KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR’S REPORT YEARS ENDED AUGUST 31, 2017 AND 2016 KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO FOR THE YEARS ENDED AUGUST 31, 2017 AND 2016 TABLE OF CONTENTS Page Independent Auditor's Report .................................................... 1 Management’s Discussion and Analysis ............................................ 3 Financial Statements ........................................................... 8 Statements of Net Position . .............................................. 9 Statements of Revenues, Expenses, and Changes in Net Position .................. 10 Statements of Cash Flows ................................................. 11 Notes to the Financial Statements ................................................. 12 Supplementary Information .................................................... 21 Schedules of Functional Expenses .......................................... 22 MANAGEMENT’S DISCUSSION AND ANALYSIS -3- KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO MANAGEMENT’S DISCUSSION AND ANALYSIS AUGUST 31, 2017 AND 2016 Introduction and Reporting Entity This discussion and analysis of KTEP-FM (“KTEP”), a public radio station operated by the University of Texas at El Paso (“UTEP”), provides an overview of KTEP’s financial activities during the year ended August 31, 2017. KTEP is the strongest public radio station in the El Paso market, serving El Paso and the surrounding areas up to 100 miles in radius. In addition to many local programs targeted specifically towards the El Paso community, KTEP also broadcasts news, cultural, and educational programs from National Public Radio and Public Radio International, as well as other independent radio networks. In addition to serving the El Paso community, KTEP also serves as a laboratory for broadcast students. KTEP is supported in part by the University of Texas at El Paso, which provides space for the station on campus, and pays the salaries of most of the full-time employees. The remaining funds come from the KTEP listening community through memberships and underwriting support and grants from the Corporation for Public Broadcasting (“CPB”). KTEP is not a separate legal entity from UTEP and is therefore exempt from income taxes. Overview of the Financial Statements KTEP’s financial statements present the financial activities of KTEP only, which are a group of accounts within UTEP’s accounting system. All amounts contained in these financial statements are included in the financial statements of the University of Texas System, a component unit of the State of Texas. The financial statements of KTEP are prepared in conformity with Governmental Accounting Standards Board pronouncements. Following this section are the basic financial statements and footnotes which should be read in conjunction with this discussion and analysis. The Statements of Net Position provide information on the types of assets and liabilities of KTEP, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether KTEP’s financial position is improving or deteriorating. The Statements of Revenues, Expenses, and Changes in Net Position provide information on income and expenses for the year, with additional detail of the expenses provided in the supplementary Schedules of Functional Expenses. The Statements of Cash Flows show the sources and uses of cash and the net changes in cash during the year. The Notes to the Financial Statements provide additional information essential to a full understanding of the data provided in the financial statements. -4- KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO MANAGEMENT’S DISCUSSION AND ANALYSIS AUGUST 31, 2017 AND 2016 Financial Highlights A summarized comparison of KTEP’s assets, deferred outflows, liabilities, deferred inflows, and net position at August 31, 2017, 2016 and 2015, are as follows: 2017 2016 2015 Current assets $ 103,333 $ 139,830 $ 197,428 Capital assets, net 12,485 26,054 41,018 Total assets 115,818 165,884 238,446 Deferred outflows of resources - - 11,529 Total assets and deferred outflows 115,818 165,884 249,975 Current liabilities 55,579 41,092 41,098 Noncurrent liabilities - - 60,508 Total liabilities 55,579 41,092 101,606 Deferred inflows of resources - - 18,509 Net position Investment in capital assets 12,485 26,054 41,018 Unrestricted 47,754 98,738 88,842 Total net position 60,239 124,792 129,860 Total liabilities, deferred inflows, and net position $ 115,818 $ 165,884 $ 249,975 Current assets decreased by $36,497 as of August 31, 2017, consisting of decreases in cash of $38,175 and prepaid expenses of $1,471, offset by an increase in receivables of $3,149. Capital assets decreased by $13,569 as a result of depreciation. Current liabilities increased by $14,487 as of August 31, 2017, due to timing of payments of programming fees. KTEP’s total net position decreased by $64,553 as of August 31, 2017. The decrease in investment in capital assets corresponds with the decrease in capital assets discussed above. The decrease