WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES AGENDA FRIDAY, December 11, 2015 Location: Old Main 340 Time: 8:00 a.m. 1. CALL TO ORDER AND APPROVAL OF MINUTES 8:00 • October 8 & 9, 2015 • November 2, 2015 • November 6, 2015 • November 17, 2015 • November 24, 2015 2. PUBLIC COMMENT 8:00 – 8:10 3. BOARD CHAIR 8:10 – 8:25 • Resolution 2015-12 Welcoming John M. Meyer • Resolution 2015-13 Welcoming Mo West 4. UNIVERSITY PRESIDENT 8:25 – 8:30 5. ASSOCIATED STUDENTS 8:30 – 8:35 6. FACULTY SENATE 8:35 – 8:40 ACTION ITEMS 7. CONSENT ITEMS 8:40 – 8:45 • Approval of Fall Quarter Degrees 8. AGREEMENT BETWEEN FOUNDATION AND TRUSTEES UPDATE 8:45 – 8:50 Presentation: Stephanie Bowers, Vice President for University Advancement 8:50 – 8:55 Discussion Active Minds Changing Lives Page 1 9. APPROVAL OF 2015-2016 INTERNAL AUDIT AND CONSULTING SCHEDULE, AND ACCEPTANCE OF 2014-2015 ANNUAL REPORT 8:55 – 9:00 Presentation: Brian Sullivan, Acting Vice President / Assistant Vice President for Business and Financial Affairs 9:00 – 9:05 Discussion 10. APPROVAL OF PRESIDENTIAL SEARCH CANDIDATE EVALUATION CRITERIA 9:05 – 9:20 Presentation: Sue Sharpe, Chair, Presidential Search Advisory Committee 9:20 – 9:35 Discussion 11. PROPOSED PRESIDENTIAL CONTRACT AMENDMENTS 9:35 – 9:40 Presentation: Trustee Betti Fujikado Trustee Chase Franklin 9:40 – 9:50 Discussion DISCUSSION ITEMS 12. WSU NORTH PUGET SOUND AT EVERETT 9:50 – 10:05 Presentation: Bob Drewel, Senior Advisor to President Dan Bernardo, Washington State University 10:05 – 10:20 Discussion Break – 10 min 10:20 – 10:30 13. DIVERSITY TASKFORCE STRATEGIC PLAN UPDATE 10:30 – 10:40 Presentation: Karen Dade, Co-Chair of the President’s Taskforce on Equity, Inclusion and Diversity/Presidential Fellow Nick Sanchez, Co-Chair of the President’s Taskforce on Equity, Inclusion and Diversity 10:40 – 11:00 Discussion 14. PRESIDENTIAL SEARCH UPDATE 11:00 – 11:10 Presentation: Sue Sharpe, Chair, Presidential Search Advisory Committee 11:10 – 11:20 Discussion 15. OLYMPIA UPDATE 11:20 – 11:30 Presentation: 11:35 – 11:40 Discussion 16. CAMPAIGN UPDATE 11:40 – 11:45 Presentation: 17. AUDIT COMMITTEE REPORT 11:45 – 11:50 Presentation: Becca Kenna-Schenk, Government Relations Director Tim Syzmanowski, Associate Vice President for Development and Leadership Giving Trustee Betti Fujikado, Chair, Board of Trustees Audit Committee Active Minds Changing Lives Page 2 18. BOARD GOVERNANCE COMMITTEE REPORT 11:50 – 11:55 Presentation: Trustee Sue Sharpe, Chair, Board Governance Committee 19. INFORMATION ITEMS 11:55 – 12:00 a. Academic Affairs Report b. Quarterly Grant Report c. Admissions and Enrollment Report d. University Advancement Report e. Capital Program Report f. University Relations and Community Development Report g. 2014-2015 University Financial Report h. 2015 Housing & Dining System Financial Report i. 2015 Wade King Student Recreation Center Financial Report j. 2015 AS Bookstore Financial Report k. 2015 Parking Services Financial Report l. Student Right to Know/Clery Act 20. DATE FOR NEXT REGULAR MEETING: February 11, 12, 2016 in Seattle at the Washington Athletic Club 21. ADJOURNMENT 22. LUNCH • University Academic Presentation o Keith Russell, Chair, Health and Human Development  Recreation Degree Program Active Minds Changing Lives Page 3 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard DATE: December 11, 2015 SUBJECT: Approval of the Minutes PURPOSE: Action Items Purpose of Submittal: Approval of the Board of Trustees Meeting Minutes. Proposed Motion: MOVED, that the Board of Trustees of Western Washington University, upon the recommendation of the president, approve the following minutes:  Approval of the Minutes of the Board of Trustees Meeting, o October 8 & 9, 2015  Approval of the Minutes of the Special Board of Trustees Meeting, o November 2, 2105 o November 6, 2015 o November 17, 2015 o November 24, 2015 Supporting Information: Minutes of October 8 & 9, 2015 with attachment Minutes of November 2, 2105 Minutes of November 6, 2015 Minutes of November 17, 2015 Minutes of November 24, 2015 DRAFT MINUTES for Approval October 8, 2015 meeting WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES MEETING MINUTES THURSDAY, October 8, 2015 1. CALL TO ORDER Chair Karen Lee called the regular meeting of the Board of Trustees of Western Washington University to order at 3:00 p.m. on Thursday, October 8, 2015 in the Board of Trustees Conference room, Old Main 340, at Western Washington University in Bellingham, Washington. Board of Trustees Karen Lee, Chair Sue Sharpe, Vice Chair Betti Fujikado Chase Franklin Earl Overstreet Seth Brickey Western Washington University Bruce Shepard, President Brent Carbajal, Provost and Vice President for Academic Affairs Eileen Coughlin, Senior Vice President and VP for Enrollment and Student Services Brian Sullivan, Assistant Vice President for Business and Financial Affairs Stephanie Bowers, Vice President for University Advancement Belina Seare, Associated Students President Molly Ware, Faculty Senate President Roger Leishman, Assistant Attorney General Paul Cocke, Director, University Communications Karen Dade, President’s Administrative Leadership Program Fellow Paul Dunn, Senior Executive Assistant to the President Barbara Sandoval, Assistant to the President and Secretary to the Board of Trustees Elissa Hicks, Assistant Secretary to the Board of Trustees Chair Karen Lee opened the meeting by asking for a moment of silence to honor the victims of the recent events at Umpqua Community College in Roseburg, Oregon. 2. WESTERN CARES – COMMITTED TO BUILDING A HEALTHY CAMPUS COMMUNITY Eileen Coughlin, Senior Vice President & Vice President for Enrollment and Student Services gave a brief overview of various health programs and initiatives offered at Western. She then introduced the participating panelists. • Sara Wilson, Special Assistant to the Vice President, Enrollment and Student Services • Dr. Farrah Greene-Palmer, Suicide Prevention Project Manager • Catharine Vader, Registered Nurse/Wellness Outreach Center Coordinator • Leslie Hall, Library/Archive Paraprofessional 6, Wilson Library Page 1 DRAFT MINUTES for Approval October 8, 2015 meeting • • • • • Stevona Burks, Western Graduate Phaolan Class, Western Sophomore Esmeralda Hernandez, Western Junior Corinne Sudduth, Western Senior Dillon van Rensburg, Western Senior Catherine Vader gave an overview of the BEST SELF health promotion model which was recently introduced on campus. The model is based on six main virtues and 24 characteristics that, when practiced, help to create a strong sense of well-being and increased resiliency. Vader said that students, staff and faculty across campus have been both leading and participating in workshops and that because the model is inclusive, simple, and flexible allows it to be adaptable to any venue or situation on campus, and has proven easy for individuals to implement as an everyday practice. Dillon van Rensburg and Esmeralda Hernandez both provided personal example of how their personal use of BEST SELF has helped them to conquer some of their personal challenges while attending school. Vader has found that students are also using it for interpersonal issues such as practicing kindness during stressful times, dealing with difficult team/group work dynamics, and to self-manage anxiety, which in turn decreases the need for outside or university assistance. Dr. Farrah Greene-Palmer provided the Board with an overview of the BRAVE program, saying that in 2013 Western received a federally funded grant to support suicide prevention initiatives. The BRAVE program is a multi-faceted effort that has involved collaboration from across the campus and includes outreach to at-risk identity groups at Western including queer students, Native American students, veterans, and men. BRAVE uses “upstream” prevention methods – addressing students’ needs when they report emotional distress and not at the point when they are in crisis. BRAVE initiatives include: providing an online training tool for faculty, paraprofessional student leaders and students; developing and hosting campus-wide suicide/mental health awareness events; and promoting Western’s values as a caring and supportive community. When students are identified as candidates for mental health intervention, the Counseling Center is able to step in with after-hours on-call services and same-day appointments for urgent needs. Western students Stevona Burks, Phaolan Class and Corinne Sudduth gave personal examples of how being involved in the administrative side of the BRAVE program has helped them personally and how they see it making a difference on campus with their peers. Trustees had questions regarding how students get access to these programs, the awareness level students have of the programs and the programs were being adopted into the Western campus culture. Vice President Coughlin responded by saying that as the needs and challenges Western students face continue to change her office continues to adapt various programs in response and tries to strengthen the university’s efforts to provide culturally competent services. She also said that the demands for services on campus have outpaced state financial support. Coughlin also said that BEST SELF and BRAVE are both relatively new programs, but that support is growing on campus. She noted that BRAVE is a grant-funded program which will need support to continue after the current biennium. 3. CAMPUS EQUITY AND INCLUSION FORUM Nick Sanchez, Co-Chair of the President’s Taskforce on Equity, Inclusion and Diversity provided an overview of the upcoming Campus Equity and Inclusion Forum. He said the forum came about because of President Shepard’s 2014 Fall Convocation address where he challenged the campus community to more fully embrace its mission to reflect the increasing diversity of its current and Page 2 DRAFT MINUTES for Approval October 8, 2015 meeting prospective students, faculty and staff. In November of 2014 the President’s Taskforce on Equity, Inclusion and Diversity started to solicit suggestions and volunteers to develop new and additional trainings. Over 25 faculty and staff volunteered to teach workshops on a variety of topics, thus the Diversity & Equity Training series was organized to assist Western in achieving its strategic goals related to diversity. The WWU Campus Equity and Inclusion Training Series is a university-wide initiative to empower members of the Western campus community to better understand and thoughtfully engage with the experiences and identities of all community members. Sanchez explained that the mission of the training series is twofold: 1) To honor and endorse existing training and engagement opportunities for Western employees to expand their critical cultural consciousness; 2) To provide a single portal for Western faculty and staff to register for diversity-related training and events. The Equity and Inclusion Training Series welcomes staff and faculty from across the university to attend, design and lead its workshops. Sanchez said that as individuals complete one workshop from each of the four conceptual areas over the course of an academic year, they will receive a certificate of lifelong learning. Trustees were interested in the subject and asked questions about campus engagement and goals for the program at the end of the year. They also expressed that they found the presentation very informative and valuable in their understanding of campus issues. 4. EXECUTIVE SESSION MAY BE HELD TO DISCUSS PERSONNEL, REAL ESTATE AND LEGAL ISSUES AS AUTHORIZED IN RCW 42.30.110. At 4:35 p.m. Chair Lee announced that the Board would convene in Executive Session for approximately 25 minutes to discuss a legal and personnel matter as authorized in RCW 42.30.110 (1)(g)&(i). The Board returned to open meeting at 6:03 p.m. with no action to report and adjourned until Friday, October 9th at 9:00am. Page 3 DRAFT MINUTES for Approval October 9, 2015 meeting WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES MEETING MINUTES FRIDAY, October 9, 2015 Breakfast with the 2015 Convocation Award recipients in the Solarium. The Trustees, President Shepard and Vice Presidents enjoyed breakfast with the 2015 Convocation Award recipients. • Don Alper, Outstanding Faculty Leadership Award • Margaret Gegenhuber, Outstanding Classified Staff Award • Casey Hayden, Professional Staff Organization Award • Marie Eaton, Diversity Achievement Award • Heather Davidson, Carl H. Simpson Bridging Award • Vernon Damani Johnson, Philip E. Sharpe Jr., Community Engagement Award • Institute for Energy Studies Team, Team Recognition Award 1. CALL TO ORDER AND APPROVAL OF MINUTES Chair Karen Lee called the regular meeting of the Board of Trustees of Western Washington University to order at 9:04 a.m. on Friday, October 9, 2015 in the Board of Trustees Conference room, Old Main 340, at Western Washington University in Bellingham, Washington. Board of Trustees Karen Lee, Chair Sue Sharpe, Vice Chair Betti Fujikado Chase Franklin Earl Overstreet Seth Brickey Western Washington University Bruce Shepard, President Brent Carbajal, Provost and Vice President for Academic Affairs Eileen Coughlin, Senior Vice President and VP for Enrollment and Student Services Brian Sullivan, Assistant Vice President for Business and Financial Affairs Stephanie Bowers, Vice President for University Advancement Belina Seare, Associated Students President Molly Ware, Faculty Senate President Roger Leishman, Assistant Attorney General Paul Cocke, Director, University Communications Karen Dade, President’s Administrative Leadership Program Fellow Paul Dunn, Senior Executive Assistant to the President Barbara Sandoval, Assistant to the President and Secretary to the Board of Trustees Elissa Hicks, Assistant Secretary to the Board of Trustees There were no changes to the draft minutes as distributed. Page 1 DRAFT MINUTES for Approval October 9, 2015 meeting MOTION 10-01-2015: Trustee Brickey moved that the Board of Trustees of Western Washington University, upon the recommendation of the President, approve the following minutes: • Board of Trustees Meeting, August 20, 2015 • Board of Trustees Special Meeting, August 21, 2015 The motion passed. 2. PUBLIC COMMENT As per Amended RCW 28B.35.110, the Board of Trustees provided time for public comment. One person signed up to testify before the Board, and Chair Lee gave him two minutes to address the Board. Mr. Gary R. Best, father of a current Western student, who also provided public comment at the June Board meeting, expressed his concerns with the treatment of his daughter during several medical incidents while she was participating on the Western Softball Team. 3. RECOGNITIONS AND INTRODUCTIONS Eileen Coughlin, Senior Vice President and Vice President for Enrollment and Student Services asked Belina Seare, Associated Students (AS) President to introduce the members of the 20152016 AS Board of Directors. Seare said that some of the Board members were unable to attend the meeting and then introduced Abby Ramos, AS Vice President for Diversity who is a junior majoring in communications and public relations with a Spanish and English minor. 4. BOARD CHAIR Chair Lee congratulated the university and all those involved with the work that lead to Western receiving the 2015 Active Minds Healthy Campus Award, which recognized our campus for our cohesive, innovative public health approach to student health and wellness. The Active Minds award is a national organization which celebrates U.S. colleges and universities that are prioritizing health and demonstrating innovation and excellence in promoting student well-being. Chair Lee said that after hearing the presentations the previous day regarding the BEST SELF and BRAVE programs on campus that the Active Minds award was well deserved and that she was impressed by both programs and how they are meeting the needs of students. Chair Lee mentioned that the presidential search process continues and that trustees will be on campus a little more to be engaged in that process and that it is an exciting time for everyone. She also mentioned that she appreciates the public comment session we have at board meetings and that she believe it is part of what makes a public university great in that people are always given access to the university. 5. UNIVERSITY PRESIDENT President Shepard introduced Karen Dade, President’s Administrative Leadership Program Fellow, saying that Karen will serve from September 15, 2015 until June 16, 2016. Shepard said that he designed the President's Administrative Leadership Program to provide a Western faculty or staff Page 2 DRAFT MINUTES for Approval October 9, 2015 meeting member the opportunity for professional development through direct engagement in projects and responsibilities of strategic importance to the University. In addition to working on projects selected in agreement with the President, the Leadership Fellow will attend meetings of the Board of Trustees, participate fully in the President's Cabinet, and, as relevant to the Fellow's projects, participate in meetings of the Vice Presidents. President Shepard said that Presidential Leadership Fellows will typically be appointed for nine months and will be selected from currently tenured members of the faculty, academic administrators, or other full-time staff members. The typical appointment will be for half the Fellow's professional efforts, and upon completion of their fellowship, they will return to their previous academic or administrative role. President Shepard also gave a brief update on the Armory and said that the planned transfer to the Foundation is still in the works, but is nearing completion and that he will continue to keep the Board updated on the progress. President Shepard asked Brian Sullivan, Assistant Vice President for Business and Financial Affairs to provide the Board with a brief summary of the Morse Hall fire incident and the clean-up efforts. Sullivan said that on August 25, a small fire broke out in a lab on the third floor of the Chemistry Building which led to an evacuation of the building. The sprinklers in the building put out the fire, and no injuries were reported. Sullivan said that the university promptly hired emergency recovery and restoration contractor Belfor for the project, who was on-site the next day to begin. Belfor and university personnel worked closely together to clean up and repair damage to the building which allowed the building to be reopened in time for the start of fall quarter classes on September 24. Sullivan said that restoration work continues on the fire-damaged lab (room 370), and the estimated damage to the building could be up to $1.9 million, which includes cleanup, restoration and replacement of equipment and materials. The university will be seeking funding from a state emergency fund to help with the costs. 6. ASSOCIATED STUDENTS Belina Seare, AS President said that so far this quarter the AS has been working on requests from the Presidential Search Advisory Committee (PSAC) and working with the students on nominations for the PSAC. She also said that the AS is working on internal and structural reviews and looking at setting priorities for the upcoming year. Trustee Sharpe, chair of the PSAC thanked Belina for and the AS Board for their efforts with the search process. 7. FACULTY SENATE Molly Ware, Faculty Senate President said that the senate has also been busy working on the presidential search efforts and on getting nominations for the PSAC. Ware said the senate has been working on visioning for the coming year with a continued focus on campus climate and inclusive excellence from last year, clarifying the faculty senate role and increased engagement in the work of shared governance, strengthening collaboration and trust across roles (faculty, staff, student, administration) and creating more dynamic communication processes. She also said that two senate task forces are being formed to work on time sensitive issues. The first is the General Undergraduate Requirements (GUR) Task Force which will look at how Western might refresh/renew the GURs and still meet accreditation standards. The second task force will be the Library Committee which will address the huge financial shortfalls that the library anticipates it will face in the coming year. Page 3 DRAFT MINUTES for Approval October 9, 2015 meeting 8. ELECTION OF BOARD SECRETARY Chair Lee said that according to the Board Rules of Operation the Board needs to elect a new Board Secretary to fulfill the remainder of former Trustee Dick Thompson’s term until June of 2016. Chair Lee nominated, and it was seconded, that Trustee Earl Overstreet be the new Board Secretary. MOTION 10-02-2015: Trustee Sharpe moved that the Board of Trustees of Western Washington University elect the new Board Secretary as nominated, to be effective immediately. • Earl Overstreet, Secretary The motion passed. 9. RESOLUTION FOR MORSE HALL FIRE EFFORTS President Shepard and trustees expressed their appreciation to all those involved in the efforts to restore Morse Hall after the fire noting that having it open for students was a massive effort and they are looking forward to formally recognizing everyone’s work with a resolution. Brian Sullivan, Assistant Vice President for Business and Financial Affairs asked if there were any further questions about the event and thanked the trustees for their recognition of the effort of all involved. Trustee Lee asked Trustee Franklin to read Resolution 2015-11 Expressing Appreciation of Morse Hall Fire Efforts and make the motion. RESOLUTION NO. 2015-11 A RESOLUTION OF THE BOARD OF TRUSTEES OF WESTERN WASHINGTON UNIVERSITY EXPRESSING APPRECIATION OF MORSE HALL FIRE EFFORTS WHEREAS, the Morse Hall Fire occurred on August 25, 2015; and WHEREAS, in the midst of an already active construction schedule, unexpected responsibilities following the August 25, 2015 fire in Morse Hall were shouldered by staff and contractors who competently and expeditiously managed and carried out the repair of smoke and water damage to the building; and WHEREAS, the effective teamwork of many individuals, including administrators, faculty, staff, students, communication and information technology specialists, classroom support technicians, procurement and supply specialists, budget analysts, campus safety personnel, custodians and maintenance workers, and skilled trades people has earned the confidence and praise of Western’s administration and Board of Trustees; and WHEREAS, having Morse Hall ready on time for the opening of classes was an extraordinary accomplishment; Page 4 DRAFT MINUTES for Approval October 9, 2015 meeting NOW, THEREFORE BE IT RESOLVED, that the Board of Trustees of Western Washington University sincerely thanks the many staff and contractors who have been instrumental in the success of this project. PASSED AND APPROVED by the Board of Trustees of Western Washington University at its regular meeting on October 9, 2015. MOTION 10-03-2015: Trustee Franklin moved that the Board of Trustees approve Resolution 2015-11 Expressing Appreciation of Morse Hall Fire Efforts. The motion passed. 10. FALL OPENING REPORT Eileen Coughlin, Senior Vice President & VP for Enrollment and Student Services gave a brief report regarding this year’s enrollment. She said that Western welcomed over 2,800 freshmen to the campus this fall and over 1,000 new transfer students. According to the chart in Attachment A which was provided to the trustees, the enrolled freshmen are more diverse and an increased number are first generation students which reflects Washington high school graduates. Coughlin said that campus housing move-in went well and welcomed 4,026 students into the residences halls. She also said that each student was provided a copy of the selected Western Reads book “Do It Anyway: The New Generation of Activists” by Courtney E. Martin which profiles the lives and motivations of 8 activists under the age of 35 to paint a portrait of activism in the 21st century. Trustees were grateful for the new freshmen statistic breakdown and had questions about funding and services for these new students with an interest in making sure the resources went to help the students where they are needed the most to help them be successful. 11. UPDATES: POULSBO MARINE SCIENCE BUILDING AND UNIVERSITY CENTER OF NORTH PUGET SOUND Brent Carbajal, Provost & Vice President for Academic Affairs and Earl Gibbons, Vice Provost for Extended Education provided the Board a brief update regarding Western’s activities in Poulsbo and Everett, Washington. Gibbons talked about recent actions taken by the Poulsbo City Council regarding the Poulsbo Marine Science Building, saying that on August 12, 2015 the council approved a memo of intent for transfer of the property to WWU. He said they also approved a limited real estate appraisal to help clarify property boundaries with the Port of Poulsbo and other neighboring properties. Gibbons outlined some recent maintenance work that the city council and Poulsbo Marine Science Center Foundation had done on the building such as HVAC work, overall cleanup, re-certification of elevator, fire and sprinkler system testing, pressure washing, interior door repair, new exterior stair banister and new exterior doors in classrooms. Page 5 DRAFT MINUTES for Approval October 9, 2015 meeting Gibbons then discussed the official groundbreaking in September for the new University Center of North Puget Sound. He said that although the new facility will be operated by Washington State University, Western Washington University continues to be the largest of the eight university partners sharing the facility, both in terms of enrollment and number of employees. WSU expects the new building to be ready for occupancy for fall 2016 said Gibbons, but that the Washington State Legislature, did not fully fund the project and the entire building may not be completed by the scheduled opening date. Trustees were grateful for the update on the progress and there were no questions. Chair Lee announced a break at 10:22 am and reconvened the meeting at 10:37 am. 12. PRESIDENTIAL SEARCH PROCESS Trustee Sue Sharpe, Chair of Presidential Search Advisory Committee (PSAC) said that the presidential search website is up and running and that there has been great campus engagement in the process so far. Sharpe said that the PSAC committee will be made up of 14 total members, 3 trustees, 3 faculty members, 3 students, 1 professional staff, 1 classified staff and 2 community members adding that nominations are due from the stakeholder groups on October 15th. Next steps in the process include selection of the committee members, several on and off campus listening sessions to gather information from the campus community and external stakeholders, Sharpe said. The PSAC is hoping to have the job description and advertisement out by thanksgiving with the goal of reviewing applicants by the end of January or early February. Sharpe said that the PSAC will continue to strive for open communication with campus stakeholders throughout the process. 13. CAMPAIGN UPDATE Stephanie Bowers, Vice President for University Advancement said that as of October 9th the campaign stood at $58.87 million dollars raised. Bowers also said that by the end of the day the foundation would hopefully finalize a donor gift of an art piece valued at nearly half a million dollars that will be counted towards the campaign goal. 14. AUDIT COMMITTEE REPORT Betti Fujikado, Chair, Board Audit Committee said that the committee welcomed Trustee Karen Lee as the newest member and gave her a crash course on the work of the committee during the meeting. Trustee Fujikado then said the committee reviewed the internal audit report for the coming year and hopes to bring it to the full board for approval in December and looks forward to reporting on the State Auditor’s report as well. 15. BOARD GOVERNANCE COMMITTEE REPORT Sue Sharpe, Chair, Board Committee on Trustees gave a brief report on the committee. Sharpe said the committee continues to work on improving the new trustee orientation process in the hopes that Western will have new governor appointed trustees soon. Page 6 DRAFT MINUTES for Approval October 9, 2015 meeting 16. INFORMATION ITEMS a. Academic Affairs Report Provost Carbajal provided a written report with information regarding Vice Provost for Undergraduate Education, Steven VanderStaay, efforts in regarding the university’s Freshman Interest Groups (FIG) program. b. Admissions and Enrollment Report Vice President Coughlin provided a written report regarding the university’s general enrollment and admissions. c. Capital Program Report Vice President Van Den Hul provided a written report on the University’s capital projects. d. University Advancement Report Vice President Bowers provided a written report on the University’s Alumni Relations and Western Foundation activities. e. University Relations and Community Development Report Vice President Swan provided a written report documenting recent activities of University Relations and Community Development. f. WWU Annual Report Vice President Swan provided the Western Washington University Annual Report for 20142015 academic year. 17. DATE FOR NEXT REGULAR MEETING: December 10, 11, 2015 18. The meeting adjourned at 11:02 a.m. Page 7 Official Fall Enrollment 2015 All WWU Students New Undergraduate Students All Students Fall 2014 All Students Change Percent Change Residency Non-Resident Resident Percent Non-Resident Non-Resident Change Percent Change First Generation First Generation not First Generation Percent First Generation First Generation Change Percent Change Race/Ethnicity White Black or African American Hispanic or Latino Asian American Native American or AK Native International Other/Multicultural Unknown Race/Ethnicity All Students Students of Color Percent Students of Color Student of Color Change Percent Change ATTACHMENT A DRAFT minutes for Approval October 9 2015 Fall 2015 On-Campus State-Funded Fall 2014 Freshman Fall 2015 All New Freshmen 15,060 15,332 272 1.8% 14,260 14,426 166 1.2% Change Percent Change 1,502 13,558 10.0% 1,639 13,693 10.7% 137 9.1% 1,434 12,826 10.1% 1,573 12,853 10.9% 139 9.7% Non-Resident Resident Percent Non-Resident Non-Resident Change Percent Change 4,834 10,226 32.1% 5,028 10,304 32.8% 194 4.0% 4,620 9,640 32.4% 4,760 9,666 33.0% 140 3.0% Fall 2014 Fall 2015 11,217 11,228 468 520 994 1,083 1,655 1,735 433 461 157 159 8 136 138 15,060 15,332 3,550 3,807 23.6% 24.8% 257 7.2% Fall 2014 Fall 2015 10,634 10,545 442 492 926 1,027 1,598 1,668 417 435 148 155 5 95 99 14,260 14,426 3,383 3,627 23.7% 25.1% 244 7.2% Residency First Generation First Generation not First Generation Percent First Generation First Generation Change Percent Change Race/Ethnicity White Black or African American Hispanic or Latino Asian American Native American or AK Native International Other/Multicultural Unknown Race/Ethnicity All Students Students of Color Percent Students of Color Student of Color Change Percent Change Transfer Fall 2014 Fall 2015 Fall 2014 Fall 2015 2,786 2,809 23 0.8% 1,108 1,161 53 4.8% 344 2,442 12.3% 404 2,405 14.4% 60 17.4% 73 1,035 6.6% 78 1,083 6.7% 5 6.8% 906 1,880 32.5% 944 1,865 33.6% 38 4.2% 477 631 43.1% 537 624 46.3% 60 12.6% Fall 2014 Fall 2015 1,973 1,934 104 121 202 245 379 391 108 84 11 12 3 9 19 2,786 2,809 793 844 28.5% 30.0% 51 6.4% Fall 2014 Fall 2015 846 861 28 44 89 86 86 94 34 50 17 14 8 1,108 237 21.4% * This document was presented at the Board meeting and has been added to the meeting packet after the presentation. 12 1,161 274 23.6% 37 15.6% DRAFT MINUTES for Approval November 2, 2015 meeting WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES MEETING MINUTES Monday, November 2, 2015 1. CALL TO ORDER Chair Karen Lee called the special meeting of the Board of Trustees of Western Washington University to order at 10:06 a.m., Monday, November 2, 2015 in the Board of Trustees Conference Room, Old Main 340, at Western Washington University in Bellingham, Washington. Board of Trustees Karen Lee, Chair Sue Sharpe, Vice Chair Earl Overstreet, Secretary Betti Fujikado Chase Franklin Mo West Seth Brickey Western Washington University Bruce Shepard, President Brent Carbajal, Provost and Vice President for Academic Affairs Richard Van Den Hul, Vice President for Business and Financial Affairs Steve Swan, Vice President for University Relations and Community Development Molly Ware, Faculty Senate President Roger Leishman, Assistant Attorney General Paul Cocke, Director, University Communications Paul Dunn, Senior Executive Assistant to the President Barbara Sandoval, Assistant to the President and Secretary to the Board of Trustees Elissa Hicks, Assistant Secretary to the Board of Trustees 2. EXECUTIVE SESSION MAY BE HELD TO DISCUSS PERSONNEL, REAL ESTATE AND LEGAL ISSUES AS AUTHORIZED IN RCW 42.30.110. At 10:06 a.m. Chair Lee announced that the Board would convene in Executive Session for approximately 30 minutes to discuss a personnel matter as authorized in RCW 42.30.110 (1)(g). The Board returned to open meeting at 10:42 a.m. with no action to report and continued with the open meeting. 3. PRESIDENTIAL SEARCH PROCESS Trustee Sue Sharpe, Chair of the Presidential Search Advisory Committee (PSAC) provided a brief overview of events related to the search to date and said the search had recently reached a new milestone by finalizing the selection of the members of the PSAC, that she proceeded to introduce to the board. DRAFT MINUTES for Approval November 2, 2015 meeting • • • • • • • • • • • • • • Spencer Anthony-Cahill, Professor, Chemistry Department Stephanie Cheng, Sophomore, Journalism & Public Relations Chase Franklin, Trustee, Western Washington University Jim Graham, Associate Professor, Psychology Kathi Hiyane-Brown, President, Whatcom Community College Aaron Ignac, Assistant Director of Operations, Academic & Career Services Kathy Kitto, Vice Provost for Research, Dean of the Graduate School Kim Kolb Ayre, Program Manager, Dean’s Office, College of Humanities & Social Sciences Karen Lee (ex officio), Chair, Western Washington University Board of Trustees Trula Nicholas, Associate Professor, Health and Community Studies Leona Oliveros, Master’s student, Secondary Education Earl Overstreet, Trustee, Western Washington University Jerry Thon, Founder, Astoria Holdings Tyler Tran, Master’s student, Environmental Science Trustee Sharpe announced that Greenwood/Asher & Associates, a leading national search firm specializing in higher education, was selected to assist and advise Western’s presidential search. She introduced Jan Greenwood, President and Partner, who will be the lead representative during the search. Greenwood shared with the trustees some of the changes that have occurred in the national market with regard to higher educational administrative positions since Western’s last search in 2008. She said that the candidate pool is aging and becoming more diverse and that a public versus private search process will produce a very different pool of candidates. Greenwood also reaffirmed her company’s commitment to diversity, integrity, fairness and equality throughout the entire search process and commended the university on the open and transparent process it has achieved so far. She also commented on the level of participation during the campus listening sessions and survey feedback and said that it is the most participation her company has seen in almost 23 years. Her final comment related to the transition process after a selection has been made, saying that a candidate who follows after a long term successful president averages only three years in their new position without effective transition support. Greenwood asked the trustees what they thought would be the most important attributes of a successful candidate based on where they see Western headed in the next five to ten years. Trustees responded with general feedback such as strategic leader, commitment to transparency and collaboration, innovative, sense of perspective for the future both in higher education in general and in communication trends, being able to engage the community and the legislature. 4. RESOLUTION 2015-09 CHARGE TO THE PRESIDENTIAL SEARCH ADVISORY COMMITTEE Trustee Lee asked Trustee Fujikado to read Resolution No.2015-09 Charge to the Presidential Search Advisory Committee. RESOLUTION 2015-09 A RESOLUTION OF THE BOARD OF TRUSTEES OF WESTERN WASHINGTON UNIVERSITY CHARGE TO PRESIDENTIAL SEARCH ADVISORY COMMITTEE WHEREAS, President Bruce Shepard has announced his intention to retire from the Presidency of Western Washington University after the conclusion of the 2015-16 academic year; and DRAFT MINUTES for Approval November 2, 2015 meeting WHEREAS, the Board of Trustees is responsible for the timely selection and appointment of an individual to replace President Shepard as president of the University; and WHEREAS, the Board of Trustees, through Resolution 2015-06, appointed Vice Chair Susan Sharpe to serve as Presidential Search Advisory Committee Chair and directed her to develop recommendations to the Board related to the search process, including with respect to the size and composition of the Presidential Search Advisory Committee; and WHEREAS, the Board of Trustees, through Resolution 2015-08, adopted recommendations and made appointments of trustees to the Presidential Search Advisory Committee; and WHEREAS, acting pursuant to Resolution 2015-08, the Board Chair and the Committee Chair will appoint individuals to serve on the Committee; and WHEREAS, it is the Board’s desire to provide clear direction to the Committee, now, therefore, be it RESOLVED that the Charge to the Presidential Search Advisory Committee attached hereto be and the same hereby is approved. Dated this 2nd day of November, 2015. Board of Trustees Charge to the Presidential Search Advisory Committee Background Selection of the University President is the statutory responsibility of the Board of Trustees (“Board”). In discharging this responsibility, the Board seeks the assistance and advice from the faculty, staff, students, other constituencies and friends of the University. Accordingly, the Board is creating a Presidential Search Advisory Committee (“Committee”). The Committee will be comprised of individuals committed to the advancement of the University, who have been nominated by the leadership of their respective campus governance organizations. The members will bring diverse expertise, perspectives and experiences to the common task of advising the Board in preparation for the Board’s evaluation of candidates for president of the University. Of necessity, the considerable work of the Committee will require evening and weekend meetings. However, those who have served on past Presidential Search Advisory Committees have found it rewarding and manageable. Staffing will be provided and the Committee’s efforts will be supported by Greenwood/Asher & Associates, a professional search consulting firm. Charge The Committee’s initial task is to develop a list of qualifications and characteristics the next president should possess, based on feedback received from the on- and off-campus Western community through open forums and online stakeholder surveys. After receiving the report of the Committee regarding potential presidential qualifications, the Board will adopt criteria to be applied by the Committee in evaluating and interviewing candidates. Within the timeframe established by the Board Chair and Committee Chair, the Committee is to submit to the Board a list of all candidates who meet the minimum qualifications along with the Committee’s unranked recommendation of three to five candidates for the Board to consider inviting for final interviews. For each of the recommended candidates, the Committee is to provide a written statement explaining why he or she is considered to be suited to be president of the University. In carrying out its duties, the Committee is expected to undertake the following activities: DRAFT MINUTES for Approval November 2, 2015 meeting • conduct a national search to enable the Board to consider a select group of highly qualified candidates; • advertise the position by appropriate means; • actively recruit candidates from a wide, diverse group of well-qualified individuals, including women, minorities and non-traditional applicants; • maintain records of all nominations and applicants; • screen applications using the criteria established by the Board; • provide appropriate information about the University to the candidates; • keep the candidates apprised of their status in the search; • interview and conduct reference checks on all recommended candidates; • ensure that the process is conducted with integrity, candidate confidentiality, and in compliance with all applicable laws and University policies. The Committee’s role is strictly advisory to the Board. The Committee is not authorized to conduct hearings, take testimony or public comment, or otherwise act on behalf of or exercise any of the powers of the Board. The Committee understands that the Board Chair and the Chair of the Committee are the only persons authorized to engage in public communication concerning the search. The Chair of the Committee is the only person authorized to engage in public communication on behalf of the Committee. Meetings of the Committee are not required to be open to the public and will generally be held privately. The Committee and its members are required to maintain strict confidentiality during and after the search. All members will be required to sign a confidentiality agreement to ensure the integrity of the process. The Board thanks the members in advance for devoting their time and considerable talents to the task of advising the Board concerning the evaluation of candidates for the president of the University. Approved by the Board on the 2nd day of November, 2015. MOTION 11-02-2015: Trustee Fujikado moved that the Board of Trustees approve Resolution 2015-09 Charge to the Presidential Search Advisory Committee. Motion was approved. 5. The meeting adjourned at 11:55 a.m. DRAFT MINUTES for Approval November 6, 2015 meeting WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES MEETING MINUTES Friday, November 6, 2015 1. CALL TO ORDER Chair Karen Lee called the regular meeting of the Board of Trustees of Western Washington University to order at 10:00 a.m., Friday, November 6, 2015 in the Board of Trustees Conference Room, Old Main 340, at Western Washington University in Bellingham, Washington. After Chair Lee called the meeting to order, she asked Trustee Sue Sharpe to run the meeting. Board of Trustees Karen Lee, Chair – by phone Sue Sharpe, Vice Chair Earl Overstreet, Secretary – by phone Betti Fujikado – by phone Chase Franklin - by phone John M. Meyer – by phone Mo West – by phone Seth Brickey – by phone Western Washington University Bruce Shepard, President Brent Carbajal, Provost and Vice President for Academic Affairs Richard Van Den Hul, Vice President for Business and Financial Affairs Steve Swan, Vice President for University Relations and Community Development Molly Ware, Faculty Senate President Roger Leishman, Assistant Attorney General Paul Cocke, Director, University Communications Paul Dunn, Senior Executive Assistant to the President Elissa Hicks, Assistant Secretary to the Board of Trustees 2. CONSIDERATION OF CONTRACT WITH UFWW President Shepard thanked all the members of the negotiation teams for their hard work, long hours and the respectful process. He introduced the faculty who were in attendance to support the contract, Dr. Chuck Lambert, United Faculty of Western Washington (UFWW) president and Associate Professor in Woodring College of Education; Dr. Kevin Leonard, Professor and Chair of the History Department; Dr. Mark Greenberg, Dean of Libraries; and Dr. Brian Burton, Associate Vice President for Academic Affairs. Shepard said that this contract renewal was not simply a faculty contract but a contract between equal partners. He pointed out some of the highlights in the contract and asked for Chuck Lambert to report on the ratification vote from the union. Lambert said that the UFWW members had a chance to review and vote on the contract previously that week and that the votes were tallied on Thursday evening with 97% voting in favor of approving the contract. Lambert then also thanked the negotiation teams and the administration for providing a five year contract to the faculty which they see as providing some stability during a time of change for the University. He also pointed out that a technical error was discovered in the contract late the DRAFT MINUTES for Approval November 6, 2015 meeting previous day and that there will be a Memorandum of Understanding for signature shortly to correct the mistake. Trustees expressed their gratitude for all the hard work that went into the contract and negotiation process as well and for the way that they were kept informed of the process. Trustees commented that the contract seems fair and equitable for all involved. There were no specific questions regarding the contract from the Trustees. Trustee Sharpe then asked Trustee Lee to make the motion to officially approve the contract. MOTION 11-02-2015: Trustee Lee moved that the Board of Trustees hereby approves the proposed collective bargaining agreement with the United Faculty of Western Washington. The Board of Trustees authorizes the President or his designee to execute the agreement on behalf of the Board effective November 6, 2015, in keeping with the reserved authority in the Board of Trustees Rules of Operation, Section 2.3(h). A roll call vote was taken with all Trustees voting in favor of the contract. Trustee Brickey recused himself from the vote because of his current student status. 3. The meeting adjourned at 10:22 a.m. DRAFT MINUTES for Approval November 17, 2015 meeting WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES MINUTES MONDAY, NOVEMBER 17, 2015 1. CALL TO ORDER Chair Karen Lee called the special meeting of the Board of Trustees of Western Washington University to order at 1:04 p.m., in the Boardroom, Old Main 340, in Bellingham, WA. Board of Trustees Karen Lee, Chair Sue Sharpe, Vice Chair Earl Overstreet, Secretary – by phone Betti Fujikado Chase Franklin Mo West John M. Meyer Seth Brickey Western Washington University Bruce Shepard, President Brent Carbajal, Provost and Vice President for Academic Affairs Eileen Coughlin, Senior VP, Vice President for Enrollment and Student Services Richard Van Den Hul, Vice President for Business and Financial Affairs Stephanie Bowers, Vice President for University Advancement Steve Swan, Vice President for University Relations and Community Development Molly Ware, Faculty Senate President Roger Leishman, Assistant Attorney General Paul Cocke, Director of University Communications Barbara Sandoval, Assistant to the President and Secretary to the BOT Elissa Hicks, Assistant Secretary to the Board of Trustees Paul Dunn, Senior Executive Assistant to the President 2. PRESIDENTIAL SEARCH PROCESS & APPROVAL OF POSITION DESCRIPTION Trustee Sharpe and Jan Greenwood, President and Partner, Greenwood/Asher & Associates, updated the Board on the recent activity of the Presidential Search Advisory Committee (PSAC). They said that over the last couple of weeks the PSAC has held over 25 listening session with broad campus constituencies and collected and analyzed feedback from the online survey. Sharpe said that some efforts were more successful than others and some events were altered at the last minute to encourage greater participation. She said that overall Western’s process had broken participation records in every category. Sharpe said that strong leadership traits for the next president came from the listening sessions. She called some the “flavor of Western” which she said are examples of the excellent teamwork that has been present on campus over the last few years which include: accessible and transparent, good communication skills, focus on diversity and sustainability, legislative know how, strong academic background with a liberal arts foundation, a strong understand of shared governance, good community outreach, strong fundraising/alternative funding skills. Greenwood said that all of DRAFT MINUTES for Approval November 17, 2015 meeting the feedback ended up shaping the recommended Position Description and the recommended Leadership Challenges, Opportunities and Expectations, and that the documents were a summary of all the input. Trustees had questions about student engagement. Sharpe responded that there was more student participation through online resources than in person, but when they engaged students in small groups on campus, in-person participation was improved. Trustee Sharpe said that overall the committee has worked very well together and she feels that the PSAC has created a really spectacular document that showcases the strengths of Western and will attract quality candidates for the position. Greenwood said that these documents, once approved, would be used by their firm to market the position and made into a professional document that would be sent to potential candidates and applicants. Sharpe requested one modification to the Recommended Position Description in the How to Apply section of the document. Before the fourth sentence a sentence should be added that says “For best consideration applications and materials should be received by January 20, 2016”. Greenwood said that the document is truly inspiring, invites a higher level of candidate and is very authentic to the Western experience. She added that the document is forward looking and sets the ground work for a successful search. Trustees thanked Trustee Sharpe for her leadership and the entire PSAC for their hard work over the past couple of weeks in creating these inspiring documents. Trustee Lee asked Trustee Meyer to make the motion to approve the documents. MOTION 11-03-2015 Trustee Meyer moved that the Board of Trustees of Western Washington University, on recommendation of the Chair of the Board and the Chair of the Presidential Search Advisory Committee, approve the Position Description, as modified, and the Leadership Challenges, Opportunities and Expectations document, to be used for advertisement and recruitment of the next President of Western Washington University. A roll call vote was taken with all Trustees voting in favor. Chair Lee announced a break at 2:51 p.m. The Board returned and reconvened the meeting at 2:59 p.m. 3. EXECUTIVE SESSION MAY BE HELD TO DISCUSS PERSONNEL, REAL ESTATE AND LEGAL ISSUES AS AUTHORIZED IN RCW 42.30.110. 2:30 – 4:00 At 2:59 p.m. Chair Lee announced that the Board would convene in Executive Session for approximately ninety minutes to discuss personnel and legal matters as authorized in RCW 42.30.110 (1)(g)&(i). The Board returned to open meeting at 4:47 p.m. with no action to report and adjourned the meeting. DRAFT MINUTES for Approval November 24, 2015 meeting WESTERN WASHINGTON UNIVERSITY BOARD OF TRUSTEES MINUTES Tuesday, November 24, 2015 1. CALL TO ORDER Chair Karen Lee called the special meeting of the Board of Trustees of Western Washington University to order at 7:30 a.m. on November 24, 2015, via a conference call. Board of Trustees Karen Lee, Chair – by phone Sue Sharpe, Vice Chair – by phone Earl Overstreet, Secretary – by phone Betti Fujikado – by phone Chase Franklin - by phone John M. Meyer – by phone Mo West – by phone Western Washington University Roger Leishman, Assistant Attorney General 2. EXECUTIVE SESSION At 7:30 a.m. the Board convened in Executive Session to discuss personnel matters as authorized in RCW 42.30.110. At 8:27 a.m. the Board convened in Open Session via conference call. No action was taken. 3. ADJOURNMENT The meeting adjourned at 8:27 p.m. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Bruce Shepard, President DATE: December 11, 2015 SUBJECT: Public Comment Period PURPOSE: Information Item Purpose of Submittal: RCW 28B.35.110 requires that the governing boards of regional universities provide for public comment at meetings and follow procedures for open public meetings in the Open Public Meetings Act. Persons wishing to comment will sign in between 7:45 – 7:55 a.m. the day of the Board of Trustees meeting. The signup sheet will be given to the Board Chair at 8:00 a.m. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Karen Lee, Chair, Board of Trustees DATE: December 11, 2015 SUBJECT: Board Chair Report PURPOSE: Information Item Purpose of Submittal: Board Chair Karen Lee will report to members of the Board and President Shepard and his staff on topics related to the Board of Trustees. • Resolution 2015-12 Welcoming John M. Meyer • Resolution 2015-13 Welcoming Mo West RESOLUTION NO. 2015-12 A RESOLUTION OF THE BOARD OF TRUSTEES OF WESTERN WASHINGTON UNIVERSITY WELCOMING TRUSTEE John M. Meyer WHEREAS, on October 21, 2015, Governor Jay Inslee appointed JOHN M. MEYER of Mount Vernon, Washington, to serve a term on the Western Washington University Board of Trustees through September 30, 2021; and WHEREAS, JOHN M. MEYER brings to his appointment as a trustee over 40 years of legal and judicial experience as a Skagit County Superior Court and District Court judge, as a partner at Gilbert and Meyer Law Firm, and as a staff attorney with the Federal Power Commission in Washington, D.C. WHEREAS, JOHN M. MEYER has received many honors over his professional career including the Washington State Association for Justice 2009 Judge of the Year award and induction into the Skagit Valley College Hall of Fame; and WHEREAS, JOHN M. MEYER has shown his incredible commitment to community service by serving as a member on numerous boards, including the Board of Judicial Administration, the Sentencing Guidelines Commission Board, the Washington State Trial Lawyers Association Board, and Skagit Valley College Board; serving as chair of the Board of Judicial Administrations Court Education Committee, the Skagit County Law and Justice Board, and the Skagit Homeless Youth Task Force; serving as dean of the Washington State Judicial College; serving as treasurer of the Superior Court Judges' Association; and serving as president of the University of Washington Alumni Association Board, the Skagit County Bar Association, the Skagit Valley College Foundation, Mount Vernon Kiwanis, and the Skagit Valley Family YMCA; and WHEREAS, JOHN M. MEYER received his Bachelor’s degree in education from the University of Washington and his Juris Doctorate from the University of California Hastings College of Law; and WHEREAS, JOHN M. MEYER has declared his commitment to serve as a member of the Western Washington University Board of Trustees; and NOW, THEREFORE BE IT RESOLVED that the Board of Trustees of Western Washington University officially extends a warm welcome to JOHN M. MEYER as he begins his term on the Board. PASSED AND APPROVED by the Board of Trustees of Western Washington University at its regular meeting on December 11, 2015. RESOLUTION NO. 2015-13 A RESOLUTION OF THE BOARD OF TRUSTEES OF WESTERN WASHINGTON UNIVERSITY WELCOMING TRUSTEE Maureen “Mo” West WHEREAS, on October 21, 2015, Governor Jay Inslee appointed MO WEST of Bellingham, Washington, to serve a term on the Western Washington University Board of Trustees through September 30, 2021; and WHEREAS, MO WEST brings to her appointment as a trustee years of extensive professional experience in nursing and government policy work with over 30 years in the nursing profession and by serving in Washington, D.C. for eight years as a legislative assistant with the U.S. Senate with the Senate Committee on Labor and Human Resources, Subcommittee on Disability Policy, and as a professional staff member to former U.S. Senator Robert Dole, responsible for legislation relating to various health, education, disability and social policy programs; and WHEREAS, MO WEST also brings to her appointment academic experience serving as an instructor in Western’s RN-BSN program, as adjunct faculty in the School of Health Sciences at Seattle Pacific University, and as a current member of the faculty at the University of Washington, Bothell School of Nursing and Health Studies; and WHEREAS, MO WEST has shown commitment to serve her community by actively participating in local non-profit boards including Mt. Baker Planned Parenthood, the Bellingham Festival of Music, PeaceHealth St. Joseph Medical Center Foundation, and the Brigid Collins Family Support Center; and WHEREAS, MO WEST received her Bachelor’s degree in Nursing from the University of Iowa, her Master’s in Nursing from the Catholic University of America, and her Doctorate in Nursing from the University of Washington; and WHEREAS, MO WEST has declared her commitment to serve as a member of the Western Washington University Board of Trustees; and NOW, THEREFORE BE IT RESOLVED that the Board of Trustees of Western Washington University officially extends a warm welcome to MO WEST as she begins her term on the Board. PASSED AND APPROVED by the Board of Trustees of Western Washington University at its regular meeting on December 11, 2015. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Bruce Shepard, President DATE: December 11, 2015 SUBJECT: President’s Report PURPOSE: Information Item Purpose of Submittal: President Shepard will present brief reflections on issues of interest to the Board. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard on behalf of the Associated Students DATE: December 11, 2015 SUBJECT: Associated Students PURPOSE: Associated Students Report Purpose of Submittal: AS President, Belina Seare, will brief the Board of Trustees on current activities of the Associated Students. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Molly Ware, Faculty Senate President DATE: December 11, 2015 SUBJECT: Faculty Senate PURPOSE: Information Item Molly Ware, Faculty Senate President, will brief the Board on recent activities of the Faculty Senate. • • • The Senate Executive Council in collaboration with faculty, staff, and administration from across campus has taken leadership in response to the hate speech events on campus, which we are viewing as manifestations of systemic racism, in the following ways: o Sending a campus-wide response to all faculty, staff, and administration in response to these events. o Creating an accommodations guideline document providing faculty with specific ideas for making accommodations for those students who do not feel safe returning to campus during dead week or finals week. o Generating a list of principles and resources to support the campus in facilitating challenging conversations in the coming weeks in ways that strengthen the health of our campus climate. The Senate Executive Council has identified a list of 5 action steps to strengthen inclusive excellence on campus (presented at our last meeting). These will be prioritized and time will be designated in upcoming meetings for faculty and students to collaborate on these projects. All action steps are intended to strengthen the alignment of our university structures with our values in the mission/vision. The Senate President and Vice President attended the Associated Students Board meeting on November 18 in order to 1) get students’ feedback on identified action steps and to 2) think strategically about creating a pool of students at the beginning of each year who may be interested in influencing university decision-making. Currently, meaningful collaboration with more than a few students is challenging at the university level. We’d like a substantive pool of students readily available to participate in key projects. Students in the pool will be identified by both faculty and openly invited to sign up by AS. