYSTEM Report Summary Year Ended June 30, 2017 Purposes and Scope of Audit The Office of the State Auditor engaged BKD, LLP (BKD) to conduct a financial and compliance audit of the Colorado State University System (the System) for the year ended June 30, 2017. BKD performed the audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. The audits of the Colorado State University Foundation and the Colorado State University – Pueblo Foundation, the discretely presented component units of the System, were not performed in accordance with the standards applicable to financial audits contained in Government Auditing Standards. The purposes and scope of the audit were to: Express opinions on the financial statements of the System as of and for the years ended June 30, 2017 and 2016, including consideration of internal control over financial reporting as required by auditing standards generally accepted in the United States of America and Government Auditing Standards for the year ended June 30, 2017. Evaluate compliance with certain provisions of laws, regulations, contracts and grants governing the expenditure of federal funds for the year ended June 30, 2017. Issue a report on the System’s internal control over financial reporting and on compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters based on our audit of the financial statements performed in accordance with Government Auditing Standards for the year ended June 30, 2017. Report on the System’s compliance with applicable bond covenants. Evaluate progress in implementing prior year audit recommendations. The System’s schedule of expenditures of federal awards and applicable opinions thereon, issued by the Office of the State Auditor, are included in the Statewide Single Audit Report issued under separate cover. Audit Opinions and Reports The independent auditor’s reports included herein expressed unmodified opinions on the System’s financial statements as of and for the years ended June 30, 2017 and 2016. One material weakness in internal control over compliance was identified. We noted areas in which the System could improve its compliance procedures. This area is discussed in the Auditor’s Findings and Recommendations section of this report. (Continued) 1 COLORADO STATE UNIVERSITY SYSTEM Report Summary Year Ended June 30, 2017 Summary of Audit Recommendations Expenditures of Federal Awards There was one finding related to our testing of Federal Student Financial Aid Cluster expenditures under Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Single Audit) related to the following: CSU – System submitted students’ status changes to NSLDS after the 60-day notice requirement and did not submit errors identified by NSLDS within the required 15 business-day timeframe. Summary of Progress in Implementing Prior Audit Recommendations For the Fiscal Year 2017 audit, we performed test work to determine the disposition of the four prior year recommendations relating to Fiscal Year 2016. We found that three of the four recommendations for the fiscal year ended June 30, 2016, were implemented, while the other one was partially implemented and is repeated in the current year finding. The outstanding recommendation relates to internal controls over compliance as it relates to the Student Financial Aid Cluster. 2 COLORADO STATE UNIVERSITY SYSTEM Recommendation Locator Year Ended June 30, 2017 Recommendation Page Implementation Recommendation Summary Response Number Number Date 1 8 Colorado State University System should Agree (A) - January 2018 improve internal controls over Student Financial Aid Pell and Direct Loan Program (B) - August 2017 and enrollment reporting to the