in unrestricted net position of $50,984 was the result of operating activities, with the exclusion of depreciation expense. -5- KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO MANAGEMENT’S DISCUSSION AND ANALYSIS AUGUST 31, 2017 AND 2016 A summarized comparison of KTEP’s revenues, expenses and changes in net position for the years ended August 31, 2017, 2016 and 2015 are as follows: 2017 2016 2015 Operating revenues UTEP direct and indirect support $ 411,796 $ 412,999 $ 403,328 Grants 147,798 149,975 155,685 Membership, gifts and other 351,485 370,512 315,534 Total revenue 911,079 933,486 874,547 Operating expenses Program services 658,740 673,077 630,521 Supporting services 316,892 332,965 292,033 Total expenses 975,632 1,006,042 922,554 Operating income (loss) (64,553) (72,556) (48,007) Change in net position (64,553) (72,556) (48,007) Beginning net position, (restated for 2016) 124,792 197,348 177,867 Ending net position $ 60,239 $ 124,792 $ 129,860 Operating revenues for 2017 decreased by $22,407 or 2 %. Membership, gifts and other revenues decreased by $19,027 in 2017 primarily due to a nonrecurring 2016 gift of $35,000 for station improvements and equipment upgrades. UTEP’s direct and indirect support decreased by $1,203 and grants by $2,177. Operating expenses for 2017 decreased by $30,410 or 3%. Program services decreased $14,337, primarily due to switching two students to supporting services and changes to programs in an effort to reduce programming costs. Supporting services decreased by $16,073 due to the fact that 2016 expenses included station improvement costs. Economic Outlook KTEP’s main broadcast antenna was damaged in a wind storm in December 2016 which required more than $36,000 to repair. While the antenna was covered by the University of Texas at El Paso’s insurance policy, KTEP still had a $10,000 deductible which had to be paid. To expedite the work and minimize the time that KTEP would broadcast on low power, the repairs were paid up-front and insurance reimbursed the difference once the claim cleared. This required KTEP to receive permission from program suppliers to pay some program fees later than usual. Payment for some of these fees was then pushed back into fiscal year 2018, which is reflected in the increase in accounts payable at August 31, 2017. -6- KTEP is aggressively fundraising to ensure that any future equipment failures will not leave the station without means to make the necessary repairs. Unfortunately, the El Paso economy slowed some in 2017 making it difficult to achieve these fundraising goals. We are currently in the process of making additional programming adjustments that will lower some of the programming costs for next year. Moreover we are seeing a slight increase in program underwriting and vehicle donations for this year so we are certain that KTEP’s financial situation will continue to improve as we move forward. Contacting KTEP’s Management This financial report is designed to provide our listening and membership community and grantors with a general overview of KTEP’s finances. If you have any questions about this report, please contact KTEP’s General Manager at 500 West University Avenue, Cotton Memorial Bldg, Suite 203, El Paso, Texas 79968. -7- FINANCIAL STATEMENTS -8- KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO STATEMENTS OF NET POSITION AUGUST 31, 2017 AND 2016 ASSETS 2017 2016 Current Assets: Cash $ 94,113 $ 132,288 Membership and gift receivables 4,031 882 Prepaid expenses 5,189 6,660 Total current assets 103,333 139,830 Capital assets, net 12,485 26,054 Total assets $ 115,818 $ 165,884 LIABILITIES AND NET POSITION Current Liabilities: Accounts payable and accrued expenses $ 55,579 $ 41,092 Total liabilities 55,579 41,092 Net Position Investment in capital assets 12,485 26,054 Unrestricted net position 47,754 98,738 Total net position 60,239 124,792 Total liabilities and net position $ 115,818 $ 165,884 The accompanying notes are an integral part of these financial statements. -9- KTEP-FM OF THE UNIVERSITY OF TEXAS AT EL PASO STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEARS ENDED AUGUST 31, 2017 AND 2016 2017 2016 Operating Revenues: University of Texas at El Paso direct support $ 297,515 $ 298,657 Indirect administrative and occupancy support from University of Texas at El Paso 114,281 114,342 Membership contributions and gifts 261,381 289,551 Grants 147,798 149,975 Program underwriting 36,982 26,259 In-kind contributions 53,122 54,702 Total operating revenues 911,079 933,486 Operating Expenses: Programming and production 411,261 424,565 Broadcasting 172,835 171,040 Program information and promotion 74,644 77,472 Management and general 266,155 281,946 Fundraising and membership development 50,737 51,019 Total operating expenses 975,632 1,006,042 Operating income (loss) (64,553) (72,556) Change in net position (64,553) (72,556) Net position, beginning of year 124,792 197,348 Net position, end of year $ 60,239 $ 124,792 The accompanying notes are an integral part of these financial statements.