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard DATE: December 11, 2015 SUBJECT: Consent Items PURPOSE: Action Items Purpose of Submittal: Approval of the university recommendations provided on the consent item agenda. Proposed Motion(s): MOVED, that the Board of Trustees of Western Washington University, upon the recommendation of the president, approve the following consent items: • Approval of Fall Quarter Degrees Supporting Information: Materials supporting the consent item agenda are attached. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Provost Brent Carbajal DATE: December 11, 2015 SUBJECT: Approval of Fall Quarter Degrees PURPOSE: Action Item Purpose of Submittal: Board of Trustees responsibility to approve awarding of degrees Proposed Motion: MOVED, that the Board of Trustees of Western Washington University, on recommendation of the faculty and subject to the completion of any unmet requirements, approves awarding undergraduate and graduate degrees to the candidates listed in the files of the Registrar and Graduate Dean, for Fall Quarter 2015, effective December 12, 2015. Supporting Information: Lists on file with the Registrar and Graduate Dean. Students Undergraduates Masters December 2015 632 35 Comparison: December 2014 688 36 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard on behalf of Stephanie Bowers, Vice President for University Advancement DATE: December 11, 2015 SUBJECT: Update of the Agreement between Foundation and Trustees PURPOSE: Action Item Purpose of Submittal: To obtain approval from the Board for an updated Agreement between the WWU Foundation and the Board of Trustees. Proposed Motion: MOVED, that the Board of Trustees of Western Washington University, upon recommendation of the President, approve the updated Agreement between the WWU Foundation and the Board of Trustees as proposed in the attached. Points to Consider: This agreement is being updated to further amend aspects of the relationship between the University and the Foundation, specifically to include the lease of the President’s Residence from the Foundation and eliminate potential actions around patents and copyrights. All other updates are language refinements. Supporting Information: A redlined final draft version of the updated agreement is attached. The Assistant Attorney General has reviewed. AGREEMENT Between WESTERN WASHINGTON UNIVERSITY And WESTERN WASHINGTON UNIVERSITY FOUNDATION DRAFT THIS AGREEMENT is entered into by and between WESTERN WASHINGTON UNIVERSITY (the University), a public institution of higher education located in Bellingham, Washington, and WESTERN WASHINGTON UNIVERSITY FOUNDATION (the Foundation), a nonprofit corporation headquartered at the University in Bellingham, Washington. WHEREAS, the University, pursuant to RCW 28B.35.120(10) may receive such gifts, grants, conveyances, devises, and bequests of real or personal property from whatsoever sources, as may be made from time to time, in trust or otherwise, whenever the terms and conditions thereof will aid in carrying out University programs; and WHEREAS, the University has, from its express power to receive such gifts, the implied power to solicit the same pursuant to an agreement such as this; and WHEREAS, the University has authority pursuant to RCW 28B.35.120(1) to carry out such other activities consistent with Chapter 28B.35 RCW and the authority pursuant to RCW 28B.35.120(9) to enter into contracts essential to the purposes of the University; and WHEREAS, the Foundation is a nonprofit corporation duly organized for such purposes as maintaining, developing, increasing, and extending the facilities and services of the University; and WHEREAS, the Foundation is empowered to solicit and receive property and to make contributions, grants, gifts, and transfers of property to the University; and WHEREAS, the University and the Foundation first entered into a similar agreement in 1995, which was first amended in 2010, and has been reviewed and is now further amended to reflect changes in the name of the Foundation and to update other aspects of the relationship between the University and the Foundation, 1 NOW, THEREFORE, the parties hereby agree as follows: I. Pledge of Mutual Support and Cooperation The Board of Trustees of the University and the Board of Directors of the Foundation pledge their mutual support and cooperation in furtherance of the respective purposes of the University and the Foundation. The Board of Trustees of the University recognizes and respects the authority of the Board of Directors of the Foundation to govern and manage its affairs, as set forth in its Articles of Incorporation. The Board of Directors of the Foundation recognizes and respects the authority of the Board of Trustees to govern the University, to define its policies and purposes, and to determine program emphasis. II. Obligations of the Foundation The Foundation, its Board of Directors, officers, and agents agree to: 1. Design and implement such programs and procedures so as to persuade continuous and special philanthropic support and benefactions to further the purposes of the Foundation for the benefit of the University. This support shall include financial support for the University President and other designated University officials to engage in University development activity, including, but not limited to, expenses for travel, vehicle provision, certain memberships, and entertainment expenses, as may need to be incurred. For this purpose, the Foundation will comply with all applicable federal and state laws, and will establish rules and procedures for the management of all affairs of the Foundation in accordance with: a. the requirements for tax-exempt entities under the federal laws described in Section 501(c)(3) of the Internal Revenue Code of 1954 and 1986, or acts amendatory thereof or supplementary thereto; and b. the laws of the state of Washington applicable to the Foundation, including, but not limited to, those governing charitable solicitations (Chapter 19.09 RCW), nonprofit corporations (Chapter 24.03 RCW), trusts holding property for charitable purposes (Chapter 11.110 RCW), and the authority of state agencies (Chapter 43.09). 2. Work with the Board of Trustees to provide a reasonable level of support for the President. “Reasonable level of support” may include, but not be limited to: a. Provision of, on agreed upon lease terms, appropriate housing for the President and family that is commensurate with the role of University 2 President, and is suitable for regular entertaining that is intended to advance the mission of the University; b. An appropriate vehicle, including regular and preventative maintenance; c. Membership to appropriate social/business/athletic club(s) that provide the opportunity to entertain guests or potential donors of the University; d. Provision of funding to be used for expenses related to development and professional activities, as incurred by the President and other designated University staff. The President’s expenses intended for reimbursement by the Foundation will be reviewed quarterly by the Chair of the Board of Trustees of the University, or his designee, to insure the President’s expenses have been properly submitted, reviewed, and approved. Provision of any additional support will be determined mutually between the Board of Trustees and the Foundation Board. 2. Apply for and aid in the processing of applications for patents and copyrights; receive or purchase patents and copyrights, inventions, processes, and discoveries; hold, manage, use, and develop the same; sell, license, or otherwise dispose of the same; and collect royalties thereon. 3. Accept, hold, administer, invest, and disburse such funds and properties of any kind or character as from time to time may be given to it by persons or foundations absolutely or in trust, as the case may be; retain proper agents, experts, consultants, accountants, counselors, advisers, and investment advisers for the proper accepting, holding, administering, investing, and disbursing of such funds and properties of any kind or character; and in general do all things that may appear necessary and useful in accomplishing these purposes. 4. Acknowledge that the Foundation can provide financial support for the University to hire employees for various program or development activities. 5. Use all assets and earnings of the Foundation exclusively for University purposes, including the payment of expenses necessarily incident thereto; and no part of such assets and earnings shall benefit any officer or member of the Board of the Foundation or any other individual, except in payment of reasonable compensation for services actually rendered or expenses necessarily incurred. 3 6. Have the authority, and it shall be its duty, to hold and apply the corpus and income of any donation, grant, devise, or bequest, or any part thereof in such manner as may have been stipulated or provided in the instrument creating such donation, grant, devise, or bequest. 7. Have the authority to sell, mortgage, pledge, lease, or exchange all or any part of the real or personal property or funds of the Foundation, unless otherwise specifically provided in the Foundation’s creating instrument, at such prices and upon such terms and conditions as the Foundation may deem best; and the Foundation may prudently invest and reinvest Foundation funds, although such investments are not approved as investments for University trustees under the laws of the state of Washingtonwithout regard to any limitations on investments imposed by law on state agencies . 8. Have full power and authority to purchase, lease, accept as a gift, devise, or bequest, or otherwise acquire such real or personal property for University purposes, contingent upon University approval by the President or his designee, and to establish title of such property in the University upon acknowledgement of receipt. 9. Have full power and authority to purchase, lease, accept as a gift, devise, or bequest, or otherwise acquire such real or personal property, to be held, administered, or used in any way whatsoever for the benefit of the University, or to assist the University in the fulfillment of its educational purposes; and to that end, the Foundation shall have full power and authority to hold, own, control, handle, administer, or operate any such real or personal property, including the operation of any business connected with or incident to the ownership or control of such property, and to sell, lease, pledge, mortgage, exchange, or otherwise dispose of any such property at such prices and upon such terms and conditions as it may deem best. 10. Borrow money and make and issue bonds, notes, contracts, and other evidence of indebtedness therefore, and by the proper resolution duly adopted by a majority vote of the members of the Foundation’s Board of Directors, to secure payment thereof by authority provided above. 11. Engage in and disburse any part or all of its funds, both income and principal, for any and all lawful activities permitted by the laws and regulations governing tax-exempt charitable corporations at that time, and which may be necessary or incidental to the 4 furtherance of the purposes of this Foundation, including disbursements for scholarships or grants for students at the University pursuant to such terms and conditions as might be lawfully established by donors or the University. 12. Hold, invest, and manage University endowment funds established through donation, grant, devise, or bequest from any public or private source as agent of the University; and apply the corpus and income, or any part thereof in such manner as may have been stipulated or provided in the instrument creating the endowment. 13. Use reasonable portions of its funds and income thereto to pay the administrative expenses of the operation of the Foundation not provided by the University under this Agreement. 14. Not change its stated purpose for existence as set forth in Article IV of its Articles of Incorporation during the lifetime of this Agreement without first obtaining written consent from the University. 15. Agrees to be responsible and account for in its own records all donations wherein the donor names the Foundation or the University as recipient. The Foundation agrees to accept, acknowledge, and timely tender to the University all donations it receives from donors who expressly direct that the donation be made to the University and not the Foundation. Funds will be timely tendered to the University in accordance with donor intent and University policy. 16. Agrees to transmit to the University’s Vice President for Business and Financial Affairs a copy of its annual audited financial statement and management letter, if any, prepared by an independent certified public accountant, by October 15 25 of each year. The Foundation agrees to makes its books and records available to audit by such individual as designated by the University’s Board of Trustees or its designee. III. Obligations of the University For and in consideration of the Foundation promising to operate solely for the benefit of the University and to carry out the aforementioned activities, the University agrees to: 1. Provide the Foundation with office space, utilities, office equipment, furnishings, and access to space for development activities. The fair rental market value 5 for the use of such space and equipment shall be deemed to be a partial payment by the University for the Foundation’s services as described in Article II above. 2. Provide the Foundation with support services, such as consumable office supplies, telephone service, software and data services, postage, the use of audio-visual equipment and services, errors and omissions insurance coverage for its directors, workers’ compensation insurance coverage for its volunteers, and duplicating, printing, and publication services, all as partial payment for the Foundation’s services to the University as described in Article II above. 3. Provide for the operation of the Foundation, professional staff services in the form of a person to function as executive director of the Foundation and such other professional and classified staff as may be needed to carry out Foundation activities within the confines of support budgeted by the University. The University also agrees to provide accounting, fiscal, information, and such other services as may be necessary to carry out Foundation activities. The services provided to the Foundation by the University pursuant to this section shall be services rendered by employees of the University. 4. Provide parking passes to Foundation donors for special events and other limited uses as specified annually by the Foundation. 5.4. Annually determine the level of services to be provided to the Foundation, in consultation with the Foundation. The services anticipated to be provided may include the provisions of memberships, a vehicle for use by the President, reimbursement for entertainment expenses connected to development activities, and the like, to be incurred by the President and other designated University staff. The President’s expenses will be reviewed quarterly by the Chair of the Board of Trustees of the University, or his designee, including those submitted for reimbursement to the Foundation, to insure that the President’s expenses have been properly submitted, reviewed, and approved. 6.5. Submit an annual statement of accounting to the Foundation summarizing the value of items 1, 2, and 3 above, and referencing salary and benefits. This submission can be in the form of the portion of the annual operating budget adopted by the University which relates to University advancement and development activity. The University shall submit its annual statement of accounting to the Foundation by September 1 of each year. IV. Services Acknowledged 6 The services as described in Article III above shall constitute payment in full by the University for Foundation services. The Foundation will in turn acknowledge to the University that it has fully complied with its obligation to expend its best efforts to seek to accrue gifts, grants, donations, and endowments for the benefit of the University. V. Other Agreements The Foundation and the University further agree as follows: 1. At all times and for all purposes of this Agreement, except for the provisions in paragraph II. 12, the Foundation shall act as an independent contractor and not as an agent of the University. The Foundation, when acting as an agent of the University, shall abide by the terms set forth in Western Washington University Board of Trustees rules of operations. 2. That Foundation books, accounts, and any form of communications and records are not public records as defined in Chapter 42.17 RCW and Chapter 42.56 RCW; and that the University’s public records that pertain to donations to the University are nondisclosable under RCW 42.56.320(4) or otherwise non-disclosable under RCW 42.56.230(4) or .420(4), or such other provisions as may be enacted into law. 3. Foundation accounts and records pertaining exclusively to the management of University endowments are deemed public records and the Foundation shall provide, upon request of the University, reports thereon in a timely manner. VI. Not Assignable This Agreement is not assignable by the Foundation either in whole or in part. VII. Variations and Amendments in Writing No amendment, alteration, or variation of the terms of this Agreement shall be valid unless made in writing and signed by the parties hereto, and no oral understanding or agreements not incorporated herein, and no amendments, alterations, or variations of the terms hereof unless made in writing between the parties, shall be binding on any of the parties hereto. VIII. Parties Responsible for Own Acts The Foundation and the University shall each be responsible for their own acts and responsible to each other for any negligent acts which cause damage to the other. 7 IX. Termination of Agreement This Agreement may be terminated by either party effective at the end of any State of Washington fiscal year upon written notice to the other party at least thirty (30) days in advance thereof. X. Choice of Laws This agreement shall be construed in accordance with the laws of the state of Washington. XI. Effective Date This Agreement shall be effective immediately and replaces any and all earlier agreements between the parties. 8 WESTERN WASHINGTON UNIVERSITY By: Chair, Board of Trustees Date: Attest: Secretary, Board of Trustees Date: Approved as to legal form: By: ROGER LEISHMAN Assistant Attorney General Date: WESTERN WASHINGTON UNIVERSITY FOUNDATION By: Chair, Board of Directors Date: Attest: Secretary, Board of Directors Date: 9 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Acting Vice President Brian Sullivan, Business and Financial Affairs DATE: December 11, 2015 SUBJECT: APPROVAL OF 2015-2016 INTERNAL AUDIT AND CONSULTING SCHEDULE, AND ACCEPTANCE OF 2014-2015 ANNUAL REPORT PURPOSE: Action item Purpose of Submittal: The Office of Internal Audit submitted its 2014-2015 Annual Report to the Board of Trustees Audit Committee at its October 8, 2015 meeting. Following revisions as requested by the Audit Committee, the final draft is now submitted to the Board of Trustees. The Audit Committee requests approval of the 2015-2016 Internal Audit and Consulting Schedule (attached appendices). Proposed Motion: MOVED, that the Board of Trustees, upon recommendation of the Board of Trustees Audit Committee and President Bruce Shepard, accepts the 2014-2015 Annual Report of the Office of Internal Audit, and approves the 2015-2016 Internal Audit and Consulting Schedule. Attachment: Draft 2014-2015 Annual Report to the Board of Trustees by the Office of Internal Audit, updated November 24, 2015 2014-2015 ANNUAL REPORT TO THE BOARD OF TRUSTEES DRAFT OFFICE OF INTERNAL AUDIT October 8, 2015 Updated November 24, 2015 Modifications are underlined in red TABLE OF CONTENTS INTRODUCTION ……………………………………….…….……….................1 PURPOSE ……………………………………..….……….....…….............………...2 RESULTS OF 2014-2015 AUDIT ACTIVITIES ...…………………..3 QUALITY ASSURANCE …………………………………..………...…....5 APPENDIX A – 2013-2016 INTERNAL AUDIT SCHEDULE Office of Internal Audit 2014-2015 ANNUAL REPORT TO THE BOARD OF TRUSTEES INTRODUCTION The purpose of the annual report is to provide the Audit Committee and Board of Trustees with information on the University’s internal audit program. Historical Information: The Office of Internal Audit has been providing internal auditing services to Western since the early 1980s. The oversight responsibilities for the Internal Audit program have changed over the years. In 2001, Internal Audit’s reporting structure was changed from the division of Business and Financial Affairs (BFA) to the President’s Office. The reporting responsibilities changed again on May 1, 2005, when the Board of Trustees adopted the Audit Committee Charter. The Charter established that the Office of Internal Audit would report functionally to the Audit Committee of the Board of Trustees, and administratively to the President. The Office of Internal Audit was a one-person department until December 2005, when an additional staff auditor and a half-time administrative assistant were hired. 2014-2015 Governance Highlights: The Audit Committee held five meetings between July 1, 2014 and June 30, 2015. The President and Office of Internal Audit participated in each of these meetings, as did management from Business and Financial Affairs for relevant agenda items. The Audit Committee meetings also included entrance and exit meetings with the Washington State Auditor’s Office for the University’s financial statement and accountability audits. The former Internal Audit Director left the position in April 2015. Teresa Hart, Director of Financial Services, was appointed as the Interim Managing Supervisor of Internal Audit. PURPOSE Internal Auditing is an independent function established within the University to examine and evaluate its activities as a service to the organization. The objective of the Office of Internal Audit is to assist the Board of Trustees, President and University management in the discharge of their oversight, management, and operating responsibilities. This objective is accomplished by providing analyses, appraisals, recommendations and information about the activities reviewed by the Office of Internal Audit. The Office of Internal Audit assesses the efficiency and effectiveness of internal controls with the goal of promoting effective controls at reasonable cost 2014-2015 Annual Report to the Board of Trustees Page | 1 to the University. The internal audit function is an integral part of the institution, and plays an important role in the management control system by measuring and evaluating controls. The internal audit review and appraisal process does not in any way relieve other University personnel of the responsibilities assigned to them. The Office of Internal Audit is committed to the professional practice of internal auditing. Internal Audit’s functional reporting to the Audit Committee of the Board of Trustees, and administrative reporting to the President of the University. The Office of Internal Audit performs internal operational, compliance, and financial related audits of programs, services, departments and accounts that come under the budget authority of the University. Internal Audit performs four types of audit services: 1. Assurance Services: Assurance services are objective reviews of evidence for the purpose of providing an independent assessment. The scope and nature of assurance services includes reviewing and evaluating for: operational efficiencies and effectiveness; reliability of financial and operational systems; adequacy and clarity of policies and procedures; compliance with University policy and state and federal law; safeguarding of assets; and, accomplishment of objectives and goals. 2. Consulting Services: Consulting services are advisory and other service activities include counsel, advice, facilitation, process design and limited training. The objective of consulting services is to add value in the development or modification of processes, procedures, and controls to minimize risk and achieve objectives. The nature and scope of particular consulting services are agreed upon with management. Internal Audit will not assume management’s responsibilities in order to maintain appropriate objectivity and independence. 3. Special Investigations: Investigations evaluate allegations of unethical business practices and financial and operational misconduct to determine if allegations are substantiated and to prevent future occurrences. 4. Follow-up Engagements: Follow-up engagements evaluate plans and actions taken to correct reported conditions. Final audit reports are distributed to the Audit Committee, President, Vice Presidents, and Deans or Directors involved in the audit. The President and appropriate University management have an opportunity to review and discuss all draft reports. Written responses are requested from management, and are included in the audit reports to provide information on the University’s plans to address the issues identified in the reports. Internal Audit Schedule and Risk Assessment Processes: As outlined in Internal Audit’s charter, policy and procedure, the Office of Internal Audit creates a risk-based annual audit schedule to maximize the effective use of Western’s Internal Audit resources. The audit schedule is developed with input from the Audit Committee, President, Provost, Vice Presidents, and other University management. Audit services are coordinated with external auditors to reduce duplication of efforts and increase audit coverage of the University. 2014-2015 Annual Report to the Board of Trustees Page | 2 RESULTS OF 2014-2015 AUDIT ACTIVITIES Summaries of the audit reports issued and other activities conducted by the Office of Internal Audit during fiscal period July 1, 2014 through June 30, 2015 are provided below. Cash Handling Audits Although the Internal Audit Schedule has included “Cash Audits” as an on-going activity, no audits appear to have been performed in at least 10 years. In July 2014, the Interim Supervisor directed staff to evaluate the departments that were handling cash and prioritize them for audit in accordance with assessed risks. Internal Audit subsequently performed cash handling audits in the following departments: • Department of Communication Sciences and Disorders • Central Stores Department - Surplus Property • Testing Center • Geology Department, College of Sciences and Engineering The audit recommendations were similar for all of these departments, and included the following areas: • Custody of cash • Training • Handling receipts • Mail handling • Timely deposits • Reconciliation • Monitoring Based on the similarity of these findings and the fact that the BFA Division was in the process of revising the University’s cash handling policies and procedures, Internal Audit suspended further departmental cash audits pending completion and implementation of the revised policy and procedures. The revised policy “Billing and Receiving Payment for Tuition, Fees, Goods and Services” was approved by the President on September 1, 2015, with full implementation of the new requirements for departmental cash handling to be complete by June 30, 2016. Student Sports Clubs This audit item was closed, as review of state funded sports clubs expenditures was included in the FY 14 Services and Activities Fee audit, with no irregularities identified. Special Investigation Report Internal Audit conducted a Special Investigation of Space Use by a private for-profit company, Chris Trudeau SAT Prep. Internal Audit had been contacted by an employee concerned about this company using University classroom space. The audit concluded that use of the space without authorization had been occurring for at least three years. 2014-2015 Annual Report to the Board of Trustees Page | 3 Western’s Assistant Attorney General mailed cease and desist letters to the company principals, and Internal Audit made the following recommendation: We recommend that the Provost enlist the offices of Space Administration and Conference Services to create university policy and procedures that outline the controlled use of university facilities, including improved guidance and monitoring of facility uses by outside entities. The President approved the new policy “Managing Access To University Facilities” on September 1, 2015. Quarterly Audit of President’s Expenses Internal Audit was delegated responsibility from the Audit Committee of the Board of Trustees to perform a quarterly audit of all state-funded travel and entertainment expense reimbursements to President Bruce Shepard. During fiscal year 2014-2015, Internal Audit performed four audits and reported on the results to the Audit Committee. Our review concluded that all reimbursed expenses were allowed by state rules. Other Audit and Consulting Activities In addition to scheduled audit activities, the Office of Internal Audit performs the following activities throughout the year: • • • • • • Questions and advice consulting services ** Department ethics training upon request Participation on University committees, including the Policy Technical Review Committee and Banner Initiatives projects Participation in audit meetings and discussions with the State Auditor’s Office Tracking incidents of reportable losses or other illegal activities to the State Auditor’s Office Liaison to the State Auditor’s Office Whistleblower Program ** Internal Audit receives questions and requests for advice throughout the year. These inquiries require research, summary opinions and advice. Internal Audit works closely with the Assistant Attorney Generals in responding to many of these requests. 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Number of questions/requests for advice received by Internal Audit per calendar year 24 88 85 77 71 77 80 66 68 68 The decrease in logged requests in 2014 from 2013 is attributable to the departure of the Internal Audit Director, as well as a shift to logging only “material” requests that require at least an hour in research time. 2014-2015 Annual Report to the Board of Trustees Page | 4 QUALITY ASSURANCE The Office of Internal Audit evaluates its audit and consultation services to ensure useful and high quality service, compliance with University policies and audit standards, and development of staff. Customer Surveys One of the primary methods to obtain feedback on the effectiveness of Internal Audit’s audit and consultation services, as well as the value received by audit clients, is through Internal Audit’s Customer Survey process. The Office of Internal Audit’s Customer Survey forms are sent to the Vice Presidents and members of management, faculty and/or staff most involved in the audit or consultation after the completion of the review. Internal Audit considers the feedback provided in the customer survey responses, and takes action deemed necessary to address quality service or performance issues. Internal Audit summarizes each audit or consultation Customer Survey results and discusses them with the President and Audit Committee at Audit Committee meetings. Note: Internal Audit does not request feedback via the Customer Survey process for special investigations due to their unique purpose and scope. We also do not request Customer Survey forms for small follow up audits. The Customer Survey results for the audit report issued from July 1, 2014 through June 30, 2015 and July 1, 2013 through June 30, 2014 is as follows: SURVEY QUESTIONS 1 2 3 4 5 6 7 8 9 10 11 The Office of Internal Audit conducted business in a courteous and professional manner Audit or consulting related activities were conducted with as little inconvenience to me as possible The objectives of audit or consulting related activities were clearly communicated to me The results of the audit or consultation were discussed with me on a timely basis Deliverables or reports were clearly written and logically organized The audit covered key business and operational risks My input regarding the scope and objectives were solicited, considered and addressed in a reasonable manner My concerns and perspectives were adequately considered during interactions The duration of the audit was reasonable Audit recommendations were accurate and constructive Overall, the involvement of internal audit provided value to my organization AVERAGE SCORE July 1, 2014 to June 30, 2015 AVERAGE SCORE July 1, 2013 to June 30, 2014 3.73 3.60 2.27 3.25 3.27 3.00 3.55 3.20 3.36 3.45 3.10 2.80 2.73 3.00 2.82 3.00 3.27 3.40 2.66 2.60 3.36 AVERAGE RESPONSE 3.17 Survey Scale: 4= Excellent; 3 = Good; 2 = Fair; 1 = Poor; and N/A Applicable 2014-2015 Annual Report to the Board of Trustees Page | 5 3.20 3.07 In addition to the above questions, the Customer Survey form also provides the opportunity for written comments. Some positive feedback received included: “I also appreciate Paul Schronen’s availability...while we were developing these new processes, Paul was always just a phone call away. I don’t think there wasn’t a time he didn’t answer my many questions in a thoughtful, professional and cheerful manner.” “I think most employees want to follow the correct procedures, so approaching the audits from an educational and reminder standpoint is much appreciated.” “I appreciated the explanations of the steps we needed to change in the handling of the cash. The auditors educated us on the correct procedures and the approach was welcoming.” 2014-2015 Annual Report to the Board of Trustees Page | 6 Appendix A Western Washington University Office of the Internal Auditor Amended 2013-2015 Internal Audit and Consulting Schedule 2013-2014 2014-2015 2015-2016 OPERATIONAL/FINANCIAL REVIEWS OPERATIONAL/FINANCIAL REVIEWS OPERATIONAL/FINANCIAL REVIEWS Huxley College - Audit of Fee Expenditures To review and evaluate Huxley Colleges’ course and lab, service and facility rental fees for compliance with the university’s processes. [REMOVED] Athletics Department: Expenditure Compliance and Program Compliance with Selected NCAA Rules To review and evaluate expenditure compliance with state regulations and the department’s compliance with selected NCAA rules and Western’s academic standards. Grant Administration Process To review and evaluate the operational efficiency, effectiveness and compliance of the University’s grant processes. Services and Activities Fee Process To review and evaluate the operational efficiency, effectiveness and compliance of the University’s processes for administering services and activities fees. [COMPLETED] FOLLOW UP AUDITS • Vending Machine Contracts [COMPLETED] • Purchasing Card Audit [COMPLETED] Fraud Risk Management Program Assessment To evaluate the University’s fraud risk management practices and controls to determine if the potential risks of fraud are reasonably managed. Note: This may include use of a consultant and new “data analytics.” Laboratory Chemicals Audit To review and evaluate the administration and handling of the University’s laboratory chemicals for safety and compliance. Student Sports Clubs To review and evaluate student sports clubs fundraising processes for efficiency, effectiveness and compliance. Office of the Internal Auditor – Amended 2013-2015 Internal Audit and Consulting Schedule Approved by Board of Trustees 12/12/14 Housing and Dining Services To review and evaluate the operational efficiency, effectiveness and compliance of Housing and Dining Operations. Registrar’s Office To review and evaluate the operational efficiency, effectiveness and compliance of the Registrar’s Office operations. Human Resources To review and evaluate the efficiency, effectiveness and compliance of selected Human Resource functions. Ethics Program To review and evaluate the design and implementation of the University’s ethicsrelated objectives, programs, and activities for efficiency, effectiveness and compliance. Page 7 2013-2014 Quarterly President Expense Reviews To review the President’s state-funded travel and entertainment expenses for compliance with state rules and University policies. [ONGOING] FOLLOW UP AUDITS • Property Management Contract Consultation [IN PROCESS] 2014-2015 Cash Audits This on-going project monitors the efficiency, effectiveness and compliance of the University’s cash handling processes. Quarterly President Expense Reviews To review the President’s state-funded travel and entertainment expenses for compliance with state rules and University policies. FOLLOW UP AUDITS • Lakewood Center Use of Resources Special Investigation [COMPLETED] • Property Management Contract Consultation [NEAR COMPLETION] Office of the Internal Auditor – Amended 2013-2015 Internal Audit and Consulting Schedule Approved by Board of Trustees 12/12/14 2015-2016 Student Travel Abroad Oversight Compliance To review and evaluate if all events or programs where Western Washington University students travel and study outside of the United States are administered under the direction of the Center for International Studies in compliance with University policies. Cash Audits This on-going project monitors the efficiency, effectiveness and compliance of the University’s cash handling processes. Quarterly President Expense Reviews To review the President’s state-funded travel and entertainment expenses for compliance with state rules and University policies. Page 8 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Sue Sharpe, Chair, Presidential Search Advisory Committee DATE: December 11, 2015 SUBJECT: Approval of Presidential Search Candidate Evaluation Criteria and Application Screening Form PURPOSE: Action Item Purpose of Submittal: Trustee Sue Sharpe, Chair of the Presidential Search Advisory Committee, will present to the Board, for their approval, the proposed Presidential Characteristics/Evaluation Criteria and Application Screening Form created by the PSAC. Proposed Motion: MOVED, that the Board of Trustees of Western Washington University, upon the recommendation of the Chair of the Board of Trustees and the Chair of the Presidential Search Advisory Committee, adopt the Presidential Characteristics/Evaluation Criteria and Application Screening Form. Supporting Information: WWU Presidential Characteristics/Evaluation Criteria WWU Application Screening Form WESTERN WASHINGTON UNIVERSITY PRESIDENTIAL CHARACTERISTICS/EVALUATION CRITERIA DECEMBER 11, 2015 1. Doctorate or equivalent terminal degree and academic credentials sufficient to engender respect from the academy and the community at large; 2. Demonstrated successful leadership experience a. Experience engaging a diverse community in the development and implementation of a shared strategic vision and an ongoing strategic planning process; b. Demonstrated success institutionalizing equity, inclusion, and diversity, that results in the promotion of an inclusive climate, and the recruitment, advancement, and retention of diverse faculty, staff and students; c. Demonstrated knowledge of emerging and innovative trends in public higher education funding and strategic management; d. Successful experience responding to emerging problems and opportunities, and a willingness to foster and encourage positive change; e. Acumen working with local, state and federal legislators as well as other public higher education institutions to advance the mission and vision of a public university where affordable access to quality higher education is viewed as a public good; f. Demonstrated commitment to advancing the University’s liberal arts and sciences core insuring an affordable and accessible student-centered educational experience where student success is the top priority; g. Experience promoting partnerships and collaboration with other higher education institutions, P-12 schools, private sector entities, governmental agencies, and communities to strengthen the mission of a university; h. Experience advancing high quality, student-centered education through nonresidential educational opportunities; i. Demonstrated ability to achieve a high degree of visibility and accessibility with students, faculty, and staff, as well as surrounding communities; j. Demonstrated commitment to and success in advancing sustainability and environmental stewardship; k. Experience promoting and modelling innovation in a university setting; l. Demonstrated experience personally engaging with students. 3. Demonstrated strong senior management experience a. Experience setting clear priorities, delegating and holding accountable a strong collaborative leadership team; b. Experience managing transparent and inclusive financial and budgeting operations of a higher education institution that ensures effective use of institutional resources and advancement of University objectives; c. Experience with and commitment to broadly inclusive shared governance of a university, including students, faculty and staff; d. Experience overseeing the negotiation and administration of union contracts that maintain healthy and productive relationships with all employee groups; e. Experience advancing the use and application of technology to support a 21st century teaching and learning experience, and the overall operations of a university. 4. Demonstrated successful experience in resource development a. Successful experience taking an active and personal role in fund raising that cultivates financial support and partnerships in the private sector; b. Demonstrated experience working with state legislators and other government funders to maximize public appropriations; c. Experience developing multiple sources of support such as auxiliary enterprises, securing grants and contracts, developing public-private partnerships and research licensing. . WESTERN WASHINGTON UNIVERSITY - PRESIDENT Application Screening Form – 2015 Name of Applicant:__________________________________________________ Status: ___________ Instructions: Check the box which most closely reflects this person knowledge, skills, abilities and competencies. List N/A if the information is Not Available. KNOWLEDGE, SKILLS , ABILITIES, & OTHER COMPETENCIES 1. Doctorate or equivalent terminal degree and academic credentials sufficient to engender respect from the academy and the community at large; 2. Demonstrated successful leadership experience a. Experience engaging a diverse community developing and implementing a shared strategic vision and an ongoing strategic planning process; b. Demonstrated success institutionalizing equity, inclusion, and diversity, that promotes recruitment, advancement, and retention of diverse faculty, staff and students; c. Demonstrated knowledge of emerging and innovative trends in public higher education funding and strategic management; d. Successful experience responding to emerging problems and opportunities, and a willingness to foster and encourage positive change; Evidence Shown No Evidence Shown Unknown Comments WESTERN WASHINGTON UNIVERSITY - PRESIDENT Application Screening Form – 2015 KNOWLEDGE, SKILLS , ABILITIES, & OTHER COMPETENCIES e. Acumen working with local, state and federal legislators and other public higher education institutions to advance the mission and vision of a public university where affordable access to quality higher education is viewed as a public good; f. Demonstrated commitment to advancing the University’s liberal arts and sciences core insuring an affordable and accessible student-centered educational experience where student success is the top priority; g. Experience promoting partnerships and collaboration with other higher education institutions, P-12 schools, private sector entities, governmental agencies, and communities to strengthen the mission of a university; h. Experience advancing high quality, student-centered education through non-residential educational opportunities; i. Demonstrated ability to achieve a high degree of visibility and accessibility with students, faculty, and staff, as well as surrounding communities; j. Demonstrated commitment to and success in advancing sustainability and environmental stewardship; Evidence Shown No Evidence Shown Unknown Comments WESTERN WASHINGTON UNIVERSITY - PRESIDENT Application Screening Form – 2015 KNOWLEDGE, SKILLS , ABILITIES, & OTHER COMPETENCIES k. Experience promoting and modelling innovation in a university setting; l. Demonstrated experience personally engaging with students in university life. 3. Demonstrated strong senior management experience a. Experience setting clear priorities, delegating and holding accountable a strong collaborative leadership team; b. Experience managing transparent and inclusive financial and budgeting operations of a higher education institution that promotes effective use of institutional resources and advancement of University objectives; c. Experience with and commitment to broadly inclusive shared governance of a university, including students, faculty and staff; d. Experience overseeing the negotiation and administration of union contracts that maintain healthy and productive relationships with all employee groups; e. Experience advancing the use and application of technology to support a 21st century teaching and learning experience, and the overall operations of a university. Evidence Shown No Evidence Shown Unknown Comments WESTERN WASHINGTON UNIVERSITY - PRESIDENT Application Screening Form – 2015 KNOWLEDGE, SKILLS , ABILITIES, & OTHER COMPETENCIES Evidence Shown No Evidence Shown Unknown Comments 4. Demonstrated successful experience in resource development a. Successful experience taking an active and personal role in fund raising that cultivates financial support and partnerships in the private sector; b. Demonstrated experience working with state legislators and other government funders to maximize public appropriations; c. Experience developing multiple sources of support such as auxiliary enterprises, securing grants and contracts, developing public-private partnerships and research licensing. STATUS NOTES A (Seriously consider for interview) B (Possibly consider for interview) C (No further consideration) WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Trustees Betti Fujikado and Chase Franklin DATE: December 11, 2015 SUBJECT: Proposed Presidential Contract Amendments PURPOSE: Action Item Purpose of Submittal: Approval of proposed amendments to the presidential contract. Proposed Motion: I move that the Board of Trustees of Western Washington University approve Amendment No. 2 to the Employment Contract for President Bruce Shepard to increase the President’s annual salary with a merit increase of 4 percent, to $324,500, effective July 1, 2015, and authorize the Board Chair to execute the action on behalf of the Board of Trustees. All other terms and conditions are to remain the same. I move that the Board of Trustees of Western Washington University approve Amendment No. 3 to the Employment Contract for President Bruce Shepard in connection with his announced retirement from the presidency and the faculty, and authorize the Board Chair to execute the action on behalf of the Board of Trustees. All other terms and conditions are to remain the same. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard DATE: December 11, 2015 SUBJECT: WSU North Puget Sound at Everett PURPOSE: Discussion Item Purpose of Submittal: Bob Drewel, Senior Advisor to WSU Interim President Dan Bernardo, will be providing an update on the status of the Everett University Center, including the recent groundbreaking for a new 95,000 square foot building in Everett, the addition of new STEM related programs and the ongoing successful partnership with Western Washington University. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard on behalf of Karen Dade and Nick Sanchez, Co-Chairs of the President’s Taskforce on Equity, Inclusion and Diversity DATE: December 11, 2015 SUBJECT: Diversity Taskforce Strategic Plan Update PURPOSE: Discussion Item Purpose of Submittal: Karen Dade, Associate Dean of Woodring College of Education and Presidential Leadership Fellow, and Nick Sanchez, Employment Inclusion Manager, will engage the Trustees in conversation about the President’s Equity, Inclusion and Diversity Taskforce’s draft Diversity Strategic Plan, and related to efforts to improve Western’s campus climate. Background: The President’s Equity, Inclusion and Diversity Taskforce was established by President Shepard in 2012 to rigorously review campus climate, recruitment and retention practices, curriculum, and community outreach efforts in order to develop a comprehensive strategic plan, and to recommend initiatives, policies, and procedures that increase equity and inclusion and allow Western to embrace and reflect a truly diverse society. Key taskforce recommendations to President Shepard that have been implemented include: • Prior to the passage of marriage equality legislation in Washington State, the University began reimbursing employees in same sex couples for the federal taxation on same sex partners’ health and wellness benefits. The process, termed a “gross-up benefit,” increases salaries by the amount taxed by the federal government plus the amount taxes increase due to the increased income, effectively eliminating the penalty incurred by same sex couples. • Expanding the University’s Dual Career Assistance policy to apply to same sex couples. • Developing infrastructure to enable faculty, staff and students to change their gender marker or preferred name in University systems without going through the time and expense of legally changing their name and/or gender marker with external governing bodies. • Allocating permanent funding for a Director of Women’s Studies and two tenured faculty lines with half appointments in American Cultural Studies, the home department for a series of courses and minors devoted to ethnic, racial and cultural minorities. • Bridge funding to support early opportunities hires—i.e., outstanding candidates who do not fulfill an immediate need but would be an excellent fit for a position soon to come open—where those individuals advance the diversity priorities of the University. These funds allow for hiring earlier than would otherwise be possible, before the opportunity would disappear. • Conducting additional qualitative research and interviews into the results of campus climate surveys, resulting in two reports created by past Taskforce co-chair Raine Dozier: The Experiences of LGBT Faculty at Western Washington University and The Experiences of Faculty of Color at Western Washington University. • The WWU Campus Equity and Inclusion Forum Training Series, a university-wide initiative to empower members of the Western campus community to better understand and thoughtfully engage with the experiences and identities of all our community members. The mission of the Equity and Inclusion Training series is twofold: (1) to honor and endorse existing training and engagement opportunities for Western employees to expand their critical cultural consciousness; (2) to provide a single portal for Western faculty and staff to register for diversity-related training and events. Faculty and staff from across the University are invited to attend, design and lead the Forum’s workshops. More information about the President’s Equity, Inclusion and Diversity Taskforce may be found at: http://www.wwu.edu/president/diversity.shtml Attachments: Draft Diversity Strategic Plan Strategic Vision In our path to enhance excellence, Western Washington University will become a place where all students, faculty, staff, and stakeholders feel and are welcome, included, respected, and valued regardless of identity or group membership. Strategic Obligations We all, who are Western Washington University: • Publicly advocate for and champion issues related to equity, inclusion, and diversity as part of our educational mission and obligation to the state and its residents. • Serve the people of Washington State by becoming a deeply inclusive place whose students, faculty, and staff reflect the population of our state and the diversity of our society. • Ensure that all students’ academic experience (curricular, co-curricular, and scholarly work) includes critical engagement with matters of equity, inclusion, and diversity. • Support and hold accountable all divisions, units, programs, committees, and departments for implementing evidence-based practices that promote equity, inclusion, and diversity including, as relevant, the creation of new policies, procedures, programs, and events. Guiding Beliefs We believe that: • Our commitment to equity, inclusion, and diversity is part of our brand and reputation and guides all our interactions and permeates all facets of the university experience and engagement with the broader community. • Equity, inclusion, and diversity are communal responsibilities. The pursuit of equity, inclusion, and diversity requires the proactive engagement of all individuals, programs, organizations, and leadership. • A commitment to equity, inclusion, and diversity requires ongoing proactive engagement and life-long learning. This commitment challenges us to imagine and learn ways of interacting and responding to these issues which reflect the complexity of the human experience and can be described as adaptive change.1 • Fostering a diverse, equitable, and inclusive climate is an act of social justice and requires a critical approach, addressing the legacy of power and privilege in institutional structures, demographics, working relationships, and individual interactions. • The future success of Western Washington University is dependent on how we collectively address equity, inclusion, and diversity. Western Washington University affirms continuing progress on issues of equity, inclusion, and diversity in all aspects of University life. Operational Framework In considering the strategic action domains listed below, it is incumbent among us to incorporate the following fairness principles when reviewing unit, division and university recommendations and practices regarding equity, inclusion, and diversity. 1 Heifetz, Ronald & Linsky, Marty. (2002). Leadership on the Line. Harvard Business Review Press. V 10.13.15 1 1. Procedural fairness: that the way decisions are made is indeed fair to those who are affected. 2. Distributive fairness: that how the outcomes of decisions are allocated is such that more desirable or preferred outcomes do not systematically replicate patterns of historical or unearned privilege, but rather move towards providing all individuals what they need to be successful, active members of the university community. (See definition of Equity below.) 3. Interpersonal fairness: that how individuals are treated as individuals is free of overt and subtle harassment and discrimination. Strategic Action Domains The university efforts to foster equity, inclusion, and diversity will address six strategic areas: • Recruitment of students, staff, and faculty The university should reflect the ever-changing demographics of our state and the global community. • Retention and development of students, faculty, and staff The university should build healthy and sustained academic and professional communities that support and promote educational, professional, and civic development. • Campus climate The university should foster a campus climate, including the physical environment, that welcomes and affirms the diversity of individuals, groups, and cultures, promoting positive relations across difference. • Educational experience The university should develop and sustain academic programs and initiatives that engage issues of access, equity, power, and privilege in order to encourage individuals to take action to create a more just world. • Leadership development The university should, via formal and informal leadership, advance efforts toward equity, inclusion, and diversity as essential elements of their work and be accountable for advancement of the university’s diversity goals. • External relations The university should model positive external relations in advancing diversity with community partners and underrepresented groups, building on local and global knowledges in ways that express humility, reciprocity, respect, collaboration, and a spirit of inquiry. V 10.13.15 2 Appendix A Definitions The Task Force recognizes that the definitions of evidence-based, equity, inclusion, and diversity are in the public domain and have multiple meanings and are contextually nuanced. The intent here is to offer readers an understanding of how we are using these terms in this document. • Equity is the guarantee of fair treatment, access, opportunity, and advancement for all students, faculty, and staff, while at the same time striving to identify and eliminate barriers that have systematically prevented the full participation of some groups. The principle of equity acknowledges that there are historically underserved and underrepresented populations and that furthering diversity requires systematic efforts to remediate structural and historical inequalities experienced by certain groups, including, but not limited to groups offered protection by federal or state civil rights laws. This does not imply that everyone is treated the same, since, both individually and as a result of their social group identities, they are not (see diversity below). Rather, it means creating the conditions by which all individuals are provided what they need to be successful, active members of the university community. • Inclusion is a state of being in which all members of the university community feel genuinely invited, engaged, valued, respected, supported and empowered. Inclusion occurs when the learning and work environment ensures that appropriate conditions are in place for all people to achieve their full potential. Inclusion requires diligence in ensuring that systems of privilege that enable marginalization and oppression are identified and replaced so that the university’s culture, practices, policies and relationships reflect the conditions required to support a diverse workforce and student body. • Diversity acknowledges all the ways in which people differ, and it encompasses all the characteristics that differentiate one individual or group from another. We conceptualize diversity broadly. It is extensive in scope and appreciates everyone and every group as part of our human diversity that should be valued. While diversity efforts require respect for all individuals, they also recognize that certain social groups have historically and contemporarily been disenfranchised while people from other social groups have been privileged. Toward that end, diversity initiatives should have a strong focus on addressing issues of privilege and marginalization within unequal relations of power, based on social group membership. • Evidence is conceived broadly and includes a variety of forms of information including formal and informal collection of the experiences, perceptions, and views of faculty, staff, students, and communities in addition to relevant research and program evaluations from internal and external sources such as other institutions and organizations. V 10.13.15 3 Appendix B Suggested activities and strategies by domain Campus Climate • Create and sustain an environment in which all students, staff, and faculty feel welcome, included, respected, and valued regardless of identity or group membership. • Increase the number of students, faculty, and staff from underrepresented groups in order to reach a “critical mass” of underrepresented individuals on campus. • Implement ongoing, dedicated climate assessments that gather quantitative and qualitative data from a variety of populations in order to evaluate climate and changes in climate. • Develop and support policies, procedures, programs, and events that further inclusion, equity, and diversity. • Take public, widely visible stances on issues relating to inclusion, equity, and diversity. Leadership • Assure that Western’s commitments to equity, inclusion, and diversity suffuse the processes, principles, and statement of required qualifications that are a part of the current presidential search; the President’s Equity, Inclusion, and Diversity Taskforce will be preparing to support these expected requisite commitments during the period of presidential transition. • Ensure that leadership personnel at WWU mirror the ethnic/racial, gender, and sexual orientation demographics of the region if not the nation. • Institutionalize and support faculty, staff, and student orientation and development programs that promote and encourage practices that enhance equity, inclusion, and diversity. • Reward leadership (administrative, faculty, staff, and student) that promotes practices that improve equity, inclusion, and diversity at WWU. • Ensure that leadership personnel at WWU have a commitment for and are prepared to advance the goals of the university with respect to equity, inclusion, and diversity. • Review and monitor university policies and practices to assure an equitable, diverse and inclusive university community. Educational Experience • Enable all students to experience active, intentional, and ongoing engagement with diverse people and communities in the curriculum and in the co-curriculum. • Provide opportunities for students to address racial and multicultural issues in the classroom and in extracurricular settings in order to foster students’ cognitive development and leadership abilities. • Increase diversity among faculty and support faculty scholarship that furthers understanding of equity, inclusion, and diversity. • Provide opportunities for faculty to build skills in addressing diversity in the classroom including topics such as facilitating difficult conversations and meeting the needs of diverse learners. V 10.13.15 4 • Assess the degree to which diversity is incorporated into WWU classes from both faculty and students' perspective. • Evaluate courses that have high failure rates in order to identify contributing factors and develop strategies to foster student learning and improve outcomes. Retention and Development • Increase the number of students, faculty, and staff from all underrepresented groups in order to reach a critical mass of underrepresented individuals on campus. • Support a positive, inclusive campus climate for all faculty, staff, and students. • Increase retention of underrepresented faculty, staff, and students. • Create and implement evidence-based, transparent policies and programs that promote professional development and advancement for professional staff. • Support development of offices, programs, networks, and connections for underrepresented faculty, staff, and students both within and across identity groups, disciplines, and programs in order to foster community building and professional and academic development. • Develop a systematic approach to monitoring retention rates of faculty, staff, and students • Develop a better understanding of the factors that contribute to retention and loss of underrepresented faculty, staff, and students. Recruitment • Increase the number of students, faculty, and staff from all underrepresented groups in order to reach a critical mass of underrepresented individuals on campus. • Foster a positive, inclusive campus climate for all faculty, staff, and students • Identify best practices for recruiting diverse faculty, staff and students that are deemed likely to succeed given the setting and the needs of Western Washington University. External Relations • Develop ongoing relationships, initiatives, and projects with local and regional partners. • Build reciprocal connections with external agencies and key individuals. • Put into practice strategies that support student, faculty, and staff community engagement that fosters connections with diverse individuals and communities. V 10.13.15 5 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Sue Sharpe, Chair, Presidential Search Advisory Committee DATE: December 11, 2015 SUBJECT: Presidential Search Update PURPOSE: Discussion Item Purpose of Submittal: Trustee Sue Sharpe, Chair of the Presidential Search Advisory Committee, will update the Board on the status of the presidential search process. