A REPORT TO THE MONTANA LEGISlaTURE FINANCIal AUDIT Montana State University For the Two Fiscal Years Ended June 30, 2019 FEBRUarY 2020 LEGISlaTIVE AUDIT DIVISION 19-11A Financial Audits Legislative Audit Committee Financial audits are conducted by the Legislative Audit Division to determine if the financial statements included in this report Representatives are presented fairly and the agency has complied with laws and Kim Abbott regulations having a direct and material effect on the financial [email protected] statements. In performing the audit work, the audit staff uses Dan Bartel standards set forth by the American Institute of Certified Public [email protected] Accountants and the United States Government Accountability Tom Burnett Office. Financial audit staff members hold degrees with an [email protected] emphasis in accounting and many staff members hold Certified Denise Hayman, Vice Chair Public Accountant (CPA) certificates. [email protected] Emma Kerr-Carpenter The Single Audit Act Amendments of 1996 and the Uniform [email protected] Administrative Requirements, Cost Principles, and Audit Matt Regier Requirements for Federal Awards require the auditor to issue [email protected] certain financial, internal control, and compliance reports in Senators addition to those reports required by Government Auditing Dee Brown, Chair Standards. This individual agency audit report is not intended [email protected] to comply with these reporting requirements and is therefore Jason Ellsworth not intended for distribution to federal grantor agencies. The [email protected] Legislative Audit Division issues a statewide biennial Single Audit John Esp Report which complies with the above reporting requirements. [email protected] The Single Audit Report for the two fiscal years ended June 30, Pat Flowers 2017, was issued March 23, 2018. The Single Audit Report for the [email protected] two fiscal years ended June 30, 2019, will be issued by March 31, Tom Jacobson 2020. [email protected] Mary McNally [email protected] Members serve until a member’s legislative term of office ends or until a successor is appointed, Audit Staff whichever occurs first. Jennifer Erdahl Donald Erdmann John Fine Karen E. Simpson §5-13-202(2), MCA Fraud Hotline Reports can be found in electronic format at: (Statewide) 1-800-222-4446 https://leg.mt.gov/lad/audit-reports (in Helena) 444-4446 [email protected]. www.montanafraud.gov LEGISLATIVE AUDIT DIVISION Angus Maciver, Legislative Auditor Deputy Legislative Auditors: Deborah F. Butler, Legal Counsel Cindy Jorgenson Joe Murray February 2020 The Legislative Audit Committee of the Montana State Legislature: This is our financial audit report on the consolidated financial statements of the Montana State University for the fiscal year ended June 30, 2019, with comparative information for the fiscal year ended June 30, 2018. The financial statements include financial information from five related organizations, comprised of the foundations at MSU Bozeman, MSU Billings, and MSU Northern, the Bobcat Club at MSU Bozeman, and the Museum of the Rockies. These entities are also considered component units for the university, and their financial information is audited by other audit organizations. Our audit efforts focused on the university’s material revenues, expenses, assets, and liabilities, including: tuition and fee and federal grant and contract revenues; state appropriation support; compensation and benefits, scholarships and fellowships, and operating expenses; and investments, bonds payable, and pension liabilities. We also performed audit procedures over the presentation and disclosure of the financial statements and note disclosures, and work necessary to rely on the audits completed by other organizations over the component units. We issued unmodified opinions on the financial statements, which means you can rely on the information they present. Our report contains no recommendations to the university. We thank President Cruzado and her staff for their cooperation and assistance during the audit. Respectfully submitted, /s/ Angus Maciver Angus Maciver Legislative Auditor Room 160 • State Capitol Building • PO Box 201705 • Helena, MT • 59620-1705 Phone (406) 444-3122 • FAX (406) 444-9784 • E-Mail [email protected] i Table of Contents Appointed and Administrative Officials ...................................................................................ii Report Summary ...................................................................................................................S-1 CHAPTER I – INTRODUCTION AND BACKGROUND ����������������������������������������������������������������������1 Audit Scope ...............................................................................................................................1 Background �������������������������������������������������������������������������������������������������������������������������������1 INDEPENDENT AUDITOR’S REPORT AND UNIVERSITY FINANCIAL STATEMENTS Independent Auditor’s Report ............................................................................................... A-1 Montana State University Management’s Discussion and Analysis ....................................... A-5 Consolidated Statements of Net Position ............................................................................ A-16 University Component Units-Combined Statements of Financial Position ........................ A-17 Consolidated Statements of Revenues, Expenses and Changes in Net Position .................. A-18 University Component Units-Combined Statements of Activities ...................................... A-19 Consolidated Statements of Cash Flows .............................................................................. A-21 Notes to Consolidated Financial Statements .......................................................................A-23 Required Supplementary Information ................................................................................ A-71 Unaudited Supplemental Information ................................................................................A-82 REPORT ON INTERNAL CONTROL AND COMPLIANCE Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards .............................................................................................................B-1 UNIVERSITY RESPONSE Montana State University ......................................................................................................C-1 19 -11A ii Montana Legislative Audit Division Appointed and Administrative Officials Term Expires Board of Regents of Higher Casey Lozar, Chair February 1, 2025 Education Paul Tuss, Vice Chair February 1, 2020 Joyce Dombrouski February 1, 2026 Robert A. Nystuen February 1, 2022 Brianne Rogers February 1, 2024 Martha Sheehy February 1, 2021 John Miller, Student Regent June 30, 2020 Clayton Christian, Commissioner of Higher Education* Steve Bullock, Governor* Elsie Arntzen, Superintendent of Public Instruction* *Ex officio members Office of the Commissioner Clayton Christian Commissioner of Higher Education of Higher Education Brock Tessman Deputy Commissioner, Academic & Student Affairs Tyler Trevor Deputy Commissioner for Budget & Planning, Chief of Staff Vivian Hammill MUS Chief Legal Counsel, Deputy Commissioner Diedra Murray MUS Internal Auditor Montana State University Waded Cruzado President All Campuses Kellie Peterson Legal Counsel Daniel Adams Director of Audit Services iii Montana State University Robert Mokwa Executive Vice President for Academic Affairs Bozeman and Provost Terry Leist Vice President for Administration and Finance Jason Carter Vice President of Research, Economic Development, and Graduate Education Chris Kearns Vice President of Student Success Aaron Mitchell Assistant Vice President for Financial Services Leslie Schmidt Associate Vice President for Research James Broscheit Director of Financial Aid Megan Lasso Director of University Budget Office Montana State University Dan Edelman Chancellor Billings Melinda Arnold Provost and Vice Chancellor for Academic Affairs Susan Simmers Vice Chancellor for Administration and Finance Kimberly Hayworth Vice Chancellor of Student Access and Success Heather Hanna Director of Financial Services Barb Shafer Director of Business Services Thomas Valles Director of Financial Aid and Scholarships Montana State University Greg Kegel Chancellor Northern Vacant Vice Chancellor for Finance and Administration R. Neil Moisey Vice Chancellor for Academic Affairs Alisha Schroeder Registrar Chris Wendland Controller Steven Wise Dean of Students Maura Gath Executive Director of Enrollment Management Cindy Small Director of Financial Aid 19 -11A iv Montana Legislative Audit Division Great Falls College Susan Wolff CEO/Dean Montana State University Carmen Roberts Director of Operations Mary Kay Bonilla Chief Student Affairs and Human Resources Officer Oceane Weldele Accounting Manager Montana Agricultural Sreekala Bajwa Vice President for Agriculture Experiment Station Jody Barney Budget and Fiscal Director Montana State University Cody Stone Director Extension Sandra Rahn Gibson Budget and Fiscal Director Montana State University John Culbertson Director Fire Services Training School For additional information concerning Montana State University, contact: Daniel Adams, Director