2017 Bondholders Report 2017 Bondholders Report
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2017 BONDHOLDERS REPORT 2017 BONDHOLDERS REPORT TABLE OF CONTENTS 1 Introduction 2 2017 Financial Report 3 Supplemental Bondholder Information Official Statement Disclosures Students & Enrollment Faculty and Other Data Medical Centers Endowment Resources Operating Funds University Liquidity Future Debt Service 4 Supplemental Financial Reports Supplementary Information (General Revenues) Housing and Food Services Intercollegiate Athletics UW Medicine Clinical Enterprise—UW Division Metropolitan Tract Student Facilities Fees—Seattle Campus University of Washington 2017 BONDHOLDERS REPORT This report includes financial and operating information on the University of Washington (the “University”). As a preface to reviewing the materials, we suggest starting with the University’s Financial Report, which highlights the accomplishments, opportunities and challenges facing the University. The enclosed audited financial statements are as of June 30, 2017, the University’s fiscal year end. Unlike previous years, the 2017 financial statements present only the current fiscal year. A change in accounting treatment required by GASB 73, which was implemented during fiscal year 2017, cannot be applied to the prior fiscal year. Also included is a supplemental report, which includes additional financial and operating information, provided for the benefit of the holders and beneficial owners of the Bonds. This section includes some information that is also provided in the University’s Financial Report. This information may contain adjustments resulting from changes in methodology or timing. If you have comments, questions or need additional information, please contact us using the information shown below. Bill Starkey Annette Sommer Senior Associate Treasurer Associate Treasurer (206) 616-5122 (206) 221-8982 [email protected] [email protected] Mia Martincic Junior Analyst (206) 897-1693 [email protected] The information presented in this report is not intended to cover all material information that may be relevant to the outstanding bonds of the University of Washington. The information contained herein has been obtained from University officers, employees, records and other sources believed to reliable. The University of Washington is under no legal obligation to provide the bondholders report, nor should it be construed that the University will provide such information in whole or in part in the future. 4311 11th Avenue NE, Suite 600 Seattle, Washington 98105-4608 Phone: (206) 221-6752 Fax: (206) 543-3698 2017 Table of Contents 1 INDEPENDENT AUDITORS’ REPORT 3 MANAGEMENT’S DISCUSSION AND ANALYSIS 12 FINANCIAL STATEMENTS 16 NOTES TO FINANCIAL STATEMENTS 43 SCHEDULES OF REQUIRED SUPPLEMENTARY INFORMATION INSIDE BACK COVER BOARD OF REGENTS AND ADMINISTRATIVE OFFICERS University Facts FISCAL YEAR 2017 FISCAL YEAR 2012 FISCAL YEAR 2007 Academic Year Academic Year Academic Year 2016–2017 2011–2012 2006–2007 STUDENTS Autumn Enrollment 1 Undergraduate 40,832 36,192 31,086 Graduate 13,896 12,574 10,540 Professional 2,081 1,979 1,802 TOTAL 56,809 50,745 43,428 Extension course and conference registrations 82,949 70,823 48,577 Number of Degrees Awarded Bachelor’s 10,626 9,853 8,306 Master’s 4,454 3,635 2,877 Doctoral 766 712 631 Professional 574 565 500 TOTAL 16,420 14,765 12,314 FACULTY 1 (Professorial, Instructional, Research) 4,707 4,280 3,650 FACULTY AND STAFF2 31,264 25,523 23,913 RESEARCH FUNDING – ALL SOURCES (in thousands of dollars) $ 1,628,539 $ 1,365,002 $ 995,531 SELECTED REVENUES (in thousands of dollars) Patient Service and Other Medical-Related Revenues 3 $ 2,509,177 $ 1, 8 6 2 , 557 $ 900,266 Gifts, Grants and Contracts 1,571,890 1,425,659 1,079,926 Tuition and Fees 4 941,873 681,227 396,895 Auxiliary Enterprises and Other Revenues 659,195 413,528 299,158 Investment Income 443,383 34,123 503,300 State Appropriations (Operating) 341,971 218,343 365,782 SELECTED EXPENSES (in thousands of dollars) Medical Related 3 $ 2 , 26 0 , 315 $ 1,709,781 $ 689,435 Instruction, Academic Support and Student Services 1 , 8 9 5 , 5 4 4 1, 32 8 ,79 0 1,102,630 Research and Public Service 807,225 817,370 630,460 Institutional Support and Physical Plant 809,910 608,810 505,523 Auxiliary Enterprises 495,375 194,949 142,883 CONSOLIDATED ENDOWMENT FUND5 (in thousands of dollars) $ 3,144,000 $ 2,111,000 $ 2,098,000 SQUARE FOOTAGE6 (in thousands of square feet) 24,329 21,428 18,676 1 Headcount 2 Full time equivalents 3 Includes Valley Medical Center and Northwest Hospital in 2017 and 2012 only 4 Net of scholarship allowances of $159,166,000 in 2017, $133,243,000 in 2012 and $55,394,000 in 2007 5 Stated at fair value 6 Gross square footage, all campuses KPMG LLP Suite 2900 1918 Eighth Avenue Seattle, WA 98101 Independent Auditors’ Report The Board of Regents University of Washington: We have audited the accompanying financial statements of the business-type activities and the aggregate discretely presented component unit of the University of Washington (the University), an agency of the state of Washington, which comprise the statements of net position as of June 30, 2017, and the related statements of revenues, expenses, changes in net position, and cash flows for the year then ended, and the related notes to the financial statements, which collectively comprise the University’s basic financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and the aggregate discretely presented component unit of the University of Washington as of June 30, 2017, and the respective changes in financial position and cash flows thereof for the year then ended, in accordance with U.S. generally accepted accounting principles. KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Emphasis of Matters As discussed in note 1 to the financial statements, the financial statements of the University of Washington, an agency of the state of Washington, are intended to present the financial position, the changes in financial position, and where applicable, cash flows of only the respective portion of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the state of Washington that are attributable to the transactions of the University of Washington and its discretely presented component unit. They do not purport to, and do not, present fairly the financial position of the state of Washington as of June 30, 2017, the changes in its financial position or, where applicable, its cash flows for the year then ended, in accordance with U.S. generally accepted accounting principles. Our opinion is not modified with respect to this matter. As discussed in note 1 to the financial statements, on July 1, 2016, the University adopted new accounting guidance requiring governments providing defined benefit pension plans to their employees that are not administered through a trust to record the total pension liability, as well as recognizing most changes in the total pension liability within pension expense. Our opinion is not modified with respect to this matter. As discussed in note 1 to the financial statements, on July 1, 2016, the University adopted new accounting guidance which amends requirements for the financial statement presentation of component units of all state and local governments. As a result of this amendment the University now reports Northwest Hospital and Medical Center