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Steve Swan, V.P. for University Relations and Community Development DATE: December 11, 2015 SUBJECT: Olympia Update PURPOSE: Discussion Item Purpose of Submittal: Becca Kenna-Schenk, Director of Government Relations, will give an update on the upcoming 2016 legislative session. Supporting Information: State Relations The WWU State Government Relations team has been gearing up for the 2016 Legislative Session, which is scheduled to begin on January 11, 2016 and conclude sixty days later. The “short,” sixty-day session is intended to provide legislators an opportunity to make adjustments to the two-year, biennial operating and capital budgets. Western’s 2016 legislative priorities: • Student Success ($2.4 million) – Request for state investment in support services, including academic advising, tutoring and retention services. • Network/Wireless Renewal Initiative ($4.4 million) – Request for state investment in IT and wireless network infrastructure. • Security Upgrades for Campus Lockdown Capabilities ($4.8 million) – Request for state investment to improve Western’s emergency response system through replacement of its existing electronic access control system and expansion of the system in order to enable immediate lockdown of occupied buildings during campus emergencies. During the Legislature’s 2015 Assembly Days on November 18-20, Western was highlighted on several panels and committees: • WWU’s Director of First Year Programs/Vice Provost for Undergraduate Education, Dr. Steven Vanderstaay served as a panelist on a statewide conversation about access and affordability. • Dr. David Patrick, WWU Professor of Chemistry presented to the Senate Energy, Environment and Telecommunications Committee on his work related to solar window technology. • Sara Wilson, Special Assistant to the Vice President for Enrollment and Student Services, and Dr. Steve Vanderstaay presented to the House Higher Education Committee on Western’s student advising system known as the Student Success Collaborative. • Dr. Bill Lyne, President of United Faculty of Washington and WWU Professor of English participated on a faculty panel discussion in the House Higher Education Committee. Government Relations is also organizing several events this fall to express the University’s appreciation to state legislators for their support of Western in the 2015 session. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Tim Szymanowski, Associate Vice President for Development and Leadership Giving, University Advancement DATE: December 11, 2015 SUBJECT: Campaign Update PURPOSE: Discussion Item Purpose of Submittal: Tim Szymanowski, Associate Vice President for Development and Leadership Giving, University Advancement, will provide an update to the board on the Western Washington University campaign. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Betti Fujikado, Chair, Board Audit Committee DATE: December 11, 2015 SUBJECT: Board Audit Committee Report PURPOSE: Information Item Purpose of Submittal: Chair Fujikado will report to members of the Board of Trustees and the university president and his staff topics related to the Board Audit Committee. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: Sue Sharpe, Chair, Board Governance Committee DATE: December 11, 2015 SUBJECT: Board Governance Committee Report PURPOSE: Information Item Purpose of Submittal: Chair Sharpe will report to members of the Board of Trustees and the university president and his staff topics related to the Board Committee on Trustees. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Provost Brent Carbajal DATE: December 11, 2015 SUBJECT: Academic Affairs Report: Number of Declared Majors PURPOSE: Information Item Purpose of Submittal: To provide the Board of Trustees with overviews on quarterly information about the number of declared student majors per academic department for fall quarter 2015 and fall quarter 2014. The reports include fall 2014 and fall 2015 peak date comparisons. Supporting Information: • • Fall 2015 – Number of Declared Majors at Peak Fall 2014 – Number of Declared Majors at Peak Fall 2015 - Number of Declared Majors at Peak Department ENG - English HHD - Health & Human Development HCS - Health & Community Studies PSY - Psychology BIOL - Biology SPED - Special Educ & Educ Leadership SOC - Sociology CSCI - Computer Science MGMT - Management LANG - Modern and Classical Languages ESCI - Environmental Sciences ELED - Elementary Education ART - Art FMKT - Finance & Marketing ENGD - Engineering and Design ENVS - Environmental Studies MUS - Music HIST - History DSCI - Decision Sciences MATH - Mathematics FAIR - Fairhaven College ACCT - Accounting ECON - Economics ANTH - Anthropology PLSC - Political Science CHEM - Chemistry GEOL - Geology CSD - Communication Sci & Disorders THTR - Theatre Arts and Dance DSGN - Design COMM - Communication Studies LING - Linguistics MDS - Multidisciplinary Studies SEC - Secondary Education JOUR - Journalism MBA - Master of Business Admin PHIL - Philosophy PHYS - Physics and Astronomy SCED - Science Education LBRL - Liberal Studies EAST - East Asian Studies AMST - American Cultural Studies C/AM - Canadian/American Studies ENRG - Energy SSED - Social Studies All Declared Majors Undergraduate Graduate 454 36 454 19 258 97 293 43 308 23 285 23 251 231 15 242 237 213 24 223 9 231 230 216 167 48 193 10 170 29 189 166 23 185 176 9 174 1 159 14 163 130 23 123 26 100 43 140 133 102 86 86 85 73 64 52 46 31 30 14 7 3 1 1 7,026 664 Note that this counts majors: a student with more than one major is counted once for each major. Total 490 473 355 336 331 308 251 246 242 237 237 232 231 230 216 215 203 199 189 189 185 185 175 173 163 153 149 143 140 133 102 86 86 85 73 64 52 46 31 30 14 7 3 1 1 7,690 Fall 2014 - Number of Declared Majors at Peak Department HHD - Health & Human Development ENG - English PSY - Psychology HCS - Health & Community Studies SPED - Special Educ & Educ Leadership BIOL - Biology ENGD - Engineering and Design FMKT - Finance & Marketing LANG - Modern and Classical Languages ART - Art ESCI - Environmental Sciences MGMT - Management ENVS - Environmental Studies SOC - Sociology CSCI - Computer Science DSCI - Decision Sciences GEOL - Geology HIST - History ACCT - Accounting MATH - Mathematics ECON - Economics FAIR - Fairhaven College PLSC - Political Science ANTH - Anthropology ELED - Elementary Education CHEM - Chemistry THTR - Theatre Arts and Dance MUS - Music CSD - Communication Sci & Disorders DSGN - Design COMM - Communication Studies PHYS - Physics and Astronomy SEC - Secondary Education MDS - Multidisciplinary Studies LING - Linguistics JOUR - Journalism MBA - Master of Business Admin PHIL - Philosophy SCED - Science Education LBRL - Liberal Studies EAST - East Asian Studies AMST - American Cultural Studies C/AM - Canadian/American Studies SSED - Social Studies All Declared Majors Undergraduate Graduate 632 15 448 37 288 37 237 87 283 19 254 19 236 229 226 214 186 25 208 163 40 196 178 17 195 169 23 162 25 181 4 162 21 174 168 165 1 149 17 162 4 147 19 166 151 7 89 44 130 124 93 83 78 75 73 69 68 30 27 21 8 2 1 6,948 613 Note that this counts majors: a student with more than one major is counted once for each major. Total 647 485 325 324 302 273 236 229 226 214 211 208 203 196 195 195 192 187 185 183 174 168 166 166 166 166 166 158 133 130 124 93 83 78 75 73 69 68 30 27 21 8 2 1 7,561 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Provost Brent Carbajal DATE: December 11, 2015 SUBJECT: Quarterly Report on Grants and Contracts PURPOSE: Informational Item Purpose of Submittal: Information from the Office of Research and Sponsored Programs concerning grant awards for the period July 1, 2015 – September 30, 2015 and fiscal year 2015/16. Supporting Information: • Grant awards/totals for the period 7/1/15 – 9/30/15 • Grant awards for the fiscal year 2015/16 Grant Awards for the Period 07/01/15 – 09/30/15 The total amount of grants and contracts received this period was $5,289,548.11. This includes both new awards and additions to existing awards. Department Biology Border Policy Research Campus Compact Chemistry Elementary Education Engineering Technology Environmental Sciences Extended Education Geology History Mathematics PEHR Physics Psychology Research & Sponsored Programs SMATE Shannon Point Marine Center Toxicology Watershed Studies Total Award Total 111,631.00 71,000.00 673,464.00 581,000.00 77,668.11 248,617.00 746,749.00 142,651.00 107,342.00 287,521.00 8,000.00 24,650.00 301,885.00 108,610.00 46,000.00 1,247,085.00 421,136.00 76,539.00 8,000.00 5,289,548.11 Awards 2 1 Additions 2 3 1 2 2 1 1 1 1 1 3 1 1 3 1 1 1 22 7 GRANT AWARDS FOR THE PERIOD July, August, September 2015 FUND 51184 56369 DESCRIPTION Causes of Natural Variation in Protein Expression Dynamics Rapid Diagnostics for Cryptic Insect Pests NEW FUNDS 72,086.00 39,545.00 55881 15-16 Cross-Border Freight Operations Study 71,000.00 54573 Year 6 - WA Campus Compact VISTA Project 54580 Year 2 - College Access Corps 51596 56762 56763 High Sensitivity 500MHz NMR for Faculty Research & Undergrad Training Dreyfus Boissevain Lectureship for Undergraduate Institutions Dreyfus Teacher-Scholar Awards Program 56343 Year 2 - AFT Innovation Grant 54117 Signals through Tinkering and Game-Playing 55111 Prepreg Materials using Destructive and Non-Destructive Testing 51598 Patnership for Geoscience Education 54116 Assessing Butterfly Distributions 55791 Add to NW Advanced Renewables Alliance (NARA) 54118 An Analogue Geochronology Mission to Mars 54119 Preparing National Park Service Records for Improved Public Access ADD'L FUNDS 9,600.00 663,864.00 502,500.00 18,500.00 60,000.00 FUNDING AGENCY National Science Foundation University of Notre Dame P.I. D. Pollard D. Schwarz Whatcom Council of Governments L. Trautman Corp. for National & Community Service Corp. for National & Community Service National Science Foundation Dreyfus Foundation Dreyfus Foundation 77,668.11 J. Hine Campus Compact Campus Compact Total Chemistry Chemistry Chemistry Chemistry Total Elementary Education Elementary Education Total Engineering 663,864.00 673,464.00 502,500.00 18,500.00 60,000.00 581,000.00 77,668.11 77,668.11 148,715.00 Engineering Engineering Total Environmental Sciences 99,902.00 248,617.00 736,749.00 10,000.00 746,749.00 142,651.00 S. Smirnov A. Murphy C. Spiegel A. Klein 99,902.00 Office of Navel Research Joint Center for Aerospace Tech Innovation 736,749.00 National Science Foundation 10,000.00 National Parks Service 107,342.00 287,521.00 71,000.00 Campus Compact M. Miller 142,651.00 DEPT. TOTAL 72,086.00 39,545.00 111,631.00 71,000.00 J. Hine AFT Innovation Fund 148,715.00 DEPARTMENT Biology Biology Biology Total Border Policy Research Border Policy Research Total N. Larson J. Rybczyk Washington State University K. Corrigan Environmental Sciences Environmental Sciences Total Extended Education National Science Foundation M. Rice Extended Education Total Geology 142,651.00 107,342.00 R. Jimerson Geology Total History 107,342.00 287,521.00 History Total 287,521.00 National Park Service J. McLaughlin 9,600.00 51597 28th Annual Pacific NW Numerical Analysis Seminar 56368 Evaluation of the Base Camp Program for Youth 51178 CAREER: Systematic Kinematic Survey of Young Milky Way Clusters 51183 56367 RUI: Microscopic Molecular Structure in Confined Bose-Einstein Condensates Conjugated Polymers and Polymerizable Salts 51185 RUI: Identity Through College 51595 Villalobos NSF Graduate Fellowship 51152 51185 Year 5 - Model of Research-based Education for Teachers Year 3 - Change at the Core 56351 Year 2 - Next Generation STEM Teacher Prep 51186 RUI: Will climate change cause 'lazy larvae'? 56370 Bayesian Approaches for Adverse Outcome Pathway Development 56371 Heart Lake Water Monitoring 8,000.00 National Science Foundation J. Zhang Mathematics 8,000.00 8,000.00 24,650.00 Enviros Wilderness School K. Russell Mathematics Total PEHR 169,885.00 National Science Foundation National Science Foundation K. Covey PEHR Total Physics American Chemical Society B. Peden J. Leger Physics Physics National Science Foundation K. McLean Physics Total Psychology 301,885.00 108,610.00 National Science Foundation K. Kitto Psychology Total RSP 108,610.00 46,000.00 635,470.00 596,615.00 National Science Foundation National Science Foundation D. Hanley E. Geary RSP Total SMATE SMATE 635,470.00 596,615.00 15,000.00 Carlton College E. Geary SMATE S. Arellano SMATE Total SPMS W. Landis SPMS Total Toxicology R. Matthews Toxicology Total Watershed Studies 62,000.00 70,000.00 108,610.00 46,000.00 421,136.00 National Science Foundation 76,539.00 Harvard 8,000.00 Herrera Environmental Consult. Watershed Studies Total Grand Total 24,650.00 24,650.00 169,885.00 62,000.00 70,000.00 46,000.00 15,000.00 1,247,085.00 421,136.00 421,136.00 76,539.00 76,539.00 8,000.00 8,000.00 5,289,548.11 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Senior Vice President Eileen Coughlin DATE: December 11, 2015 SUBJECT: Admissions and Enrollment Summary PURPOSE: Information Item Purpose of Submittal: To provide a general update on enrollment and admissions Fall 2015 Enrollee and Non-enrollee Survey Results Results were similar among enrolled and non-enrolled students for Fall 2015 who were surveyed to identify the most important qualities that influenced their decisions of where to attend college. The top 5 criteria for both groups included: 1. 2. 3. 4. 5. availability of specific academic programs overall cost to the student’s family campus location campus culture access to faculty Of course, Western has more control over some of these criteria than others, with more control over cost, campus culture and access to faculty, vs. the availability of specific academic programs and campus location. Winter 2016 Admission Update Our applications for winter 2016 admission came in strong. Compared to winter 2015, we had a 17% increase in new student applications for admission, including freshmen, transfer and postbaccalaureate students. We admitted approximately 53% of our transfer applicants and 42% of our freshman applicants. The average GPA of transfer students was 3.25 and 72% of our admitted transfer applicants report they will be transferring directly from a Washington state community college. While the numbers remain small, we saw an increase in international transfer applicants for winter quarter from 23 last year to 38 this year. International Outreach Recruitment efforts this fall focused on continuing to strengthen relationships with our WA community college global partners – our number #1 source for international students. Western’s International Admissions Advisor made visits to 9 colleges to meet with students and staff and to give international admission presentations. In addition, we attended 10 international transfer fairs in the Seattle area. Western attended the Vancouver Area Independent School Fair in British Columbia – a large fair promoting US Colleges and Universities. Students from over 15+ private and public schools in the Vancouver area were in attendance. On November 13 we hosted our main international campus visit program, International Connections Day. Twenty-one prospective international students and advisors had the opportunity to tour campus, meet current international students and advisors, attend a student-faculty panel, receive an admissions overview, view residential options and eat in the dining hall. Admissions is partnering with Western’s Center for International Studies to coordinate outreach efforts to international students. In addition, a high-level advisory committee has been established to create a framework to expand international student recruitment. King County and Hispanic Outreach The Office of Communications and Marketing has designed two marketing campaigns: one to reach high achieving King County students, and another to reach Washington Hispanic students and their families. Increasing these populations’ awareness of academic and research opportunities at Western is a high priority for the Office of Admissions, which is collaborating on the project by providing market research and content for the campaigns. The campaigns will include advertising methods popular with prospective students that haven’t yet been utilized by either office, including Pandora, YouTube, Facebook, and Chegg (an online college search site that allows us to reach out to students in identified geographic regions based on specified criteria). Champions of Diversity Western will participate in the annual Champions of Diversity award night, an annual scholarship and outreach effort, on December 2 at Skagit Valley College to recognize young multicultural leaders in Skagit, Island and San Juan counties. Western will present 11 high-achieving high school seniors with two-year Multicultural Achievement Program Awards worth $3,000 per year. Phoneathon Via the Fall Phoneathon during the week of November 16, StARs (Student Admissions Representatives) called approximately 2,240 prospective students for Fall 2016 who had either been admitted or indicated an interest in attending Western. StARs urged students to complete their admission applications to Western, apply early, visit campus through Western Preview and other events, and confirm early. In addition our StARs generally served as a resource to answer any questions students had. Phoning establishes a personal connection to Western, reminds prospective students to turn in an admissions application and helps alleviate concerns students have about applying. In addition, our StARs offer relatable life experiences, advice and assistance from a student to student perspective. Western Fall Welcome This year’s event was the largest Western Fall Welcome to date, with 543 students (1354 total participants) attending from all over the country. Western Fall Welcome provides prospective students and family members with a comprehensive campus experience, with a goal to highlight Western as a top candidate in their college search process. Guests are able explore social and academic opportunities through departmental open houses and presentations, identify areas of interest, engage with current students, and explore on-campus living communities. Students have an opportunity to learn more about Western and compare Western’s academic offerings to other schools they have researched, which hopefully yields more applications and future enrollments. This year our out-of-state attendees more than doubled, from 26 to 66, and our in-state attendees increased by 82 students. In addition, we saw a significant increase in students of color from 88 last year to 134 this year. Online Enrollment Confirmation Fee Improvements Admissions, the Student Business Office and Enterprise Application Services collaborated to move the current enrollment confirmation fee payment process from CashNet to a customized eMarket site. The new process provides prospective students with the singular option to pay their enrollment confirmation fee, whereas the old system was also used by currently enrolled students to make a variety of payments. Implementation has greatly simplified the confirmation fee payment process. UNIVERSITY A D VA N C E M E N T REPORT DECEMBER 2015 This winter holiday season – our season of giving thanks – marks a particularly special moment here at Western Washington University with the opportunity to acknowledge the ongoing success of our Western Stands for Washington campaign. Awareness of and participation in our events and programs continue to grow as we engage our donors, alumni and other constituencies, and as our students benefit from scholarship dollars that we secure. We look forward to growing these critical aspects of our work in 2016, and, in the meantime, we invite you to please mark your calendars for Feburary 24 and March 8, in Bellingham and Seattle, respectively. We look forward to welcoming you to either one or both occasions, and to thanking you in person for all that we are accomplishing together. CAMPAIGN RESULTS THROUGH OCTOBER 31, 2015 $60 $55 $2.0 -GIFTS IN KIND $3.5 -PLEDGES $45 $27.9 -CASH $35 $30 In September and October, we secured four major gifts totalling $787,658 and five major pledges totalling $263,500, contributing $1,051,158 toward the Western Stands For Washington campaign. Our major gift officers engaged in 540 interactions with donors, including 121 personal visits and 405 conversations via phone, email and snail mail. $25 $20 $15 SEPT 1 - OCT 31, 2015 In the past two months, 37 student Phonathoners made 32,203 calls, reaching 5,511 alumni, garnering 687 pledges and raising $36,587. $50 $40 ADVANCEMENT FAST FACTS $26.3 $10 $5 -PLANNED GIFTS WWU Alumni Association’s 13 events – including our 8th Annual Get Your Blue on BBQ, a Happy HourSeahawk game combo in D.C. and a Portland Art Museum tour and lunch – engaged 1,811 Western alumni, families, staff and community members. Over the past two months, 1,209 Annual Giving donors have contributed 1,613 gifts, generating $367,348. $0 TOTAL $59.7 Million We’ve welcomed 204 Alumni Association members for a current total of 2,567. $ MILLIONS 1 GROWING AWARENESS WWU alumna and former Alumni Association Board Member Vini Samuel, ‘94, made history on November 3, 2015 when she became the first female mayor of Montesano, WA, and the first female Indian-American mayor in the U.S. This news also brought historic numbers to our social media pages with more than 200,000 people reached in the first week and nearly 15,000 individuals engaging (clicking, sharing, liking) with the post. Vini Samuel As we enter our final months of the campaign, interest continues to build momentum with a 133% increase in combined Alumni and Campaign website visits in September and an 85% increase in October over the same time last year. WEBSITE VISITS 14,000 12,000 2,272 10,000 3,906 8,000 7,944 6,000 4,000 2,000 0 1,508 139 4,164 4,851 SEPT ‘14 9,921 7,733 SEPT ‘15 ALUMNI OCT ‘14 OCT ‘15 CAMPAIGN ENGAGEMENT METRICS A NEW FALL PHONATHON OUTREACH TO 3400 FRESHMAN & SOPHOMORE PARENTS RAISED $24,113 IN THE FIRST SIX WEEKS SINCE OUR SEPTEMBER 21 OPENING, MORE THAN IN PLEDGES. 15 POUNDS OF SWEETS — DREW ABOUT 300 900 PEOPLE HAVE VISITED OUR WESTERN CITY CENTER IN DOWNTOWN BELLINGHAM FOR MEETINGS, EVENTS — AND JUST TO SEE THE SPACE AND ENJOY OUR COMPLIMENTARY WOODS COFFEE. OUR WESTERN CITY CENTER HALLOWEEN EVENT — AT WHICH WE HANDED OUT MOREOVER, 340 OF THE 491 PLEDGES CAME FROM FIRST-TIME DONORS, WHO CONTRIBUTED A WHOPPING GHOULS, GHOSTS & GOBLINS. $15,223. 2 E N G A G E M E N T EVENTS FROM SEPT-NOV In September, our Phonathoners implemented a new series of check-in calls with 2,578 recent graduates, using the opportunity to remind them that Western cares, as well as to update contact information and inform them of alumni-related resources. And on November 3, Woodring College of Education Dean Francisco Rios attended the Phonathon to thank the callers, sharing words of funding priorities, inspiration and encouragement. Within the first hour of calling, they raised more than $8,000 with 126 pledges! — On October 21, alumna Diane Sigel Steinman (‘77) and Allan Steinman hosted a reception at their home for a group of 24 that included Washington State Representative Gerry Pollet and prominent members of the Seattle Jewish Community such as the executive director of the Jewish Federation of Greater Seattle, Keith Dvorchik. Guests enjoyed remarks by History Department Chair Kevin Leonard and Professor of History Steven Garfinkle regarding the College of Humanities and Social Sciences’ initiative to endow a professorship of Jewish History. We received nearly $40,000 at the event bringing the total commitments towards the new professorship to nearly $800,000. — On Friday, November 6, University leadership honored Saturna Capital which, with a six-figure gift, funded the new Saturna Sustainable Investing Lab in Parks Hall. This College of Business and Economics research lab, with its real-time access to market data and automated data analytical tools, provides a learning environment for students of finance, accounting and marketing. Approximately 45 people – a mix of Saturna executives, WWU alumni and student interns who work at Saturna and University and CBE leadership – mingled at the festive ribbon cutting. SATURNA’S WESTERN INVESTMENT: (L to R) CBE Dean Emeritus Dennis Murphy (‘69, ‘71), Saturna Chairman Nick Kaiser, Saturna President Jane Carten (‘01, ‘06), CBE Dean Craig Dunn, President Bruce Shepard. — For this year’s National Philanthropy Day on November 12, our stewardship team led the nomination for Sanitary Services Company of Bellingham to be recognized as Outstanding Philanthropic Small Business. Thanks to our team’s excellent work, Sanitary Services Company and its president, Paul Razore (’74), were honored this year with the award, in recognition for their longtime support of WWU and more than 100 other Whatcom County organizations. — Fall is always a busy time for Alumni Association events and this year was no exception. On October 4, we sold out our section in the Hawks Nest at CenturyLink Field – 273 tickets – to watch the Seattle Sounders tie the L.A. Galaxy. This event has become a tradition for many of our constituents who traveled from afar to join us for the pregame party under the WWU tents at Pyramid Alehouse. — The following weekend on October 10 in Portland, 24 of our Western community members enjoyed a docentled tour of the Portland Art Museum to see world-renowned landscape works from the Paul G. Allen Collection. Posttour, guests lunched together at Nel Centro, swapping travel stories and memories of Western. — We also hosted a tour at the Seattle Art Museum on October 17. Forty-five guests joined our reception at TASTE followed by a 90-minute docent-led tour of SAM, including a collection of Manet, Renoir, Monet, Boudin, Cezanne, Degas, Pissarro, Bonnard, Gauguin and van Gogh on loan from The National Gallery in Washington, D.C. — While art enthusiasts were entertained in Seattle, WWU Athletics fans were treated to an exciting women’s soccer game versus Seattle Pacific University on our home pitch at Harrington Field. Our BBQ on Viking Bunker sold out with 107 participants who enjoyed food and beverages with fellow alumni throughout the game. — On October 22, the Alumni Association hosted a gathering of 24 Westernrelated folks in Washington, D.C. at a casual Happy Hour and game-viewing party, joining WWU alum Gen O’Sullivan (‘00) at her Sona Creamery and Wine Bar 3 E N G A G E M E N T CONTINUED... SPECIAL RECEPTION: Alumni Association Lifetime members’ downtown dinner. for socializing before heading across the street to Barrel to watch the Seahawks vs. 49ers football game. — We rounded out the month at Western City Center where Alumni and student staff donned costumes to hand out candy for the Downtown Bellingham Trick-or-Treat on October 30. Several hundred children and their families trekked through the downtown streets of Bellingham, pausing at our Herald Building headquarters – marked during the rainy afternoon by WWU tents – for seasonal treats and good cheer. — The following week, Alumni student staff transitioned into professional wear for the Ask an Alum event which connects students with alumni mentors for advice, answers and feedback. For this session, 13 Western alumni from a variety of professions and locations across Washington came to campus to mentor 70 students attendees. In addition to getting resume help and career direction, students and alumni had a chance to network at a reception beforehand. — On November 7, we hosted yet another sold-out Curling in Canada event with 30 enthusiastic alumni and friends as, for the second time this year, Vikings crossed over to White Rock to learn the sport of curling and socialize with fellow Western supporters over drinks and dinner. This event is always an instant sell-out for the Alumni Association, one of our most popular regular events. — November 7 also marked our WWU Alumni Association Lifetime Member Dinner and Reception. This was the first time a gathering specifically honoring our Lifetime Members had been offered in more than a decade. The response from our 77 guests – who gathered for a wine reception, dinner and discussion from Dennis Murphy (‘69 & ’71), dean emeritus of the College of Business and Economics – was overwhelming. All of the positive feedback from these dedicated members indicates we will be hosting more events like this one in the future. CURLING CUES: Curling in Canada participants get tips from the pros. — 4 UPCOMING EVENTS DECEM B E R 1 2 – Commencement on campus: commencement speaker Dr. Richard Veith (‘69) DECEM B E R 1 2 – Skagit River Eagle Float DECEM B E R 1 6 – Vikings Want to Know Reception at Russel Investments in Seattle J A N U A RY 4 – Court of Dreams at the Portland Trail Blazers J A N U A RY 9 – WWU Women’s Basketball vs. CWU at Whatcom Community College J A N U A RY 1 3 – Vikings Want to Know Reception at Boeing in Everett J A N U A RY 2 0 – Vikings Want to Know Reception at Boeing in Seattle J A N U A RY 2 1 – Ignite Your Intellect at Bellingham Cruise Terminal: Jim Reavis (‘87) on cloud and digital security J A N U A RY 2 1 – Vikings Want to Know Networking Lunch for Young Alumni at Russell Investments in Seattle FEB R U A RY 4 – Ignite Your Intellect at Schack Art Center in Everett: Jackie Caplan-Auerbach, WWU Associate Professor of Geology FEB R U A RY 1 1 – Happy Hour and docent-led tour of Paul Allen Collection at Phillips Gallery in Washington, D.C. FEB R U A RY 1 1 – Ask an Alum in Bellingham FEB R U A RY 1 8 – Ignite Your Intellect at Western City Center in Bellingham: Laurie Trautman (‘01) on Canadian border trade FEB R U A RY 2 4 – Campaign Celebration in Bellingham FEB R U A RY 2 5 – WWU @ SPU Hoops in Seattle M A R CH 8 – Campaign Celebration in Seattle 5 W H Y W E D O W H AT W E D O . . . In 2004-5, then-Fairhaven College student Rachel Lee spent ten months in Japan, South Korea and China studying ceramics, culture and language. “My intent was to visit towns known for enduring ceramics culture such as Arita, Japan; Icheon, Korea; and Jingdezhen, China,” says Lee. “I worked out the details of lodging and studying upon arrival, and to offer English lessons in exchange. I was very proactive and it went so smoothly!” Her experience not only went pretty much as planned, it offered plenty of opportunity for the kind of unexpected moments that generate life-changing touchstones of cross-cultural understanding and social skills. “My world grew in every direction,” says Lee. “There is a huge population of humans that were foreign to me who are now familiar, recognizable, and I have an improved ability to communicate with them both linguistically and intuitively. I was able to connect with intriguing, one-of-a-kind humans, like the Korean grandma who slept on the floor next to me in a church for two months; or Coco, my wild flat-mate in Shanghai; or the grad students who shared their studio with me at the ceramics center in Jingdezhen. One of the grad students gave me a Song Dynasty tea bowl she excavated that is about 1,000 years old, and on a dig in Beijing, I accidentally discovered an ancient brick to add to the archeologists’ findings.” The excitement of that discovery, still palpable a decade later, was made possible by the Adventure Learning Grant, an immersive educational experience that was the brainchild of former Fairhaven College professor David Mason. Mason, who died earlier this year, was determined to create a program that would encourage students to follow their passions and see what came of that pursuit. “The point was to cut people loose and that was SO the way David taught,” notes Fairhaven College Professor Emerita Kathryn Anderson who has helped coordinate the program since its inception. “It was always about giving students the resources, empowering them to mine a rich environment and letting them learn what they can.” For former students such as Tyson Minck, who works as an arborist and musical-instrument designer and was part of 2007-8’s cohort, that commitment and intent translated into an extended exploration of the South American continent by bicycle, a trip that covered 16,000 miles and 15 countries over two years. “This grant has found a way to put a face on self-directed interdisciplinary studies,” he says, “a face that will continue to draw positive attention to WWU for years to come.” “The experience heightened my critical lens towards ‘helping’ in any context,” says Rachel Clark (2011-12) who studied community-based healthcare in Kenya and is currently in her first year of medical school. “It pushed me to return home and learn more about people living in poverty in my own community. I was teetering on the edge of applying for medical school, and being in Kenya pushed me over that edge. I want to give back to the place I live, and I want to do it through listening to peoples’ stories and providing compassionate and kind care. It pushed me beyond where I was comfortable, to a space so far outside of where I’d been before, and has been my greatest teacher. It has impacted my relationships, both with my family who came to visit me, and friends who were there with me on the ride. It is the greatest gift and opportunity I have ever received and probably will ever receive in my life. It is freedom and time and space in an era in which we have none. I am unendingly grateful to David for his gift, and for the faculty that are responsible for overseeing it.” “The connections and memories from my adventure are exceptional,” adds Lee, a family nurse practitioner with a thriving family of her own. “It strengthened me. I’ll rock in my rocking chair at 92 and laugh as I relive karaoke nights in East Asia, or perhaps recall some more subtle and precious experiences like a child putting her hand in mine. After living in another culture, some things become part of your life forever.” NEW FACES IN ADVANCEMENT Heidi Mezo, a lifelong Bellingham resident and mother of two, who studied Human Services at WWU, is joining the University Advancement team as the donor relations program coordinator. She spent the last year in the Physics & Astronomy Department. Her former career was at Whatcom Community College in their Entry & Advising area for more than 15 years. 6 Capital Program Report Board of Trustees December 11, 2015 MAJOR/INTERMEDIATE CAPITAL PROJECTS • Carver Renovation The General Contractor/Construction Manager (GC/CM) contractor, Mortenson Construction, continues releasing subcontractor packages for pricing. Most of the subcontractor packages have opened and this effort should be complete in January 2016. Abatement and demolition work is nearly complete throughout the site and existing building. Foundation work has started and pile installation is underway, as well as site utilities. The project is scheduled to be substantially complete in April 2017. • Classroom and Lab Upgrades – Phase 2 There are two remaining components to this work: 1. PW679 Classroom and Lab Upgrades – Phase 2: has reached substantial completion and all classrooms and labs were used Fall Quarter. The contract with Regency NW is being closed out. 2. The final component, PW681 Haggard Hall Media Commons and Parks Hall Finance and Learning Lab: Construction is complete. The contract with Regency NW is being closed out. • New Student Housing Enrollment and Student Services (ESS) is working with Brailsford & Dunlavey, Inc. on a student housing market study. The results of this study will assist in developing the project scope and programming for a proposed new on-campus student housing project. In addition, the University is starting the process for City of Bellingham planning permits to be prepared if the housing project moves forward. • Science Building Renovation & Addition Predesign THA Architects Engineers and Western representatives continue to have meetings and work on elements of the Science Building Renovation & Addition Predesign. Completion is scheduled for June 30, 2016. • Performing Arts Center Renovation & Addition Predesign Opsis Architecture and Western representatives continue to meet and work on elements of the Performing Arts Center Renovation & Addition Predesign. Completion is scheduled for June 30, 2016. For more information about the major projects, the Capital Program, and the Capital Planning Process, visit the Office of Facilities Development and Capital Budget website: http://www.wwu.edu/wwuarchitect/. WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Steve Swan, V.P. for University Relations and Community Development DATE: December 11, 2015 SUBJECT: University Relations and Community Development Report PURPOSE: Information Item Purpose of Submittal: A written report is provided on the recent activities of University Relations and Community Development. WESTERN WASHINGTON UNIVERSITY OFFICE OF THE VICE PRESIDENT FOR UNIVERSITY RELATIONS AND COMMUNITY DEVELOPMENT REPORT FROM THE VICE PRESIDENT TO THE BOARD OF TRUSTEES COMMUNICATIONS AND MARKETING Highlights of recent news include the following stories of interest: • A front-page story in the Skagit Valley Herald that highlighted Western alumna Berenice Rodriguez, whose dream of becoming a teacher was made possible through Woodring College of Education’s innovative Pathways program. It can be access via this link. • A feature article in Science Magazine on WWU Geology Professor Melissa Rice and the Mars Rover Team’s research which can be accessed here. • An article in the Bellingham Herald about the life of longtime Western administrator and interim university president Al Froderberg following his recent death. WWU is nearing the one-year anniversary of the @ourwestern Instagram account, which allows a different student each week to share their Western story from their own perspective. The account, which aims primarily to show prospective students what life is like at WWU, has been a huge hit. To date, the account has 3,173 followers. A recent drive to recruit students to host the account resulted in 30 applications in just one day. To view the students’ posts week by week, visit https://storify.com/ourwestern. With the account’s success, we’re now rolling out two new studentrun platforms: blogs and Snapchat. Look for a soft launch from both this month. The Marketing Office is ramping up for a comprehensive marketing campaign in conjunction with the Office of Admissions targeted at two key demographics: high-achieving Seattle metro area high schoolers and first-generation Hispanic students. This outreach is initially in the form of advertising on Spanish radio in the Yakima and Skagit valleys as well as electronic outreach through digital media such as Pandora, YouTube and Facebook to the Seattle metro area in the coming weeks. 1 In the following charts you will find metrics and other data associated with various mediums that University Communications and Marketing uses in the dissemination of Western related stories and information. 2 GOVERNMENT RELATIONS Federal Relations WWU recently sent letters to Senators Patty Murray and Maria Cantwell, Congressman Rick Larsen and Congresswoman Suzan DelBene expressing concern over proposed changes to the regulations governing white collar exemptions to the Fair Labor Standard Act (FLSA)’s overtime rule pay requirements. Should these exemptions be changed it will result in a budgetary impact of more than $700,000 for Western Washington University. On July 6, 2015, the Department of Labor (DOL) issued proposed rules changing certain aspects of the “white collar” exemptions and invited public comments. The College and University Professional Association for Human Resources (CUPA‐HR) and the American Association for State Colleges and Universities (AASCU), along with 16 other higher education associations, submitted comments on September 4 outlining their concerns with the proposed rules. Western supports the recommendations to the DOL that have been offered by CUPA-HR, AASCU and the 16 other higher education associations. 3 SMALL BUSINESS DEVELOPMENT CENTER Among the highlights of activities regarding the SBDC in the past two months are the following: • Two part-time Western graduate assistants were hired from the WWU MBA program to assist with client research and financial analysis. • An internship marketing position was filled with an undergraduate student of the WWU marketing program, to begin January 2016. o Hired to bring more visibility to program, recruit higher caliber of client, assist in the redesign and conversion of SBDC website, etc. • Solidified a satellite SBDC office within Barkley Village slated to open early 2016; will result in better/easier access for North Whatcom County businesses. • Launched the ‘Effective Financial Management’ series during Global Entrepreneurship week with local CPA, Stephanie Artino. • Publishing a comprehensive ‘Whatcom County Finance Guide’ intended for county-wide use. • Assisting in the creation of an economic development website, with the City of Bellingham, intended to serve as reference for business owners in or relocating to Whatcom County. • Continuing to collaborate with WWU CBE business professors by pairing students with SBDC clients. This support satisfies outside projects requirements in several keystone WWU courses including “Entrepreneurship” and “Project Management.” • Attended and presented on “Risk Management Techniques for Small Business Counselors”, at the Statewide SBDC Fall Conference, held at Semiahmoo on October 7 – 9, 2015. WASHINGTON CAMPUS COMPACT In October 2015, Washington Campus Compact board elections were held. The board members are: Four-Year Public Institutions • Bruce Shepard, Western Washington University – Board Chair • Mary Cullinan, Eastern Washington University • Justin Guillory, Northwest Indian College Private Institutions • John Bassett, Heritage University • Tom Krise, Pacific Lutheran University • Joseph Castleberry, Northwest University Two-Year Community and Technical Colleges • Ryan Carstens, Spokane Community College • Eileen Ely, Green River Community College • Denise Yochum, Pierce College, Fort Steilacoom On November 5, 2015, the WCC held the statewide Faculty Institute focused on three themes that address critical issues in Washington: diversity and social justice, sustainability, economic development/social entrepreneurship. Western had three presenters selected for the institute: Heather Davidson (Communications), Dan Purdy (College of Business and Economics), and Galen Herz (Biochemistry and Anthropology student). On November 6, 2015, WCC held a statewide Network Meeting for member institutions only. The University of Washington presented their community partnership mapping project and campus teams discussed strategies for collecting campus-wide student engagement data. Jack Herring and John Thompson represented WWU. Eighteen institutions from across the state sent representatives/teams to participate. 4 WEB COMMUNICATION TECHNOLOGIES (WebTech) WebTech will be welcoming a new employee, Alex Waltrip, to the team December 1st. He will be providing much needed support in addressing a growing backlog of website development projects. He was previously a member of Administrative Computing Services at Western. A number of important projects were recently wrapped up. They include: • The integration of the emergency messaging alert system, RAVE, into the Western homepage. This integration provides another avenue for communication during emergencies and severe weather incidents. • The release of a short URL tool that is being managed by WebTech. The goal is to enhance the brand through wwu.edu/q/ quick links rather than using bit.ly for the same service. • The activation of the new Fairhaven College website which was built upon the Drupal platform. It can be accessed at https://fairhaven.wwu.edu • The adoption and use of WordPress is increasing steadily on campus. Human Resources recently launched their new WordPress website and it can be accessed at http://wwu.edu/hr WESTERN WINDOW TV SHOW A synopsis of the latest episode of the Western Window TV Show, which is telecast on KVOS-TV via Comcast Cable on the west side of the mountains is listed below. This student intern produced show is aired Sunday mornings at 7 a.m. on KVOS and is also televised daily in Bellingham on BTV-10. Here is a link to the archives of the shows and below is information on the three latest episodes. Episode 31 - October 2015 This month’s show is hosted by Chris Roselli of the WWU Alumni Association and Teague Parker, a student at Western. Following is the story lineup for this episode: • Campus Equity and Inclusion Forum – Western’s Nick Sanchez is leading an effort to shed light on the work being done on campus surrounding diversity, equity and inclusion – making sure everyone gets invited the table to participate in campus life and raise the university’s critical cultural consciousness and create an atmosphere that welcomes and includes all. • Wildland Firefighting – These Western students and alumni spend their summers fighting the increasingly destructive cycle of wildfires while at the same time learning how these incidents are a naturally occurring part of the mountain/forest ecosystem. • Down the Drain – At the end of the summer of 2015, 85% of the state was classified as being in severe drought conditions, making water conservation even more critical. What can each of us be doing to help? • Restoring Habitat, Restoring Health – Salmon are critically important to the ecosystems of the Pacific Northwest; organizations like the Nooksack Salmon Enhancement Association and faculty like Western’s Jim Helfield are working to bring back healthy populations of native salmon. • WWU Ideas on Stage – TedX WWU showcases the work of Western change makers to the community, the region, and the world. Episode 32 – November 2015 This month’s show is a single “Office Hours” segment hosted by Dan Purdy, director of Western’s Front Door to Discovery program. • The Big One: Is a MegaQuake Coming, and How Can We Prepare For It? – Purdy leads a panel of speakers through a topic of imminent concern for most Pacific Northwesterners: we live in an area of high earthquake activity, an area that has seen huge earthquakes in the past that would dwarf anything in recent times. Is the Big One really coming, and if so, how can we prepare for it? Panelists for this discussion are Paul Gazdik, emergency manager for the City of Bellingham; Jackie Caplan-Auerbach, WWU professor of Geology and an expert in seismology, volcanism and plate tectonics; and David Sattler, WWU professor of Psychology, an expert on how populations react to, and rebound from, natural disasters. 5 Board of Trustees and Administrative Officers FINANCIAL REPORT Financial Report 2015 2015 June 30, 2015 and 2014 1 President’s Letter of Transmittal FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION President’s Letter of Transmittal 2 Board of Trustees and Administrative Officers 3 Management’s Discussion and Analysis 5 Independent Auditor’s Report 15 FINANCIAL STATEMENT Statement of Net Position (University) 19 Statement of Financial Position (Foundation) 20 Statement of Revenues, Expenses and Changes in Net Position (University) 21 Statement of Activities and Changes in Net Assets 2015 (Foundation) 22 Statement of Activities and Changes in Net Assets 2014 (Foundation) 23 Statement of Cash Flows (University) 24 Notes to the Financial Statement 26 Schedules of WWU’s Proportionate Share of the Net Pension Liability 55 Schedules of Contributions 58 1 President’s Letter of Transmittal Financial Report 2015 November 16, 2015 Karen Lee, Chair Board of Trustees Western Washington University Bellingham, WA 98225 Dear Chair Lee: We are pleased to submit the Annual Financial Report of Western Washington University. The accounts of WWU are maintained in accordance with policies and regulations established by Washington State and its Office of Financial Management. This report has been prepared in accordance with generally accepted accounting principles and following the guidance of the Governmental Accounting Standards Board. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatement. The Washington State Auditors’ Office has issued an unqualified (clean) opinion on the Western Washington University financial statement for the year ended June 30, 2015. This opinion is included in the independent auditor’s report. Management’s discussion and analysis, located at the front of the financial section of this report, provides a narrative introduction, overview, and analysis of the basic financial statement. Western Washington University is recognized nationwide as a premier public comprehensive university. WWU is ranked #2 for top public schools and #21 in regional university for the western region by US News and World Report and is one of the 100 best values in public colleges according to Kiplinger’s Personal Finance. Western’s national academic reputation, excellent faculty, as well as its prime location, make it an institution “in demand.” Sincerely, Bruce Shepard President Richard Van Den Hul Vice President for Business and Financial Affairs 2 Board of Trustees and Administrative Officers Financial Report 2015 BOARD OF TRUSTEES* Karen Lee, Chair Sue Sharpe, Vice Chair Dick Thompson, Secretary Carly Roberts, Student Trustee Chase Franklin Betti Fujikado Earl Overstreet Ralph Munro ADMINISTRATIVE OFFICERS Bruce Shepard, President Brent Carbajal, Provost and Vice President for Academic Affairs Eileen V. Coughlin, Senior Vice President for Enrollment and Student Services Richard Van Den Hul, Vice President for Business and Financial Affairs Steve Swan, Vice President for University Relations Stephanie Bowers, Vice President for University Advancement Brian Sullivan, Assistant Vice President for Business and Financial Affairs Teresa Hart, Director, Financial Services Michael Ulrich, Accounting Manager, Accounting Services *as of June 30, 2015 3 Management’s Discussion and Analysis Financial Report 2015 OVERVIEW The following discussion and analysis provides an overview of the financial position and activities of Western Washington University (WWU) for the years ended June 30, 2015 and 2014. This discussion has been prepared by management and should be read in conjunction with the financial statements and accompanying notes which follow this section. WWU is one of six public, four-year institutions of higher education in the state of Washington. WWU is governed by a Board of eight Trustees, which has broad responsibilities to supervise, coordinate, manage and regulate WWU as provided by State law. Trustees are appointed by the Governor for a term of six years, except a student Trustee who is appointed to a one-year term. As a comprehensive regional university, WWU offers undergraduate and graduate degrees in over 160 academic programs in its eight colleges. WWU is nationally recognized for providing excellent education at an affordable cost, with Forbes and Kiplinger magazines ranking Western as a top value in education. WWU was established in 1893 and currently has approximately 15,000 full-time and part-time students. Located on the shores of Bellingham Bay with Mount Baker as its backdrop, Bellingham is the last major city before the Washington coastline meets the Canadian border. The City of Bellingham, which serves as the county seat of Whatcom County, is at the center of a uniquely picturesque area offering a rich variety of recreational, cultural, educational and economic activities. WWU is the second largest employer in Whatcom County. Using the Financial Statement WWU’s financial report includes the Statement of Net Position, the Statement of Revenues, Expenses and Changes in Net Position, the Statement of Cash Flows and the Notes to the Financial Statement. The Statement of Net Position provides information about WWU at a moment in time, the June 30 fiscal year end. The Statement of Revenues, Expenses, and Changes in Net Position and the Statement of Cash Flows provide information about WWU’s activities and operations during the fiscal year. The financial statement, in conjunction with the Notes to the Financial Statement, provides a comprehensive way to assess WWU’s financial health. WWU’s financial statements are prepared in accordance with Governmental Accounting Standards Board (GASB) principles, which establish standards for external financial reporting for public colleges and universities. WWU’s component unit, the Western Washington University Foundation (Foundation), is a separate legal entity and reports its financial results under Financial Accounting Standards Board (FASB) principles. The Foundation’s financial statements are reported separately within this report. FINANCIAL HIGHLIGHTS FOR FISCAL YEAR 2015 WWU’s overall financial position decreased in fiscal 2015 due to implementation of a new accounting standard (GASB Statement No. 68 – See Note 1 and 19 to the Financial Statements). This accounting standard requires government agencies to recognize the long-term obligation for the net unfunded actuarial defined benefit liability on the Statement of Net Position. This does not impact WWU’s funding requirements for the defined benefit pension plans, but does require a $31.5 million restatement of beginning net position. On a go-forward basis the standard requires recognition of pension expense using a systematic method designed to match the cost of pension benefits with service periods for eligible employees. Significant actions which occurred during the fiscal year include the following (discussed in further detail on the following pages): • Adopted a new reporting standard that reduced beginning FY 2015 net position by $31.5 million • Tuition and fees revenue increased $4.1 million (2.9%) • Salaries expense increased $9.3 million (7.2%) • Federal grants and contracts revenue increased $924 thousand (15.4%) June 30, 2015 and 2014 5 Management’s Discussion and Analysis Financial Report 2015 Statement of Net Position The Statement of Net Position presents the financial condition of WWU at the end of the last three fiscal years and reports all assets, deferred outflows, liabilities and deferred inflows of WWU. A summarized comparison of WWU’s assets, liabilities and net position as of June 30, 2015, 2014 and 2013, follows: 2015 2014 2013 (Dollars in thousands) Assets Current assets $75,910 $69,672 Noncurrent assets 76,399 74,821 60,448 Capital assets, net 427,626 433,147 441,496 579,935 $577,640 $572,424 5,080 1,641 1,798 31,450 Total assets Deferred outflows $70,480 Liabilities Current Liabilities Noncurrent Liabilities Total liabilities 38,388 34,869 104,710 82,740 84,919 143,098 117,609 116,369 461,672 457,853 Deferred inflows 10,464 Total net position 431,453 Assets Current assets consist primarily of cash and cash equivalents, short-term investments, funds held with the State Treasurer, and accounts receivable, net. The majority of the $6.2 million increase (9.0%) in fiscal year (FY) 2015 over FY 2014 is the result of an increase in short term investments offset by a decrease in Funds with the State Treasurer. Short term investments increased $8.9 million (61.0%) as WWU’s investment strategy is to ensure liquidity needs while optimizing investment returns. The decrease in Funds with the State Treasurer is due to increased spending of these funds on various capital projects. The slight decrease in total current assets of $808 thousand (-1.1%) in FY 2014 over FY 2013 is the result of an overall decrease in Accounts Receivable, Net. The fiscal 2015 increase of $1.6 million (2.1%) and the fiscal 2014 increase of $14.4 million (23.8%) in noncurrent assets (excluding capital assets) is attributed to the increases in long-term investments, as WWU continues to build an appropriate level of operating reserve (see ratios later in this section). Liabilities The excess of current assets over current liabilities of $37.5 million in FY 2015 and $34.8 million in FY 2014 reflects the continuing ability of WWU to meet its short-term obligations with liquid or easily liquidated assets. Current liabilities typically fluctuate depending on the timing of accounts payable payments and the receipt of deposits and revenue that is applicable to the next fiscal year. Current liabilities increased by $3.5 million (10.1%) in FY 2015 largely due to an increase in Accounts payable and accrued liabilities attributable to the timing of invoice payments. Current liabilities increased $3.4 million (10.9%) in FY 2014, which (apart from the accounts payable increase related to timing of payments) is attributable to higher unearned revenue. In addition, the Recreation Center Refinancing bonds issued in FY 2012 called for no principal payments until FY 2015, increasing the current portion of bonds and notes payable in FY 14. Long-term liabilities increased $22.0 million (26.6%) during FY 2015 due to an increase of $26.2 million in the net pension obligation, offset by a $4.3 million decrease in bonds and notes payable. The increase in the net pension obligation is due to the implementation of GASB Statement No. 68 Accounting and Financial Reporting For Pensions-An Amendment of GASB Statement No. 27. This statement requires WWU to include as a long-term liability its share of the actuarially calculated net pension liability for the retirement plans administered through a 6 Western Washington University Management’s Discussion and Analysis Financial Report 2015 trust by the State of Washington Department of Retirement Systems (DRS). Long-term liabilities decreased overall $2.2 million (-2.6%) during fiscal 2014 due largely to decreases in scheduled principal payments ($4.4 million) for Housing and Dining Bonds and leases payable. This decrease was offset by a $2.2 million (29.9%) increase in the unfunded long-term net pension obligation to certain state employees based on the estimated State Actuarial valuation of the University Retirement Plan (Note 19). Net Position The difference between assets, deferred outflows, liabilities and deferred inflows is net position. The change in net position measures whether the overall financial condition has improved or deteriorated during the year. The net position is reported in the following categories: Net Investment in Capital Assets – WWU’s total investments in property, plant equipment, and infrastructure, net of accumulated depreciation and outstanding debt obligations related to those capital assets. Restricted: • Nonexpendable consists of funds on which the donor or other external party has imposed the restriction that the corpus is not available for expenditures but for investment purposes only. • Expendable are resources which WWU is legally or contractually obligated to spend in accordance with time or purpose restrictions placed upon them by donors or other external parties. Unrestricted – All remaining funds available to the institution for any purpose, although these are often internally designated for specific purposes. WWU’s net position as of June 30, 2015, 2014 and 2013 are summarized as follows: 2015 2014 2013 (Dollars in thousands) Net Position Net investment in capital assets $355,929 $357,384 $363,010 Restricted: Nonexpendable Expendable Unrestriced Total net position 4,631 4,631 4,629 23,870 25,943 28,701 47,023 73,714 61,513 $431,453 $461,672 $457,853 Net investment in capital assets decreased by $1.5 million (-0.4%) during fiscal 2015 primarily due to a $19.2 million increase in capital assets, a $24.7 million increase in depreciation and a $4.3 million decrease in debt. Net investment in capital assets decreased by $5.6 million (-1.5%) during fiscal 2014 primarily due to a $14.9 million increase in capital assets, a $23.3 million increase in depreciation and a $3.6 million decrease in debt. During fiscal 2014, WWU granted $723 thousand in land and $523 thousand in buildings (net) to the Western Crossing Development (WCD), which is a private/public partnership joint venture with the Port of Bellingham to develop a WWU waterfront campus (See Note 23). Highlights of fiscal 2015 capital asset activities: • Construction in process increased $12.2 million due to the beginning of renovations and improvements. • Capital improvements to buildings increased $2.3 million primarily due to the completion of various projects. • Long-term debt used to purchase capital assets decreased $4.3 million due to principal payments and amortizations. June 30, 2015 and 2014 7 Management’s Discussion and Analysis Financial Report 2015 Restricted nonexpendable includes donations and matching State contributions for the purpose of establishing distinguished professorships and graduate fellowships. Restricted expendable net position decreased $2.1 million (-8.0%) during FY 2015 and $2.8 million (-9.6%) during FY 2014 primarily due to spending $1.8 million and $2.3 million, respectively, of the Permanent Fund (Funds with the State Treasurer) on capital projects. Unrestricted net position decreased $26.7 million (-36.2%) largely due to the implementation of GASB Statement No. 68 – Accounting and Financial Reporting for Pensions. GASB Statement No. 68 requires WWU to include a net pension liability of its share of the State’s actuarially calculated total net pension liability (See notes 1 & 19). Unrestricted net position increased $12.2 million (19.8%) during FY 2014 mainly due to higher tuition and fee revenue, longer start-up periods for new programs funded by one-time funds and departmental savings under budget due to timing of new hires. Capital Assets and Related Debt During FY 2015 and FY 2014, $15.8 million and $14.9 million (excluding library materials and equipment) respectively, were expended on capital improvements compared to $18.3 million in FY 2013. Of the $15.8 million in capital improvements during FY 2015, $6.7 million was spent on upgrading residence halls, $3.4 million was expended on utility upgrades, $2.7 million was spent on classroom and laboratory upgrades and $2.1 million on the Performing Arts Center exterior upgrade (See Note 9). Specific projects completed or underway in fiscal 2015 include: Carver Academic Renovations The estimated $80.4 million addition of 41,977 square feet will provide additional general classroom seats as well as dedicated lab and instructional spaces. The consolidation and growth of student activities and conferences will also be serviced in the refurbished 2,600 seat event space. Funding was provided in the 2015-2017 capital request. Classroom & Laboratory Upgrades WWU has maintained a continuous renovation program over many years to upgrade General University classrooms and general use lab spaces. The estimated $4.7 million program is vital to the function of the campus and has ensured that General University learning space is up-to-date, offers a high level of relevant technology and is adaptable to accommodate various learning modalities. This project is funded using Permanent Funds and state capital appropriations. North Campus Utility Upgrade The estimated $3.4 million project upgrades the existing north campus 4,160 volt electrical distribution system to a looped 12,470 volt system pursuant to the 2001 Utilities Master Plan. The existing distribution system is a radial feed network and failure in a critical location could cause an outage that lasts days instead of hours for the affected buildings. Buildings connected to the north campus system are Old Main, Mathes Hall, Nash Hall, Higginson Hall and Edens Halls (both North and South). Performing Arts Exterior Upgrade The estimated $2.9 million project will repair and replace the exterior cladding and roof systems of the Performing Arts Center which have deteriorated to the point where they are adversely impacting the building occupants (the College of Fine and Performing Arts faculty, staff and students). The large stucco wall of the Performing Arts Center Concert Hall has developed cracks and water stained soffits are in need of repair and steel windows require replacement. Access to preserve the exterior is complicated by a portion of the building that overhangs the Garden Street By-pass road, approximately 25 feet below. 8 Western Washington University Management’s Discussion and Analysis Financial Report 2015 Statement of Revenues, Expenses and Changes in Net Position The Statement of Revenues, Expenses and Changes in Net Position present WWU’s results of operating and nonoperating items that result in the changes in net position for the year. In accordance with GASB reporting principles, revenues and expenses are classified as operating or nonoperating. A condensed comparison of WWU’s revenues, expenses and changes in net position for the years ended June 30, 2015, 2014 and 2013 follows: 2015 2014 2013 (Dollars in thousands) Operating revenues $206,970 $200,594 Operating expenses 278,397 268,756 255,965 (71,427) (68,162) (59,030) State appropriations revenue 49,623 52,028 40,052 Other nonoperating revenues 16,836 17,369 16,460 Nonoperating expenses (3,487) (3,554) (3,653) (8,455) (2,319) (6,171) 9,782 6,138 11,627 1,327 3,819 5,456 461,672 457,853 452,397 $461,672 $457,853 Operating loss (Loss) income before other revenues Other revenues Increase in net position Net position, beginning of year Restatement Net position, end of year $196,935 (31,546) $431,453 WWU relies primarily on student tuition and fees and state appropriations as revenue sources to support operations. Student tuition and fees, which includes tuition fees and mandatory fees (such as Service and Activity Fee and Health Service Fee) increased slightly by $4.1 million (2.9%) during FY 2015 compared to a slight increase in FY 2014 of $4.4 million (3.2%). The Washington State Legislature provides the Board of Trustees with tuition setting authority for the following student categories at WWU: non-resident undergraduate, resident graduate, and nonresident graduate. WWU no longer has tuition setting authority for resident undergraduate students and as such there was no tuition increase for this student category in FY 2015. The FY 2015 increase is due to tuition increases in the other categories along with a marginal increase in the headcount of student population combined with various student fee increases. Resident undergraduate students comprise approximately 85% of the total student population. The tuition rate for resident undergraduates remained constant in FY 2015 when compared to FY 2014. Enrollment increased to an average annual headcount of 14,452 in FY 2015 compared to 14,316 in FY 2014 and 14,237 students in FY 2013. Net tuition revenue (student tuition and fees less scholarship allowances) increased 1.98% in FY 2015, 2.8% in FY 2014 and 11.2% in FY 2013. To assist with tuition increases, WWU provided $29.0 million in scholarship allowances in FY 2015, compared to $27.2 million in FY 2014 and $25.8million in FY 2013. Federal grants and contracts revenue increased $924 thousand (15.4%) during FY 2015 primarily due to a new award from the Corporation for National Community Service to be used to provide support for AmeriCorps activities. The $1.1 million (-15.2%) decrease in FY 2014 is due to the expiration of various grants. During FY 2015, state appropriations used for operations (which includes capital appropriations that are used for operations) decreased by $2.4 million (-4.6%) due to a slight decrease in state support for anticipated health care cost reductions. During FY 2014, state appropriations used for operations (which includes capital appropriations that are used for operations) increased $12.0 million (29.9%) compared to an increase during FY 2013. The increase during FY 2014 represents a 29.9% increase in state funding for WWU. WWU’s state supported budgeted enrollments (FTE) were 11,762 for FY 2015, 2014 and 2013 while the actual average FTE was 12,565 for FY 2015, 2014 and 12,516 for FY 2013. The differences of 803 in FY 2015, 2014 and 754 in FY 2013 non-budgeted FTE were not supported by State dollars. June 30, 2015 and 2014 9 Management’s Discussion and Analysis Financial Report 2015 Capital appropriations are recognized as revenue when expenditures are incurred on capital projects and WWU is entitled to receive the cash. Capital appropriations increased $4.4 million (174.1%) when compared to FY 2014 due to expenditures related to building improvements. Capital appropriations decreased $5.9 million (-69.7%) when comparing FY 2014 to FY 2013 due to the completion of state supported capital projects that began during FY 2013. Other capital revenue is the revenue earned from the State of Washington Normal School Permanent Fund and capital contributions received. Capital contributions are related to WWU’s Dining Services contract, which provided for a $7.3 million contribution for dining facilities for renovations and improvements over a 10 year contractual period. The FY 2015 decrease of $699 thousand (-20.0%) is due to lower capital contributions and reduced Permanent Fund investment earnings. The increase of $287 thousand (8.9%) during FY 2014 is due to increases in the capital contributions combined with Permanent Fund investment earnings. The majority of the improvements are reported as capitalized assets on the Statement of Net Position. During FY 2014, the Foundation pledged $92 thousand in additional support to the Harrington Field project, payable during FY 2015. There were no additional pledges during FY 2015. In April 2012, WWU received a $1.0 million unconditional pledged gift from the Foundation for the purpose of design and construction of the Harrington Field project. The $1.0 million pledged gift is scheduled to have 8 annual payments. This gift is recorded at its present value, with the discount amortized over the term of the pledged period using the straight line method. The following graphs illustrate revenues by source for the years ended June 30, 2015 and 2014: Total revenues by source for the year ended June 30, 2015 $283,211 (in thousands) 2% Tuition and Fees, Net $116,204 State Appropriations – Operating $49,623 2% 1% 1% Auxiliary Enterprises $56,087 16% 41% Grants and Contracts $44,434 State Appropriations – Capital $6,990 Sales and Services of Educational Activities $5,402 20% Other Capital Revenue $2,792 Other $1,679 17% Total revenues by source for the year ended June 30, 2014 $276,128 (in thousands) 1% Tuition and Fees, Net $113,943 State Appropriations – Operating $52,028 2% 1% 1% Auxiliary Enterprises $55,192 15% 41% Grants and Contracts $41,502 State Appropriations – Capital $2,550 Sales and Services of Educational Activities $4,650 20% Other Capital Revenue $3,491 Other $2,772 10 Western Washington University 19% Management’s Discussion and Analysis Financial Report 2015 WWU’s FY 2015 operating expenses increased $9.6 million (3.6%) primarily due to increases in salaries and wages. WWU’s operating expense increased $12.8million (5.0%) during FY 2014 largely due to a $9.8 million increase in salaries and benefits combined with a $2.7 million increase in depreciation. Salaries and wages increased $9.3 million (7.2%) in FY 2015, as faculty and professional staff received compensation increases and classified staff received step increases. The decrease of $2.2 million (-5.4%) in benefits is attributed primarily to a reduction in health care costs ($1,200 per employee per year). The $9.8 million (6.2%) increase in salary and wages and benefits expense in FY 2014 is attributable to negotiated faculty and professional staff salary increases of $6.3 million combined with the $2.2 million amortization of the unfunded net pension obligation. WWU places a high priority on student financial aid as part of its commitment to affordability. Scholarships and fellowships, representing financial aid and fee waivers awarded by WWU, increased slightly during FY 2015 and FY 2014 by $542 thousand (3.1%) and $693 thousand (4.1%), respectively. Supplies and materials increased $1.6 million (3.4%) due to increased maintenance and repair, technology purchases, and expenses related to Dining Services. Supplies and materials decreased $2.3 million (-4.7%) during FY 2014 partly due to reduced purchases of noncapital furnishing and equipment. Depreciation expense increased $522 thousand (2.1%) during FY 2015 and increased $2.7 million (12.4%) during FY 2014 as additional capital assets were completed and depreciated. The following graphs illustrate expenses by natural classification for the years ended June 30, 2015 and 2014: Total Expenses by Natural Classification for the year ended June 30, 2015 $281,884 (in thousands) Salaries $137,979 2% 2% 1% 6% Supplies $47,860 Benefits $37,829 9% Depreciation $24,913 49% 14% Scholarships $18,032 Utilities $5,330 Purchased & personal services $6,455 17% Interest and other $3,487 Total Expenses by Natural Classification for the year ended June 30, 2014 $272,310 (in thousands) Salaries $128,689 2% 2% 1% 7% Supplies $46,299 Benefits $39,989 9% Depreciation $24,390 47% Scholarships $17,490 Utilities $5,515 15% Purchased & personal services $6,384 Interest and other $3,554 17% June 30, 2015 and 2014 11 Management’s Discussion and Analysis Financial Report 2015 The following graph illustrate expenses by natural classification for the years ended June 30, 2015, 2014, 2013, 2012, 2011: Operating Expenses by Function 5 year trend (in thousands) $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 In on cti u str R h arc e es Ac c mi e ad rt s ice po p su t en d Stu 2015 rv Se rt a on uti tit M O& Ins 2014 2013 t lan po p l su p of 2012 ips sh r ola h Sc t en ud /st ry ia xil Au es ris p ter en 2011 Operating Loss WWU’s operating losses were $71.4 million in FY 2015, an increase of $3.3 million (4.8%) from FY 2014, and $68.2 million in FY 2014, an increase of $9.1 million from FY 2013. GASB Statement No. 34 requires that State appropriations and Federal Pell grants be classified as nonoperating revenues, thereby creating the significant operating loss. If these revenues were classified as operating the operating losses would have been $6.2 million in FY 2015 and $1.2 million in FY 2014. Financial Indicators The financial indicators presented below represent a few of the standard ratios used in higher education. The ratios summarize the performance of WWU over a 5 year period. The information provided in WWU’s Statement of Net Position and the Statement of Changes in Revenue, Expense and Net Position (not including the Foundation) are used for the calculations. The downturn in FY 2015 ratios is attributed to the adoption of GASB Statement No. 68, which resulted in a $31.5 million beginning net position restatement. Primary Reserve Ratio This ratio measures the financial strength of WWU by comparing expendable net position to total expenses. A ratio of .40 or better is advisable from various studies to give institution the flexibility to transform an enterprise over the long-term and that an institution has sufficient expendable resources to continue operations for approximately 120 days without any additional revenue or support in the event of a catastrophe. The .23 ratio indicates WWU has 2.3 months or roughly 75 days of expendable resources to cover operations. does not include Foundation 0.50 0.40 0.30 0.27 0.30 0.30 • • 2012 2013 0.33 • 0.23 0.20 0.10 0.00 2011 12 Western Washington University 2014 2015 Management’s Discussion and Analysis Financial Report 2015 Viability Ratio The Viability ratio measures the ability of the institution to liquidate debt from its expendable resources. A ratio of 1:1 or greater is recommended by various studies and indicates existing debt could be repaid from expendable resources available today. 1.30 1.17 1.10 0.90 0.97 0.81 0.86 • 2012 2013 • • 0.87 0.70 0.50 2011 2014 2015 Return on Net Position This ratio shows whether the institution is better off financially than it was in previous years. This ratio is better applied over an extended period so that results over the long-term plans are measured. A decline in this ratio may be appropriate and even warranted if it reflects a strategy or policy changes at the state level. 10.0% 7.0% 6.62% 3.54% 4.0% • 1.0% 1.21% • -2.0% 0.83% • -7.03% -5.0% -8.0% 2011 2012 2013 2014 2015 Economic Factors That Will Affect the Future WWU classified staff will receive compensation increases (funded by the state) of 3% in FY 2016 and 1.8% in FY 2017. The current contract with the United Faculty of Western Washington (UFWW) expires September 15, 2015. It is anticipated that any compensation increases resulting from the new faculty contract may not be fully funded by the state. WWU received capital funding from the state for the Carver Academic renovation project. This project is estimated to be $80.4 million and will increase WWU’s net investment in capital assets over the 2015/2017 biennium. The state of Washington continues to address the requirement of the Supreme Court’s 2012 McCleary ruling that found that the state has failed to meet its constitutional requirement to sufficiently fund basic education. Progress was made during the 2013-15 biennium but did not satisfy the court. The ruling, scheduled for full implementation in 2018, may have in impact on state appropriations for higher education. GASB Statement No. 68 was implemented in FY 2015, resulting in a $31.5 Net Pension Liability for WWU’s June 30, 2015 and 2014 13 Management’s Discussion and Analysis Financial Report 2015 proportionate share of the state’s defined benefit plans. While the state of Washington pension plans in total are funded at 95% level two of the individual plans PERS1 and TERS1 are underfunded by $5.5 billion which may have a financial impact on WWU at a future date. GASB has issued two new pronouncements that will be effective in FY 2017. GASB Statement No. 73 will affect financial reporting related to the University’s Retirement Plan (URP) supplemental component with the inclusion of the net pension liability to the Statement of Net Position. The Office of State Actuary has valued the liability at $21 million as of June 30, 2015. GASB Statement No. 74 addresses the liability associated with Other Post-Employment Benefits (OPEB) offered to retirees. The financial impact of this statement is uncertain at this time. 14 Western Washington University Washington State Auditor’s Office INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS Board of Trustees Western Washington University Bellingham, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the business-type activities and the aggregate discretely presented component units of the Western Washington University (the University), Whatcom County, Washington, as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the University’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of the Western Washington University Foundation (the Foundation), which represents 100 percent of the assets, net position and revenues of the aggregate discretely presented component units. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Foundation, is based solely on the report of the other auditors. June 30, 2015 and 2014 15 We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in 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 from material misstatement. The financial statements of the Foundation were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s 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 University’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 University’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. Opinion In our opinion, based on our audit and the report of the other auditors, 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 Western Washington University, as of June 30, 2015 and 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 1, the financial statements of the Western Washington University, an agency of the state of Washington, are intended to present the financial position, and the changes in financial position, and cash flows of only the respective portion of the activities of the state of Washington that is attributable to the transactions of the University and its aggregate discretely presented component units. They do not purport to, and do not, present fairly the financial position of the state of Washington as of June 30, 2015 and 2014, the changes in its financial 16 Western Washington University position, or where applicable, its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. As discussed in Note 1 to the financial statements, in 2015, the University adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and the schedules of the University’s proportionate share of the net pension liability and schedules of contributions pension trust fund information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the University’s basic financial statements as a whole. The President's Letter of Transmittal and the Board of Trustees and Administrative Officers are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. June 30, 2015 and 2014 17 OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2015 on our consideration of the University’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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University’s internal control over financial reporting and compliance. JAN M. JUTTE, CPA, CGFM ACTING STATE AUDITOR OLYMPIA, WA November 16, 2015 18 Western Washington University Statement of Net Position Financial Report 2015 2015 2014 $40,457,830 $41,777,144 23,533,163 14,619,746 2,181,948 4,008,042 Assets Current assets: Cash and cash equivalents (Note 3) Investments (Note 4) Funds with State Treasurer (Note 5) Interest receivable Accounts receivable, net (Note 6) Pledged gift receivable from the Foundation (Note 24) Prepaid expenses Inventories (Note 8) Total current assets 880,854 753,700 6,728,559 6,571,399 50,000 141,634 368,479 344,863 1,708,771 1,455,486 75,909,604 69,672,014 Noncurrent assets: Restricted cash and cash equivalents (Note 3) Restricted investments (Note 4) Investments (Note 4) 868,090 883,514 9,146,990 8,938,542 53,998,181 52,946,032 Due from State Treasurer 3,013,269 3,192,149 Student loans receivable, net (Note 7) 7,823,192 7,921,302 Pledged gift receivable from the Foundation (Note 24) 786,709 819,412 Non-depreciable capital assets (Note 9) 34,044,525 21,850,996 Depreciable capital assets, net (Note 9) 393,581,786 411,295,551 Net Pension Other assets (Note 1) Total noncurrent assets Total assets 752,620 9,813 119,732 504,025,175 507,967,230 579,934,779 577,639,244 1,641,095 Deferred outflows Deferred loss on bond refunding 1,431,421 Relating to pension (Note 19) 3,648,257 Total deferred outflows 5,079,678 1,641,095 Liabilities Current liabilities: Accounts payable and accrued liabilities 14,233,367 11,443,526 Deposits payable 2,846,662 2,607,639 Unearned revenues 8,523,978 8,208,306 Compensated absences (Note 11) 8,145,435 7,968,633 Current portion of bonds and notes payable (Notes 12,13,15) 4,253,347 4,252,910 376,000 376,000 Current portion of net pension obligations (Note 15,19) 9,364 11,877 38,388,153 34,868,891 Long-term portion of bonds and notes payable (Note 12, 13,15) 68,875,382 73,150,533 Long-term net pension obligations (Note 15,19) 35,834,188 9,589,408 104,709,570 82,739,941 143,097,723 117,608,832 Deposits held in custody for others Total current liabilities Noncurrent liabilities: Total noncurrent liabilities Total Liabilities Deferred inflows Relating to pension (Note 19) 10,464,227 Total deferred inflows 10,464,227 Net Position Net investment in capital assets 355,929,003 357,384,198 Restricted for: Pensions Nonexpendable: scholarships and professorships 752,620 4,631,296 4,631,015 Expendable: Instruction and research Loans Capital Projects Unrestricted Total net position 2,433,444 2,448,499 14,092,075 14,234,250 7,343,490 9,259,794 46,270,579 73,713,751 $431,452,507 $461,671,507 See accompanying notes to the financial statements 19 Foundation Statement of Financial Position Financial Report 2015 2015 (Restated) 2014 Assets Cash and cash equivalents $16,715 $702,080 4,819,533 4,361,907 Operating investment pool 12,796,975 13,133,188 Endowment investment pool Unconditional promises to give, net Investments: 66,910,165 55,518,148 Endowment real estate held for investment 2,811,600 2,811,600 Annuity and life income investments 2,226,760 4,707,803 Real property and notes receivable Total investments 160,000 160,000 84,905,500 76,330,739 Other assets 316,500 23,971 Property and equipment, net 531,392 549,303 90,589,640 81,968,000 Accounts payable and accrued expenses 311,156 145,773 Due to Western Washington University 214,888 394,405 Gift payable to Western Washington University, net 836,709 878,725 Annuity and life income obligations 938,351 1,116,744 12,516,601 12,390,142 Total Assets Liabilities and Net Assets Liabilities Investments held in trust for Western Washington University Contingent obligation to Northwest Indian College Foundation 1,269,609 1,243,999 16,087,314 16,169,788 Unrestricted 16,066,143 16,277,142 Temporarily restricted 20,717,974 19,974,030 Permanently restricted 37,718,209 29,547,040 Total Net Assets 74,502,326 65,798,212 $90,589,640 $81,968,000 Total Liabilities Net Assets Total Liabilities and Net Assets 20 See accompanying notes to the financial statements Statements of Revenues, Expenses, and Changes in Net Position Financial Report 2015 2015 2014 $145,246,475 $141,124,174 (29,042,676) (27,181,020) Net student tuition and fees 116,203,799 113,943,154 Federal grants and contracts 6,910,295 5,986,263 Operating Revenues Student tuition and fees Less scholarship allowances State and local grants and contracts 18,579,094 17,805,187 Nongovernmental grants and contracts 3,347,378 2,661,042 Sales and services of educational activities 5,401,957 4,650,219 Interest earned on loans to students 207,772 192,000 Other operating revenue 232,656 164,600 62,931,583 61,608,600 Auxiliary enterprises Less scholarship allowances Net auxiliary enterprises Total operating revenues (6,845,019) (6,417,020) 56,086,564 55,191,580 206,969,515 200,594,045 Operating Expenses Salaries and wages 137,978,506 128,689,182 Benefits 37,828,906 39,988,628 Scholarships and fellowships 18,031,770 17,489,523 Utilities Supplies and materials Purchased services Depreciation 5,329,942 5,515,154 47,861,095 46,298,546 6,454,566 6,384,324 24,912,316 24,390,381 Total operating expenses 278,397,101 268,755,738 Operating loss (71,427,586) (68,161,693) State appropriations 49,623,384 52,028,184 Federal Pell grant revenue 15,597,411 14,952,723 Nonoperating Revenues (Expenses) Investment income Interest on indebtedness Gain (loss) on endowments 921,794 712,531 (3,486,933) (3,554,252) 290,833 1,674,587 26,015 28,186 62,972,504 65,841,959 (8,455,082) (2,319,734) Capital appropriations 6,989,901 2,549,922 Other capital revenue 2,792,384 3,491,369 Total other revenues 9,782,285 6,138,023 Increase in net position 1,327,203 3,818,289 Net position, beginning of year 461,671,507 457,853,218 Restatement (Note 1) (31,546,203) Nonoperating rental property expense/income Total nonoperating revenues (expenses) Income (Loss) before other revenues Other Revenues 96,732 Pledged gift revenue from the Foundation Net position, beginning of year, as restated Net position end of year 430,125,304 457,853,218 $431,452,507 $461,671,507 See accompanying notes to the financial statements 21 Foundation Statement of Activities & Changes in Net Assets Financial Report 2015 Unrestricted Temporarily Restricted Permanently Restricted 2015 Total $329,033 $3,747,899 $8,236,528 $12,313,460 Support and Revenue: Contributions In-kind services and facilities provided by Western Washington University 2,996,763 2,996,763 Interest and dividends 449,112 657,756 Net realized and unrealized gains on investments 164,303 839,049 1,106,868 1,003,352 Return on annuity and life income investments (14,133) (107,330) (121,463) Change in valuation of annuity and life income obligations 136,422 41,971 178,393 867,266 Administrative fees 867,266 Fundraising events and other 123,184 560,095 Total support and revenue before net assets released from restrictions 4,929,661 5,927,088 Net assets released from restrictions 5,404,793 (5,404,793) Recovery of underwater endowments (221,649) 221,649 10,112,805 743,944 Total Support and Revenue 683,279 8,171,169 19,027,918 8,171,169 19,027,918 Expenses: Program services and grants 6,121,637 6,121,637 Management and general in-kind 1,534,766 1,534,766 Management and general - other 259,445 259,445 1,461,997 1,461,997 945,959 945,959 10,323,804 10,323,804 Fundraising - in-kind Fundraising - other Total Expenses Change in Net Assets Net Assets, beginning of year (restated) Net Assets, end of year 22 See accompanying notes to the financial statements (210,999) 743,944 8,171,169 8,704,114 16,277,142 19,974,030 29,547,040 65,798,212 $16,066,143 $20,717,974 $37,718,209 $74,502,326 Foundation Statement of Activities & Changes in Net Assets Financial Report 2015 Unrestricted (Restated) Temporarily Restricted (Restated) Permanently Restricted (Restated) 2014 Total $272,388 $4,166,210 $1,245,243 $5,683,841 Support and Revenue: Contributions In-kind services and facilities provided by Western Washington University Interest and dividends Net realized and unrealized gains on investments 2,913,341 2,913,341 511,714 734,954 1,246,668 1,835,491 4,609,894 6,445,385 Return on annuity and life income investments 13,381 456,538 Change in valuation of annuity and life income obligations (1,296) 71,674 651,592 Fundraising events and other 103,527 662,264 Total support and revenue before net assets released from restrictions 6,288,053 10,185,407 Net assets released from restrictions 5,515,783 (5,515,783) 103,025 (103,025) 11,906,861 4,566,599 Total Support and Revenue 70,378 651,592 Administrative fees Recovery of underwater endowments 469,919 765,791 1,773,455 18,246,915 1,773,455 18,246,915 Expenses: Program services and grants 6,090,507 6,090,507 Management and general in-kind 1,661,584 1,661,584 303,762 303,762 Fundraising in-kind 1,251,757 1,251,757 Fundraising - other 552,941 552,941 Total Expenses 9,860,551 9,860,551 Change in Net Assets 2,046,310 4,566,599 1,773,455 8,386,364 14,230,832 15,407,431 27,773,585 57,411,848 $16,277,142 $19,974,030 $29,547,040 $65,798,212 Management and general - other Net Assets, beginning of year (restated) Net Assets, end of year See accompanying notes to the financial statements 23 Statement of Cash Flows Financial Report 2015 2015 2014 $116,590,318 $113,938,036 Cash Flows from Operating Activities Tuition and fees Grants and contracts 28,386,479 27,573,882 Payments to vendors (77,040,768) (75,847,247) (174,137,225) (163,902,435) (1,749,488) (1,894,366) Payments to employees for salaries and benefits Loans issued to students Collection of loans to students Sales of auxiliary enterprises Sales and services of educational activities 1,794,303 1,441,709 56,120,146 55,182,549 5,767,561 6,440,765 440,428 356,600 (43,828,246) (36,710,507) State appropriations 49,839,384 51,644,304 Direct Lending proceeds 68,414,963 67,846,851 (68,411,942) (67,828,397) Interest received on loans to students Net cash used by operating activities Cash Flows from Noncapital Financing Activities Direct Lending disbursements Federal Pell grant receipts Net cash provided by noncapital financing activities 15,597,411 14,952,723 65,439,816 66,615,481 (21,525,591) (21,893,668) 11,642,410 16,530,556 Cash Flows from Investing Activities Purchases of investments Net proceeds from sales of investments Interest received on investments Net cash (used)/provided by investing activities 794,640 602,861 (9,088,541) (4,760,251) Cash Flows from Capital and Related Financing Activities Proceeds from capital debt 13,480,923 Interest earned on bond proceeds 6,952,781 Capital appropriations 1,826,094 (875,147) Other capital (expense)/revenue 2,884,018 3,496,467 Contributions and gifts in-kind 2,644,362 27,651 11,917 Proceeds from disposal of capital assets (18,169,034) (17,476,246) Purchases of capital assets (19,662,286) (3,565,748) (1,223,929) (3,469,308) 26,015 28,186 Principal paid on capital debt Interest paid on capital debt 28,186 33,280 (13,857,767) (19,205,517) Net increase/(decrease) in cash and cash eqivalents (1,334,738) 5,939,206 Cash and cash equivalents, beginning of year 42,660,658 36,721,452 $41,325,920 $42,660,658 Other activities Net cash used by capital and related financing activities Cash and cash equivalents, end of year 24 See accompanying notes to the financial statements Statement of Cash Flows Financial Report 2015 Reconciliation of Operating Loss to Net Cash used by Operating Activities 2015 2014 ($71,427,586) ($68,161,693) Depreciation expense 24,912,316 24,390,381 Net pension expense (1,411,525) Operating loss Adjustments to reconcile operating loss to net cash used by operating activities Gain on disposal of fixed assets (23,284) 1,235,116 Changes in assets and liabilities: Funds with the State Treasurer Accounts receivable Student loans receivable Inventories Prepaid expenses Accounts payable and accrued expenses (124,456) 926,387 98,110 (209,589) (253,285) (85,027) (23,616) 165,644 1,525,665 2,130,361 Deferred revenue 315,672 836,973 Student and other deposits 239,023 (131,290) (5,534) (212,467) Deposits held in custody Compensated absences 176,802 200,260 Net pension obligation expense 2,173,452 2,204,437 Net cash used by operating activities ($43,828,246) ($36,710,507) $3,306,864 $2,061,036 Supplemental disclosure of cash flow information Acquisition of capital assets through accounts payable See accompanying notes to the financial statements 25 Notes to the Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity Western Washington University (WWU) is a comprehensive, degree granting public university in the State of Washington. It is governed by a Board of eight Trustees appointed by the Governor. These financial statements summarize all the fund types of WWU including agency funds. As defined by generally accepted accounting principles established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of the primary government, as well as its component unit, the Western Washington University Foundation (the Foundation). The Foundation is a legally separate, tax-exempt entity. The Board of Directors is self–perpetuating and consists of 31 members. WWU has an agreement with the Foundation to design and implement such programs and procedures so as to persuade continuous and special philanthropic support for the benefit of WWU. In exchange, WWU provides the Foundation with office facilities, furniture and equipment, and a significant number of full-time employees and support services, including depository, disbursing, and payroll and purchasing functions. Although WWU does not control the timing or amount of receipts from the Foundation, the majority of the resources or income the Foundation holds and invests is restricted for the activities of WWU by the donors. The Foundation’s activity is reported in separate financial statement because of the difference in its reporting model as described below. The Foundation reports its financial results under Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 958-605, Revenue Recognition, and ASC 958-205, Presentation of Financial Statement. As such, certain revenue recognition criteria and presentation features are different from GASB. No modifications have been made to the Foundation’s financial information in WWU’s financial statement for these differences; however, significant note disclosures (see Note 2) to the Foundation’s financial statement have been incorporated into WWU’s notes to the financial statement. The Foundation’s financial statement can be obtained by contacting the Foundation at (360) 650-3408. Financial Statement Presentation The financial statements are presented in accordance with 26 Western Washington University Financial Report 2015 generally accepted accounting principles and follow the guidance given by GASB. WWU has special purpose reports reflecting the net position, results of operations and cash flows for certain auxiliary units: Housing and Dinning System, Wade King Recreational Center, Parking Services and Associated Students Bookstore. These financial statements present only a selected portion of the activities of WWU. As such, they are not intended to and do not present the financial position, results of operations, or changes in net position of WWU. The auxiliary unit financial statements can be obtained by contacting Western Washington University at (360) 650-3675. Basis of Accounting For financial r eporting p urposes, W WU i s c onsidered a special-purpose government engaged only in business-type activities. Accordingly, WWU’s financial s tatements h ave been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All intra-agency transactions have been eliminated. New Accounting Pronouncements On July 1, 2013, WWU adopted GASB Statement No. 67 “Financial Reporting for Pension Plans-an amendment of GASB Statement No. 25”. The r equirements o f this Statement will improve financial r eporting p rimarily through enhanced note disclosures and schedules of required supplementary information that will be presented by the pension plans that are within its scope. The n ew information will enhance the decision-usefulness of the financial reports of these pension plans, their value for assessing accountability, and their transparency by providing information about measures of net pension liabilities and explanations of how and why those liabilities changed from year to year. The contribution schedule will provide measures to evaluate decisions related to the assessment of contribution rates in comparison to actuarially determined rates, when such rates are determined. In that circumstance, it also will provide information about whether employers and non-employer contributing entities, if applicable, are keeping pace with actuarially determined contribution measures. In addition, new information about rates of return on pension plan investments will inform financial report users about the effects of market conditions on the pension plan’s assets over time and provide information for users to assess the relative success of the pension plan’s investment strategy and the relative contribution that investment earnings provide to Notes to the Financial Statements the pension plan’s ability to pay benefits to plan members when they come due. As Statement No. 67 sets the standards for the retirement plans to follow which are held at the state level, there is no impact to statements. impact to these WWU’s statements. On July 1, 2013, WWU adopted GASB Statement No. 66 “Technical Corrections—2012—an amendment of GASB Statements No. 10 and No. 62”. The requirements of this Statement resolve conflicting accounting and financial reporting guidance that could diminish the consistency of financial reporting and thereby enhance the usefulness of the financial reports. This Statement amends Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, by removing the provision that limits fund-based reporting of an entity’s risk financing activities to the general fund and the internal service fund type. This Statement also amends Statement 62 by modifying the specific guidance on accounting for (1) operating lease payments that vary from a straight-line basis, (2) the difference between the initial investment (purchase price) and the principal amount of a purchased loan or group of loans, and (3) servicing fees related to mortgage loans that are sold when the stated service fee rate differs significantly from a current (normal) servicing fee rate. On July 2, 2013, WWU adopted GASB Statement No. 70 “Accounting and Financial Reporting for Non-exchange Financial Guarantees”. The requirements of this Statement will enhance comparability of financial statements among governments by requiring consistent reporting by those governments that extend non-exchange financial guarantees and by those governments that receive non-exchange financial guarantees. This Statement also will enhance the information disclosed about a government’s obligations and risk exposure from extending non-exchange financial guarantees. This Statement also will augment the ability of financial statement users to assess the probability that governments will repay obligation holders by requiring disclosures about obligations that are issued with this type of financial guarantee. This Statement specifies the information required to be disclosed by governments that extend non-exchange financial guarantees. In addition, this Statement requires new information to be disclosed by governments that receive non-exchange financial guarantees. Financial Report 2015 On July 1, 2014, WWU adopted GASB Statement No. 68 “Accounting and Financial Reporting for Pensions-an amendment of GASB Statement No. 27”. This Statement revises existing standards for employer financial statements relating to measuring and reporting pension liabilities for pension plans provided by WWU to its employees. This Statement requires recognition of a liability equal to the net pension liability, which is measured as the total pension liability, less the amount of the pension plan’s fiduciary net position. The total pension liability is determined based upon discounting projected benefit payments based on the benefit terms and legal agreements existing at the pension plan’s fiscal year end. Projected benefit payments are required to be discounted using a single rate that reflects the expected rate of return on investments, to the extent that plan assets are available to pay benefits, and a tax-exempt, high-quality municipal bond rate when plan assets are not available. This Statement requires that most changes in the net pension liability be included in pension expense in the period of the change. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement replaces the requirements of Statement No. 27, “Accounting for Pensions by State and Local Governmental Employers”, as well as the requirements of Statement No. 50, “Pension Disclosures”, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this Statement. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. On July 1, 2014, WWU adopted GASB Statement No. 69 “Government Combinations and Disposals of Government Operations”. This Statement establishes accounting and financial reporting standards related to government combinations and disposals of government operations. As used in this Statement, the term government combinations includes a variety of transactions referred to as mergers, acquisitions, and transfers of operations. On July 1, 2014, WWU adopted GASB Statement No. 71 “Pension Transition for Contributions Made Subsequent to the Measurement Date-an amendment of GASB Statement No. 68”. The objective of this Statement is to June 30, 2015 and 2014 27 Notes to the Financial Statements address an issue regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government’s beginning net pension liability. This Statement amends paragraph 137 of Statement 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. Statement 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts. OTHER ACCOUNTING POLICIES Cash, Cash Equivalents and Investments Cash and cash equivalents include cash on hand, bank demand deposits, and deposits with the Washington State Local Government Investment Pool (LGIP). Cash and cash equivalents that are held with the intent to fund WWU operations are classified as current assets along with operating funds invested in the LGIP. Cash, cash equivalents, and investments that represent unspent bond proceeds or are held with the intent to fund capital projects are classified as noncurrent assets. Endowment investments are also classified as noncurrent assets. WWU records all cash and cash equivalents at cost and investments at fair value. WWU combines unrestricted cash operating funds from all departments into an internal investment pool, the income from which is allocated on a proportional basis. The internal investment pool is comprised of cash, cash equivalents, certificates of deposit, U.S. Treasuries and U.S. Agency securities. Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff. It also includes amounts due from the Federal government, State and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to WWU’s grants and contracts. Accounts receivable are shown net of estimated uncollectible amounts. 28 Western Washington University Financial Report 2015 Inventories Inventories are stated at cost using various methods: retail, first-in, first-out (FIFO), or average cost. Capital Assets Capital assets are defined as assets with an initial individual cost of $5,000 or more, or $1 million or more for intangible assets, and an estimate useful life in excess of one year. Capital assets consist of buildings, furniture, equipment, and intangible assets recorded at cost or, if donated, at their estimated fair value at the date of donation. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Interest expense incurred during capital construction is capitalized as part of the building cost. Depreciation is computed using the straight line method over the estimated useful lives of the assets, generally 40 to 50 years for buildings, 20 to 25 years for infrastructure and land improvements, 15 years for library resources, and 5 to 7 years for equipment. Deferred outflows of resources and deferred inflows or resources. WWU classifies gains on retirement of debt as deferred inflows of resources and losses as deferred outflows of resources and amortizes such amounts as a component of interest expense over the remaining life of the old debt, or the new debt, whichever is shorter. Changes in net pension liability not included in pension expense are reported a deferred outflows of resources or deferred inflows of resources. Employer contributions subsequent to the measurement date of the net pension liability are reported as deferred outflows of resources. Bond Premiums/Discounts Bond premiums/discounts are deferred and amortized over the term of the bonds using the effective interest method. The remaining balances of bond premiums/discounts are presented in the Statement of Net Position net of the face amount of bonds payable. Net pension obligations WWU records pension obligations equal to the net pension liability for its defined benefit plans. The net pension liability is measured as the total pension liability, less the amount of the pension plan’s fiduciary net position. The fiduciary net position and changes in net position of the defined benefit plans has been measured consistent with Notes to the Financial Statements the accounting plans. The The total total penaccounting policies policiesused usedbybythethe plans. sion liability is determined based upon discounting propension liability is determined based upon discounting jected benefit payments based on the benefit terms and project-ed benefit payments based on the benefit terms legal agreements existing at the plan’s fiscalfiscal year and legal agreements existing at pension the pension plan’s end. benefit benefit payments are discounted using a year Projected end. Projected payments re discounted single rate that reflects the expected rate of return on inusing a single rate that reflects the expected rate of return vestments, to thetoextent that plan available to pay on investments, the extent thatassets plan are assets re available benefits, a tax-exempt, bond to pay and benefits, and ahigh-quality tax-exempt,municipal high-quality rate when plan are not available. municipal bondassets rate when plan assets Pension are not expense available.is recognized for benefits earned during measurement Pension expense is recog-nized for the benefits earned period, on the unfunded liability and changes during interest the measurement period, interest on thein benefit terms. The differences between expected andThe acunfunded liability and changes in benefit terms. tual experience and changes assumptions about future differences between expected in and actual expe-rience and economic or demographic reported as deferred changes in assumptions factors about are future economic or inflows or outflows recognized over the average demographic factors and are are reported as deferred inflows or expected remaining service period employees eligible outflows and are recognized over thefor average expected refor pension benefits. differenceseligible between maining service periodThe for employees for expected pension and actualThe returns are reported as deferred inflows outbenefits. differences between expected and or actual flows andare arereported recognized over fiveinflows years. or outflows and re-turns as deferred are recognized over five years. Unearned revenues Unearned revenues revenues occur when revenues have been col-lected tuitionoccur and fees and certain have auxiliary Unearned for revenues when revenues beenactivicolties prior the end the fiscal year, but relate toactivities services lected fortotuition andof fees and certain auxiliary to be to provided year.to services to be prior the endin of the the following fiscal year, fiscal but relate provided in the following fiscal year. Restatement of Net Position During FY 2015, WWU adopted GASB Statement No. Restatement of Net Position 68 “Accounting Financial Reporting Pensions-an During FY 2015,and WWU adopted GASB for Statement No. amendment of GASB Statement No. 27”. Statement 68 “Accounting and Financial Reporting for Pensions-an No. 68 requires that WWU record itsStatement statements its amendment of GASB Statement No.in 27”. pro-portional the State’s netinpension liabilityits for No. 68 requiresshare thatofWWU record its statements the defined benefit plans that are administered pro-portional share pension of the State’s net pension liability by the State and tobenefit restatepension the beginning netare position of the for the defined plans that earli-est period Thetoamount of beginning restatement administered by presented. the State and restate the netto the be-ginning FY 15 net position was $31.5 million.ofThe position of the earli-est period presented. The amount amount of the netbe-ginning pension liability is $24.1 million. restatement to the FY 15 net position was The net pension liability information is provided to WWU $31.5 million. The amount of the net pension liability is by the Department Retirement Systems (DRS) and $24.1 million. Theofnet pension liability information is the Office of to State Actuary (OSA). The information provided provided WWU by the Department of Retirement by DRS and OSA restate FY 15 Systems (DRS) andonly theallowed Office WWU of StatetoActuary beginning net position due to the measurement (OSA). The information provided by DRS and period OSA of June 30, 2014WWU for thetonet pension liability. only allowed restate FY 15 beginning net position due to the measurement period of June 30, 2014 Net Position for the net pension liability. WWU’s net position is classified as follows: Net Position Net investment in capital assets as follows: WWU’s net position is classified This represents WWU’s total investment in capital assets, net outstanding debtassets obligations related to those capNet of investment in capital ital To the extent total debt investment has been incurred, but not Thisassets. represents WWU’s in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred, but not Financial Report 2015 yet expended for capital assets, such amounts are not included as a component of capital assets but are included as a compo-nent of restricted expendable net position described below. Restricted net position, expendable Restricted expendable include resources in which WWU is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Restricted net position, nonexpendable Nonexpendable restricted consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Unrestricted net position Unrestricted represent resources derived from student tuition and fees, State appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of WWU, and may be used at the discretion of the governing board to meet expenses. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide goods and service for students, faculty and staff. Classification of Revenues and Expenses WWU has classified its revenues and expenses as either operating or nonoperating according to the following criteria: Operating revenues Operating revenues include activities that have the characteristics of exchange transactions such as: (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, (3) most Federal, State and local grants and contracts, and (4) interest on institutional student loans. Operating expenses Operating expenses are those costs incurred in daily operations, such as salaries and wages, benefits, scholarships and fellowships expenses, depreciation, utilities, and supplies. Nonoperating revenues Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as State appropriations, Federal Pell grant revenue and investment income. June 30, 2015 and 2014 29 Notes to the Financial Statements Financial Report 2015 Nonoperating expenses Nonoperating expenses include costs related to financing or investing activities such as interest on indebtedness. position and activities according to the following three classes of net position, depending on the existence and nature of donor restrictions: Other Revenues Other revenues include activities that have the characteristics of non-exchange transactions, such as state capital appropriations and gifts to endowments. Unrestricted net assets Support received that is not subject to donor-imposed restrictions and over which the Board of Directors has discretionary control is classified as unrestricted. Scholarship Discounts and Allowances Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses, and Changes in Net Position. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by WWU, and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other Federal, State or non-governmental programs are recorded as either operating or nonoperating revenues in WWU’s financial Statement. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, WWU has recorded a scholarship discount and allowance. Temporarily restricted net assets Support received subject to donor-imposed use restrictions or time restrictions that will be met either through actions of the Foundation or by the passage of time is classified as temporarily restricted. In the period donor restrictions are met, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Tax Exemption WWU is a tax-exempt instrumentality of the State of Washington organized under the provisions of Section 115(a) of the Internal Revenue Code and is exempt from Federal income taxes on related income. Reclassifications Certain accounts in the prior year financial statement may have been reclassified for comparative purposes to conform to the presentation in the current year financial statement. 2. COMPONENT UNIT The Western Washington University Foundation (the Foundation) is a discretely presented component unit of WWU. The language in the Foundation’s bylaws satisfies the “direct benefit” criterion, and the “entitlement/ability to access” criterion is met due to the Foundation’s history of supporting WWU. The “significance” criterion is met because the combined resources used by WWU activities and the restricted resources held by the Foundation are deemed to be significant to WWU, regardless of the extent to which those resources may be used for “in-kind”. The Foundation presents information about its financial 30 Western Washington University Permanently restricted net assets Support received subject to donor-imposed restrictions stipulating that funds be invested in perpetuity is classified as permanently restricted. In accordance with purposes stipulated by the donors, earnings from such funds may be either unrestricted or temporarily restricted. 3. CASH AND CASH EQUIVALENTS WWU combines unrestricted cash operating funds from all departments into an internal investment pool, the income from which is allocated to the departments on a proportional basis. The internal investment pool is comprised of cash and cash equivalents and investments. Cash and cash equivalents include cash on hand, petty cash, change funds, bank balances, and funds held in the Local Government Investment Pool (LGIP). Bank balances are insured by the Federal Deposit Insurance Corporation (FDIC) or by a collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). The LGIP is comparable to a Rule 2a-7 money market fund recognized by the Securities and Exchange Commission (17CFR.270.2a-7). Rule 2a-7 funds are limited to high quality obligations with limited maximum and average maturities, the effect of which is to minimize both market and credit risk. The LGIP is an unrated investment pool. At June 30, 2015 and 2014, the carrying amount of cash and cash equivalents is $41,325,921 and $42,660,658, respectively. These balances include restricted cash and Notes to the Financial Statements cash equivalents of $868,090 and $883,514 in Recreation Center renewal and replacement funds at June 30, 2015 and 2014, respectively. The c arrying a mount o f c ash a nd cash equivalents approximates the market value. 4. INVESTMENTS Investments include internally pooled cash operating funds, renewal and replacement funds, unspent bond proceeds, and University endowment funds. WWU held $6,036,446 and $6,036,447 in certificates of deposits in pooled investments at June 30, 2015 and 2014, respectively. WWU held $65,076,050 and $55,025,950 in U.S. Agency and Treasury securities in the investment pool at June 30, 2015 and 2014, respectively. The H ousing a nd D ining S ystem R enewal a nd Replacement fund held $3,048,225 and $3,050,772 as of June 30, 2015 and 2014, respectively. This was separately invested in CDs and U.S. Agencies. University endowment funds are held and managed by the Western Washington University Foundation (the Foundation). The e ndowment f unds a re i nvested i n a ccordance with the Foundation policy under the direction of the Foundation Finance and Audit Committee (the Committee). The c ommittee i s r esponsible f or r eviewing and defining i nvestment p olicy, m onitoring i nvestment performance, and recommending managers to oversee the investment of the portfolio. The C ommittee reviews a nd updates its investment policy every three years. Financial Report 2015 Custodial Credit Risk Custodial credit risk is the risk that in the event of the failure of the counterparty, WWU will not be able to recover the value of the investment. As of June 30, 2015 WWU had $65,076,050 in US Agencies and Treasuries held in custody by Bank of New York Mellon in WWU’s name. Interest Rate Risk WWU manages its exposure to fair value losses in the internal investment pool by targeting the portfolio duration to 2.25 years and limiting the weighted average maturity to a maximum of 3 years. WWU generally does not invest operating funds in securities maturing more than 5 years from the date of purchase. Endowment funds are invested under the Foundation Investment Policy guidelines. These guidelines include the primary objective of achieving long-term growth, while using prudent investing practices and do not limit investment maturities as a means to managing interest rate exposure. Concentration of Credit Risk Concentration of credit risk for investments is the risk of loss attributable to the magnitude of an investment in a single issuer. WWU’s operating investment policy limits per issuer holdings to 5%, with the exception of U.S. Treasuries (100%), U.S. Agencies (35% per agency), and Certificates of Deposit (10%). As of June 30, 2015, WWU’s Endowment funds are comprised of $6,797,881 in donor restricted and unrestricted funds and $5,718,720 in Quasi-endowments. As of June 30, 2014, the balances were $6,801,482 and $5,588,660 respectively. Credit (Quality ) Risk Credit risk is the risk that an issuer or other counterparty will not fulfill its obligations. S tatutory and policy constraints with regard to the types of instruments available for investment limit WWU’s exposure to this risk. Instruments available for investment include obligations of the US Treasury and agency securities and certificates of deposit. The certificates of deposit held in the internal investment pool are insured by the Federal Deposit Insurance Company (FDIC) or by a collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). US Treasury and Agency securities are rated at least AA by the three major rating agencies June 30, 2015 and 2014 31 Notes to the Financial Statements Financial Report 2015 The Endowment Investment Policy limits the endowment investments to no more than 5% of the portfolio for a single issuer, with the exception of U.S. government and agency securities. At June 30, 2015, WWU held the following in cash, cash equivalents and investments: Description Fair Value Weighted Average Maturity (in Years) $41,325,921 0.001 WWU Investment Pool: Cash & Cash Equivalents Time Certificates of Deposits (CDs) 6,036,447 1.033 U.S. Treasuries 19,963,300 24.100 U.S. Agencies 45,112,750 1.614 WWU Endowment Funds: Cash & cash equivalents 12,360 Fixed income investments: U.S. Treasuries 126,019 12.200 U.S. Agencies 283,543 4.500 Other fixed income 1,883,013 n/a 7,349,402 n/a 506,592 n/a 2,355,672 n/a Renewal and Replacement Time CDs 1,521,563 1.241 Renewal and Replacement U.S. Agencies 1,526,662 2.877 1,010 n/a Equity investments Real estate Alternative investments Other Investments: Miscellaneous TOTAL CASH AND INVESTMENTS $128,004,254 At June 30, 2014, WWU held the following in cash, cash equivalents and investments: Description Fair Value Weighted Average Maturity (in Years) WWU Investment Pool: Cash & Cash Equivalents $42,660,658 0.001 Time Certificates of Deposits (CDs) 6,036,446 2.033 U.S. Treasuries 5,005,250 1.085 U.S. Agencies 50,020,700 2.657 WWU Endowment Funds: Cash & cash equivalents 105,792 Fixed income investments: U.S. Treasuries 108,741 14.600 U.S. Agencies 524,885 4.700 1,457,548 n/a 8,064,962 n/a 600,105 n/a 1,528,109 n/a Renewal and Replacement Time CDs 1,521,563 2.241 Renewal and Replacement U.S. Agencies 1,529,209 0.907 1,010 n/a Other fixed income Equity investments Real estate Alternative investments Other Investments: Miscellaneous 32 TOTAL CASH AND INVESTMENTS $119,164,978 Notes to the Financial Statements 5. FUNDS WITH STATE TREASURER This account represents WWU’s share of net earnings of the State of Washington Normal School Permanent Fund and the building fee portion of tuition, reduced by expenditures for capital projects and debt service incurred over the years. The Normal School Permanent Fund, established under RCW 43.79.160, is a permanent endowment fund. Earnings from the investment are either reinvested or used for the benefit of Central Washington University, Eastern Washington University, Western Washington University, and The Evergreen State College. 6. Financial Report 2015 The investing activities are the responsibility of the Washington State Treasurer’s Office. The primary sources of new principal for the Normal School Permanent fund are revenues, primarily timber sales, from certain State lands. The State lands include 100,000 acres granted by the United States government for state normal schools and are managed by the State Department of Natural Resources. WWU’s combined earnings and distributions on the fund for the years ending June 30, 2015 and 2014 are $2,681,519 and $2,721,735, respectively, which are reported as other capital revenue along with any capital gifts or contributions. ACCOUNTS RECEIVABLE, NET At June 30, 2015 and 2014, the major components of accounts receivable are as follows: Student tuition and fees 2015 2014 $3,144,781 $4,037,992 Federal, State and private grants and contracts 2,402,842 1,653,891 Auxiliary enterprises and other operating activities 2,204,145 1,741,350 7,751,768 7,433,233 Less allowance for doubtful accounts (1,023,209) (861,864) Accounts receivable, net $6,728,559 $6,571,369 2015 2014 Total accounts receivable 7. STUDENT LOANS RECEIVABLE, NET At June 30, 2015 and 2014, student loans receivable are as follows: Federal Perkins student loans $8,641,008 $8,790,081 Other long-term loans 26,386 41,387 Institutional loans 54,232 51,295 8,721,626 8,882,763 (898,434) (961,461) $7,823,192 $7,921,302 Total student loans Less allowance for doubtful accounts Student loans receivable, net June 30, 2015 and 2014 33 Notes to the Financial Statements 8. Financial Report 2015 INVENTORIES At June 30, 2015 and 2014, inventories, stated at cost using various methods: retail, first-in, first-out (FIFO), or average cost, consist of the following: Valuation Method 2015 2014 $996,885 $975,475 Location Bookstore Central Stores Retail Average Cost 24,784 19,001 Facilities Maintenance FIFO 231,020 136,895 Lock Shop FIFO 189,685 191,920 Other inventory FIFO 266,397 132,195 $1,708,771 $1,455,486 Total inventory 9. LAND AND CAPITAL ASSETS, NET The depreciation expense for the fiscal years ended June 30, 2015 and 2014 was $24,912,316 and $24,390,381, respectively. Following are the changes in land and capital assets for the year ended June 30, 2015: 6/30/2014 Additions Reductions 6/30/2015 Non-depreciable Capital Assets Land Construction in progress Total non-depreciable capital assets $12,049,317 $12,049,317 9,801,678 12,193,530 21,995,208 $21,850,995 $12,193,530 $34,044,525 Depreciable Capital Assets Infrastructure $52,945,934 Buildings 415,152,405 2,271,718 Furniture, fixtures and equipment 39,252,724 3,544,226 Library materials, art collection 53,309,434 205,476 143,610,344 1,181,701 704,270,841 7,203,121 Improvements Total depreciable capital assets $52,945,934 417,424,123 181,776 42,615,174 53,514,910 144,792,045 181,776 711,292,186 Less Accumulated Depreciation Infrastructure 27,389,858 1,326,517 28,716,375 154,105,368 11,055,200 165,160,568 Furniture, fixtures and equipment 29,161,522 3,520,358 Library materials, art collection 43,419,019 1,495,443 Improvements 38,899,523 7,514,798 292,975,290 24,912,316 177,206 317,710,400 $411,295,551 ($17,709,195) $4,570 $393,581,786 Buildings Total accumulated depreciation Capital Assets, Net of depreciation 34 Western Washington University 177,206 32,504,674 44,914,462 46,414,321 Notes to the Financial Statements Financial Report 2015 Following are the changes in land and capital assets for the year ended June 30, 2014: 6/30/2013 Additions Reductions 6/30/2014 $723,276 $12,049,317 Non-depreciable Capital Assets Land Construction in progress Total non-depreciable capital assets $12,772,593 23,727,877 (13,926,199) 9,801,678 $36,500,470 (13,926,199) $723,276 $21,850,995 Depreciable Capital Assets $52,945,934 Infrastructure $52,945,934 Buildings 397,986,330 17,994,547 828,472 Furniture, fixtures and equipment 37,821,788 2,310,198 879,262 Library materials, art collection 53,131,868 177,566 132,878,741 10,731,603 674,764,661 31,213,914 Improvements Total depreciable capital assets 415,152,405 39,252,724 53,309,434 143,610,344 1,707,734 704,270,841 Less Accumulated Depreciation Infrastructure 26,045,261 1,344,597 143,792,256 10,617,826 304,714 154,105,368 Furniture, fixtures and equipment 26,328,086 3,712,698 879,262 29,161,522 Library materials, art collection 41,813,999 1,605,020 Improvements 31,789,283 7,110,240 269,768,885 24,390,381 1,183,976 292,975,290 $404,995,776 $6,823,533 $523,758 $411,295,551 Buildings Total accumulated depreciation Capital Assets, Net of depreciation 27,389,858 43,419,019 38,899,523 10. ART COLLECTIONS 11. COMPENSATED ABSENCES WWU has several collections of art that it does not capitalize. The Outdoor Sculpture Collection is a public art collection displayed throughout the entire campus. There are also collections of 19th and 20th century prints and drawings, the Whittington Collection of Asian Ceramics, and the Chair Collection. These collections adhere to WWU’s policy to (a) maintain them for public exhibition, education, or research; (b) protect, keep unencumbered, care for, and preserve them; and (c) require proceeds from their sale to be used to acquire other collection items. WWU’s policy is to permit collections maintained in this manner to be charged to operations at the time of purchase rather than capitalized. The accrued leave balances as of June 30, 2015 and 2014 are $8,145,435 and $7,968,633, respectively. This consists of unused vacation leave and compensatory time earned for exempt professionals and classified staff. It also includes a percentage of earned and unused sick leave for exempt professionals and classified staff. For reporting purposes, the entire balance of accrued leave is considered a current liability. In 2004, WWU began participating in the Voluntary Employees’ Beneficiary Association Medical Expense Plan (VEBA-MEP). The plan is a post-retirement medical expense reimbursement account available to professional staff employees of WWU. The VEBA-MEP enables WWU to deposit funds equivalent to the cash-out of compensable unused sick leave at retirement, tax free to a VEBA trust account on the employee’s behalf. Funds deposited into a VEBA-MEP account, as well as the earnings on the accounts, are not subject to federal income or social security taxes. During FY 2015 and FY 2014, $190,390 and $167,268, respectively, were contributed to VEBA accounts by WWU on behalf of employees. June 30, 2015 and 2014 35 Notes to the Financial Statements Financial Report 2015 12. NOTES PAYABLE WWU finances certain land and equipment purchases through certificates of participation issued by the Washington State Treasurer. WWU’s debt service requirements for these agreements for the next five years and thereafter are as follows: Fiscal Year Principal Interest 2016 $518,347 $150,968 2017 465,062 133,975 2018 451,003 120,157 2019 385,000 107,955 2020 395,000 94,815 2021-2025 1,905,000 257,081 2026-2030 370,000 16,875 $4,489,412 $881,826 Total 13. BONDS PAYABLE $12,835,000 at June 30, 2015. Bonds payable consist of revenue bonds issued by WWU for Housing and Dining System facilities and the Wade King Student Recreation Center. Bonds outstanding are shown on the following page. Series 1998 Junior Lien Revenue and Refunding Bonds with interest rates ranging from 4.4% to 5.5% and an aggregate face value of $8,355,000 at June 30, 2015, which is reported net of the unamortized original issue premium of $73,395. Housing and Dining Revenue Bonds As specified in Master Resolution 97-09, the Housing and Dining System (the System) Revenue Fund is used to pay operating expenses, principal and interest, fund debt service reserve accounts required in subsequent series resolutions, pay the renewal and replacement fund and, if desired, retire debt in the open market. Net revenues are pledged to equal at least 125% of debt service. The System has funded a reserve account for debt service, and maintains a renewal and replacement fund equal to at least 5% of outstanding bonds. The Housing and Dining System has the following outstanding bond issues: Series 2015 Revenue and Refunding bonds with interest rates ranging from 2.0% to 5.0% and an aggregate face value of $13,435,000 and June 30, 2015, which is reported not of the original issue premium of $1,857,291. Series 2012 Revenue and Refunding Bonds with interest rates ranging from 3.0% to 5.0% and an aggregate face value of 7,690,000 at June 30, 2015, which is reported net of the original issue premium of $363,976. Series 2009 A Revenue Bonds with interest rates ranging from 4.0% to 7.4% and an aggregate face value of 36 Western Washington University Wade King Student Recreation Center Revenue and Refunding Bonds The Recreation Center issued Revenue and Refunding Bonds Series, 2012, on April 30 2012. The bonds bear interest at rates of 3% to 4% and have an aggregate face value of $23,685,000 at June 30, 2015, which is reported net of the unamortized original issue premium of $344,655. Current refunding On March 4, 2015, the Housing and Dining System issued at par $13,435,000 Revenue and Refunding Bonds Series 2015. The purpose of the bonds is the refunding of then-outstanding Revenue Bonds Series 2005 and 2006 with a combined principal balance of $15,935,000. The refunded series 2005 and 2006 bonds carried interest rates of 3.75% to 4.5%. Management expects the refunding will provide a net present value savings of approximately $1,034,389 in debt service over the life of the new bonds and loss on defeasance of $511,154. The amount required to refund the 2005 and 2006 bonds remaining plus a refunding premium and underwriter’s discount (total of $15,455,988) were sent directly to the escrow agent, US Bank, and these funds were disbursed completely by June 1, 2015. Notes to the Financial Statements Financial Report 2015 The debt service requirements for the revenue/refunding bonds for the next five years and thereafter are as follows: Housing and Dining Revenue and Refunding Bonds Fiscal Year Student Recreation Center Revenue and Refunding Bonds Principal Interest Principal Interest 2016 $3,010,000 $2,198,122 $725,000 $904,350 2017 3,170,000 2,042,160 750,000 882,600 2018 3,285,000 1,921,943 770,000 860,100 2019 3,390,000 1,797,112 795,000 837,000 2020 3,530,000 1,656,290 815,000 813,150 2021-2025 16,040,000 5,621,766 4,540,000 3,603,475 2026-2030 5,735,000 2,546,220 5,520,000 2,633,800 2031-2035 4,155,000 786,990 6,700,000 1,438,600 2036-2037 __________ __________ 3,070,000 185,400 42,315,000 18,570,603 23,685,000 12,158,475 Total Unamortized premium/ (discount) 2,294,662 Total $44,609,662 344,655 $18,570,603 $24,029,655 $12,158,475 14. PLEDGED REVENUES WWU has pledged certain revenues, net of specified operating expenses, to repay the principal and interest of revenue bonds. The following is a schedule of the pledged revenues and related debt: Source of Revenue Pledged Total Future Revenues Pledged * Description of Debt Purpose of Debt Proportion of Term of Debt Service to Commitment Pledged Revenues (current yr) Housing and Dining revenues, net of operating expenses $60,885,603 Housing and Dining bonds issued in 1998, 2009,2012, 2015 Construction and renovation of student housing projects 2034 83.2% Student Recreation Center gross revenues $35,843,475 Student Recreation Center bonds issued in 2012 Construction of the Student Recreation Center 2037 35.9% * Total future principal and interest payments on debt June 30, 2015 and 2014 37 Notes to the Financial Statements Financial Report 2015 15. LONG-TERM LIABILITIES Following are the changes in long-term liabilities for the years ended June 30, 2015 and 2014: 6/30/14 Additions/ Retirements Amortization 6/30/15 Current Portion $68,639,316 $3,735,000 518,347 Bonds and notes payable Revenue and refunding bonds Notes payable Net pension obligation Total long term liabilities $72,442,043 $15,341,649 $19,144,376 4,961,400 45,923 517,910 4,489,413 9,965,408 26,520,328 275,548 36,210,188 376,000 $87,368,851 $41,907,900 $19,937,834 $109,338,917 $4,629,347 6/30/13 Additions/ Retirements Amortization 6/30/14 Current Portion $3,014,287 $72,442,043 $3,735,000 551,462 4,961,400 517,910 Bonds and notes payable Revenue and refunding bonds Notes payable $75,482,723 ($26,393) 5,512,862 Net pension obligation Total long term liabilities 7,760,970 2,449,000 244,562 9,965,408 376,000 $88,756,555 $2,422,607 $3,810,311 $87,368,851 $4,628,910 16. LEASES WWU leases facilities for off-campus office and educational spaces under a variety of agreements. WWU also finances certain equipment through non-cancelable operating leases. At June 30, 2015, future payments under these operating leases are as follows: Fiscal Year Lease Payment 2016 $324,516.66 2017 257,609 2018 234,071 2019 234,776 2020 228,302 2021 Total minimum lease payments 148,981 $1,428,255.66 17. DEFERRED COMPENSATION WWU, through the State of Washington, offers its employees a Deferred Compensation Plan created under Internal Revenue Code Section 457. The plan, available to all State employees, permits individuals to defer a portion of their salary until future years. The State of Washington administers the plan on behalf of WWU’s employees. WWU does not have legal access to the funds. 38 Western Washington University Notes to the Financial Statements Financial Report 2015 18. OPERATING EXPENSES BY FUNCTIONAL CATEGORIES In the Statement of Revenues, Expenses and Changes in Net Position, operating expenses are displayed by natural classifications which include salaries, employee benefits, goods and services, and other similar categories. Operating expenses by functional classification for the years ended June 30, 2015 and 2014 are as follows: Operating Expenses Instruction Research 2015 2014 $108,020,837 $101,503,895 6,096,508 5,333,465 Academic Support 13,661,804 13,685,703 Student Services 19,149,372 18,069,416 Institutional Support 20,515,752 19,669,297 Operation and Maintenance of Plant 46,229,209 47,436,065 Scholarships and other student aid 18,031,770 17,620,538 Auxiliary enterprise expenditures 46,691,849 45,437,358 $278,397,101 $268,755,737 Total operating expenses 19. PENSION PLANS A. SUMMARY WWU offers five defined benefit pension plans and three defined benefit/defined contribution plans: the Washington State Public Employees’ Retirement System (PERS) plans 1-3, the Washington State Teachers Retirement System (TRS) plans 1-3, the Law Enforcement Officers’ and Firefighters’ Retirement System (LEOFF) plan 1 and the Western Washington University Retirement Plan (WWURP). Accounting and Financial Reporting for Pensions for the fiscal year 2015 financial reporting. WWU’s defined benefit pension plans were created by statutes rather than through trust documents. With the exception of the supplemental defined benefit component of the higher education retirement plan, they are administered in a way equivalent to pension trust arrangements as defined by the GASB. In accordance with Statement No. 68, WWU has elected to use the prior fiscal year end as the measurement date for reporting net pension liabilities. WWU contributes to PERS, TRS and LEOFF cost sharing multiple-employer defined benefit pension plans administered by the State of Washington Retirement System. Refer to sections B and C of this note for descriptions of these plans. The state Legislature establishes and amends laws pertaining to the creation and administration of all state public retirement systems. Additionally the state Legislature authorizes state agency participation in plans other than those administered by the state. The payroll for WWU employees covered by PERS for the year ended June 30, 2015 and 2014 is $34,580,645 and $33,728,574; the payroll for employees covered by TRS is $898,552 and $1,060,622; the payroll covered by WWURP is $78,790,919 and $70,445,521; the payroll for LEOFF is $969,083 and $957,148, respectively. Basis of Accounting Pension plans administered by the state are accounted for using the accrual basis of accounting. Under the accrual basis of accounting, employee and employer contributions are recognized in the period in which employee services are performed; investment gains and losses are recognized as incurred; and benefits and refunds are recognized when due and payable in accordance with the terms of the applicable plan. WWU implemented Statement No. 68 of the Governmental Accounting Standards Board (GASB) June 30, 2015 and 2014 39 Notes to the Financial Statements For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all plans and additions to/deductions from all plan fiduciary net position have been determined in all material respects on the same basis as they are reported by the plans. The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB Statement No. 68 for WWU, for fiscal year 2014: Aggregate Pension Amounts - All Plans Pension liabilities $ (24,071,328) Pension assets 752,620 Deferred outflows of resources related to pensions 3,648,257 Deferred inflows of resources related to pensions (10,464,227) Pension expense/expenditures (1,411,525) Investments The Washington State Investment Board (WSIB) has been authorized by statute as having investment management responsibility for the pension funds. The WSIB manages retirement fund assets to maximize return at a prudent level of risk. Retirement funds are invested in the Commingled Trust Fund (CTF). Established on July 1, 1992, the CTF is a diversified pool of investments that invests in fixed income, public equity, private equity, real estate, and tangible assets. Investment decisions are made within the framework of a Strategic Asset Allocation Policy and a series of written WSIB-adopted investment policies for the various asset classes in which the WSIB invests. Department of Retirement Systems As established in chapter 41.50 of the Revised Code of Washington (RCW), the Department of Retirement Systems (DRS) administers eight retirement systems covering eligi-ble employees of the state and local governments. The Governor appoints the director of the DRS. The DRS administered systems that WWU offers its employees are comprised of five defined benefit pension plans and two defined benefit/defined contribution plans. Below are the DRS plans that WWU offers its employees: • Public Employees’ Retirement System (PERS) Plan 1 - defined benefit 40 Western Washington University Financial Report 2015 Plan 2 - defined benefit Plan 3 - defined benefit/defined contribution • Teachers’ Retirement System (TRS) Plan 1 - defined benefit Plan 2 - defined benefit Plan 3 – defined benefit/defined contribution • Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) Plan 2 - defined benefit Although some assets of the plans are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to the members of that plan in accordance with the terms of the plan. Administration of the PERS, TRS, and, LEOFF, systems and plans was funded by an employer rate of 0.18 percent of employee salaries. The DRS prepares a stand-alone financial report that is compliant with the requirements of Statement 67 of the Governmental Accounting Standards Board. Copies of the report may be obtained by contacting the Washington State Department of Retirement Systems, PO Box 48380, Olympia, Washington 98504-8380 or online at http://www.drs.wa.gov/administration/ annual-report/. Higher Education As established in chapter 28B.10 RCW, eligible higher education state employees may participate in higher education retirement plans. These plans include a defined contribution plan administered by a third party with a supplemental defined benefit component (on a pay as you go basis) which is adminis-tered by the state. B. DEFINED CONTRIBUTION PLANS Western Washington University Retirement Plan (WWURP) Plan Description The WWURP is a defined contribution single employer pension plan with a supplemental payment when required. The plan covers faculty, professional staff, and certain other employees. It is administered by WWU. WWU’s Board of Trustees is authorized to establish and amend benefit provisions. Notes to the Financial Statements Contributions to the plan are invested in annuity contracts or mutual fund accounts offered by one or more fund sponsors. Benefits from fund sponsors are available upon separation or retirement at the member’s option. Employees have at all times a 100% vested interest in their accumulations. Financial Report 2015 Funding Policy Employee contribution rates, which are based on age, range from 5% to 10% of salary. WWU matches the employee contributions. All required employer and employee contributions have been made. The WWURP contributions for the years ending June 30, 2015, 2014 and 2013 are as follows: 2015 2014 2013 Employee $6,676,394 $6,221,794 $5,906,235 University $6,676,724 $6,219,353 $5,938,412 Supplemental Component The supplemental payment plan determines a minimum retirement benefit goal based upon a one-time calculation at each employee’s retirement date. $10,035,000 respectively, and is amortized over an 11 year period. WWU makes direct payments to qualified retirees when the retirement benefit provided by the fund sponsor does not meet the benefit goal. The Annual Required Contribution (ARC) of $2,449,000 consists of amortization of the UAL ($1,730,000), normal cost (or current cost) ($669,000) and interest. The UAL and ARC were established using the entry age normal cost method. WWU received an actuarial evaluation of the supplemental component of the WWURP during fiscal 2013. The previous evaluation was performed in 2011. The Unfunded Actuarial Accrued Liability (UAL) calculated as of June 30, 2013 and 2011 was $17,924,000 and The actuarial assumptions included an investment rate of return of 4.25% to 7.25% and projected salary increases of 3.0%. Approximately $78,790,919 and $70,445,521 of WWU’s payroll were covered under this plan during fiscal 2015 and fiscal 2014, respectively. The following table reflects the activity in the Net Pension Obligation for the year ended June 30, 2015: Balance as of June 30, 2013 Annual Required Contribution FY14 $7,760,970 2,449,000 Payments to Beneficiaries FY14 (244,562) Balance as of June 30, 2014 9,965,408 Annual Required Contribution FY15 2,449,000 Payments to Beneficiaries FY15 Balance as of June 30, 2015 (275,548) $12,138,860 Public Employees’ Retirement System Plan 3 section C of this note for all PERS Plan descriptions. Plan Description The Public Employees’ Retirement System (PERS) Plan 3 is a combination defined benefit/defined contribution plan administered by the state through the Department of Retirement Systems (DRS). Refer to PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. As established by chapter 41.34 RCW, employee contribution rates to the defined contribu- June 30, 2015 and 2014 41 Notes to the Financial Statements Financial Report 2015 tion component range from 5 to 15 percent of salaries, based on member choice. Members who do not choose a contribution rate default to a 5 percent rate. There are currently no requirements for employer contributions to the defined contribution component of PERS Plan 3. Members in TRS Plan 3 are immediately vested in the defined contribution portion of their plan, and can elect to withdraw total employee contributions adjusted by earnings and losses from investments of those contributions upon separation from TRS-covered employment. PERS Plan 3 defined contribution retirement benefits are dependent upon the results of investment activities. Members may elect to self-direct the investment of their contributions. Any expenses incurred in conjunction with self-directed investments are paid by members. Absent a member’s self-direction, PERS Plan 3 contributions are invested in the retirement strategy fund that assumes the member will retire at age 65. C. STATE PARTICIPATION IN PLANS ADMINISTERED BY DRS Members in PERS Plan 3 are immediately vested in the defined contribution portion of their plan, and can elect to withdraw total employee contributions adjusted by earnings and losses from investments of those contributions upon separation from PERS-covered employment. Teachers’ Retirement System Plan 3 Plan Description The Teachers’ Retirement System (TRS) Plan 3 is a combination defined benefit/defined contribution plan administered by the state through the Department of Retirement Systems (DRS). Refer to section C of this note for all TRS Plan descriptions. TRS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. As established by chapter41.34 RCW, employee contribution rates to the defined contribution component range from 5 to 15 percent of salaries, based on member choice. Members who do not choose a contribution rate default to a 5 percent rate. There are currently no requirements for employer contributions to the defined contribution component of TRS Plan 3. TRS Plan 3 defined contribution retirement benefits are dependent upon the results of investment activities. Members may elect to self-direct the investment of their contributions. Any expenses incurred in conjunction with self-directed investments are paid by members. Absent a member’s self-direction, TRS Plan 3 investments are made in the retirement strategy fund that assumes the member will retire at age 65. TRS Plan 3 defined contribution benefits are financed from employee contributions and investment earnings. 42 Western Washington University Public Employees’ Retirement System Plan Description The Legislature established the Public Employees’ Retirement System (PERS) in 1947. PERS retirement benefit provisions are established in chapters 41.34 and 41.40 RCW and may be amended only by the Legislature. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior Courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. PERS members who joined the system by September 30, 1977, are Plan 1 members. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by either, February 28, 2002, for state and higher education employees, or August 31, 2002, for local government employees, are Plan 2 members unless they exercised an option to transfer their membership to PERS Plan 3. PERS participants joining the system on or after March 1, 2002, for state and higher education employees, or September 1, 2002, for local government employees, have Notes to the Financial Statements Financial Report 2015 the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. Employees who fail to choose within 90 days default to PERS Plan 3. per year of service. There is no cap on years of service credit. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. Refer to section B of this note for a description of the defined contribution component of PERS Plan 3. Effective June 7, 2006, PERS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Benefits Provided. PERS plans provide retirement, disability, and death benefits to eligible members. PERS Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The monthly benefit is 2 percent of the average final compensation (AFC) per year of service capped at 60 percent. The AFC is the average of the member’s 24 highest consecutive service months. PERS Plan 1 members retiring from inactive status prior to the age of 65 may receive actuarially reduced benefits. Plan 1 members may elect to receive an optional cost of living allowance (COLA) that provides an automatic annual adjustment based on the Consumer Price Index. The adjustment is capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced. A member with five years of covered employment is eligible for non-duty disability retirement. Prior to the age of 55, the benefit amount is 2 percent of the AFC for each year of service. This is reduced by 2 percent for each year that the member’s age is less than 55. The total benefit is limited to 60 percent of the AFC. Plan 1 members may elect to receive an optional COLA amount based on the Consumer Price Index, capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced. PERS Plan 2 members are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. There is no cap on years of service credit and a COLA is granted based on the Consumer Price Index, capped at 3 percent annually. The AFC is the average of the member’s 60 highest paid consecutive months. PERS Plan 2 members have the option to retire early with reduced benefits. The defined benefit portion of PERS Plan 3 provides members a monthly benefit that is 1 percent of the AFC PERS Plan 3 members have the option to retire early with reduced benefits. PERS members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Contribution requirements are established and amended by state statute. Members in PERS Plan 1 and Plan 2 can elect to withdraw total employee defined benefit contributions and interest thereon, in lieu of any retirement benefit, upon separation from PERS-covered employment. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Inverstment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published June 30, 2015 and 2014 43 Notes to the Financial Statements by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in: • Expected annual return. • Standard deviation of the annual return. • Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: 44 Western Washington University Financial Report 2015 Asset Class Fixed Income Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% 23% 9.05% Tangible Assets Private Equity Total 100% The i nflation co mponent us ed to cr eate th e ab ove ta ble is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates (including PERS Plan 2/3 employers whose rates include a component for the PERS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, WWU reported $16.13 million for its proportionate share of the collective net pension liability for PERS 1 and $7.42 million for PERS 2/3. WWU’s proportion for PERS 1 was 0.320 percent, a decrease of 0.002 percent since the prior reporting period, and 0.367 percent for PERS 2/3, an increase of 0.005 percent. The proportions are based on WWU’s contributions to the pension plan relative to the contributions of all participating employers. Notes to the Financial Statements Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of WWU as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. $ 19,881,648 Current Discount Rate $ 16,129,871 1% Increase $ 12,909,343 1% Decrease $ 30,954,760 Current Discount Rate $ 7,421,044 (10,554,337) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, WWU recognized a PERS 1 pension expense of $610 thousand, and recognized a PERS 2/3 pension expense of $(1.90) million. At June 30, 2014, PERS 1 and PERS 2/3 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PERS 1 Difference between expected and actual experience $ Deferred Inflows of Resources $ Changes of assumptions Net Difference between projected and actual earnings on pension plan investments 2,016,951 Change in proportion Contributions subsequent to the measurement date Total 124,718 $124,718 $ Deferred Inflows of Resources $ Changes of assumptions Net Difference between projected and actual earnings on pension plan investments 7,866,375 171,635 Total 3,141,736 $3,313,371 $7,866,375 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: PERS 2/3 Employer’s proportionate share of Net Pension Liability (Asset) Deferred Outflows of Resources PERS 2/3 Difference between expected and actual experience Contributions subsequent to the measurement date 1% Decrease $ Deferred Outflows of Resources Change in proportion PERS 1 Employer’s proportionate share of Net Pension Liability (Asset) 1% Increase Financial Report 2015 $2,016,951 PERS 2/3 2015 $ 38,141 2016 $ 38,141 2017 $ 38,141 2018 $ 38,141 2019 $ 19,071 Thereafter $ Teachers’ Retirement System Plan Description. The Legislature established the Teachers’ Retirement System (TRS) in 1938. TRS retirement benefit provisions are established in chapters 41.32 and 41.34 RCW and may be amended only by the Legislature. Eligibility for membership requires service as a certificated public school employee working in an instructional, administrative, or supervisory capacity. TRS is comprised principally of non-state agency employees. TRS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered June 30, 2015 and 2014 45 Notes to the Financial Statements Financial Report 2015 a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. year of service. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. TRS members who joined the system by September 30, 1977, are a Plan 1 member. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by June 30, 1996, are Plan 2 members unless they exercised an option to transfer their membership to Plan 3. TRS members joining the system on or after July 1, 1996 are members of TRS Plan 3. TRS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in TRS Plan 2 by July 1, 1996. Plan 3 members are immediately vested in the defined contribution portion of their plan. TRS Plan 3 members have the option to retire early with reduced benefits. Legislation passed in 2007 gives TRS members hired on or after July 1, 2007, 90 days to make an irrevocable choice to become a member of TRS Plan 2 or Plan 3. At the end of 90 days, any member who has not made a choice becomes a member of Plan 3. Refer to section B of this note for a description of the defined contribution component of TRS Plan 3. Benefits Provided. TRS plans provide retirement, disability, and death benefits to eligible members. TRS Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The monthly benefit is 2 percent of the average final compensation (AFC) for each year of service credit, up to a maximum of 60 percent. The AFC is the total earnable compensation for the two consecutive highest-paid fiscal years, divided by two. TRS Plan 1 members may elect to receive an optional cost of living allowance (COLA) amount based on the Consumer Price Index, capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced. TRS Plan 2 retirement benefits are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. A COLA is granted based on the Consumer Price Index, capped at 3 percent annually. TRS Plan 2 members have the option to retire early with reduced benefits. The AFC is the average of the member’s 60 highest paid consecutive months. The defined benefit portion of TRS Plan 3 provides members a monthly benefit that is 1 percent of the AFC per 46 Western Washington University TRS members meeting specific eligibility requirements, have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. TRS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. The methods used to determine the contribution requirements are established under state statute. Members in TRS Plan 1 and Plan 2 can elect to withdraw total employee contributions and interest thereon upon separation from TRS-covered employment. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Inverstment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied Notes to the Financial Statements Financial Report 2015 on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in: • Expected annual return. • Standard deviation of the annual return. • Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Asset Class Fixed Income Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Tangible Assets Total Discount Rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent longterm discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates (including TRS Plan 2/3, whose rates include a component for the TRS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, WWU reported a liability of $485 thousand for its proportionate share of the collective net pension liability for TRS 1 and $35 thousand for TRS 2/3. WWU’s proportion for TRS 1 was 0.016442 percent, an increase of 0.00143 percent since the prior reporting period, and 0.010980 percent for TRS 2/3, an increase of 0.00317 percent. The proportions are based on WWU’s contributions to the pension plan relative to the contributions of all participating employers. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of WWU as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. 100% June 30, 2015 and 2014 47 Notes to the Financial Statements TRS 1 Employer’s proportionate share of Net Pension Liability (Asset) 1% Decrease $ 624,064 Current Discount Rate $ 484,949 1% Increase $ 365,537 Financial Report 2015 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: TRS 2/3 TRS 2/3 Employer’s proportionate share of Net Pension Liability (Asset) 2015 $ 5,091 2016 $ 5,091 2017 $ 5,091 1% Decrease $ 308,256 2018 $ 5,091 Current Discount Rate $ 35,464 2019 $ 5,091 1% Increase $ (167,302) Thereafter $ 3,056 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, WWU recognized a TRS 1 pension expense of $57 thousand, and recognized a TRS 2/3 pension expense of $(51) thousand. At June 30, 2014, TRS 1 and TRS 2/3 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: TRS 1 Difference between expected and actual experience Deferred Outflows of Resources $ Deferred Inflows of Resources $ Changes of assumptions Net Difference between projected and actual earnings on pension plan investments 85,038 Change in proportion Contributions subsequent to the measurement date 15,275 Total $15,275 TRS 2/3 Difference between expected and actual experience $85,038 Deferred Outflows of Resources $ Deferred Inflows of Resources $ 81,384 Change in proportion 28,511 Contributions subsequent to the measurement date 81,324 Total 48 Western Washington University $109,835 Plan Description. The Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) was established in 1970 by the Legislature. LEOFF retirement benefit provisions are established in chapter 41.26 RCW and may be amended only by the Legislature. Membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. LEOFF membership is comprised primarily of non-state employees, with Department of Fish and Wildlife enforcement officers who were first included effective July 27, 2003, being an exception. LEOFF is a cost-sharing, multiple-employer retirement system, comprised of two separate defined benefit plans. LEOFF members who joined the system on or after October 1, 1977, are Plan 2 members. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established by Initiative 790 to provide governance of LEOFF Plan 2. The board’s duties include adopting contribution rates and recommending policy changes to the Legislature. Benefits Provided. LEOFF Plan 2 provides retirement, disability, and death benefits to eligible members. Changes of assumptions Net Difference between projected and actual earnings on pension plan investments Law Enforcement Officers’ and Fire Fighters’ Retirement System $81,384 LEOFF Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members are eligible for retirement at the age of 53 with five years of service, or at age 50 with 20 years of service. Plan 2 members receive a benefit of 2 percent of the FAS per year of service. FAS is based on the highest consecutive 60 months. Members who retire prior to the age of 53 receive reduced benefits. Notes to the Financial Statements A cost of living allowance (COLA) is granted based on the Consumer Price Index, capped at 3 percent annually. LEOFF members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, generally with reduced benefits. Contributions. LEOFF retirement benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays through legislative appropriations. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plans. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The methods used to determine the contribution requirements are established under state statute. Members in LEOFF Plan 2 can elect to withdraw total employee contributions and interest earnings upon separation from LEOFF-covered employment. The Legislature, by means of a special funding arrangement, appropriates money from the state General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. For fiscal year 2014, the state contributed $55.6 million to LEOFF Plan 2. Beginning in 2011, when state General Fund revenues increase by at least 5 percent over the prior biennium’s revenues, the State Treasurer will transfer, subject to legislative appropriation, specific amounts into a Local Public Safety Enhancement Account. Half of this transfer will be proportionately distributed to all jurisdictions with LEOFF Plan 2 members. The other half will be transferred to a LEOFF Retirement System Benefits Improvement Account to fund benefit enhancements for LEOFF Plan 2 members. However, this special funding situation is not mandated by the State Constitution and this funding requirement could be returned to the employers by a change of statute. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. The following information applies to WWU as a LEOFF 2 employer. Financial Report 2015 Actuarial Assumptions. The total net pension asset was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Inverstment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in: • Expected annual return. • Standard deviation of the annual return. • Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term June 30, 2015 and 2014 49 Notes to the Financial Statements downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Asset Class Fixed Income Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Tangible Assets Total 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount Rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent longterm discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. 50 Western Washington University Financial Report 2015 Collective Net Pension Liability/Asset At June 30, 2014, WWU reported an asset of $753 thousand for its proportionate share of the collective net pension asset for LEOFF 2. WWU’s proportion for LEOFF 2 was 0.056714 percent, an increase of 0.00461 percent since the prior reporting period. The proportions are based on WWU’s contributions to the pension plan relative to the contributions of all participating employers and the nonemployer contributing entity. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of WWU as an employer, calculated using the discount rate of 7.50 percent, as well as what the employers’ net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. LEOFF 2 Employer’s proportionate share of Net Pension Liability (Asset) 1% Decrease $ 322,078 Current Discount Rate $ (752,620) 1% Increase $ (1,559,109) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, WWU recognized a LEOFF 2 pension expense of $(125) thousand. At June 30, 2014, LEOFF 2 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: LEOFF 2 Difference between expected and actual experience Deferred Outflows of Resources $ Deferred Inflows of Resources $ Changes of assumptions Net Difference between projected and actual earnings on pension plan investments 398,212 Change in proportion Contributions subsequent to the measurement date Total 16,267 85,058 $85,058 $414,479 Notes to the Financial Statements Financial Report 2015 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: LEOFF 2 2015 $ 2016 $ (2,542) (2,542) 2017 $ (2,542) 2018 $ (2,542) 2019 $ (2,542) Thereafter $ (3,557) TABLE 1: Required Contribution Rates The required contribution rates (expressed as a percentage of current year covered payroll) at June 30, 2014 are as follows: Employer (University) Required Contribution Rates Plan 1 Plan 2 Employee Plan 3 Plan 1 Plan 2 Plan 3 * 6.00% 4.92% ** * 6.00% 4.96% ** N/A 8.41% N/A PERS State agencies, local governmental units 9.03% 4.98% 4.98% Administrative fee 0.18% 0.18% 0.18% PERS Plan 1 UAAL 0.00% 4.05% 4.05% 9.21% 9.21% 9.21 State agencies, local governmental units 10.21% 5.84% 5.84% Administrative fee 0.18% 0.18% 0.18% TRS Plan 1 UAAL 0.00% 4.37% 4.37% 10.39% 10.39% 10.39% N/A 8.41% N/A Total TRS Total LEOFF Ports and universities Administrative fee Total 0.18% 8.59% * Plan 3 defined benefit portion only. ** Variable from 5% to 15% based on rate selected by the member. N/A indicates data not applicable. June 30, 2015 and 2014 51 Notes to the Financial Statements Financial Report 2015 TABLE 2: Required Contributions The required contributions for the years ending June 30, 2015, 2014 and 2013 are as follows: 2015 2014 2013 Employee $1,821,241 $1,756,832 $1,604,739 University 3,279,158 3,074,774 2,297,067 Employee $67,322 $45,491 $31,890 University 97,538 61,753 36,137 Employee $81,500 $80,496 $72,180 University 84,618 82,185 73,545 PERS TRS LEOFF All required employer and employee contributions have been made. 20. OTHER POST EMPLOYMENT BENEFITS (OPEB) During the 2008 fiscal y ear, W WU a dopted G ASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. OPEB are those provided to retired employees beyond those provided by their pension plans. Statement No. 45 requires systematic, accrual-basis measurement and recognition of OPEB expense in the year in which such benefits are earned by the member. Disclosure information, as re-quired under GASB Statement No. 45, does not exist at department lev-els and, as a result, the net OPEB obligation is recorded in the State of Washington comprehensive annual financial report which is available from: Office of Financial Management, Insurance Building, PO Box 43113, Olympia, Washington 98504-3113. Health care and life insurance programs for employees of the State of Washington are administered by the Washington State Health Care Authority (HCA). The HCA calculates the premium amounts each year that are sufficient to fund the State-wide health and life insurance programs on a pay-as-you-go basis. These costs are passed through to individual state agencies based upon active employee headcount; the agencies pay the premiums for active employees to the HCA. The agencies may also charge employees for certain higher cost options elected by the employees. State of Washington retirees may elect coverage through state health and life insurance plans, for which they pay less than the full cost of the benefits, based on 52 Western Washington University their age and other demographic factors. The health care premiums for active employees, which are paid by the agency during employees’ working careers, subsidize the “underpayments” of the retirees. An additional factor in the OPEB obligation is a payment that is required by the State Legislature to reduce the premiums for retirees covered by Medicare (an “explicit subsidy”). For fiscal 2015, this amount was $150 per retiree eligible for parts A and B of Medicare, per month. This is also passed through to State agencies via active employees rates charged to the agency. There is no formal State or University plan that underlies the subsidy of retiree health and life insurance. An actuarial study performed by the Washington Office of the State Actuary (OSA) calculated the total OPEB actuarial accrued liability of the State of Washington at January 1, 2015 to be $10.9 billion. OSA calculated the OPEB obligation based on individual state employee data, including age, retirement eligibility, and length of service. The probability of an employee of a given age and length of service retiring and receiving OPEB benefits is based on statewide historical data. Since sufficient specific employee data and other actuarial data are not available at levels below the statewide level, such amounts have not been determined nor recorded in WWU’s financial statement. WWU was billed and paid approximately $15.2 million for active and retiree health care expense during fiscal 2015 and $17.2 million during f iscal 2014. Notes to the Financial Statements 21. RISK MANAGEMENT WWU participates in a State of Washington risk management self-insurance program. Premiums to the State are based on actuarially determined projections and include allowances for payments of both outstanding and current liabilities. WWU self-insures unemployment compensation for all employees. In addition, sufficient insurance coverage for property casualty loss on the residence halls and the Wade King Student Recreation Center is maintained in accordance with the Housing and Dining System and Wade King Student Recreation Center Master Bond Resolutions. WWU has been named in several lawsuits. While the final outcome of the lawsuits cannot be predicted with certainty, it is WWU’s opinion that the ultimate liability will not materially affect the financial statement. WWU participates in the State insurance program and is indemnified and will be reimbursed by the State for any claims paid related to these lawsuits. 22. COMMITMENTS Goods and services for operating and capital projects, contracted for but not yet received, are considered commitments at year end. The amount of these commitments at June 30, 2015 and 2014 are: Financial Report 2015 of Trustees, the President of WWU, a member of the Commission of the Port of Bellingham appointed by the Commission of the Port, the Executive Director of the Port of Bellingham, and a fifth board member who was appointed by a majority vote of the other four board members who are not affiliated with either entity. The board of directors may in the future allow other Washington governments or educational institutions to become members under such terms and conditions as they determine. The purpose of this joint venture is to help facilitate the timely development of new facilities on the Bellingham waterfront. This investment is not reflected on WWU’s Statement of Net Position. During FY 2014, WWU transferred $723 thousand in land and $524 thousand in buildings, net to the WCDC to facilitate WWU development on the waterfront. 24. FOUNDATION PLEDGED GIFT RECEIVABLE In April 2012, WWU received a $1.0 million unconditional pledged gift from the Foundation for the purpose of the design and construction of the Harrington Field project to be located on WWU’s campus. The pledged gift to WWU is recorded at its net present value, with the discount amortized over the 8 year payment schedule using the straight line method. During FY 2014, the Foundation made an additional pledge of $92 thousand to help support the Harrington Field project. The pledge is expected to be paid as follows: For the year ending June 30, 2015 2014 Operating $6,733,515 $5,699,850 Research 1,028,028 665,598 Capital projects 7,300,369 12,513,683 $15,061,912 $18,879,131 Total commitments 2016 $50,000 2017 150,000 2018 150,000 2019 250,000 Thereafter 250,000 850,000 23. JOINT VENTURE Less present value discount (0.71%) In FY 2010, WWU participated in the formation of a not-for-profit corporation titled Western Crossing Development Corporation (WCDC). WCDC was formally incorporated pursuant to the articles of incorporation dated October 7, 2009 and is a 501(c) (3) corporation under the Internal Revenue code of 1986, amended. The five member Board of Directors includes a member of WWU Board of Trustees appointed by WWU Board Pledged gift receivable from the Foundation, net (13,291) $836,709 June 30, 2015 and 2014 53 Required Supplementary Information Required Supplementary Information 54 Western Washington University Financial Report 2015 Required Supplementary Information Financial Report 2015 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of WWU’s Proportionate Share of the Net Pension Liability Schedule of WWU’s Proportionate Share of the Net Pension Liability Public Employees’ Retirement System (PERS) Plan 1 Measurement Date of June 30 * (dollars in thousands) 2014 WWU PERS 1 employers’ proportion of the net pension liability 0.32% WWU PERS 1 employers’ proportionate share of the net pension liability $16,130 WWU PERS 1 emoployers’ covered-employee payroll $1,754 WWU PERS 1 employers’ proportionate share of the net pension liability as a percentage of its covered-employee payroll 0.92% Plan fiduciary net position as a percentage of the total pension liability 61.19% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. Schedule of WWU’s Proportionate Share of the Net Pension Liability Public Employees’ Retirement System (PERS) Plan 2/3 Measurement Date ended June 30 * (dollars in thousands) 2014 WWU PERS 2/3 employers’ proportion of the net pension liability 0.37% WWU PERS 2/3 employers’ proportionate share of the net pension liability $7,421 WWU PERS 2/3 emoployers’ covered-employee payroll $31,601 WWU PERS 2/3 employers’ proportionate share of the net pension liability as a percentage of its covered-employee payroll 0.02% Plan fiduciary net position as a percentage of the total pension liability 93.29% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. June 30, 2015 and 2014 55 Required Supplementary Information Financial Report 2015 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of WWU’s Proportionate Share of the Net Pension Liability Schedule of WWU’s Proportionate Share of the Net Pension Liability Public Employees’ Retirement System (TRS) Plan 1 Measurement Date of June 30 * (dollars in thousands) 2014 WWU TRS 1 employers’ proportion of the net pension liability 0.02% WWU TRS 1 employers’ proportionate share of the net pension liability $485 WWU TRS 1 emoployers’ covered-employee payroll $128 WWU TRS 1 employers’ proportionate share of the net pension liability as a percentage of its covered-employee payroll 0.38% Plan fiduciary net position as a percentage of the total pension liability 68.77% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. Schedule of WWU’s Proportionate Share of the Net Pension Liability Public Employees’ Retirement System (TRS) Plan 2/3 Measurement Date ended June 30 * (dollars in thousands) 2014 WWU TRS 2/3 employers’ proportion of the net pension liability 0.01% WWU TRS 2/3 employers’ proportionate share of the net pension liability $35 WWU TRS 2/3 emoployers’ covered-employee payroll $470 WWU TRS 2/3 employers’ proportionate share of the net pension liability as a percentage of its covered-employee payroll 0.01% Plan fiduciary net position as a percentage of the total pension liability 96.81% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. 56 Western Washington University Required Supplementary Information Financial Report 2015 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of WWU’s Proportionate Share of the Net Pension Liability Schedule of WWU’s Proportionate Share of the Net Pension Liability Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) Plan 2 Measurement Date of June 30 * (dollars in thousands) 2014 WWU LEOFF 2 employers’ proportion of the net pension liability 0.06% WWU LEOFF 2 employers’ proportionate share of the net pension liability (asset) ($753) WWU LEOFF 2 emoployers’ covered-employee payroll $948 WWU LEOFF 2 employers’ proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll (0.08%) Plan fiduciary net position as a percentage of the total pension liability (asset) 116.75% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. June 30, 2015 and 2014 57 Required Supplementary Information Financial Report 2015 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Public Employees’ Retirement System (PERS) Plan 1 Fiscal Year Ended June 30 Fiscal Year 2015 Contractually Required Contributions $124,080 Contributions in relation to the Contractually Required Contributions $124,718 Contribution deficiency (excess) Coveredemployee payroll ($637) $1,347,236 Contributions as a percentage of coveredemployee payroll 9.26% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes: These schedules will be built prospectively until they contain ten years of data. PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Public Employees’ Retirement System (PERS) Plan 2/3 Fiscal Year Ended June 30 Fiscal Year 2015 Contractually Required Contributions $3,047,368 Contributions in relation to the Contractually Required Contributions $3,141,737 Contribution deficiency (excess) Coveredemployee payroll ($94,369) 2016 2017 2018 2019 2020 2021 2022 2023 2024 58 Notes: These schedules will be built prospectively until they contain ten years of data. $33,087,603 Contributions as a percentage of coveredemployee payroll 9.50% Required Supplementary Information Financial Report 2015 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Teachers’ Retirement System (TRS) Plan 1 Fiscal Year Ended June 30 Fiscal Year 2015 Contractually Required Contributions $15,275 Contributions in relation to the Contractually Required Contributions Contribution deficiency (excess) Coveredemployee payroll $15,275 $147,013 Contributions as a percentage of coveredemployee payroll 10.39% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes: These schedules will be built prospectively until they contain ten years of data. PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Teachers’ Retirement System (TRS) Plan 2/3 Fiscal Year Ended June 30 Fiscal Year 2015 Contractually Required Contributions $77,145 Contributions in relation to the Contractually Required Contributions $81,324 Contribution deficiency (excess) Coveredemployee payroll ($4,179) $742,495 Contributions as a percentage of coveredemployee payroll 10.95% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes: These schedules will be built prospectively until they contain ten years of data. 59 Required Supplementary Information Financial Report 2015 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) Plan 2 Fiscal Year Ended June 30 Fiscal Year 2015 Contractually Required Contributions $83,684 Contributions in relation to the Contractually Required Contributions $85,058 Contribution deficiency (excess) Coveredemployee payroll ($1,374) 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes: These schedules will be built prospectively until they contain ten years of data. 60 Western Washington University $974,206 Contributions as a percentage of coveredemployee payroll 8.73% Accounting Services 333 32nd Street, Suite 114 Bellingham, WA 98225 Phone: 360-650-3040 Fax: 360-650-4666 HOUSING AND DINING SYSTEM Table of Contents Management’s Discussion and Analysis ......................................................................................... 3 Independent Auditor’s Report ...................................................................................................... 11 Financial Statements Statements of Net Position.......................................................................................................... 15 Statements of Revenues, Expenses and Changes in Net Position .............................................. 16 Statements of Cash Flows ........................................................................................................... 17 Notes to the Financial Statements............................................................................................... 18 Required Supplementary Information Schedules of Housing and Dining System’s Proportionate Share of the Net Pension Liability 37 Schedules of Contributions ......................................................................................................... 39 Other Information Schedules of Room and Board Rates.......................................................................................... 42 Schedule of Occupancy .............................................................................................................. 43 Schedule of Insurance Coverage ................................................................................................ 44 Schedule of Expenditures for Plant Facilities ............................................................................. 45 This page intentionally left blank HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Overview Western Washington University’s Housing and Dining System (the System) maintains over a million square feet of living space - home to 4,000 students. Nine residential communities consist of sixteen residence halls and one apartment complex. Residence halls are all equipped with laundry facilities, computer labs, study areas, community kitchens, TV lounges, game rooms, bicycle storage, 24-hour security, and staffed service desks. Western's campus is a 20-minute walk from end to end, so no matter where students live their classes and activities are nearby. The following discussion and analysis provides an overview of the financial position and activities of the System for the years ended June 30, 2015, 2014 and 2013. This discussion has been prepared by management and should be read in conjunction with the financial statements and accompanying notes which follow this section. Using the Financial Statements The System’s financial report includes the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Net Position and the Statement of Cash Flows. The statements are formatted following the guidelines of the Governmental Accounting Standards Board (GASB) pronouncements. These financial statements are prepared in accordance with GASB principles, which establish standards for external financial reporting for public colleges and universities. The System’s financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Statement of Net Position The Statement of Net Position presents the financial condition of the System at the end of the fiscal years and reports all assets and liabilities of the System. The amounts in this statement represent the physical assets used to provide the housing, meal, and student activity programs, as well as assets available to continue the operations of the System, also identifying commitments to vendors and bond holders. The difference between assets, deferred outflows, liabilities and deferred inflows is net position. Net position is one indicator of the current financial condition of the System. Below is a condensed view of the Statement of Net Position as of June 30, 2015, 2014 and 2013: 3 HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 (Dollars in Thousands) 2015 Assets Current Assets Noncurrent assets Capital assets, net Total assets Deferred Outflows Deferred loss on bonds Due to Pension Total deferred outflows Liabilities Current liabilities Noncurrent liabilities Total liabilities Deferred Inflows Due to Pension Net Position Net investment in capital assets Restricted, expendable Unrestricted Total net position 2014 2013 $11,584 10,506 100,253 122,343 $9,326 9,737 100,362 119,425 $10,009 7,564 100,466 118,039 995 155 1,150 1,173 1,173 1,297 1,297 8,054 43,108 51,162 6,887 44,651 51,538 6,617 47,790 54,407 517 - - 56,638 3,314 11,862 $71,814 53,850 3,289 11,921 $69,060 51,063 3,235 10,631 $64,929 Total current assets increased $2,258,110 (24.2%) during fiscal 2015 due to an increase in cash and cash equivalents from operating activities and short-term investments. The increase in short-term investments is due to WWU’s investment strategy to ensure liquidity needs while optimizing investment returns (See Note 2). Current assets decreased $683,095 (-6.8%) in fiscal 2014 compared to fiscal 2013 due primarily to a reallocation from short-term to long-term investments. Total noncurrent assets, excluding capital assets, increased $769,865 (7.9%) in fiscal 2015 and $2,171,805 (28.7%) during fiscal 2014 due primarily to an increase in long-term investments, as the System continues to build reserves necessary to implement planned capital projects. Depreciable and non-depreciable capital assets decreased minimally in both fiscals 2015 and 2014 by $109,249 (-0.1%) and $103,292 (-0.1%), respectively, due to accumulated depreciation. The major project completed during fiscal 2015 was the Buchanan Towers mechanical room. This project allowed the mechanical room to comply with codes and WWU standards. Major projects completed during fiscal 2014 included the Mathes and Ridgeway Alpha residence halls fire sprinklers and the Fairhaven Dining Commons renovation. Current liabilities increased $1,167,291 (17.0%) in fiscal 2015 and $269,300 (4.1%) in fiscal 2014 due to an increase in accounts payable from the timing of invoice payments. Total noncurrent liabilities decreased $1,542,593 (-3.5%) during fiscal 2015 due to a reduction in long-term debt from scheduled principal payments combined with an increase in the net pension liability. The increase of 4 HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 $1,508,789 (100.0%) in the net pension liability is due to the System adopting GASB Statement No. 68 – Accounting and Financial Reporting for Pensions – An amendment of GASB Statement No. 27. This statement requires the System to record its share of the actuarially calculated net pension liability of the defined benefit pension plans (see Note 7). Noncurrent liabilities decreased $3,139,285 (-6.6%) during fiscal 2014 due to scheduled long-term debt principal payments. Total net position increased $2,753,918 (4.0%) in fiscal 2015 over fiscal 2014 due to an increase in net investment in capital assets. Total net position increased $4,131,324 (6.4%) in fiscal 2014 over fiscal 2013 due to an increase in unrestricted net position and the completion of planned renovations. Net investment in capital assets increased in fiscal 2015 by $2,788,947(5.2%) primarily due to a decrease in bonds payable from scheduled principal payments. Net investment in capital assets increased in fiscal 2014 by $2,786,914 (5.5%) due to the capitalization of the fire sprinkler and dining renovation projects combined with reduced capital debt due to principal payments. Statement of Revenues, Expenses and Changes in Net Position The changes in total net position, as presented on the Statement of Net Position, are detailed in the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The statement presents the System’s results of operations. In accordance with GASB reporting principles, revenues and expenses are classified as operating or non-operating. In general, operating revenues are those received for providing housing, dining and related services to the customers of the System, the majority of which consists of room and board services to students. Operating expenses are those expenses paid to provide the services and resources to the students in return for the operating revenues. Non-operating revenues are monies received for which goods and services are not provided, such as investment income. Non-operating expenses include interest expense on outstanding debt and amortization of bond costs. Following is a condensed view of the Statements of Revenues, Expenses and Changes in Net Position for the fiscal years ended June 30, 2015, 2014 and 2013: (Dollars in thousands) Operating Revenues Operating Expenses Income from operations Nonoperating Revenues Nonoperating Expenses Increase in Net Position Net Position, Beginning of year Restatement Net Position, Beginning of year , as restated Net Position, End of year 2015 2014 2013 $41,881 (35,357) 6,524 531 (2,537) 4,518 $40,582 (35,135) 5,447 1,155 (2,471) 4,131 $39,241 (31,287) 7,954 1,124 (3,116) 5,962 69,060 (1,764) 64,929 - 58,967 - 67,296 64,929 58,967 $71,814 $69,060 $64,929 5 HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Total operating revenue increased for fiscal 2015 primarily influenced by an increase to the room and board rate. Operating Revenues by major source for fiscal 2015: $41,880,975 Service & Activity Fees 3% Room Rent & Food Services 85% Student Building Fees 4% Conferences 1% Other 2% Commissions 5% Operating Revenues by major source for fiscal 2014: $40,582,460 Service & Activity Fees 3% Room Rent & Food Services 85% Student Building Fees 4% Conferences 1% Other 2% Commissions 5% The System’s largest revenue source is room rent and food services totaling $35,455,523 or 84.7% of the System’s operating revenue compared to $34,550,060 (85.1%) in fiscal 2014. Room rent and food service revenues increased $905,463 (2.6%) in fiscal 2015 over 2014 due to a 4.0% rate increase coupled with a slight decrease of -1.4% in residence hall occupancy. Room and food service revenues increased $1,200,457 (3.6%) in fiscal 2014 over fiscal 2013 due to a 3.0% rate increase and increased occupancy Student building fee revenue increased $13,517 (0.8%) in fiscal 2015 and $12,787 (0.8%) in fiscal 2014 due to slight changes in enrollment. There was no change in the $39 per quarter mandatory student building fee for fiscal 2015 or fiscal 2014. 6 HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Conference revenue increased $43,663 (8.0%) in fiscal 2015 due to a rate increase and increased bookings. Conference revenue decreased $17,017 (-3.0%) in fiscal 2014 due to reduced bookings. Viking Union revenue increased $6,528 (1.8%) in fiscal 2015 primarily due to increased facility and services use. Viking Union revenue increased $198,960 (124.0%) in fiscal 2014 primarily due to the one-time transfer of the recycle center financial operations to the Viking Union. Commission revenue increased $146,976 (7.4%) in fiscal 2015 and $95,802 (5%) in fiscal 2014 primarily due to increased dining commissions received from the Dining Services contractor (See Note 6). Fees, penalties, and other income increased $166,381 (125.1%) in fiscal 2015 primarily influenced by the recurring annual departmental transfer that was recorded as a reduction to revenue in fiscal 2014. Fees penalties, and other income in fiscal 2014 decreased $147,648 (-52.6%) primarily due to a decrease in other income from the recording of the recurring annual departmental transfer. Overall operating expenses for fiscal 2015 increased $221,833 (0.6%) over fiscal 2014, due to an increase in depreciation and slight increases in food services, salaries, and repairs and maintenance. Overall operating expenses for fiscal 2014 increased $3,847,742 (12.3%) primarily due to increases in depreciation, noncapitalized renewals, and cost of food services. Cost of food services for fiscal 2105 increased $360,103 (3.0%) over fiscal 2014 due to a rate increase. Cost of food services increased $640,961 (5.6%) in fiscal 2014 primarily due to the combination of a rate increase and increased voluntary meal plan purchases. 7 HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Operating Expenses by major source for fiscal 2014: $35,134,649 Supplies, Furnishings & Equipment 1% Noncapitalized Renewals 7% Maintenance 5% Other Expenses 9% Cost of Food Services 35% Salaries & Related Benefits 18% Utilities 7% Depreciation 18% Salaries and benefits expense for fiscal 2015 increased $142,671 (2.3%) due to the combination of classified staff wage increases, filling of vacant positions and a decrease to the employer’s share of health care costs. Salaries and benefits increased $347,910 (5.8%) in fiscal 2014 as position vacancies were filled and State wage increases occurred. Utilities expense for fiscal 2015 increased $28,919 (1.1%) with the net increase due primarily to water/sewer increases. Utilities expense increased $126,297 (5.3%) in fiscal 2014 primarily due to increases in water and natural gas. Repairs and maintenance expense for fiscal 2015 increased $626,483 (34.8%) as more expenses met this classification rather than being categorized as Non-capitalized renewals and replacements. There was also a 4.0% increase in the Facilities Management recharge rate. Repairs and maintenance expense decreased $121,988 (-6.4%) in fiscal 2014 as certain larger repairs were classified as non-capitalized renewals and replacements. There were no major unanticipated incidents in fiscal 2015. Depreciation expense for fiscal 2015 increased $309,497 (4.8%) and $1,710,045 (36.2%) for fiscal 2014 due to the addition of completed renovations. WWU’s administrative services assessment fee (included in institutional services) increased $194,895 (14.5%) in fiscal 2015 and $163,246 (13.8%) in fiscal 2014 due to rate increases. The rate charged against the System revenues (less food service contract) was 5.5% in fiscal 2015 and 5.0% in fiscal 2014. Other expenses increased $202,451 (32.3%) in fiscal 2015 primarily influenced by the recurring annual departmental transfer that was recorded as an expense in fiscal 2015 and a reduction to revenue in fiscal 2014. Other expenses decreased $299,768 (-32.4%) in fiscal 2014 primarily influenced by decreases in Other Goods & Services. Non-operating expenses (interest & amortization) for fiscal 2015 increased $65,904 (2.7%) due to increased bond cost amortization relating to the issuance of revenue and refunding (See Note 4). Non-operating expenses (interest & amortization) for fiscal 2014 increased $644,410 (20.7%) primarily due to reduced bond cost amortization. 8 HOUSING AND DINING SYSTEM MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Non-Operating revenue for fiscal 2015 decreased $623,602 (-54.0%) due to a reduction in other capital contributions (See Note 6). Non-Operating revenue for fiscal 2014 increased $30,937 (2.8%) due to a slight increase in the capital contribution. Economic Factors and Significant Events WWU’s Fall quarter of fiscal 2015 enrollment headcount of 14,260 represents a 0.55% increase over Fall quarter of fiscal 2014 enrollment. The average annual fiscal 2015 enrollment was slightly higher (0.77%) than fiscal 2014. Management will address housing demand independent of enrollment through room capacity practices, such as adding or reducing the number beds in a room for example. The System’s auxiliary capital plan for University Residences, shared with WWU’s Board of Trustees in December 2014, identifies major projects including the final phases of the fire sprinkler installations and major upgrades for residential structures and living spaces. A significant facilities condition assessment is in process, the results of which will be incorporated into the capital plan. System leadership is reviewing options for the renovation or replacement of the Edens North facility and for the addition of on-campus student apartment housing. The Board of Trustees approved a set of housing and dining principles in 1993 (updated in 2010) to guide the System’s financial planning. The six principles address (i) Revenue Fund levels, (ii) Renewal and Replacement Fund levels, (iii) Major maintenance expenditures, (iv) Capital planning efforts, (v) Debt Service Coverage Ratio, and (vi) Occupancy. The System exceeded the minimum requirements established within these principles. The Board periodically reviews the principles to ensure ongoing compliance. 9 This page intentionally left blank Washington State Auditor’s Office INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS Board of Trustees Western Washington University Housing and Dining System Bellingham, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the Western Washington University Housing and Dining System (Housing and Dining), Whatcom County, Washington, as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the Housing and Dining’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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. Auditor’s Responsibility 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 the standards applicable to financial audits contained in 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 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 auditor’s 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 Housing and Dining’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 Housing and Dining’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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Western Washington University Housing and Dining System, as of June 30, 2015 and 2014, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 1, the financial statements of the Western Washington University Housing and Dining System, a department of the University, are intended to present the financial position, and the changes in financial position, and cash flows of only the respective portion of the activities of the University that is attributable to the transactions of Housing and Dining. They do not purport to, and do not, present fairly the financial position of thesta University as of June 30, 2015 and 2014, the changes in its financial position, or its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. As discussed in Note 1 to the financial statements, in 2015, Housing and Dining adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and the schedules of Housing and Dining system’s proportionate share of the net pension liability and schedules of contributions pension trust fund information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Housing and Dining’s basic financial statements as a whole. The Other Information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2015 on our consideration of the Housing and Dining’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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Housing and Dining’s internal control over financial reporting and compliance. JAN M. JUTTE, CPA, CGFM ACTING STATE AUDITOR OLYMPIA, WA November 16, 2015 HOUSING AND DINING SYSTEM STATEMENT OF NET POSITION Assets Current assets Cash and cash equivalents (Note 2) Investments (Note 2) Accounts receivable, net of allowance of $99,428 and $87,490 in 2015 and 2014, respectively Interest receivable Other receivables Inventory Total current assets Noncurrent assets Restricted investments (Note 2) Investments (Note 2) Depreciable capital assets, net (Note 3) Nondepreciable capital assets, net (Note 3) Other assets (Note 1) Total noncurrent assets Total assets Deferred Outflows Deferred loss on bond refunding Related to pension Total deferred outflows Liabilities Current liabilities Accounts payable Accrued expenses Residents' housing deposits Unearned revenues Bonds interest payable Current portion of bonds payable (Note 4) Total current liabilities Noncurrent liabilities Bonds payable, less current portion (Note 4) Net pension liability Total noncurrent liabilities Total liabilities Deferred Inflows Related to pension Total deferred inflows June 30, 2015 and 2014 2015 2014 $6,666,354 3,806,049 $6,223,145 2,161,956 201,760 57,853 849,650 2,236 11,583,902 134,034 31,734 773,119 1,804 9,325,792 3,048,225 7,456,128 92,778,304 7,474,735 1,846 110,759,238 122,343,140 3,050,772 6,681,725 98,448,386 1,913,902 3,837 110,098,622 119,424,414 995,306 155,269 1,150,575 1,173,492 1,173,492 2,288,606 635,365 1,269,931 280,653 569,239 3,010,000 8,053,794 1,103,047 614,144 1,280,705 323,496 530,111 3,035,000 6,886,503 41,599,662 1,508,789 43,108,451 51,162,245 44,651,044 44,651,044 51,537,547 517,193 517,193 - Net Position Net investment in capital assets 56,638,683 53,849,736 Restricted, expendable Unrestricted 3,313,637 11,861,957 3,289,241 11,921,382 $71,814,277 $69,060,359 Total net position See Notes to the Financial Statements 15 HOUSING AND DINING SYSTEM STATEMENT OF REVENUES, EXPENSES & CHANGES IN NET POSITION June 30, 2015 and 2014 2015 2014 $35,455,523 1,285,318 1,620,654 586,883 365,937 121,732 2,145,538 299,390 41,880,975 $34,550,060 1,273,981 1,607,137 543,220 359,409 117,082 1,998,562 133,009 40,582,460 Operating Expenses Cost of food services Salaries and related benefits Utilities Repairs and maintenance Communications Insurance Supplies Furniture and equipment Institutional services Depreciation Noncapitalized renewals and replacements Other Total operating expenses Income from operations 12,464,544 6,469,319 2,550,964 2,425,126 229,537 315,645 274,654 211,212 1,719,902 6,747,400 1,119,577 828,603 35,356,483 6,524,492 12,104,441 6,326,648 2,522,045 1,798,643 254,286 552,192 259,501 180,338 1,543,545 6,437,903 2,528,955 626,152 35,134,649 5,447,811 Nonoperating Revenues (Expenses) Investment income Build America Bonds interest subsidy Other Capital Contribution Interest expense Amortization of bond discounts and premiums Total nonoperating (expenses) revenues Increase in net assets 124,909 295,479 110,865 (2,400,442) (136,804) (2,005,993) 4,518,499 91,973 293,248 769,634 (2,451,547) (19,795) (1,316,487) 4,131,324 Net Position, Beginning of Year Restatement (Note 1) Net Position, Beginning of Year, as restated 69,060,359 (1,764,581) 67,295,778 64,929,035 Operating Revenues Room rent and food services Service and activity fees Student building fees Conferences Viking Union income Rent Commissions Fees, penalties, and other income Total operating revenue Net Position, End of Year 16 $71,814,277 See Notes to Financial Statements 64,929,035 $69,060,359 HOUSING AND DINING SYSTEM STATEMENT OF CASH FLOWS June 30, 2015 and 2014 2015 Cash Flows from Operating Activities Cash received from students and other customers Cash paid to employees Cash paid to suppliers Net cash flows provided by operating activities Cash Flows from Capital and Related Financing Activities Payment of long-term debt Interest payments Build America Bonds interest subsidy Purchase of capital assets Net cash flows (used in) by capital and related financing activities 2014 $41,683,102 (6,343,642) (21,850,218) 13,489,242 $40,629,990 (6,306,865) (22,267,527) 12,055,598 (3,033,010) (2,361,314) 295,479 (5,630,029) (2,913,839) (2,476,139) 293,248 (5,553,365) (10,728,874) (10,650,095) 98,790 2,547 (2,418,496) 67,280 (2,761) (926,858) (2,317,159) (862,339) Cash Flows from Investing Activities Investment income received Net proceeds (loss) of restricted investments Sales of investments Net cash flows (used in) provided by investing activities Net change in cash and cash equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year 443,209 543,164 6,223,145 5,679,981 $6,666,354 $6,223,145 6,524,492 5,447,811 6,747,400 106,132 4,569 6,437,903 176 Reconciliation of Operating Income to Net Cash Provided to Operating Activities Operating income Adjustments to reconcile operating income to net cash flows from operating activities Depreciation Net pension expense Loss on disposal of fixed asset Change in operating assets and liabilities Accounts receivable Other receivables Inventory Accounts payable Accrued salaries and benefits Residents' housing deposits Deferred revenue Cash flows from operating activities (67,726) (76,531) (432) 285,409 19,545 (10,774) (42,843) 56,791 (44,475) 287 102,108 19,783 (6,571) 41,784 $13,489,241 $12,055,597 $901,826 $11,788 Supplemental Disclosure of Noncash Capital and Related Financing Activities Change in capital asset additions included in accounts payable See Notes to the Financial Statements 17 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Western Washington University Housing and Dining System (the System) is a self-supporting, auxiliary enterprise of Western Washington University (WWU). The System operates residence halls and dining commons, an apartment complex, the Commissary/Warehouse, the Viking Union Complex and Lakewood Recreational Facility. These operations are located on or near WWU campus. Financial Statement Presentation The financial statements are presented in accordance with generally accepted accounting principles (GAAP) and follow guidance given by the Governmental Accounting Standards Board (GASB). These statements are special purpose reports reflecting the net position, results of operations, and cash flows of the System. The financial statements present only a selected portion of the activities of WWU. As such, they are not intended to and do not present either the financial position, results of operations, or changes in net position of WWU. Basis of Accounting The System's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Cash, Cash Equivalents, and Investments WWU records all cash and cash equivalents at cost. Investments held by WWU are recorded at fair value. To maximize investment income, WWU combines funds from all departments into an investment pool. The System records their share of cash, cash equivalents and investments in the same relation as WWU’s investment pool itself. Investment income is allocated to the System in proportion to its average balance in the investment pool. Accounts Receivable Receivables are primarily from students of WWU and are unsecured. The System considers all accounts past due when they remain unpaid after their due dates. An allowance based on historical collection rates is established for recognizing potential bad debts. When an account is deemed uncollectible, it is written off against the allowance. Inventory Inventory consists of snack and sundry items and is stated at the lower of cost (first-in, first-out method) or market. Capital Assets The capitalization policy includes all items with a unit cost of $5,000 or more and an estimated useful life of greater than one year. The basis of valuation for assets purchased or constructed is cost. The costs of normal maintenance and repairs that do not increase the value of the assets or materially extend asset lives are charged to operating expense in the year the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets: 40 years for buildings and building improvements, 20 to 25 years for infrastructure and other improvements, and 5 to 7 years for furniture, fixtures, and equipment. 18 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Deferred Outflows of resources and Deferred Inflows of resources. The System classifies gains on retirement of debt as deferred inflows and losses as deferred outflows of resources and amortizes such amounts as a component of interest expense over the remaining life of the old debt, or the new debt, whichever is shorter. Change in net pension liability not included in pension expense are reported as deferred outflows of resources or deferred inflows of resources. Employer contributions subsequent to the measurement date of the net pension liability are reported as deferred outflow of resources. Unearned Revenue Summer quarter, which is the first quarter of WWU’s fiscal year, begins shortly before June 30. Room and board charges related to fiscal year 2015 are recorded as unearned revenue. Net Pension Liability The System records pension obligations equal to the net pension liability for its defined benefit plans. The net pension liability is measured as the total pension liability, less the amount of the pension plan’s fiduciary net position. The fiduciary net position and changes in net position of the defined benefit plans has been measured consistent with the accounting policies used by the plans. The total pension liability is determined based upon discounting projected benefit payments based on the benefit terms and legal agreements existing at the pension plan’s fiscal year end. Projected benefit payments re discounted using a single rate that reflects the expected rate of return on investments, to the extent that plan assets re available to pay benefits, and a tax-exempt, high- quality municipal bond rate when plan assets are not available. Pension expense is recognized for benefits earned during the measurement period, interest on the unfunded liability and changes in benefit terms. The differences between expected and actual experience and changes in assumptions about future economic or demographic factors are reported as deferred inflows or outflows and are recognized over the average expected remaining service period for employees eligible for pension benefits. The differences between expected and actual returns are reported as deferred inflows or outflows and are recognized over five years. Restatement of Net Position During FY 2015, the System adopted GASB Statement No. 68 “Accounting and Financial Reporting for Pensions-an amendment of GASB Statement No. 27”. Statement No. 68 requires that WWU record in its statements its proportional share of the State’s net pension liability for the defined benefit pension plans that are administered by the State and to restate the beginning net position of the earliest period presented. The amount of restatement to the beginning fiscal 2015 net position was $1,764,581 million. The amount of the net pension is $1,508,789 million. The net pension liability information is provided to the System by the Department of Retirement Systems (DRS) and the Office of State Actuary (OSA). The information provided by DRS and OSA only allowed the System to restate fiscal 2015 beginning net position due to the measurement period of June 30, 2014 for the net pension liability. Net Position The System's net position is classified as follows:  Net Investment in Capital Assets - Represents the System's total investment in capital assets, net of outstanding debt obligations related to those capital assets.  Restricted, Expendable - Restricted net position represent resources restricted by bond covenants for system renewals and replacements. 19 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS  June 30, 2015 and 2014 Unrestricted - Unrestricted net position represent resources derived from operations and investing activities. The System has internally designated $11,561,531 and $9,476,125of this balance at June 30, 2015 and 2014, respectively, for funding the acquisition of future capital assets and the renovation of current capital assets. Classification of Revenues and Expenses The System has classified its revenue and expenses as either operating or non-operating according to the following criteria: Operating revenues. Operating revenues include activities that have the characteristics of exchange transactions, such as sales and services. Operating expenses. Operating expenses are those incurred in daily operations such as salaries and wages, benefits, utilities and supplies. Non-operating revenues. Non-operating revenues include activities that have the characteristics of nonexchange transactions such as investment income. Non-operating expenses. Non-operating expenses include costs related to financing or investing activities such as interest on indebtedness and amortization of bond costs. Premiums/Discounts Bond premiums and discounts are amortized over the term of the bonds using the effective interest method. The remaining balances of bond premiums/discounts are presented in the Statement of Net Position net of the face amount of bonds payable. Administrative Assessment WWU provides support to the System through cash and debt management, accounting, human resources, purchasing and accounts payable services, risk management, and other support services. The effects of these transactions are included as institutional services in these financial statements. The amount paid was $1,537,315 and $1,342,420, which was 5.5% and 5.0% of revenues (less food service contract) for the years ending June 30, 2015 and 2014, respectively. Tax Exemptions WWU, and the System as an auxiliary enterprise, is a tax-exempt instrumentality of the State of Washington under the provisions of Section 115(a) of the Internal Revenue Code and are exempt from federal income taxes on related income. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 20 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS Interest Rate and Credit Risk The System’s operating cash is part of WWU’s internal investment pool. The pool is invested in demand deposits, time certificates of deposit, the Washington State Local Government Investment Pool (LGIP) and U.S. Treasury and Agency securities. The LGIP is comparable to a Rule 2a-7 money market fund recognized by the Securities and Exchange Commission (17CFR.270.2a-7). Rule 2a-7 funds are limited to high quality obligations with limited maximum and average maturities, the effect of which is to minimize both market and credit risk. The LGIP is an unrated investment pool. Bank balances (including time certificates of deposit) are insured by the Federal Deposit Insurance Corporation (FDIC) or by a collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). U.S. Treasury and Agency securities are rated AA+ by Standard & Poor’s and Aaa by Moody’s Investors Service. WWU manages its exposure to fair value losses in the internal investment pool by targeting the portfolio duration to 2.25 years and limiting the weighted average maturity to a maximum of three years. WWU generally does not invest operating funds in securities maturing more than five years from the date of purchase. The System’s restricted investments of $3,048,225 and $3,050,772 in fiscals 2015 and 2014 respectively are restricted for renewals and replacements and are separately invested in time certificates of deposit and U.S. Treasury and Agency securities. Cash and cash equivalents Weighted Average Maturity June 30, 2015 (in years) June 30, 2014 $6,666,354 0.001 $6,223,145 Weighted Average Maturity (in years) 0.001 Investments Certificates of deposit-restricted 1,521,563 1.033 1,521,563 2.241 U.S. Agencies-restricted 1,526,662 1.614 1,529,209 0.907 956,046 1.033 874,286 2.033 U.S. Treasury 3,161,631 2.410 724,917 1.085 U.S. Agencies 7,144,500 $20,976,756 1.614 7,244,478 $18,117,598 2.657 Certificates of deposit 21 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 3. CAPITAL ASSETS, NET The depreciation expense for the fiscal years ended June 30, 2015 and 2014 was $6,747,400 and $6,437,903, respectively. Following are the changes in capital assets for the year ended June 30, 2015: Description Non-depreciable capital assets Construction in progress Depreciable capital assets Buildings Buildings improvements Furniture, fixtures, and equipment Infrastructure Total cost June 30, 2014 Additions Retirements $1,913,902 $5,878,522 112,122,143 33,917,366 7,157,942 4,492,564 159,603,917 777,105 304,782 (17,047) 6,960,409 (17,047) 45,554,788 8,585,154 3,274,814 1,826,873 59,241,629 $100,362,288 3,644,870 1,885,908 1,098,386 118,236 6,747,400 $213,009 Transfers June 30, 2015 ($317,689) $7,474,735 (317,689) 112,899,248 33,917,366 7,445,677 4,492,564 166,229,590 ($317,689) 49,199,658 10,471,062 4,360,722 1,945,109 65,976,551 $100,253,039 Accumulated Depreciation Buildings Buildings improvements Furniture, fixtures, and equipment Infrastructure Total accumulated depreciation Capital assets, net (12,478) (12,478) ($4,569) Following are the changes in capital assets for the year ended June 30, 2014: Description Non-depreciable capital assets Construction in progress Depreciable capital assets Buildings Buildings improvements Furniture, fixtures, and equipment Infrastructure Total cost June 30, 2013 Additions Retirements Transfers June 30, 2014 $5,259,312 $1,513,050 ($4,858,460) $1,913,902 104,021,951 32,737,040 6,776,429 4,492,564 153,287,296 3,241,732 1,180,326 399,679 4,858,460 (18,166) 6,334,787 (18,166) - 112,122,143 33,917,366 7,157,942 4,492,564 159,603,917 42,139,831 6,758,904 2,224,225 1,698,756 52,821,716 $100,465,580 3,414,957 1,826,250 1,068,579 128,117 6,437,903 ($103,116) - 45,554,788 8,585,154 3,274,814 1,826,873 59,241,629 $100,362,288 Accumulated Depreciation Buildings Buildings improvements Furniture, fixtures, and equipment Infrastructure Total accumulated depreciation Capital assets, net 22 (17,990) (17,990) ($176) $ HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 4. BONDS PAYABLE In accordance with bond covenants, a Renewal and Replacement (R&R) Fund has been established to pay extraordinary operating and maintenance expenses; to make capital replacements, expansions, additions, repairs and renewals of the System; and to pay bond principal and interest to the extent other funds are not legally available. The balance of the R&R Fund must equal at least 5% of the principal balance of outstanding bonds. Bond covenants also require that the System pledge net revenue (as defined) in each fiscal year at least equal to the greater of (i)125% of the amounts required in such fiscal year to be paid as scheduled debt service (principal and interest) on outstanding bonds, or (ii) amounts required to be deposited during such fiscal year from net revenues into debt service and reserve funds established for outstanding bonds and into the R&R Fund, but excluding from each of the foregoing, payments made from refunding debt and capitalized debt service. On March 4, 2015, the System issued at par $13,435,000 Revenue and Refunding Bonds Series 2015. The purpose of the bonds is the refunding of then-outstanding Revenue Bonds Series 2005 and 2006 with a combined principal balance of $15,935,000. The refunded series 2005 and 2006 bonds carried interest rates of 3.75% to 4.5%. Management expects the refunding will provide a net present value savings of approximately $1,034,389 in debt service over the life of the new bonds and loss on defeasance of $511,154. The amount required to refund the 2005 and 2006 bonds remaining plus a refunding premium and underwriter’s discount (total of $15,455,988) were sent directly to the escrow agent, US Bank, and these funds were disbursed completely by June 1, 2015. 23 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS Series 2015 Housing & Dining Refunding Bonds with interest rates ranging from 2.0% to 5.0% and principal payments due in annual amounts ranging from $985,000 to $1,530,000 through October 31, 2026. The Series 2015 bonds have an aggregate face value of $13,435,000 at June 30, 2015 which is reported net of the unamortized original issues premium of $1,857,291. Series 2012 Revenue and Refunding Bonds with interest rates ranging from 3.0% to 5.0% and principal payments due in annual amounts ranging from $750,000 to $980,000 through October 31, 2023. The Series 2012 bonds have an aggregate face value of $7,690,000 at June 30, 2015 which is reported net of the unamortized original issues premium of $363,976. Series 2009 A & B Housing and Dining Revenue Bonds with interest rates ranging from 3.0% to 7.4% and principal payments due in annual amounts ranging from $295,000 to $1,115,000 through June 30, 2034. The Series 2009 bonds have an aggregate face value of $12,835,000 at June 30, 2015 which is reported net of the unamortized original issue premium of $0. June 30, 2015 and 2014 June 30, 2015 June 30, 2014 $15,292,291 $ 8,053,976 8,900,561 12,835,000 13,146,334 Series 2006 Housing and Dining Revenue Bonds with an interest rate of 4% and principal payments due in annual amounts ranging from $420,000 to $700,000 through April 1, 2026. The Series 2006 bonds have an aggregate face value of $0 at June 30, 2015 which is reported net of the unamortized original premium of $0. Series 2005 Housing and Dining Revenue and Refunding Bonds with interest rates ranging from 4.0% to 4.5%, and principal payments due in annual amounts ranging from $620,000 to $1,005,000 through June 1, 2026. The Series 2005 bonds have an aggregate face value of $0 at June 30, 2015, which is reported net of the unamortized original discount of $0. Series 1998 Housing and Dining Junior Lien Revenue Refunding Bonds, with interest rates ranging from 4.4% to 5.5%, and principal payments due in annual amounts that range from $825,000 to $1,270,000 through October 1, 2022. The Series 1998 bonds have an aggregate face value of $8,355,000 at June 30, 2015, which is reported net of the unamortized original issue premium of $73,395. Less current portion 24 - - 6,714,114 - 9,601,856 8,428,395 9,323,179 44,609,662 47,686,044 (3,010,000) (3,035,000) $41,599,662 $44,651,044 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Following are the changes in long-term liabilities for the year ended June 30, 2015: Bonds Payable Series 2015 Refunding Bonds Series 2012 Refunding Bonds Series 2009 Revenue Bonds Series 2006 Revenue Bonds Series 2005 Refunding Bonds Series 1998 Junior Lien Revenue Refunding Plus unamortized premium Less unamortized discount Total Long-term liabilities June 30, 2014 $ 8,455,000 13,145,000 6,690,000 9,685,000 9,230,000 47,205,000 564,188 (83,144) $47,686,044 Additions $13,435,000 13,435,000 Reductions $ (765,000) (310,000) (6,690,000) (9,685,000) (875,000) (18,325,000) 1,932,994 - (202,520) 83,144 $15,367,994 ($18,444,376) June 30, 2015 Current Portion $13,435,000 $985,000 7,690,000 785,000 12,835,000 320,000 8,355,000 920,000 42,315,000 3,010,000 2,294,662 $44,609,662 $3,010,000 Following are the changes in long-term liabilities for the year ended June 30, 2014: Bonds Payable Series 2012 Refunding Bonds Series 2009 Revenue Bonds Series 2006 Revenue Bonds Series 2005 Refunding Bonds Series 1998 Junior Lien Revenue Refunding Plus unamortized premium Less unamortized discount Total Long-term liabilities June 30, 2013 Additions $9,205,000 $ 13,440,000 7,110,000 10,305,000 10,055,000 50,115,000 680,831 (95,502) $50,700,329 Reductions June 30, 2014 Current Portion ($750,000) $8,455,000 $765,000 (295,000) 13,145,000 310,000 (420,000) 6,690,000 440,000 (620,000) 9,685,000 645,000 (825,000) 9,230,000 875,000 (2,910,000) 47,205,000 3,035,000 - (116,643) 12,358 - ($3,014,285) 564,188 (83,144) $47,686,044 Total interest incurred on bonds payable for the years ended June 30, 2015 and June 30, 2014 was $2,400,442 and $2,451,547, respectively. The principal and interest maturities of bonds payable for years ending June 30 are as follows: 25 $3,035,000 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2034 Less unamortized (discounts)/premiums & loss on defeasence Principal $3,010,000 3,170,000 3,285,000 3,390,000 3,530,000 16,040,000 5,735,000 4,155,000 42,315,000 June 30, 2015 and 2014 Interest $2,198,122 2,042,160 1,921,943 1,797,112 1,656,290 5,621,766 2,546,220 786,990 $18,570,603 Total $5,208,122 5,212,160 5,206,943 5,187,112 5,186,290 21,661,766 8,281,220 4,941,990 $60,885,603 2,294,662 $44,609,662 NOTE 5. COMMITMENTS The System regularly enters into contracts and purchase orders that commit fund balances for future purchases of goods and services. At June 30, 2015 and 2014, these commitments totaled $5,570,055 and $5,570,055 respectively, for all funds. NOTE 6. CONTRACT WITH ARAMARK In fiscal 2012 Aramark contracted with WWU to manage the dining services provided by the System. As part of this contract, Aramark agreed to provide a contribution totaling $7,314,000 to the System as a financial commitment for the acquisition of capital and non-capital assets. $110,865 and $769,634 of that amount was used in fiscals 2015 and 2014 respectively. NOTE 7. PENSION PLANS A. SUMMARY WWU offers five defined benefit pension plans and three defined benefit/defined contribution plans: the Washington State Public Employees' Retirement System (PERS) plans 1-3, the Washington State Teachers Retirement System (TRS) plans 1-3, the Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) plan 1 and the Western Washington University Retirement Plan (WWURP). As employees of WWU, the full-time System employees are participants in WWURP and PERS. The System contributes to PERS cost sharing multiple-employer defined benefit pension plans administered by the State of Washington Retirement System. Refer to sections B and C of this note for descriptions of the plans. The System contributed approximately $235,373, $226,642 and $190,774 to these plans in fiscal 2015, 2014 and 2013 respectively. An actuarial valuation of the PERS plan for the System as an entity is not available. 26 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 The System implemented Statement No. 68 of the Governmental Accounting Standards Board (GASB) Accounting and Financial Reporting for Pensions for the fiscal year 2015 financial reporting. The System’s defined benefit pension plans were created by statutes rather than through trust documents. With the exception of the supplemental defined benefit component of the higher education retirement plan, they are administered in a way equivalent to pension trust arrangements as defined by the GASB. In accordance with Statement No. 68, the System has elected to use the prior fiscal year end as the measurement date for reporting net pension liabilities. The state Legislature establishes and amends laws pertaining to the creation and administration of all state public retirement systems. Additionally the state Legislature authorizes state agency participation in plans other than those administered by the state. Basis of Accounting Pension plans administered by the state are accounted for using the accrual basis of accounting. Under the accrual basis of accounting, employee and employer contributions are recognized in the period in which employee services are performed; investment gains and losses are recognized as incurred; and benefits and refunds are recognized when due and payable in accordance with the terms of the applicable plan. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all plans and additions to/deductions from all plan fiduciary net position have been determined in all material respects on the same basis as they are reported by the plans. The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB Statement No. 68 for the System, for fiscal year 2014: Aggregat e Pension Amount s - PERS 1, 2 & 3 Pension liabilities Pension assets Deferred outflows of resources related to pensions Deferred inflows of resources related to pensions Pension ex pense/ex penditures $ (1 ,508,7 89) 1 55,269 (51 7 ,1 93) 1 06,1 32 Investments The Washington State Investment Board (WSIB) has been authorized by statute as having investment management responsibility for the pension funds. The WSIB manages retirement fund assets to maximize return at a prudent level of risk. Retirement funds are invested in the Commingled Trust Fund (CTF). Established on July 1, 1992, the CTF is a diversified pool of investments that invests in fixed income, public equity, private equity, real estate, and tangible assets. Investment decisions are made within the framework of a Strategic Asset Allocation Policy and a series of written WSIB-adopted investment policies for the various asset classes in which the WSIB invests. 27 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Department of Retirement Systems. As established in chapter 41.50 of the Revised Code of Washington (RCW), the Department of Retirement Systems (DRS) administers eight retirement systems covering eligible employees of the state and local governments. The Governor appoints the director of the DRS. The DRS administered systems that the System offers its employees are comprised of two defined benefit pension plans and one defined benefit/defined contribution plan. Below are the DRS plans that the System offers its employees:  Public Employees’ Retirement System (PERS) Plan 1 – defined benefit Plan 2 - defined benefit Plan 3 - defined benefit/defined contribution Although some assets of the plans are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to the members of that plan in accordance with the terms of the plan. Administration of the PERS plans is funded by an employer rate of 0.18 percent of employee salaries. The DRS prepares a stand-alone financial report that is compliant with the requirements of Statement 67 of the Governmental Accounting Standards Board. Copies of the report may be obtained by contacting the Washington State Department of Retirement Systems, PO Box 48380, Olympia, Washington 98504-8380 or online at http://www.drs.wa.gov/administration/annual-report/. Higher Education. As established in chapter 28B.10 RCW, eligible higher education state employees may participate in higher education retirement plans. These plans include a defined contribution plan administered by a third party with a supplemental defined benefit component (on a pay as you go basis) which is administered by the state. B. DEFINED CONTRIBUTION PLANS Western Washington University Retirement Plan (WWURP) Plan Description The WWURP is a defined contribution single employer pension plan with a supplemental payment, when required. The plan covers faculty, professional staff, and certain other employees. It is administered by WWU. WWU’s Board of Trustees is authorized to establish and amend benefit provisions. Contributions to the plan are invested in annuity contracts or mutual fund accounts offered by one or more fund sponsors. Benefits from fund sponsors are available upon separation or retirement at the member’s option. Employees have at all times a 100% vested interest in their accumulations. Funding Policy Employee contribution rates, which are based on age, range from 5% to 10% of salary. WWU matches the employee contributions. All required employer and employee contributions have been made. Supplemental Component The supplemental payment plan determines a minimum retirement benefit goal based upon a one-time calculation at each employee’s retirement date. The System makes direct payments to qualified retirees when the retirement benefit provided by the fund sponsor does not meet the benefit goal. During fiscal year ending 28 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 June 30, 2011, WWU amended the supplemental retirement plan, limiting participation to those individuals who were active participants on June 30, 2011. Public Employees’ Retirement System Plan 3 Plan Description The Public Employees’ Retirement System (PERS) Plan 3 is a combination defined benefit/defined contribution plan administered by the state through the Department of Retirement Systems (DRS). Refer to section C of this note for all PERS Plan descriptions. PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. As established by chapter 41.34 RCW, employee contribution rates to the defined contribution component range from 5 to 15 percent of salaries, based on member choice. Members who do not choose a contribution rate default to a 5 percent rate. There are currently no requirements for employer contributions to the defined contribution component of PERS Plan 3. PERS Plan 3 defined contribution retirement benefits are dependent upon the results of investment activities. Members may elect to self-direct the investment of their contributions. Any expenses incurred in conjunction with self-directed investments are paid by members. Absent a member’s self-direction, PERS Plan 3 contributions are invested in the retirement strategy fund that assumes the member will retire at age 65. Members in PERS Plan 3 are immediately vested in the defined contribution portion of their plan, and can elect to withdraw total employee contributions adjusted by earnings and losses from investments of those contributions upon separation from PERS-covered employment. C. STATE PARTICIPATION IN PLANS ADMINISTERED BY DRS Public Employees’ Retirement System Plan Description. The Legislature established the Public Employees’ Retirement System (PERS) in 1947. PERS retirement benefit provisions are established in chapters 41.34 and 41.40 RCW and may be amended only by the Legislature. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior Courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. 29 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS members who joined the system by September 30, 1977, are Plan 1 members. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by either, February 28, 2002, for state and higher education employees, or August 31, 2002, for local government employees, are Plan 2 members unless they exercised an option to transfer their membership to PERS Plan 3. PERS participants joining the system on or after March 1, 2002, for state and higher education employees, or September 1, 2002, for local government employees, have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. Employees who fail to choose within 90 days default to PERS Plan 3. Refer to section B of this note for a description of the defined contribution component of PERS Plan 3. Benefits Provided. PERS plans provide retirement, disability, and death benefits to eligible members. PERS Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The monthly benefit is 2 percent of the average final compensation (AFC) per year of service capped at 60 percent. The AFC is the average of the member’s 24 highest consecutive service months. PERS Plan 1 members retiring from inactive status prior to the age of 65 may receive actuarially reduced benefits. Plan 1 members may elect to receive an optional cost of living allowance (COLA) that provides an automatic annual adjustment based on the Consumer Price Index. The adjustment is capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced. A member with five years of covered employment is eligible for non-duty disability retirement. Prior to the age of 55, the benefit amount is 2 percent of the AFC for each year of service. This is reduced by 2 percent for each year that the member’s age is less than 55. The total benefit is limited to 60 percent of the AFC. Plan 1 members may elect to receive an optional COLA amount based on the Consumer Price Index, capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced. PERS Plan 2 members are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. There is no cap on years of service credit and a COLA is granted based on the Consumer Price Index, capped at 3 percent annually. The AFC is the average of the member’s 60 highest paid consecutive months. PERS Plan 2 members have the option to retire early with reduced benefits. The defined benefit portion of PERS Plan 3 provides members a monthly benefit that is 1 percent of the AFC per year of service. There is no cap on years of service credit. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. Effective June 7, 2006, PERS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. 30 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS Plan 3 members have the option to retire early with reduced benefits. PERS members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Contribution requirements are established and amended by state statute. Members in PERS Plan 1 and Plan 2 can elect to withdraw total employee defined benefit contributions and interest thereon, in lieu of any retirement benefit, upon separation from PERS-covered employment. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Investment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in:    Expected annual return. Standard deviation of the annual return. Correlations between the annual returns of each asset class with every other asset class. 31 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Asset Class Fixed Income Tangible Assets Total 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent long-term estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates (including PERS Plan 2/3 employers whose rates include a component for the PERS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, the System reported $1,158,409 for its proportionate share of the collective net pension liability for PERS 1 and $351,380 for PERS 2/3. The System’s proportion for PERS 1 was 0.022976 percent, an increase of 0.002 percent since the prior reporting period, and 0.0174 percent for PERS 2/3, an increase of 0.0001 percent. The proportions are based on the System’s contributions to the pension plan relative to the contributions of all participating employers. 32 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of the System as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. PERS 1 T he Sy stem 's proportionate share of Net Pension Liability (Asset) 1 % Decrease $ 1 ,426,620 Current Discount Rate $ 1 ,1 57 ,409 1 % Increase $ 926,31 8 PERS 2/3 T he Sy stem 's proportionate share of Net Pension Liability (Asset) 1 % Decrease $ Current Discount Rate $ 1 ,465,681 351 ,380 1 % Increase $ (499,7 39) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, the System recognized a PERS 1 pension expense of $192,558, and recognized a PERS 2/3 pension expense of $(86,426). At June 30, 2014, PERS 1 and PERS 2/3 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Housing and Deferred Deferred Dining Sy stem Outflows of Resources Inflows of Resources PERS 1 Difference between ex pected and $ actual ex perience - $ - Changes of assumptions - - Net Difference between projected and actual earnings on pension plan inv estments - 1 44,7 27 - - 6,987 - Change in proportion Contributions subsequent to the measurement date Total $ 6,987 $ 1 44,7 27 33 HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Housing and Deferred Deferred Dining Sy stem Outflows of Resources Inflows of Resources PERS 2/3 Difference between ex pected and $ actual ex perience - $ - Changes of assumptions - - Net Difference between projected and actual earnings on pension plan inv estments - 37 2,466 4,257 - 1 44,025 - Change in proportion Contributions subsequent to the measurement date Total $ 1 48,282 $ 37 2,466 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: PERS 2/3 34 201 5 $ 946 201 6 $ 946 201 7 $ 946 201 8 $ 946 201 9 $ 47 3 Thereafter $ - HOUSING AND DINING SYSTEM NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 TABLE 1: Required Contribution Rates The required contribution rates (expressed as a percentage of current year covered payroll) at June 30, 2014 are as follows: Required Contribution Rates PERS State agencies, local gov ernmental units Administrativ e fee PERS Plan 1 UAAL Total Plan 1 9.03% 0.1 8% 0.00% 9.21 % Em ploy er Plan 2 Plan 3 4.98% 0.1 8% 4.05% 9.21 % 4.98% 0.1 8% 4.05% 9.21 % Plan 1 * Em ploy ee Plan 2 Plan 3 6.00% 4.92% ** *Plan 3 defined benefit portion only . **Variable from 5% to 1 5% based on rate selected by the member. N/A indicates data not applicable. NOTE 8. OTHER POST-EMPLOYMENT BENEFITS (OPEB) WWU funds OPEB obligations at a university-wide level on a pay-as-you-go basis. Disclosure information, as required under GASB 45, does not exist at department levels, and as a result, the actuarial accrued liability (AAL) is not available for auxiliary entities. WWU is responsible for the annual payment therefore, the annual required contribution (ARC) is not recorded on the System’s financial statements. 35 HOUSING AND DINING SYSTEM REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 RSI REQUIRED SUPPLEMENTARY INFORMATION 36 Unaudited HOUSING AND DINING SYSTEM REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Housing and Dining System’s Proportionate Share of the Net Pension Liability Schedule of Housing and Dining System Proportionate Share of the Net Pension Liability Public Employees' Retirement System (PERS) Plan 1 Measurement Date ended June 30 * 2014 Hous i ng & Di ni ng Sys tem PERS 1 empl oyers ' proportion of the net pens i on l i a bi l i ty 0.022976% Hous i ng & Di ni ng Sys tem PERS 1 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty $1,157,409 Hous i ng & Di ni ng Sys tem PERS 1 empl oyers ' covered-empl oyee pa yrol l $126,034 Hous i ng & Di ni ng Sys tem PERS 1 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty a s a percentage of i ts covered-empl oyee pa yrol l 918.33% Pl a n fi duci a ry net pos i tion a s a percentage of the total pens i on l i a bi l i ty 61.19% * As of June 30; thi s s chedul e i s to be bui l t pros pectivel y until i t contai ns ten yea rs of da ta. Unaudited 37 HOUSING AND DINING SYSTEM REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Housing and Dining System’s Proportionate Share of the Net Pension Liability Schedule of Housing and Dining System Proportionate Share of the Net Pension Liability Public Employees' Retirement System (PERS) Plan 2/3 Measurement Date ended June 30 * 2014 Hous i ng & Di ni ng PERS 2/3 empl oyers ' proportion of the net pens i on l i a bi l i ty Hous i ng & Di ni ng Sys tem PERS 2/3 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty Hous i ng & Di ni ng Sys tem PERS 2/3 empl oyers ' covered-empl oyee pa yrol l 0.017383% $351,380 $1,489,616 Hous i ng & Di ni ng Sys tem PERS 2/3 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty a s a percentage of i ts covered-empl oyee pa yrol l 23.59% Pl a n fi duci a ry net pos i tion a s a percentage of the total pens i on l i a bi l i ty 93.29% * As of June 30; thi s s chedul e i s to be bui l t pros pectivel y until i t contai ns ten yea rs of da ta. 38 Unaudited HOUSING AND DINING SYSTEM REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedule of Contributions Schedule of Contributions Public Employees' Retirement System (PERS) Plan 1 Fiscal Year Ended June 30 Housing and Dining System Contributions in relation to the Contractually Contractually Fiscal Required Required Year Contributions Contributions Contribution deficiency (excess) 2015 $ $ 6,987 $ 6,987 (0) $ Coveredemployee payroll Contributions as a percentage of coveredemployee payroll 75,861 9.21% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pectivel y until they contai n ten yea rs of da ta. Unaudited 39 HOUSING AND DINING SYSTEM REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedule of Contributions Schedule of Contributions Public Employees' Retirement System (PERS) Plan 2/3 Fiscal Year Ended June 30 Housing and Dining System Contributions in relation to the Contributions as a Contractually Contractually Contribution Covered- percentage of Fiscal Required Required deficiency employee covered- Year Contributions Contributions (excess) payroll employee payroll 2015 $ 142,679 $ 144,025 $ (1,346) $ 1,549,180 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pectivel y until they contai n ten yea rs of da ta. 40 Unaudited 9.30% HOUSING AND DINING SYSTEM OTHER INFORMATION June 30, 2015 and 2014 OTHER INFORMATION Unaudited 41 HOUSING AND DINING SYSTEM OTHER INFORMATION June 30, 2015 and 2014 SCHEDULE OF ROOM AND BOARD RATES YEAR ENDED JUNE 30, 2015 RESIDENCE HALLS Meals per Quarter Unlimited Room and Board Academic Year Contracts Double room/double occupancy Single room/single occupancy Double room/single occupancy (super single) Triple room/triple occupancy $10,042 $11,071 $11,664 $8,787 125 100 75 $9,662 $10,691 $11,284 $8,407 $9,290 $10,319 $10,912 $8,035 Double with 2/bedroom Super Single 1/bedroom $8,908 $9,937 $10,530 $7,653 APARTMENTS Family Rate Apartment only Academic Year Contracts Birnam Wood - 2 Bedroom Units 42 $3,186 Unaudited $6,360 $12,735 HOUSING AND DINING SYSTEM OTHER INFORMATION June 30, 2015 and 2014 SCHEDULE OF OCCUPANCY Year Ended June 30, 2015 ACTUAL OCCUPANCY AS A PERCENT OF OCCUPANCY CAPACITY ACTUAL Designed Operating Designed (1) Operating (2) OCCUPANCY Capacity Capacity Fall 2014 Winter 2015 Spring 2015 Average 4,159 4,159 4,159 4,045 4,045 4,045 4,009 3,833 3,676 96.4% 92.2% 88.4% 99.1% 94.8% 90.9% 4,159 4,045 3,839 92.3% 94.9% (1) Designed capacity is the number of students for which the Housing and Dining System was originally constructed and subsequently remodeled to accommodate. (2) Operating capacity is the number of students that can effectively be accomodated in an academic quarter based on housing policies in effect for that quarter. Unaudited 43 HOUSING AND DINING SYSTEM OTHER INFORMATION June 30, 2015 and 2014 SCHEDULE OF INSURANCE COVERAGE FISCAL 2015 WWU purchases buildings, contents and business interruption insurance for the Housing and Dining System through its participation in the State of Washington Master Property Insurance Program. The Housing and Dining System is responsible for 100% of its portion of the premium. Business interruption coverage is provided on earnings and rents from insured property and is included in the policy limits with a $32,500,000 sub-limit. Other highlights of insurance coverage are as follows:  Replacement cost coverage for all scheduled buildings for “all risk” of direct physical loss or damage, including earthquake and flood.  The policy limit is $100,000,000 per occurrence, with an aggregate limit of $100,000,000 for earthquake and flood damage. There is a $250,000 deductible per occurrence that increases to 3% of the value of damaged property subject to a $250,000 minimum for earthquake and flood damage.  Boiler and machinery insurance – State of Washington Program, $50,000,000 per accident, $5,000 deductible on insured objects and $50,000 deductible for property damage.  Third-party bodily injury and property damage liability insurance – State funded self-insurance liability program, $10,000,000 per occurrence, with a commercial excess liability insurance policy above, and zero deductible. The Housing and Dining System’s property insurance in effect at June 30, 2015 is summarized as follows: Ridgeway Residences and Commons Fairhaven Residences and Commons Buchanan Towers Edens Hall and Edens Hall North Viking Union, Additions and Commons Birnam Wood Residences Nash Hall Mathes Hall Higginson Hall Commissary Highland Hall Lakewood Student Center Building Insured Values Insured Contents Total System Values 44 Unaudited Insured Value $87,123,832 56,216,108 41,629,420 31,288,822 42,591,741 37,692,627 26,552,279 26,030,840 17,863,667 11,231,275 7,917,873 2,064,645 388,203,129 15,238,761 $403,441,890 HOUSING AND DINING SYSTEM OTHER INFORMATION June 30, 2015 and 2014 EXPENDED FOR PLANT FACILITIES FISCAL 2015 and 2014 Expenditures by the System to maintain and improve its facilities are listed below. Some of these projects are capitalized and increase the value of the System's buildings. Others are costs to maintain the buildings and infrastructure and are expensed. 2015 Capitalized Projects Mathes Fire Sprinklers Edens & Alpha Fire Sprinklers Nash Fire Sprinklers Buchanan Towers Mechanical Room Dining Capital Investment Projects Other capitalizable Kappa Sprinklers & Renovation Non-Capitalized Projects Painting Other Furniture & Carpet Equipment Bathroom & Shower renovations Fire Safety / Safety Corrections Door Replacements Plumbing, heating and electrical Roof Repair/Recoat/Replace Viking Union Projects ADA Upgrades Asbestos abatement & flooring Lighting Retrofits & Changes Media Installations Window repair/replacement Edens Main Floor Remodel Unaudited $ 2014 - 3,119,753 459,416 1,911 2,756,857 $1,907,604 1,401,405 928,150 671,030 321,469 176,790 $6,337,938 $5,406,449 $263,712 262,769 255,133 26,438 99,466 72,934 46,808 43,089 41,678 7,202 349 - $141,294 457,812 382,593 93,724 119,489 58,739 428,716 266,537 9,991 78,753 25,640 73,899 4,340 341,407 46,021 - $1,119,577 $2,528,955 45 This page intentionally left blank WADE KING STUDENT RECREATION CENTER Table of Contents Management’s Discussion and Analysis…………………………….……………………………3 Independent Auditor’s Report ...................................................................................................... 12 Financial Statements Statement of Net Position ........................................................................................................... 15 Statement of Revenues, Expenses and Changes in Net Position ................................................ 16 Statement of Cash Flows ............................................................................................................ 17 Notes to the Financial Statements............................................................................................... 19 Required Supplementary Information Schedules of Recreation Center’s Proportionate Share of the Net Pension Liability................. 39 Schedules of Contributions ......................................................................................................... 41 This page intentionally left blank WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Overview Western Washington University Wade King Student Recreation Center (the Recreation Center) is a state of the art open recreation fitness and wellness facility that has been created and shaped by the vision and support of Western Washington University (WWU) students. The Recreation Center was one of the nation’s first recreation centers designed to meet Leadership in Energy and Environmental Design (LEED). The following discussion and analysis provides an overview of the financial position and activities of the Recreation Center for the fiscal years ended June 30, 2015, 2014 and 2013. This discussion has been prepared by management and should be read in conjunction with the financial statements and accompanying notes which follow this section. Using the Financial Statements The Recreation Center’s financial reports include the Statement of Net Position, the Statement of Revenues, Expenses and Changes in Net Position and the Statement of Cash Flows. The statements are prepared in accordance with Governmental Accounting Standard Board (GASB) principles, which establish standards for external financial reporting for public colleges and universities. The financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when an obligation has been incurred. Statement of Net Position The Statement of Net Position presents the financial condition of the Recreation Center at the end of the fiscal year and report all assets and liabilities of the Recreation Center. The amounts in these statements represent the assets available to continue the operations of the Recreation Center and identify the amount owed to vendors and other parties. The difference between assets, deferred outflows, liabilities and deferred inflows is net position. Net position is one indicator of the current financial condition of the Recreation Center. Below is a condensed view of the Statements of Net Position as of June 30, 2015, 2014 and 2013: 3 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS Deferred Outflows Liabilities Current liabilities Noncurrent liabilities Total liabilities Deferred Inflows Net Position Net investment in capital assets Restricted for system renewal and replacements Restricted for capital projects Unrestricted Total net position 2013 2014 2015 Assets Current assets Noncurrent assets Capital assets, net Total assets June 30, 2015 and 2014 $690,260 $780,468 $1,988,552 2,771,684 2,689,285 3,633,133 22,941,211 23,580,776 21,662,553 26,403,155 27,050,529 27,284,238 450,643 467,604 500,022 1,195,236 1,225,332 790,700 23,600,069 24,056,000 24,782,393 24,795,305 25,281,332 25,573,093 104,519 - - (652,329) (707,620) (1,907,691) 2,334,830 2,139,260 1,976,548 - - 712,127 271,473 805,161 1,430,183 $1,953,974 $2,236,801 $2,211,167 Total current assets decreased $90,208 (-11.6%) and $1,208,084 (-60.8%) when comparing fiscal 2015 to fiscal 2014 and fiscal 2014 to fiscal 2013. These decreases were primarily due to funding the team rooms adjacent to Harrington Field during fiscal 2015 and the Harrington Field project during fiscal 2014 which lowered cash and cash equivalents. The receivable from the Western Washington University Foundation (the Foundation) decreased in fiscal 2015 by $2,709 (-19.5%) and decreased $22,711 (-62.0%) during fiscal 2014 due to the purchase of equipment out of the Wade King Foundation fund. Total noncurrent assets, excluding capital assets net, increased $82,399 (3.1%) during fiscal 2015 primarily due to an increase in restricted long-term investments as the Recreation Center continues to build the appropriate level of reserves. Total noncurrent assets, excluding capital assets net, decreased $943,848 (-26.0%) during fiscal 2014 as cash and investments were used to fund the Harrington Field project. During fiscal 2015, capital assets, net decreased $639,565 (-2.7%) due to the addition of team rooms at Harrington Field and depreciation. Capital assets, net balance increased by $1,918,223 (8.9%) during fiscal 2014 due to completion of the Harrington Field project. The construction of Harrington Field, a new multipurpose artificial turf field, was completed in fiscal 2014 at a total cost of $6.35 million (including capitalized interest), $3.4 million of which was funded by the Recreation Center. The project has created a fully lighted and fenced artificial turf play field that is sized for regulation soccer and will serve as the new home of WWU’s NCAA Division II men’s and women’s soccer teams. It also will be 4 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 an important resource for WWU’s recreation programs by servicing the growing needs of the intramural and sport club system. The Recreation Center contributed significant reserve funds as well as up front savings from refinancing its bonds. During fiscal 2015, the Recreation Center contributed an additional $260,000 from its reserves to assist in funding the addition of team rooms and storage space at Harrington Field in partnership with WWU. Current liabilities decreased $30,096 (-2.5%) during fiscal 2015 primarily due to reduced accounts payable and unearned revenue balances offset by an increase in the current portion of bond payable. Current liabilities increased $434,632 (55.0%) in fiscal 2014 due to the current portion of long-term debt offset by a decrease in accounts payable for the remaining Harrington Field invoices. Non-current liabilities decreased $455,931 (-1.9%) in fiscal 2015 and $726,393 (-2.9%) in fiscal 2014. The decrease in fiscal 2015 was due to the scheduled debt service principal payment of $700,000 combined with the $295,414 pension liability. During fiscal 2015, the Recreation Center adopted GASB Statement No. 68 Accounting and Financial Reporting for Pensions. This statement requires the Recreation Center to present its share of the net pension liability for the pension plans administered by the Department of Retirement System (See note 5). The decrease in fiscal 2014 was due to the Series 2012 bond amortization and the current portion of principal payments. No principal payments were scheduled until fiscal 2015 due to the 2012 bond refunding for debt service savings, which was committed as one of the funding sources for the Harrington Field project. Total net position decreased $282,827 (-12.6%) in fiscal 2015 primarily due to the restatement of $377,546 as part of the adoption of GASB Statement No. 68 (See note 1 and 5). Total net position increased $25,634 (1.2%) in fiscal 2014. The amount invested in capital assets, net of related debt continues to increase as the Recreation Center facility is depreciating at a faster rate than the related debt is repaid. Assets restricted for system renewals and replacements increased over the two prior fiscal years as contributions to this fund exceeded expenditures. Funds for renewal and replacement are set aside according to the capital and maintenance plan required by the debt covenants. These funds are classified as restricted on the Statement of Net Position. Statement of Revenues, Expenses, and Changes in Net Position The changes in total net position, as presented on the Statement of Net Position, are detailed in the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The statement presents the Recreation Center’s results of operations. In accordance with GASB reporting principles, revenues and expenses are classified as operating or non-operating. In general, operating revenues are those received for providing goods and services to the members of the Recreation Center, primarily students. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues. Non-operating revenues are monies received for which goods and services are not provided, such as investment income. Non-operating expenses include interest expense on outstanding debt and amortization of bond premium. Following is a condensed version of the Statement of Revenues, Expenses and Changes in Net Position for the fiscal years ended June 30, 2015, 2014 and 2013: 5 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS 2015 Operating revenues Operating expenses Income from operations Nonoperating revenues Nonoperating expenses Increase in net assets Net position, beginning of year Restatement Net position, beginning of year restated Net position, end of year June 30, 2015 and 2014 2014 2013 $ 4,525,656 $ 4,321,348 $ 4,327,749 (3,520,079) (3,376,104) (3,244,359) 1,005,577 945,244 1,083,390 17,885 11,765 1,022,451 (928,743) (931,375) (1,020,109) 94,719 25,634 1,085,732 2,236,801 2,211,167 2,134,238 (377,546) 1,859,255 $ 1,953,974 (1,008,803) 2,211,167 $ 2,236,801 1,125,435 $ 2,211,167 Revenues The Recreation Center’s largest source of revenue is a $99 per quarter mandatory service and activity fee entitled the “Student Recreation Fee” for use of the facility for those students taking six or more credits on WWU’s main campus. During fiscal 2015, the academic yearly average (AYA) of students taking 6 or more credits increased to 13,543 from 13,262. During fiscal 2014, AYA increased by 106 students. Other students, faculty, staff and alumni may pay a membership fee on a voluntary basis to gain access to the facility. The AYA does not include summer term. The fiscal 2015 mandatory fee increased by $4 per quarter from fiscal 2014. The fee remained $95 per quarter between fiscal 2013 and fiscal 2014. The increase in membership fees to $226,449 in fiscal 2015 from $219,779 in fiscal 2014 is primarily due to the voluntary membership fee increases which are based on the mandatory fee increase. Membership fees decreased to $219,779 in fiscal 2014 from $253,487 in fiscal 2013 primarily due to the fewer sponsored and faculty/staff memberships. This was attributed to a new Bellingham fitness facilities providing the community with additional options. For the second consecutive year instructional course fees decreased as there were fewer classes and personal training sales. These course fees decreased $20,959 during fiscal 2015 and $11,571 from fiscal 2014 to fiscal 2013. Rental revenue for fiscal 2015 increased by $15,220 primarily due to new marketing changes that promoted more usage of the facility by outside groups, specifically additional graduation night rentals. Conversely, rental revenue decreased by $12,221 between fiscal 2014 and fiscal 2013 due to a loss of two high school graduation parties. Other course fees decreased significantly because of the absence of our largest summer sport camp, rugby. The lack of a rugby camp decreased other course revenue by $13,563 between fiscal 2015 and fiscal 2014. Other course fee revenue increased by $24,412 between fiscal 2013 and fiscal 2014 due to the addition of our first summer rugby sport camp. 6 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 7 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Expenses The largest category of expenses for the Recreation Center is student and staff salaries and benefits, with depreciation being the second largest expense. Salaries and benefits comprised 44.5% of the total operating expenses in fiscal 2015 compared to 45.1% and 46.8% in fiscal 2014 and fiscal 2013, respectively. The increase of $45,247 in salaries and benefits in fiscal 2015 was due to increased student employment opportunities to assist with paraprofessional duties as well as a salary adjustment for the department’s Director. The previous fiscal year saw a moderate increase of $3,384 in salaries and benefits from fiscal 2013 to fiscal 2014. This increase was due to additional student employee opportunities. Total utility expense for fiscal 2015 was $281,628, a decrease of $1,477. This small decrease in utility expense was a net result of a decrease in water and sewer expense and an increase in refuse and disposal fees. Total utility expense for fiscal 2014 was $283,105, an increase of $944 from fiscal 2013 due to higher usage of water and sewer combined with a decrease in refuse and disposal. Repairs and maintenance decreased in fiscal 2015 by $33,536 from fiscal 2014. This is attributed to less facility maintenance and repair projects. In fiscal 2014 repairs and maintenance expenses increased by $52,151 over fiscal 2013 due to additional facility projects, such as aerobic room floor refinishing. The Recreation Center has an equipment replacement plan that budgets $100,000 per year in equipment replacement and refurbishment. The Recreation Center spent $51,929 in fiscal 2015 to maintain its equipment needs. This was a decrease of $14,565 from $66,494 in fiscal 2014, which in turn was a decrease of $48,979 from $115,473 in fiscal 2013. Supplies and materials expenses was decreased by $9,105 in fiscal 2015. This decrease is attributed to sufficient supplies and materials held over from the previous year. This same category decreased slightly by $1,047 to $71,264 in fiscal 2014 from $72,311 in fiscal 2013. WWU’s administrative services assessment fee (ASA) increased to 5.5% of revenues in fiscal 2015 from 5.0% in fiscal 2014. This expense was $245,677 in fiscal 2015, a $32,228 increase from $213,449 in fiscal 2014. During fiscal 2014, the ASA was increased from 4.5% to 5.0% resulting in an increase of $20,028. Depreciation expense increased to $957,127 in fiscal 2015 from $765,530 in fiscal 2014 due to the addition of the Recreation Center’s portion of the Harrington Field which had its first full year of service. Depreciation expense increased $33,514 during fiscal 2014 as the Harrington Field project was placed into service towards the end of last fiscal year in May 2014. 8 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 9 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Total Utility Expense Fiscal 2015, 2014, and 2013 $6,017 $5,045 $5,470 Refuse & Disposal $10,433 $10,762 $11,062 Telephone $22,315 $23,462 $21,247 Water/Sewer FY13 FY 14 FY 15 $82,292 $82,534 $82,547 Steam $161,104 $161,302 $161,302 Electricity $282,161 $283,105 $281,628 Total Utilities $- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Reserve Funds Bond Covenants require an annual addition to the renewal and replacement (R&R) reserve based on management’s assessment of the funding level necessary to maintain the facility over the long term. The initial five-year requirement was for fund transfers of $100,000 in 2004, $150,000 in each of 2005 and 2006, and $200,000 in 2007 and 2008. All of the transfers were made as planned including an additional $190,000 (unrestricted) amount in fiscal 2004 as a result of bond defeasance. Management reaffirmed the Facilities Management lifecycle maintenance plan for major maintenance and building repair and increased the annual contribution to $250,000 beginning in fiscal 2009 to meet anticipated building maintenance and repairs expenses. As planned, $250,000 was placed into the R&R reserve for fiscals 2015, 2014, and 2013. Various maintenance projects over the course of fiscal 2015 reduced the reserve amount by $63,996. At June 30, 2015, the R&R balance was $2,568,805. The funds must be used to improve or maintain the Recreation Center facility. Management established an Operating Reserve in fiscal 2005 for unforeseen or extraordinary expenses. The reserve acts as an emergency fund for unplanned repairs, insurance deductibles, and as an operating cushion to cover unforeseen decreases in revenue. Reserve funds can also be designated for facility improvements beyond basic maintenance or for the purchase of new equipment. In fiscal 2015, $7,081 was spent on non-capital equipment compared to $11,701 in fiscal 2014. The Recreation Center transferred $260,000 to the Team Rooms project expansion of the Harrington Field (formerly known as the Multipurpose Field) in fiscal 2015 as well as $600,000 to the original Harrington Field project in fiscal 2013. Contributions to this reserve in the past three years include $100,000 in fiscal 2015 and $0 in fiscal 2014 and fiscal 2013. At June 30, 2015 the Operating Reserve balance was $526,214. 10 WADE KING STUDENT RECREATION CENTER MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 The King family made an annual donation of $50,000 over the first seven years of their gift commitment, totaling $350,000. Their annual contribution to the Recreation Center was restructured in fiscal 2011 as an estate gift. This Foundation reserve fund is dedicated to maintaining the quality of the facility and its programs, and supports students directly as well. During fiscal 2015, $2,709 was spent on non-capital equipment to improve the weight and fitness areas. While $22,711 was spent on similar equipment to improve the weight and fitness areas in fiscal 2014, no money was spent out of this fund in fiscal 2013. Portions of the donations have been used in the past for youth programming scholarships and certain equipment upgrades. The available balance maintained by the Foundation at June 30, 2015 was $11,203. These assets are reported as unrestricted on the Statement of Net Position. Ratio Analysis Ratios can be helpful in evaluating the Recreation Center’s financial health and performance. The debt service coverage ratios for fiscal 2015, 2014, and 2013 were 2.80, 4.67, and 4.68 respectively. The higher ratios in fiscal 2014 and fiscal 2013 were due to the intentional structuring of bond debt payments to include interest only in support of funding the Harrington Field. This ratio is calculated by dividing total operating revenues and investment income by the actual annual debt service paid during the fiscal year on the outstanding revenue bonds. The debt services amounts for fiscal years 2015, 2014 and 2013 were $1,625,350, $925,350, and $927,920 respectively. Bond covenants require a debt service ratio of 1.25. Utilization Rates Student utilization rates increased with 13,016 (96.1%) of the estimated 13,543 AYA enrolled students using the facility during the course of fiscal 2015. This utilization rate was higher than the 12,135 (91.5%) of the estimated 13,262 AYA enrolled students who utilized the recreation center in fiscal 2014 but lower than the 13,045 (99.2%) of the 13,470 AYA who utilized the recreation center in fiscal 2013. AYA does not include summer term. Utilization information is recorded in the Recreation Center’s system when students present their membership cards upon entry to the facility. Visits by members and non-members totaled 414,199 during fiscal 2015, compared with 436,933 during fiscal 2014 and 422,709 in fiscal 2013. The highest number of visits in a given day exceeded 3,000 in fiscal 2015. This is a slight drop from 3,200 which was the highest number of visits in a given day in fiscal 2014 and 3,100 visits recorded in fiscal 2013. 11 Washington State Auditor’s Office INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS Board of Trustees Western Washington University Wade King Student Recreation Center Bellingham, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the Western Washington University Wade King Student Recreation Center (the Recreation Center), Whatcom County, Washington, as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the Recreation Center’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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. Auditor’s Responsibility 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 the standards applicable to financial audits contained in 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 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 auditor’s 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 Recreation Center’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 Recreation Center’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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Western Washington University Wade King Student Recreation Center, as of June 30, 2015 and 2014, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 1, the financial statements of the Western Washington University Wade King Student Recreation Center, a department of the University, are intended to present the financial position, and the changes in financial position, and cash flows of only the respective portion of the activities of the University that is attributable to the transactions of the Recreation Center. They do not purport to, and do not, present fairly the financial position of the University as of June 30, 2015 and 2014, the changes in its financial position, or its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. As discussed in Note 1 to the financial statements, in 2015, the Recreation Center adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and the schedules of Recreation Center’s proportionate share of the net pension liability and schedules of contributions pension trust fund information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2015 on our consideration of the Recreation Center’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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Recreation Center’s internal control over financial reporting and compliance. JAN M. JUTTE, CPA, CGFM ACTING STATE AUDITOR OLYMPIA, WA November 16, 2015 WADE KING STUDENT RECREATION CENTER STATEMENT OF NET POSITION June 30, 2015 and 2014 Assets Current assets Cash and cash equivalents (Note 2) Investments (Note 2) Accounts receivable, net of allowance of $10,285 in 2015 and $10,104 in 2014 Receivable from Western Washington University Foundation, net Inventory Total current assets Noncurrent assets Investments (Note 2) Restricted cash and cash equivalents (Note 2) Restricted investments (Note 2) Capital assets, net (Note 3) Total noncurrent assets Total assets 2015 $390,833 222,997 $512,499 177,968 62,059 71,447 11,203 3,168 690,260 13,912 4,642 780,468 436,855 868,090 1,466,739 22,941,211 25,712,895 26,403,155 550,025 883,514 1,255,746 23,580,776 26,270,061 27,050,529 14,528 436,115 450,643 467,604 467,604 4,454 173,147 140,160 152,475 725,000 1,195,236 46,392 154,395 170,320 154,225 700,000 1,225,332 295,414 23,304,655 23,600,069 24,795,305 24,056,000 24,056,000 25,281,332 Deferred Outflows Relating to pensions Deferred loss on bond refunding (Note 5) Liabilities Current liabilities Accounts payable and accrued expenses Accrued wages and benefits Unearned revenue Interest payable Current portion of bonds payable (Note 4) Total current liabilities Noncurrent liabilities Net pension liability (Note 5) Bonds payable, less current portion (Note 4) Total noncurrent liabilities Total liabilities Deferred Inflows Relating to pensions (Note 5) Total deferred inflows 104,519 104,519 Net Position Net investment in capital assets Restricted for system renewals and replacements Restricted for capital projects Unrestricted Total net position 2014 (652,329) 2,334,830 271,473 $1,953,974 See Notes to the Financial Statements - (707,620) 2,139,260 805,161 $2,236,801 15 WADE KING STUDENT RECREATION CENTER STATEMENT OF REVENUES, EXPENSES & CHANGES IN NET POSITION Operating Revenues Service and activity fees, net of mandatory transfer Staff, faculty and alumni membership fees Instructional course fees Other course fees Rental revenue Other revenues Total operating revenues Operating Expenses Salaries and benefits Depreciation Utilities Repairs and maintenance Equipment and furnishings Supplies and materials Administrative assessment Insurance Other Total operating expenses Income from operations 2015 2014 $4,041,379 226,449 108,121 21,780 65,516 62,411 4,525,656 $3,824,065 219,779 129,080 35,343 50,296 62,785 4,321,348 1,567,699 957,127 281,628 160,229 51,929 62,159 245,677 17,443 176,188 3,520,079 1,005,577 1,522,452 765,530 283,105 193,765 66,494 71,264 213,449 38,407 221,638 3,376,104 945,244 17,885 (923,600) (5,143) (910,858) 94,719 11,745 20 (925,350) (6,025) (919,610) 25,634 Nonoperating Revenues (Expenses) Investment income Gift income Interest expense Amortization of bond premiums Total nonoperating revenues (expenses) Increase in net assets Net Position, Beginning of Year Restatement (Note 1) Net Position, Beginning of Year, as restated Net Position, End of Year 16 June 30, 2015 and 2014 2,236,801 2,211,167 (377,546) 1,859,255 2,211,167 $1,953,974 $2,236,801 See Notes to the Financial Statements WADE KING STUDENT RECREATION CENTER STATEMENT OF CASH FLOWS June 30, 2015 and 2014 2015 Cash Flows from Operating Activities Cash received from students and other customers Payments to employees Payments to suppliers Net cash flows provided by operating activities Cash Flows from Noncapital Financing Activities Gift Income from the Foundation Net cash flows provided by(used in) noncapital financing activities Cash Flows from Investing Activities Net purchases of investments in internal investment pool Investment income received Net cash flows provided by investing activities activities Cash Flows from Capital and Related Financing Activities Purchases of equipment Interest paid on capital debt Principal paid on capital debt Net cash used in capital and related financing Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Reconciliation of Operating Income to Net Cash Provided to Operating Activities Income from operations Adjustments to reconcile operating income to net cash flows from operating activities Depreciation Net pension expense Change in operating assets and liabilities Accounts receivable Accounts receivable Accounts payable, accrued expenses, salaries and benefits Prepaid Expense Unearned revenue Inventory Net cash flows provided by operating activities See Notes to the Financial Statements 2014 $4,504,884 (1,541,088) (1,035,717) 1,928,079 $4,320,444 (1,522,424) (1,375,654) 1,422,366 2,709 22,731 2,709 22,731 (142,852) 17,885 1,237,377 11,745 (124,967) 1,249,122 (317,562) (925,349) (700,000) (1,942,911) (2,683,753) (925,349) (3,609,102) (137,090) (914,883) 1,396,012 $1,258,922 2,310,895 $1,396,012 $1,005,577 $945,244 957,127 7,859 765,530 9,388 (23,186) (30,160) 1,474 $1,928,079 (23,095) (287,560) 355 22,191 (299) $1,422,366 17 This page intentionally left blank WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization The Western Washington University Wade King Student Recreation Center (the Recreation Center) is a selfsupporting, auxiliary enterprise of Western Washington University (WWU). The Recreation Center is an open recreation fitness and wellness facility for the benefit of eligible students and associated members of WWU. The facility includes a lap/leisure pool and a whirlpool, a three-court gym with elevated running track, a multi-activity court, a rock climbing wall, weight and cardio areas, two group exercise/aerobic rooms, locker rooms, an injury rehabilitation room, a retail food service and lounge area, a conference room, and administrative offices for the Department of Campus Recreation. The Recreation Center is located on WWU campus and is supported by a service and activity fee assessed to students quarterly. In addition, memberships are available for purchase by faculty/staff, alumni, and others closely associated with WWU. The facility was named in memory of Wade King, a 10-year old who died in 1999 in a pipeline explosion in Bellingham. Prior to fiscal 2011, Wade King’s parents, Frank and Mary King, pledged a lifetime gift of $50,000 per year to the Western Washington University Foundation, a related party, restricted for support to ensure continued quality facilities and programs at the Recreation Center. The Recreation Center requests funds from the Western Washington University Foundation when expenditures are incurred. This gift has been restricted to an estate gift. Financial Statement Presentation The financial statements are presented in accordance with generally accepted accounting principles and follow the guidance given by the Governmental Accounting Standards Board (GASB). These statements are special purpose reports reflecting the net position, results of operations and cash flows of the Recreation Center. These statements present only a selected portion of the activities of WWU. As such, they are not intended to and do not present either the financial position, results of operations, or changes in net position of WWU. Basis of Accounting The Recreational Center's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when an obligation has been incurred. Cash, Cash Equivalents and Investments WWU records all cash and cash equivalents at cost. Investments held by WWU are recorded at fair value. To maximize investment income, WWU combines funds from all departments into an investment pool. The Recreation Center records their share of cash, cash equivalents and investments in the same relation as WWU investment pool itself. Investment income is allocated to the Recreation Center in proportion to its average balance in the investment pool. Inventory Inventory consists primarily of athletic and other supplies. Inventory is stated at the lower of cost (first-in, firstout method) or market. 19 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Accounts Receivable Receivables are recorded at their principal balances and are due primarily from WWU students. The Recreation Center considers all accounts greater than 30 days old to be past due and uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. Management determined that an allowance of $10,285 and $10,104 at June 30, 2015 and 2014 respectively, is adequate. Building and Equipment, Net The building used for the Recreation Center's operations is located on WWU’s property. Building and equipment are stated at cost, net of accumulated depreciation. The Recreation Center capitalizes any expenditure for buildings, improvements, and equipment that have a cost of at least $5,000 and an estimated useful life of more than one year. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets, forty years for buildings and five to seven years for equipment. Deferred Outflows of Resources and Deferred Inflows of Resources The Recreation Center classifies losses on retirement of debt as deferred outflows of resources and amortizes such amounts as a component of interest expense over the remaining life of the old debt, or the new debt, whichever is shorter. Changes in net pension liability not included in pension expense are reported as deferred outflows of resources or deferred inflows of resources, Employer contributions subsequent to the measurement date of the net pension liability are reported as deferred outflows of resources. Unearned Revenue Summer quarter, which is the first quarter of WWU’s fiscal year, begins shortly before June 30. The majority of cash received for service and activity fees related to summer session in fiscal 2015 are recorded as unearned revenue until the following fiscal year when the revenue is earned. Net Pension Liability The Recreation Center's net pension liability is for its defined benefit plans. The net pension liability is measured as the total pension liability, less the amount of the pension plan’s fiduciary net position. The fiduciary net position and changes in net position of the defined benefit plans has been measured consistent with the accounting policies used by the plans. The total pension liability is determined based upon discounting projected benefit payments based on the benefit terms and legal agreements existing at the pension plan’s fiscal year end. Projected benefit payments are discounted using a single rate that reflects the expected rate of return on investments, to the extent that plan assets are available to pay benefits, and a tax-exempt, high-quality municipal bond rate when plan assets are not available. Pension expense is recognized for benefits earned during the period, interest on the unfunded liability and changes in benefit terms. The differences between expected and actual experience and changes in assumptions about future economic or demographic factors are reported as deferred inflows or outflows and are recognized over the average expected remaining service period for employees eligible for pension benefits. The differences between expected and actual returns are reported as deferred inflows or outflows and are recognized over five years. 20 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Restatement of prior period During fiscal 2015, the Recreation Center adopted GASB Statement No. 68 – Accouting and Financial Reporting for Pensions – An Amendment of GASB Statement No. 27. Adoption of this statement required the Recreation Center to restate the earliest period presented however, the information provided by the Office of State Actuary (OSA) only allowed the Recreation Center to restate the beginning fiscal 2015 net position. This restatement resulted in a reduction to net position in the amount of $377,546. During fiscal 2014, it was decided with the completion of the Harrington Field project that the asset will be split between the Recreation Center and WWU based upon the amount of funding provided by each entity. As such, the Recreation Center recorded 52.8% of the capital asset. The restatement resulted in a total decrease in net position of $1,960,019 for fiscal 2013 due to the reduction of WWU capital contribution as well as the net present value of the Foundation pledge. Net Position The Recreation Center's net position is classified as follows: Net investment in capital assets. This represents the Recreation Center's total investment in capital assets, net of outstanding debt obligations related to those capital assets as well as unamortized bond issue costs. The deficit in this net position relates to depreciation expense exceeding the principal reduction on the outstanding bonds. Restricted for system renewals and replacements. Restricted net position represent resources restricted in accordance with bond covenants for system renewals and replacements. Restricted assets are used in accordance with their requirements and where both unrestricted and restricted resources are available for use, unrestricted resources are used first and restricted resources only when the specific use arises. Unrestricted net position. Unrestricted net position represent resources derived from operations and investing activities along with operating reserves established for future replacement of assets. Restricted for capital projects. Restricted for capital projects net position represent resources that are restricted by bond covenants and contracts to be used for the Harrington Field project. Classification of Revenues and Expenses The Recreation Center has classified its revenues and expenses as either operating or nonoperating according to the following criteria: Operating revenue includes activities that have the characteristics of exchange transactions, such as service and activity fees charged to students, staff, faculty, and alumni membership fees, and instructional course fees. Operating expenses are those costs incurred in daily operations, such as salaries, utilities, and depreciation. Nonoperating revenue includes activities that have the characteristics of non-exchange transactions, such as investment and gift income. Nonoperating expenses include costs related to financing or investing activities such as interest on indebtedness. Student Recreation Center Fee, net of mandatory transfer Per Revised Code of Washington Section 28B.15.820, WWU is required to transfer a minimum of 3.5% of revenues collected from tuition and services and activities fees into an institutional financial aid fund. This fund is only to be used to fund short- or long-term loans and grants to students in need. Service and activity 21 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 fee revenue is reported net of this transfer. Bond Premiums Bond premiums are deferred and amortized over the term of the bonds using the effective interest method. The remaining balances of bond premiums are presented as an increase of the face amount of bonds payable. Administrative Assessment WWU provides support to the Recreation Center through cash and bond debt management, accounting, purchasing and disbursing services, risk management, human resources and other support services. The effects of these transactions are included as operating expenditures in these financial statements. The amount paid was $245,677 and $213,449 for fiscal years ended June 30, 2015 and 2014, respectively, and is based on 5.5% and 5.0% of revenues, respectively. Tax Exemptions WWU, and the Recreation Center as an auxiliary enterprise, is a tax-exempt instrumentality of the State of Washington under Section 115(a) of the Internal Revenue Code and is exempt from federal taxes on related income. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2. CASH, CASH EQUIVALENTS, AND INVESTMENTS Interest Rate and Credit Risk The Recreation Center’s operating cash is part of WWU’s internal investment pool. The pool is invested in demand deposits, time certificates of deposit, the Washington State Local Government Investment Pool (LGIP) and U.S. Treasury and Agency securities. The LGIP is comparable to a Rule 2a-7 money market fund recognized by the Securities and Exchange Commission (17CFR.270.2a-7). Rule 2a-7 funds are limited to high quality obligations with limited maximum and average maturities, the effect of which is to minimize both market and credit risk. The LGIP is an unrated investment pool. Bank balances (including time certificates of deposit) are insured by the Federal Deposit Insurance Corporation (FDIC) or by a collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). U.S. Treasury and Agency securities are rated AA+ by Standard & Poor’s and Aaa by Moody’s Investors Service. WWU manages its exposure to fair value losses in the internal investment pool by targeting the portfolio duration to 2.25 years and limiting the weighted average maturity to a maximum of three years. WWU generally does not invest operating funds in securities maturing more than five years from the date of purchase. The Recreation Center’s investment in WWU’s pool includes $2,334,829 restricted for renewals and replacements. 22 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS Weighted Average Maturity (in years) June 30, 2015 Cash and Cash Equivalents June 30, 2015 and 2014 June 30, 2014 Weighted Average Maturity (in years) $1,258,923 0.001 $1,396,013 0.001 Certificates of deposit 180,548 1.033 196,112 2.033 U.S. Treasury 596,934 2.410 162,607 1.085 U.S. Agencies 1,349,109 $3,385,514 1.614 1,625,019 $3,379,751 2.657 Investments NOTE 3. CAPITAL ASSETS, NET The depreciation expense for the fiscal years ended June 30, 2015 and 2014 was $957,127 and $765,530, respectively. Following are the changes in capital assets for the years ended June 30, 2015 and 2014: June 30, 2014 Non-Depreciable Construction in Progress Depreciable Building Equipment Improvements Less accumulated depreciation Capital assets, net $ Additions - Depreciable Building Equipment Improvements Less accumulated depreciation Capital assets, net - 27,687,761 348,698 3,357,078 31,393,537 260,000 57,562 317,562 (7,812,761) $23,580,776 (957,127) ($639,565) June 30, 2013 Non-Depreciable Construction in Progress $ Reductions $666,247 Additions $ $ June 30, 2015 - $ $ - - 27,947,761 406,260 3,357,078 31,711,099 - (8,769,888) $22,941,211 Reductions June 30, 2014 - ($666,247) $ - 27,687,761 348,698 7,078 28,709,784 3,350,000 3,350,000 (666,247) 27,687,761 348,698 3,357,078 31,393,537 (7,047,231) $21,662,553 (765,530) $2,584,470 ($666,247) (7,812,761) $23,580,776 23 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 4. BONDS PAYABLE The Recreation Center issued the Revenue and Refunding Bonds Series 2012 in April 2012. The bonds bear interest at rates of 3.0% to 4.1% and mature annually until 2037. The bonds have an aggregate face amount of $23,685,000 and $24,385,000 at June 30, 2015 and 2014, which is reported net of the unamortized original issue premium of $344,655 and $371,000 respectively. Aggregate maturities or payments required for principal and interest under bond obligations for each of the succeeding five fiscal years and thereafter are as follows: Principal 2016 $ Interest 725,000 $ Payment 904,350 $ 1,629,350 2017 750,000 882,600 1,632,600 2018 770,000 860,100 1,630,100 2019 795,000 837,000 1,632,000 2020 815,000 813,150 1,628,150 2021-2025 4,540,000 3,603,475 8,143,475 2026-2030 5,520,000 2,633,800 8,153,800 2031-2035 6,700,000 1,438,600 8,138,600 2036-2037 3,070,000 185,400 3,255,400 23,685,000 12,158,475 35,843,475 Plus unamortized premium 344,655 Total 24 $ 24,029,655 Ⓑ $ 12,158,475 $ 35,843,475 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Following are the changes in bonds payable: Beginning Balance Additions and Amortizations of Bond Premium As of June 30, 2015 - Series 2012 Revenue Refunding Bonds, net of unamortized original issue premium of $344,655 and $371,000 at June 30, 2015 and 2014 respectively. $24,756,000 ($26,345) As of June 30, 2014 - Series 2012 Revenue Refunding Bonds, net of unamortized original issue premium of $371,000 and $397,393 at June 30, 2014 and 2013 respectively. $24,782,393 ($26,393) Retirements ($700,000) $ - Ending Balance Current Portion $24,029,655 $725,000 $24,756,000 $700,000 In accordance with resolutions of the Board of Trustees, WWU sold the Recreation Center Bonds to investors who have a first lien on, and are to be paid solely from the gross revenue from the operation of the Recreation Center. The amounts and limitations of this pledge are set forth in the resolutions of the Board of Trustees. The bond covenants require that the Recreation Center transfer monies each year to an account held as restricted net position for renewals and replacements of the facilities. NOTE 5. PENSION PLAN A. SUMMARY WWU offers five defined benefit pension plans and three defined benefit/defined contribution plans: the Washington State Public Employees' Retirement System (PERS) plans 1-3, the Washington State Teachers Retirement System (TRS) plans 1-3, the Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) plan 1 and the Western Washington University Retirement Plan (WWURP). Recreation Center employees in eligible positions are participants in WWURP, PERS plans 2 and 3, and TRS plan 1. The Recreation Center contributes to PERS and TRS cost sharing multiple-employer defined benefit pension plans administered by the State of Washington Retirement System. Refer to sections B and C of this note for descriptions of the plans. The Recreation Center contributed $62,298, $55,534 and $50,485 to these plans in fiscal 2015, 2014 and 2013, respectively. Actuarial valuations of the plans for the Recreation Center as a stand-alone entity are not available. The Recreation Center implemented Statement No. 68 of the Governmental Accounting Standards Board (GASB) Accounting and Financial Reporting for Pensions for the fiscal year 2015 financial reporting. The Recreation Center’s defined benefit pension plans were created by statutes rather than through trust documents. With the 25 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 exception of the supplemental defined benefit component of the higher education retirement plan, they are administered in a way equivalent to pension trust arrangements as defined by the GASB. In accordance with Statement No. 68, the Recreation Center has elected to use the prior fiscal year end as the measurement date for reporting net pension liabilities. The state Legislature establishes and amends laws pertaining to the creation and administration of all state public retirement systems. Additionally the state Legislature authorizes state agency participation in plans other than those administered by the state. Basis of Accounting Pension plans administered by the state are accounted for using the accrual basis of accounting. Under the accrual basis of accounting, employee and employer contributions are recognized in the period in which employee services are performed; investment gains and losses are recognized as incurred; and benefits and refunds are recognized when due and payable in accordance with the terms of the applicable plan. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all plans and additions to/deductions from all plan fiduciary net position have been determined in all material respects on the same basis as they are reported by the plans. The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB Statement No. 68 for the Recreation Center, for fiscal year 2014: Aggregate Pension Amounts - All Plans Pension liabilities $ (295,414) Pension assets Deferred outflows of resources related to pensions 14,528 Deferred inflows of resources related to pensions (104,519) Pension expense/expenditures 7,859 Investments The Washington State Investment Board (WSIB) has been authorized by statute as having investment management responsibility for the pension funds. The WSIB manages retirement fund assets to maximize return at a prudent level of risk. Retirement funds are invested in the Commingled Trust Fund (CTF). Established on July 1, 1992, the CTF is a diversified pool of investments that invests in fixed income, public equity, private equity, real estate, and tangible assets. Investment decisions are made within the framework of a Strategic Asset Allocation Policy and a series of written WSIB-adopted investment policies for the various asset classes in which the WSIB invests. Department of Retirement Systems. As established in chapter 41.50 of the Revised Code of Washington (RCW), the Department of Retirement Systems (DRS) administers eight retirement systems covering eligible employees of the state and local governments. The Governor appoints the director of the DRS. 26 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 The DRS administered systems that the Recreation Center offers its employees are comprised of two defined benefit pension plans and one defined contribution plan. Below are the DRS plans that the Recreation Center offers its employees:  Public Employees’ Retirement System (PERS) Plan 2 - defined benefit Plan 3 - defined benefit/defined contribution  Teachers’ Retirement System (TRS) Plan 1 - defined benefit Although some assets of the plans are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to the members of that plan in accordance with the terms of the plan. Administration of the PERS and TRS systems and plans is funded by an employer rate of 0.18 percent of employee salaries. The DRS prepares a stand-alone financial report that is compliant with the requirements of Statement 67 of the Governmental Accounting Standards Board. Copies of the report may be obtained by contacting the Washington State Department of Retirement Systems, PO Box 48380, Olympia, Washington 98504-8380 or online at http://www.drs.wa.gov/administration/annual-report/. Higher Education. As established in chapter 28B.10 RCW, eligible higher education state employees may participate in higher education retirement plans. These plans include a defined contribution plan administered by a third party with a supplemental defined benefit component (on a pay as you go basis) which is administered by the state. B. DEFINED CONTRIBUTION PLANS Western Washington University Retirement Plan (WWURP) Plan Description The WWURP is a defined contribution single employer pension plan with a supplemental payment, when required. The plan covers faculty, professional staff, and certain other employees. It is administered by WWU. WWU’s Board of Trustees is authorized to establish and amend benefit provisions. Contributions to the plan are invested in annuity contracts or mutual fund accounts offered by one or more fund sponsors. Benefits from fund sponsors are available upon separation or retirement at the member’s option. Employees have at all times a 100% vested interest in their accumulations. Funding Policy Employee contribution rates, which are based on age, range from 5% to 10% of salary. WWU matches the employee contributions. All required employer and employee contributions have been made. Supplemental Component The supplemental payment plan determines a minimum retirement benefit goal based upon a one-time calculation at each employee’s retirement date. The Recreation Center makes direct payments to qualified retirees when the retirement benefit provided by the fund sponsor does not meet the benefit goal. During fiscal year ending June 30, 27 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 2011, WWU amended the supplemental retirement plan, limiting participation to those individuals who were active participants on June 30, 2011. Public Employees’ Retirement System Plan 3 Plan Description The Public Employees’ Retirement System (PERS) Plan 3 is a combination defined benefit/defined contribution plan administered by the state through the Department of Retirement Systems (DRS). Refer to section C of this note for all PERS Plan descriptions. PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. As established by chapter 41.34 RCW, employee contribution rates to the defined contribution component range from 5 to 15 percent of salaries, based on member choice. Members who do not choose a contribution rate default to a 5 percent rate. There are currently no requirements for employer contributions to the defined contribution component of PERS Plan 3. PERS Plan 3 defined contribution retirement benefits are dependent upon the results of investment activities. Members may elect to self-direct the investment of their contributions. Any expenses incurred in conjunction with self-directed investments are paid by members. Absent a member’s self-direction, PERS Plan 3 contributions are invested in the retirement strategy fund that assumes the member will retire at age 65. Members in PERS Plan 3 are immediately vested in the defined contribution portion of their plan, and can elect to withdraw total employee contributions adjusted by earnings and losses from investments of those contributions upon separation from PERS-covered employment. C. STATE PARTICIPATION IN PLANS ADMINISTERED BY DRS Public Employees’ Retirement System Plan Description. The Legislature established the Public Employees’ Retirement System (PERS) in 1947. PERS retirement benefit provisions are established in chapters 41.34 and 41.40 RCW and may be amended only by the Legislature. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior Courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. PERS members who joined the system by September 30, 1977, are Plan 1 members. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by either, February 28, 2002, for state and higher education employees, or August 31, 2002, for local government employees, are Plan 2 members unless they exercised an option to transfer their membership to PERS Plan 3. 28 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS participants joining the system on or after March 1, 2002, for state and higher education employees, or September 1, 2002, for local government employees, have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. Employees who fail to choose within 90 days default to PERS Plan 3. Refer to section B of this note for a description of the defined contribution component of PERS Plan 3. Benefits Provided. PERS plans provide retirement, disability, and death benefits to eligible members. PERS Plan 2 members are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. There is no cap on years of service credit and a COLA is granted based on the Consumer Price Index, capped at 3 percent annually. The AFC is the average of the member’s 60 highest paid consecutive months. PERS Plan 2 members have the option to retire early with reduced benefits. The defined benefit portion of PERS Plan 3 provides members a monthly benefit that is 1 percent of the AFC per year of service. There is no cap on years of service credit. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. Effective June 7, 2006, PERS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. PERS Plan 3 members have the option to retire early with reduced benefits. PERS members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Contribution requirements are established and amended by state statute. Members in Plan 2 can elect to withdraw total employee defined benefit contributions and interest thereon, in lieu of any retirement benefit, upon separation from PERS-covered employment. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Investment rate of return 7.50% 29 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in:    Expected annual return. Standard deviation of the annual return. Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Asset Class Fixed Income Tangible Assets Total 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. 30 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Discount rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates (including PERS Plan 2/3 employers whose rates include a component for the PERS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, the Recreation Center reported $59,589 for its proportionate share of the collective net pension liability for PERS 2/3. The Recreation Center’s proportion for PERS 2/3 was 0.003 percent, a decrease of 0.0006 percent since the prior reporting period. The proportions are based on the Recreation Center’s contributions to the pension plan relative to the contributions of all participating employers. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of the Recreation Center as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. PERS 2/3 Rec Center's proportionate share of Net Pension Liability (Asset) 1% Decrease $ 248,558 Current Discount Rate $ 59,589 1% Increase $ (84,749) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, the Recreation Center recognized a PERS 2/3 pension expense of $(20,837). At June 30, 2014, PERS 2/3 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 31 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Deferred Outflows of Resources Recreation Center PERS 2/3 Difference between expected and $ actual experience Changes of assumptions Net Difference between projected and actual earnings on pension plan investments Change in proportion Contributions subsequent to the measurement date Total $ Deferred Inflows of Resources - $ - - - - 63,166 (18,415) - 25,137 - 6,722 $ 63,166 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: PERS 2/3 2015 $ 2016 $ 2017 $ 2018 $ 2019 $ Thereafter $ (4,092) (4,092) (4,092) (4,092) (2,046) - Teachers’ Retirement System Plan Description. The Legislature established the Teachers’ Retirement System (TRS) in 1938. TRS retirement benefit provisions are established in chapters 41.32 and 41.34 RCW and may be amended only by the Legislature. Eligibility for membership requires service as a certificated public school employee working in an instructional, administrative, or supervisory capacity. TRS is comprised principally of non-state agency employees. TRS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined benefit plan with a defined contribution component. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. TRS members who joined the system by September 30, 1977, are a Plan 1 member. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by June 30, 1996, are Plan 2 members unless they 32 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 exercised an option to transfer their membership to Plan 3. TRS members joining the system on or after July 1, 1996 are members of TRS Plan 3. Legislation passed in 2007 gives TRS members hired on or after July 1, 2007, 90 days to make an irrevocable choice to become a member of TRS Plan 2 or Plan 3. At the end of 90 days, any member who has not made a choice becomes a member of Plan 3. Refer to section B of this note for a description of the defined contribution component of TRS Plan 3. Benefits Provided. TRS plans provide retirement, disability, and death benefits to eligible members. TRS Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service, or at the age of 60 with five years of service, or at the age of 55 with 25 years of service. The monthly benefit is 2 percent of the average final compensation (AFC) for each year of service credit, up to a maximum of 60 percent. The AFC is the total earnable compensation for the two consecutive highest-paid fiscal years, divided by two. TRS Plan 1 members may elect to receive an optional cost of living allowance (COLA) amount based on the Consumer Price Index, capped at 3 percent annually. To offset the cost of this annual adjustment, the benefit is reduced. TRS Plan 2 retirement benefits are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. A COLA is granted based on the Consumer Price Index, capped at 3 percent annually. TRS Plan 2 members have the option to retire early with reduced benefits. The AFC is the average of the member’s 60 highest paid consecutive months. The defined benefit portion of TRS Plan 3 provides members a monthly benefit that is 1 percent of the AFC per year of service. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. TRS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in TRS Plan 2 by July 1, 1996. Plan 3 members are immediately vested in the defined contribution portion of their plan. TRS Plan 3 members have the option to retire early with reduced benefits. TRS members meeting specific eligibility requirements, have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. TRS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. The methods used to determine the contribution requirements are established under state statute. Members in TRS Plan 1 and Plan 2 can elect to withdraw total employee contributions and interest thereon upon separation from TRS-covered employment. 33 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Investment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in:    Expected annual return. Standard deviation of the annual return. Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: 34 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Asset Class Fixed Income Tangible Assets Total June 30, 2015 and 2014 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount Rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates (including TRS Plan 2/3, whose rates include a component for the TRS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, the Recreation Center reported a liability of $235,825 for its proportionate share of the collective net pension liability for TRS 1. The Recreation Center’s proportion for TRS 1 was 0.007996 percent, an increase of 0.000728 percent since the prior reporting period. The proportions are based on the Recreation Center’s contributions to the pension plan relative to the contributions of all participating employers. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of the Recreation Center as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. TRS 1 Rec Center's proportionate share of Net Pension Liability (Asset) 1% Decrease $ 303,475 Current Discount Rate $ 235,825 1% Increase $ 177,756 35 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, the Recreation Center recognized a TRS 1 pension expense of $28,696. At June 30, 2014, TRS 1 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources TRS 1 Difference between expected and $ actual experience Changes of assumptions Net Difference between projected and actual earnings on pension plan investments Change in proportion Contributions subsequent to the measurement date Total $ 36 Deferred Inflows of Resources $ - - - - 41,353 - - 7,806 - 7,806 $ 41,353 WADE KING STUDENT RECREATION CENTER NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 TABLE 1: Required Contribution Rates The required contribution rates (expressed as a percentage of current year covered payroll) at June 30, 2014 are as follows: Required Contribution Rates PERS State agencies, local governmental units Administrative fee PERS Plan 1 UAAL Total TRS State agencies, local governmental units Administrative fee TRS Plan 1 UAAL Total Employer (University) Plan 1 Plan 2 Plan 3 Plan 1 Employee Plan 2 Plan 3 9.03% 0.18% 0.00% 9.21% 4.98% 0.18% 4.05% 9.21% 4.98% 0.18% 4.05% 9.21% * 6.00% 4.92% ** 10.21% 0.18% 0.00% 10.39% 5.84% 0.18% 4.37% 10.39% 5.84% 0.18% 4.37% 10.39% * 6.00% 4.96% ** *Plan 3 defined benefit portion only. **Variable from 5% to 15% based on rate selected by the member. N/A indicates data not applicable. NOTE 6. OTHER POST-EMPLOYMENT BENEFITS (OPEB) WWU funds OPEB obligations at a University-wide level on a pay-as-you-go basis. Disclosure information, as required under GASB 45, does not exist at department levels, and as a result, the actuarial accrued liability (AAL) is not available for auxiliary entities. WWU is responsible for the annual payment; therefore the annual required contribution is not recorded on the Recreation Center’s financial statements. 37 WADE KING STUDENT RECREATION CENTER REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 RSI REQUIRED SUPPLEMENTARY INFORMATION 38 WADE KING STUDENT RECREATION CENTER REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Recreation Center’s Proportionate Share of the Net Pension Liability Schedule of Recreation Center Proportionate Share of the Net Pension Liability Public Employees' Retirement System (PERS) Plan 2/3 Measurement Date ended June 30 * 2014 Recreation Center PERS 2/3 employers' proportion of the net pension liability Recreation Center PERS 2/3 employers' proportionate share of the net pension liability Recreation Center PERS 2/3 employers' coveredemployee payroll 0.002948% $59,589 $255,966 Recreation Center PERS 2/3 employers' proportionate share of the net pension liability as a percentage of its covered-employee payroll 23.28% Plan fiduciary net position as a percentage of the total pension liability 93.29% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. 39 WADE KING STUDENT RECREATION CENTER REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Recreation Center’s Proportionate Share of the Net Pension Liability Schedule of Recreation Center Proportionate Share of the Net Pension Liability Teacher's Retirement System (TRS) Plan 1 Measurement Date ended June 30 * 2014 Recreation Center TRS 1 employers' proportion of the net pension liability Recreation Center TRS 1 employers' proportionate share of the net pension liability 0.007996% $235,825 Recreation Center TRS 1 employers' covered-employee payroll $62,284 Recreation Center TRS 1 employers' proportionate share of the net pension liability as a percentage of its covered-employee payroll 378.63% Plan fiduciary net position as a percentage of the total pension liability 68.77% * As of June 30; this schedule is to be built prospectively until it contains ten years of data. 40 WADE KING STUDENT RECREATION CENTER REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Public Employees' Retirement System (PERS) Plan 2/3 Fiscal Year Ended June 30 Recreation Center Contributions in relation to the Contractually Contractually Fiscal Required Required Year Contributions Contributions Contribution deficiency (excess) 2015 $ $ 25,254 $ 25,137 117 Coveredemployee payroll $ Contributions as a percentage of coveredemployee payroll 274,205 9.17% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pectivel y until they contai n ten yea rs of da ta. 41 WADE KING STUDENT RECREATION CENTER REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Teachers' Retirement System (TRS) Plan 1 Fiscal Year Ended June 30 Recreation Center Contributions in relation to the Contractually Contractually Fiscal Required Required Year Contributions Contributions Contribution deficiency (excess) 2015 $ $ 7,806 $ 7,806 0 Coveredemployee payroll $ Contributions as a percentage of coveredemployee payroll 75,130 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pectivel y until they contai n ten yea rs of da ta. 42 10.39% ASSOCIATED STUDENTS BOOKSTORE Table of Contents Management’s Discussion and Analysis ...................................................................................... 3 Independent Auditor’s Report ................................................................................................... 12 Financial Statements Statement of Net Position .................................................................................................... .16 Statement of Revenues, Expenses and Changes in Net Position .......................................... 17 Statement of Cash Flows ...................................................................................................... 18 Notes to the Financial Statements......................................................................................... 19 Required Supplementary Information Schedule of the Bookstore’s Proportionate Share of the Net Pension Liability ................... 32 Schedule of Contributions .................................................................................................... 33 Other Information Five Year Condensed View of Statements of Net Position .................................................. 36 Five Year Statements of Revenues and Expenses ............................................................... 37 Five Year Net Sales/Cost of Goods Sold and Five Year Total Operating Expenses ........... 38 Five Year Income from Operations and Gross Profit as a Percentage of Sales ................... 39 This page intentionally left blank ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Overview Western Washington University Associated Students Bookstore (the Bookstore) has served the Western Washington University (WWU) campus community since 1910. Its purpose is to serve as an academic resource for the campus, integrating itself with the academic community and ensuring the availability of educational materials and related goods and services necessary for student success. The Bookstore aims to accomplish this service mission in an economically responsible manner by applying sound, efficient business practices. The Bookstore is operated in the format of a student cooperative; textbook prices reflect a student discount and net operating revenues support student programs. The Associated Students of Western Washington University (ASWWU) manage their net operating revenues and act in partnership with the administration through involvement in the development and recommendation of general policy guidelines. The following discussion and analysis provides an overview of the financial position and activities of the Bookstore for the years ended June 30, 2015, 2014 and 2013. This discussion has been prepared by management and should be read in conjunction with the financial statements and accompanying notes which follow this section. Using the Financial Statements The Bookstore’s financial reports include the Statement of Net Position, the Statement of Revenues, Expenses and Changes in Net Position and the Statement of Cash Flows. The statements are prepared in accordance with Governmental Accounting Standard Board (GASB) principles, which establish standards for external financial reporting for public colleges and universities. The financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when an obligation has been incurred. Statement of Net Position The Statement of Net Position presents the financial condition of the Bookstore at the end of the fiscal year and reports all assets and liabilities of the Bookstore. The amounts in these statements represent the assets available to continue the operations of the Bookstore and also identify how much the Bookstore owes vendors and all other parties. The difference between assets, deferred outflows, liabilities and deferred inflows is net position. Net position is one indicator of the current financial condition of the Bookstore. The change in net position measures whether the overall financial condition has improved or deteriorated during the year. Below is a condensed view of the Statements of Net Position as of June 30, 2015, 2014 and 2013: 3 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS ASSETS 2015 Current Assets Noncurrent Assets Capital Assets, net Total assets DEFERRED OUTFLOWS $2,615,877 899,314 1,233,459 4,748,650 33,211 June 30, 2015 and 2014 2014 2013 $2,520,680 838,546 1,275,866 4,635,092 - $2,533,957 592,301 1,327,887 4,454,145 - LIABILITIES Current liabilities Noncurrent liabilities Total liabilities 390,921 110,059 500,980 360,921 306,572 360,921 306,572 DEFERRED INFLOWS 116,664 - - 1,233,459 2,930,758 1,275,866 2,998,305 1,327,887 2,819,686 $4,164,217 $4,274,171 $4,147,573 NET POSITION Net investment in capital assets Unrestricted Total net position The Bookstore’s net position decreased in fiscal 2015 by $109,954 (-2.6%) largely due to the implementation of GASB Statement No. 68 (Accounting and Financial Reporting for Pensions), which required the Bookstore to recognize its share of a net pension liability for the defined contribution pension plans offered to employees (see Notes 1 and 6). In addition, GASB Statement No. 68 required a restatement of beginning net position in the amount of $214,069. There was a net position increase of $126,598 (3.1%) when comparing fiscal 2014 to fiscal 2013 due to increased revenues. Total current assets increased $95,197 (3.8%) over fiscal 2014 largely due to investment management strategies combined with a decrease in accounts receivable and increase in inventory. Cash and cash equivalents and short term investments increased $210,818 (19.9%) as WWU’s investment strategy is to ensure liquidity needs while optimizing investment returns (see Note 2). A decrease in textbook returns to publishers contributed to a $142,651 (-29.4%) decrease in accounts receivable as well as the increase to inventory. Fiscal 2014 total current assets decreased $13,277 (-0.5%) over fiscal 2013 largely due to a decrease in cash and cash equivalents and short-term investments, combined with increases in accounts receivable and inventory. Fiscal 2014 short-term 4 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 investments decreased $174,597 (-39.2%) from fiscal 2013 due an increase in long-term investments held as a result of shifting to longer duration investments. Total noncurrent assets, excluding capital assets, increased $60,768 (7.2%) during fiscal 2015 and $246,245 (41.6%) during fiscal 2014 due to increased long-term investments as the Bookstore continues to build an appropriate level of operating reserves. Capital assets decreased $42,407 (-3.3%) during fiscal 2015 and $52,021 (-3.9%) during fiscal 2014 as existing assets depreciated at a greater rate than new capital assets were acquired. Total current liabilities increased $30,000 (8.3%) in fiscal 2015 from fiscal 2014 due to an increase in accounts payable related to the timing of invoices offset by a decrease in the total annual distributions to the ASWWU and the WWU Athletics Department (see Note 4). Total current liabilities in fiscal 2014 increased $54,349 (17.7%) primarily due to an increase in the distribution payable to the ASWWU. Beginning in fiscal 2015, deferred outflows relating to pensions of $33,211 (100.0%) were recorded in accordance with GASB Statement No. 68. The deferred outflows related to pensions is primarily due to current year pension expenses that will be recognized in fiscal 2016 (see Note 6). Noncurrent liabilities increased $110,059 (100.0%) during fiscal 2015 in accordance with GASB Statement No. 68, which requires the Bookstore to present its share of the net pension liability for the pension plans administered by the Department of Retirement System (see Note 6). Statement of Revenues, Expenses and Changes in Net Position The changes in total net position, as presented on the Statement of Net Position, are detailed in the activity shown in the Statement of Revenues, Expenses, and Changes in Net Position. The statement presents the Bookstore’s results of operations. In accordance with GASB reporting principles, revenues and expenses are classified as operating or nonoperating. In general, operating revenues are those earned by providing goods and services to the customers of the Bookstore, primarily sales of textbooks to students. Other operating revenues are primarily commissions earned from used book wholesalers who purchase textbooks from students. Operating expenses are those expenses to acquire or produce the goods and services provided in return for the operating revenues. Nonoperating revenues and expenses are monies received or expended for which goods and services are not provided. Under GASB reporting principles, investment income is classified as nonoperating revenue. 5 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Following is a condensed version of the Statements of Revenues, Expenses, and Changes in Net Position for the fiscal years ended June 30, 2015, 2014 and 2013: 2015 2014 2013 Sales, net of discounts Cost of goods sold Gross margin $ 6,666,612 (5,192,360) 1,474,252 $6,857,195 (5,265,778) 1,591,417 $6,745,860 (5,217,483) $1,528,377 Other operating revenues 61,757 62,909 69,114 1,372,125 163,884 1,441,423 212,903 1,444,707 152,784 Operating expenses Income (loss) from operations Nonoperating (expenses) revenues Changes in net position Net position, beginning of year Restatement Net position, beginning of year as restated Net position, end of year (59,769) 104,115 $4,274,171 (86,305) 126,598 (82,413) 70,371 $4,147,573 4,077,202 $4,274,171 $4,147,573 (214,069) 4,060,102 $ 4,164,217 Fiscal 2015 sales net of discounts decreased $190,583 (-2.8%) from fiscal 2014 primarily due to a reduction in the availability of used textbooks (see revenues by sales department discussion below). Net sales increased in fiscal 2014 compared to fiscal 2013 by $111,335 (1.7%) largely due to increases in the sales of course materials and school supplies. In fiscal 2015, cost of goods sold decreased $73,418 (-1.4%) from fiscal 2014 and increased $48,295 (0.9%) in fiscal 2014 from fiscal 2013 due to the overall merchandise sales variances (see Revenues by Department discussion). The gross margin percentage for fiscal 2015 decreased to 22.1% compared to 23.2% in fiscal 2014 and 22.7% in fiscal 2013. In fiscal 2015, gross margin percentage decreased slightly as cost of goods sold declined at a lower rate than reduction in net sales. The average gross margin percentage for bookstores reporting $5.0-$9.9 Million Sales Volume in the Independent College Bookstore Association (ICBA) survey for 2013-2014 was 24.3%. The level of textbook discount the Bookstore offers students also continues to impact the Bookstore’s gross margin. The Bookstore maintained a 10% discount on new and used textbooks during fiscal 2015. This discount represented an approximate reduction of $489,609 in the cost of textbooks for WWU students who purchased their textbooks at the Bookstore. In the ICBA survey for 2013-2014 the average total value of discounts provided by college bookstores who offered discounts on course books to students was $301,510. 6 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 7 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Revenues by Sales Department Total textbook sales declined to $4,875,306 in fiscal 2015. This represents a decrease of -3.8% from fiscal year 2014 sales of $5,069,147 largely due to a decrease in the sales of used textbooks. Fiscal 2014 total textbooks sales increased 1.2% from $5,006,568 in fiscal 2013 primarily due to an increase in the sales of used textbooks. New textbook sales increased in fiscal 2015 to a total of $3,510,777, an increase of $141,845 (4.2%) due to continued growth in classroom use of custom textbooks and digital components, along with continued growth in third party in-store textbook rentals. Fiscal 2014 sales were nearly flat with sales of $3,368,932, an increase of $16,134 (0.5%) from $3,352,798 in fiscal 2013. New textbook margin percentage for fiscal 2015 was 10.0%, down from 10.6% in fiscal 2014. Used textbooks sales declined in fiscal 2015 to $1,364,529, which was down $335,686 (-19.7%) from fiscal 2014 sales of $1,700,215. This reduction was due to the increased use of new textbooks (see above) and a downturn in availability of used book inventory. Fiscal 2014 sales were up $46,445 (2.8%) from $1,653,770 in fiscal 2013 due to adequate availability of inventory. Used textbook margin percentage for fiscal 2015 was 28.2%, down from fiscal 2014 margin of 30.2%. Used textbooks sales as a percent of total textbook sales were decreased to 28.0% (-5.5%) from 33.5% in fiscal 2014. New and used textbook sales accounted for 73.1% of total Bookstore sales in fiscal 2015. This percentage was nearly flat with a -0.6% change from 74.9% in fiscal 2014. The ICBA 2013-2014 survey average for bookstores reporting $5.0-$9.9 million sales volume was 65.2% of total sales. The Bookstore continued to support course material options for students by offering rental opportunities directly from the Bookstore and through Rafter, an affiliate company. In fiscal 2015, students rented 857 distinct course book titles through Rafter for a total of 4,749, an increase of 230 (5.1%) course books from 4,519 course books rented in fiscal 2014. The Bookstore directly offered 31 distinct course book titles for rent, up from 20 titles in 2014. Students rented 1025 course books directly from the Bookstore, which was down 27 (-2.6%) from 1052 course books in fiscal 2014. Fiscal 2015 revenue for the course books rented directly from the Bookstore was $76,912, an increase of $10,327 (15.5%) from $66,585 in fiscal 2014. Fiscal 2014 revenue for the course books rented directly from the Bookstore was up $37,573 (129.5%) from $29,012 in fiscal 2013. Emblematic sales of $829,090 were up $19,538 (2.4%) from fiscal 2014 sales of $809,552 due to sales increases of hats, women’s fashions and insignia gifts. Fiscal 2014 sales decreased $31,641 (-3.8%) from fiscal 2013 sales of $841,193 due to difficulties in getting products from one of the Bookstore’s primary vendors. School supplies sales fell to $396,821, a decrease of $25,766 (-6.1%) from fiscal 2014 sales of $422,587 due to a sales reduction in lab coats, school and art supplies. Fiscal 2014 sales increased $55,902 (15.2%) from fiscal 2013 sales of $366,685 due to a new WWU policy requiring lab coats for chemistry lab courses which caused lab coat sales to increase from $150 in fiscal 2013 to $35,312 in fiscal 2014. General books sales increased slightly to $214,584, an increase of $4,775 (2.3%) from fiscal 2014 sales of $209,809 due to an increase in the sales of stamps and movie tickets. The Bookstore served WWU students and the campus community by offering convenience items such as stamps and movie tickets along with trending items such as journals and book accessories. Fiscal 2014 sales were up $15,942 (8.2%) from fiscal 2013 sales of $193,867 due to the sale of quick study guides. 8 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Software sales declined in fiscal 2015 to $30,087, a decrease of $3,159 (-9.5%) from sales of $33,246 in 2014. Fiscal 2014 sales were down $43,791 (-56.8%) from sales of $77,037 in fiscal 2013. Beginning in fiscal 2013, students started receiving free on-line access to Microsoft software. Companies such as Microsoft and Adobe continued to change sales and marketing strategies for software further impacting the Bookstore’s decline in software sales. Gift sales decreased to $83,499, down $7,717 (-8.5%) from fiscal 2014 sales of $91,216. Fiscal 2015 sales of non-emblematic gifts were affected by a shift in staff responsibilities for buying non-emblematic gift merchandise. Fiscal 2014 sales were up $2,675 (3.0%) from fiscal 2013 sales of $88,541. The increase in fiscal 2014 is due to sales of non-emblematic drinkware, scarves and headwear. Sundries sales decreased to $85,964, down $4,329 (-4.8%) from sales of $90,293 in fiscal 2014. Fiscal 2014 was up $4,007 (4.6%) from $86,286 in fiscal 2013. Sundries sales were impacted by an April 2014 ASWWU policy banning the sale of bottled water on campus. Electronic sales continued to grow substantially with sales of $74,349 which were up $9,589 (14.8%) from fiscal 2014 sales of $64,760 due to the sales of phone cords and charging systems. Fiscal 2014 sales were up $8,089 (14.3%) from $56,671 in fiscal 2013. In fiscal 2014, the sales of small electronic devices such as headphones and ear buds increased to $41,713 from $33,430 in fiscal 2013 at the same time the sale of calculators remained flat. Expenses by Major Source Fiscal 2015 total operating expenses were down $69,298 (-4.8%) from fiscal 2014 due largely to a decrease in salaries and benefits. Fiscal 2014 total operating expenses were nearly flat, down $3,284 (-0.2%) from fiscal 2013. Fiscal 2015 salaries and benefits were down $112,363 (-11.2%) from fiscal 2014 as the Bookstore experienced up to three staff vacancies over various parts of the fiscal year as well as reduced employer health care expenses. Salaries and benefits were down $3,183 (-0.3%) when comparing fiscal 2014 to fiscal 2013. General and Administrative expenses increased $24,864 (9.3%) in fiscal 2015 primarily due to an increase in equipment purchases $18,414 (136%). The equipment purchased included ten new signature capture machines with the capacity to allow the cash registers to read Euro, MasterCard and Visa (EMV) payment cards also known as chip cards. The new signature capture machines will allow the Bookstore to become EMV compliant. The Bookstore also purchased four new desktop computers in an ongoing effort to replace outdated staff computers. General and Administrative expenses increased $9,935 (3.9%) in fiscal 2014 due to increased purchased computer services and administrative assessment fees. Facilities expense increased $22,303 (38.1%) from fiscal 2014 due to the continuation of repairs and maintenance projects started in fiscal 2014. These projects included resurfacing the retail stairways, conference room and staff breakroom floors. The staff breakroom and conference rooms were also painted. Fiscal 2014 facilities expenses decreased $5,086 (-8.0%) from fiscal 2013 as a number of facilities projects were initiated in fiscal 2014 that were completed in fiscal 2015. Bank card expense declined $3,334 (-5.1%) in fiscal 2015 and $5,652 (-8.0%) in fiscal 2014 due to the increased use of the “Charge It” program. The “Charge It” program allows students to charge up to $600 per quarter of Bookstore purchases to their student accounts. This allows students to purchase their course materials before 9 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 their financial aid is available. Students continued to charge an increased amount of Bookstore purchases to their student accounts rather than using a credit card. Nonoperating (expenses) revenues include distributions from the Bookstore to the ASWWU along with distributions to Athletics as part of a revenue sharing agreement (see Note 4). Total nonoperating (expenses) revenues in fiscal 2015 decreased by $26,536 (-30.7%) due to a net reduction of $42,059 to the revenue sharing distributions. There was also a decrease of $17,800 (-35.6%) in the distribution from the ASWWU to the Bookstore. Total nonoperating expenses in fiscal 2014 increased $3,892 (4.7%) primarily due to a $50,000 distribution from the ASWWU to the Bookstore, offset by a $56,193 (123.8%) increase in the distribution from the Bookstore to the ASWU. 10 ASSOCIATED STUDENTS BOOKSTORE MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Economic Factors and Significant Events Fiscal 2016 expenses will include an increase in salaries and benefits. Employees received a 3.0% wage increase effective July 1, 2015. At the same time, employer health care benefit costs increased for eligible employees from $662 per month to $840 per month and employer pension rates for retirement plans PERS 1, 2 & 3 increased from 9.21% to 11.18%. In fiscal 2017, employees are scheduled to receive a 1.8% wage increase. The Bookstore is continuing to provide course materials in various formats as faculty and students adopt to alternative formats and delivery methods, with the goal of providing options at different price points. As is evident in the fiscal 2015 results, the shift toward rentals, custom texts and digital course materials will continue to impact what have been historical gross margin percentages, expenses and operating results. On-line sales through the Bookstore web site continue to be a popular option for students. Although sales were down slightly from last year trending with net sales numbers students purchased $2,088,016 on-line in fiscal 2015, which was 31.3% of total sales compared with $2,127,300 in fiscal 2014, which was 31.0% of total sales. Fiscal 2013 students purchased $1,861,347 which was 27.6% of total sales. T 11 Washington State Auditor’s Office INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS Board of Trustees Western Washington University Associated Students Bookstore Bellingham, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the Western Washington University Associated Students Bookstore (the Bookstore), Whatcom County, Washington, as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the Bookstore’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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. Auditor’s Responsibility 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 the standards applicable to financial audits contained in 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 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 auditor’s 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 Bookstore’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 Bookstore’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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Western Washington University Associated Students Bookstore, as of June 30, 2015 and 2014, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 1, the financial statements of the Western Washington University Associated Students Bookstore, a department of the University, are intended to present the financial position, and the changes in financial position, and cash flows of only the respective portion of the activities of the University that is attributable to the transactions of the Bookstore. They do not purport to, and do not, present fairly the financial position of the University as of June 30, 2015 and 2014, the changes in its financial position, or its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. As discussed in Note 1 to the financial statements, in 2015, the Bookstore adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and the schedule of the Bookstore’s proportionate share of the net pension liability and schedule of contributions pension trust fund information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Bookstore’s basic financial statements as a whole. The Other Information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2015 on our consideration of the Bookstore’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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Bookstore’s internal control over financial reporting and compliance. JAN M. JUTTE, CPA, CGFM ACTING STATE AUDITOR OLYMPIA, WA November 16, 2015 ASSOCIATED STUDENTS BOOKSTORE STATEMENT OF NET POSITION June 30, 2015 and 2014 Assets Current assets Cash and cash equivalents (Note 2) Investments (Note 2) Receivables, net of allowance of $15,585 in 2015 and $9,965 in 2014 (Note 3) Inventory Prepaid expense Total current assets 2015 $808,956 459,063 $785,879 271,322 342,023 996,885 8,950 2,615,877 484,674 975,475 3,330 2,520,680 899,314 1,233,459 2,132,773 838,546 1,275,866 2,114,412 4,748,650 4,635,092 33,211 - 290,905 58,561 41,455 390,921 218,846 101,597 40,478 360,921 110,059 110,059 - Total liabilities 500,980 360,921 Deferred Inflows Relating to pensions (Note 6) 116,664 - 1,233,459 2,930,758 $4,164,217 1,275,866 2,998,305 $4,274,171 Noncurrent assets Investments (Note 2) Capital assets, net (Note 5) Total noncurrent assets Total assets Deferred Outflows Relating to pensions (Note 6) Liabilities Current liabilities Accounts payable and accrued expenses Distribution payable to Associated Students of WWU Distribution payable to WWU Athletics Department Total current liabilities Non current liabilities Pension liability Total noncurrent liabilities Net Position Net investment in capital assets Unrestricted Total net position 16 2014 See Notes to Financial Statements ASSOCIATED STUDENTS BOOKSTORE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION June 30, 2015 and 2014 2015 2014 $6,666,612 (5,192,360) 1,474,252 $6,857,195 (5,265,778) 1,591,417 61,757 62,909 887,579 291,019 80,832 51,253 61,442 1,372,125 163,884 999,942 266,155 58,529 52,021 64,776 1,441,423 212,903 Nonoperating Revenues (Expenses) Investment income Distribution from Associated Students of WWU Distribution to Associated Students of WWU Distribution to WWU Athletics Department Total nonoperating (expenses) revenues 8,047 32,200 (58,561) (41,455) (59,769) 5,770 50,000 (101,597) (40,478) (86,305) Increase in net position 104,115 126,598 4,274,171 (214,069) 4,060,102 $4,164,217 4,147,573 Operating Revenues Sales, net of discounts Cost of goods sold Gross margin Other Operating Revenues Operating Expenses Salaries and benefits General and administrative expense Facilities expense Depreciation Bank card expense Total operating expenses Income from operations Total Net Position, Beginning of Year Restatement (Note 6) Total Net Position, Beginning of Year as restated Total Net Position, End of Year See Notes to Financial Statements $4,274,171 17 ASSOCIATED STUDENTS BOOKSTORE STATEMENT OF CASH FLOWS June 30, 2015 and 2014 2015 Cash Flows from Operating Activities Cash received from students and other customers Payments to employees Payments to suppliers Net cash provided by operating activities $6,871,020 (920,061) (5,568,699) 382,260 $6,825,784 (988,880) (5,697,427) 139,477 Cash Flows from Noncapital Financing Activities Distribution from Associated Students of WWU Distribution to WWU Athletics Department Distribution to Associated Students of WWU Net cash used in noncapital financing activities 32,200 (40,478) (101,597) (109,875) 50,000 (42,060) (45,404) (37,464) Cash Flows from Investing Activities Investment income received Net sales of investments in internal pool Net cash flows used by investing activities 8,047 (248,509) (240,462) 5,770 (71,648) (65,878) Cash Flows from Capital and Related Financing Activities Purchases of equipment Net cash used in capital and related financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Reconciliation of Operating Income to Net Cash Flows From Operating Activities Income from operations Adjustments to reconcile operating income to net cash flows from operating activities Depreciation Net pension expense Change in operating assets and liabilities Receivables Accounts payable and accrued expenses Prepaid expenses Inventory Net cash provided by operating activities 18 2014 (8,846) (8,846) - 23,077 36,135 785,879 $808,956 749,744 $785,879 $163,884 $212,903 51,253 (20,557) 52,021 - 142,651 72,059 (5,620) (21,410) $382,260 (94,320) (262) 2,762 (33,627) $139,477 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Western Washington University Associated Students Bookstore (the Bookstore) is a self supporting, auxiliary enterprise of Western Washington University (WWU). The Associated Students of Western Washington University (ASWWU) have an active partnership with the Bookstore administration through involvement in the development and recommendation of general policy guidelines for the Bookstore. The Bookstore is a discount retailer of textbooks, supplies and general merchandise. Financial Statements Presentation These financial statements are presented in accordance with generally accepted accounting principles and follow the guidance given by the Governmental Accounting Standards Board (GASB). The statements are special purpose reports reflecting the net position, results of operations, and cash flows of the Bookstore. These financial statements present only a selected portion of the activities of WWU. As such, they are not intended to and do not present either the financial position, results of operations or changes in net position of WWU. Basis of Accounting The Bookstore's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when an obligation has been incurred. Cash, Cash Equivalents and Investments WWU records all cash and cash equivalents at cost. Investments held by WWU are recorded at fair value. To maximize investment income, WWU combines funds from all departments into an investment pool. The Bookstore records their share of cash, cash equivalents and investments in the same relation as WWU’s investment pool itself. Investment income is allocated to the Bookstore in proportion to its average balance in the investment pool. Accounts Receivable Receivables are recorded at their principal balances. The Bookstore considers all accounts greater than 30 days old to be past due and uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. Management determined that an allowance of $15,585 and $9,965 at June 30, 2015 and 2014 respectively, is adequate. Credits due from publishers represent amounts due from returned merchandise. Inventory Inventory consists of textbooks, supplies, and general merchandise and is stated at the lower of cost (retail method) or market. Improvements and Equipment The building used for the Bookstore's operations is located on the WWU’s property. Building improvements and equipment are stated at cost, net of accumulated depreciation. The Bookstore capitalizes any expenditure for buildings, improvements, and equipment that have a cost of at least $5,000 and an estimated useful life of more than one year. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets; forty years for building improvements and four to seven years for equipment. 19 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Net Position The Bookstore's net positions are classified as follows: Net investment in capital assets. This category represents the Bookstore's total investment in capital assets. Restricted, expendable. This category represents net position restricted by an outside entity for a specific use. Restricted assets are used in accordance with their requirements and where both restricted and unrestricted resources are available for use, unrestricted resources are used first and then restricted resources as the specific use arises. Unrestricted. This category represents resources derived from operations and investing activities. Classification of Revenues, Expenses, and Transfers Operating revenues. Operating revenues include activities that have the characteristics of exchange transactions, such as sales and services. Nonoperating revenues. Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as investment income. Operating expenses. Operating expenses are those costs incurred in daily operations, such as salaries, general and administrative and depreciation. Nonoperating expenses. Nonoperating expenses include amounts payable to outside entities due to existing revenue sharing agreements. Tax Exemption WWU, and the Bookstore as an auxiliary enterprise, is a tax-exempt instrumentality of the State of Washington organized under the provisions of Section 115(a) of the Internal Revenue Code and is exempt from federal income taxes on related income. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Administrative Assessment WWU provides support to the Bookstore through cash management, accounting, purchasing and disbursing services, risk management, and other support services. The effects of these transactions are recorded as operating expenses in these financial statements. Restatement During fiscal 2015, the Bookstore adopted GASB Statement No. 68 “Accounting and Financial Reporting for Pensions-an amendment of GASB Statement No. 27”. Statement No. 68 requires that the Bookstore record in its statements its proportional share of the State’s net pension liability for the defined benefit pension plans that are administered by the State and to restate the beginning net position 20 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 of the earliest period presented. The amount of restatement to the beginning FY 15 net position was $214,069. The net pension liability information is provided to the Bookstore by the Department of Retirement Systems (DRS) and the Office of State Actuary (OSA). The information provided by DRS and OSA only allowed the Bookstore to restate fiscal 2015 beginning net position due to the measurement period of June 30, 2014 for the net pension liability. NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS Interest Rate and Credit Risk The Bookstore’s operating cash is part of the WWU’s internal investment pool. The pool is invested in demand deposits, time certificates of deposit, the Washington State Local Government Investment Pool (LGIP) and U.S. Treasury and Agency securities. The LGIP is comparable to a Rule 2a-7 money market fund recognized by the Securities and Exchange Commission (17CFR.270.2a-7). Rule 2a-7 funds are limited to high quality obligations with limited maximum and average maturities, the effect of which is to minimize both market and credit risk. The LGIP is an unrated investment pool. Bank balances (including time certificates of deposit) are insured by the Federal Deposit Insurance Corporation (FDIC) or by a collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). U.S. Treasury and Agency securities are rated AA+ by Standard & Poor’s and Aaa by Moody’s Investors Service. WWU manages its exposure to fair value losses in the internal investment pool by targeting the portfolio duration to 2.25 years and limiting the weighted average maturity to a maximum of 3 years. WWU generally does not invest operating funds in securities maturing more than five years from the date of purchase. Cash and Cash Equivalents Investments Certificates of deposit U.S. Treasuries U.S. Agencies Weighted Average Maturity 2015 (in years) $808,956 0.001 Weighted Average Maturity 2014 (in years) $785,879 0.001 115,326 381,296 861,755 $2,167,333 109,766 90,898 909,204 $1,895,747 1.033 2.410 1.614 2.033 1.085 2.657 21 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 3. RECEIVABLES Receivables at June 30, 2015 and 2014 include: 2015 $236,955 105,068 $342,023 Credits due from publishers Accounts receivable 2014 $ 377,877 106,797 $ 484,674 NOTE 4. REVENUE SHARING AGREEMENTS The Bookstore and the Associated Students Board (AS Board) entered into a revenue sharing agreement commencing during fiscal year 2007. The agreement states that the Bookstore will retain the first $25,000 of net income and will split any net income above the first $25,000 equally with the ASWWU. The agreement was extended until June 30, 2015. There was a distribution of $58,561 in fiscal 2015, and $101,597 in fiscal 2014. Beginning in fiscal 2003, the Bookstore agreed to make an annual distribution to the Western Washington University Athletics Department. The appropriation is based on 5% of emblematic clothing, hat and gift item sales, after discounts. The distribution payable for the years ended June 30, 2015 and 2014 were $41,455 and $40,478 respectively. NOTE 5. CAPITAL ASSETS, NET The depreciation expense for the fiscal years ended June 30, 2015 and 2014 was $51,253 and $52,021 respectively. Following are the changes in building and equipment for the years ended June 30, 2015 and 2014: June 30, 2014 Building improvements Fixtures and equipment Less accumulated depreciation Building Improvements and Equipment, net Building improvements Fixtures and equipment Less accumulated depreciation Building Improvements and Equipment, net 22 $1,867,033 444,276 2,311,309 Additions $ 8,846 8,846 (1,035,443) $1,275,866 (51,253) ($42,407) June 30, 2013 Additions $1,867,033 459,368 2,326,401 (998,514) $1,327,887 Reductions $ June 30, 2015 - $1,867,033 453,122 2,320,155 $0 (1,086,696) $1,233,459 Reductions June 30, 2014 - $ (15,092) (15,092) $1,867,033 444,276 2,311,309 (52,021) ($52,021) 15,092 $0 (1,035,443) $1,275,866 $ ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 6. PENSION PLANS A. SUMMARY WWU offers five defined benefit pension plans and three defined benefit/defined contribution plans: the Washington State Public Employees' Retirement System (PERS) plans 1-3, the Washington State Teachers Retirement System (TRS) plans 1-3, the Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) plan 1 and the Western Washington University Retirement Plan (WWURP). Bookstore employees in eligible positions are participants in WWURP and PERS plans 2 and 3. The Bookstore contributes to PERS cost sharing multiple-employer defined benefit pension plans administered by the State of Washington Retirement System. Refer to sections B and C of this note for descriptions of the plans. The Bookstore contributed $45,088, $51,750 and $50,066 to these plans in fiscal 2015, 2014 and 2013, respectively. The Bookstore implemented Statement No. 68 of the Governmental Accounting Standards Board (GASB) Accounting and Financial Reporting for Pensions for the fiscal year 2015 financial reporting. The Bookstore’s defined benefit pension plans were created by statutes rather than through trust documents. With the exception of the supplemental defined benefit component of the higher education retirement plan, they are administered in a way equivalent to pension trust arrangements as defined by the GASB. In accordance with Statement No. 68, the Bookstore has elected to use the prior fiscal year end as the measurement date for reporting net pension liabilities. The state Legislature establishes and amends laws pertaining to the creation and administration of all state public retirement systems. Additionally the state Legislature authorizes state agency participation in plans other than those administered by the state. Basis of Accounting Pension plans administered by the state are accounted for using the accrual basis of accounting. Under the accrual basis of accounting, employee and employer contributions are recognized in the period in which employee services are performed; investment gains and losses are recognized as incurred; and benefits and refunds are recognized when due and payable in accordance with the terms of the applicable plan. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all plans and additions to/deductions from all plan fiduciary net position have been determined in all material respects on the same basis as they are reported by the plans. The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB Statement No. 68 for the Bookstore, for fiscal year 2014: 23 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Aggregat e Pension Amount s - PERS 2/3 Pension liabilities $ Pension assets Deferred outflows of resources related to pensions Deferred inflows of resources related to pensions Pension ex pense/ex penditures (1 1 0,059) 33,21 1 (1 1 6,664) (20,557 ) Investments The Washington State Investment Board (WSIB) has been authorized by statute as having investment management responsibility for the pension funds. The WSIB manages retirement fund assets to maximize return at a prudent level of risk. Retirement funds are invested in the Commingled Trust Fund (CTF). Established on July 1, 1992, the CTF is a diversified pool of investments that invests in fixed income, public equity, private equity, real estate, and tangible assets. Investment decisions are made within the framework of a Strategic Asset Allocation Policy and a series of written WSIB-adopted investment policies for the various asset classes in which the WSIB invests. Department of Retirement Systems. As established in chapter 41.50 of the Revised Code of Washington (RCW), the Department of Retirement Systems (DRS) administers eight retirement systems covering eligible employees of the state and local governments. The Governor appoints the director of the DRS. The DRS administered systems that the Bookstore offers its employees are comprised of one defined benefit pension plan and one defined benefit/defined contribution plan. Below are the DRS plans that the Bookstore offers its employees:  Public Employees’ Retirement System (PERS) Plan 2 - defined benefit Plan 3 - defined benefit/defined contribution Although some assets of the plans are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to the members of that plan in accordance with the terms of the plan. Administration of the PERS plans is funded by an employer rate of 0.18 percent of employee salaries. The DRS prepares a stand-alone financial report that is compliant with the requirements of Statement 67 of the Governmental Accounting Standards Board. Copies of the report may be obtained by contacting the Washington State Department of Retirement Systems, PO Box 48380, Olympia, Washington 98504-8380 or online at http://www.drs.wa.gov/administration/annual-report/. Higher Education. As established in chapter 28B.10 RCW, eligible higher education state employees may participate in higher education retirement plans. These plans include a defined contribution plan administered by a third party with a supplemental defined benefit component (on a pay as you go basis) which is administered by the state. 24 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 B. DEFINED CONTRIBUTION PLANS Western Washington University Retirement Plan (WWURP) Plan Description The WWURP is a defined contribution single employer pension plan with a supplemental payment, when required. The plan covers faculty, professional staff, and certain other employees. It is administered by WWU. WWU’s Board of Trustees is authorized to establish and amend benefit provisions. Contributions to the plan are invested in annuity contracts or mutual fund accounts offered by one or more fund sponsors. Benefits from fund sponsors are available upon separation or retirement at the member’s option. Employees have at all times a 100% vested interest in their accumulations. Funding Policy Employee contribution rates, which are based on age, range from 5% to 10% of salary. WWU matches the employee contributions. All required employer and employee contributions have been made. Supplemental Component The supplemental payment plan determines a minimum retirement benefit goal based upon a one-time calculation at each employee’s retirement date. The Bookstore makes direct payments to qualified retirees when the retirement benefit provided by the fund sponsor does not meet the benefit goal. During fiscal year ending June 30, 2011, WWU amended the supplemental retirement plan, limiting participation to those individuals who were active participants on June 30, 2011. Public Employees’ Retirement System Plan 3 Plan Description The Public Employees’ Retirement System (PERS) Plan 3 is a combination defined benefit/defined contribution plan administered by the state through the Department of Retirement Systems (DRS). Refer to section C of this note for all PERS Plan descriptions. PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. As established by chapter 41.34 RCW, employee contribution rates to the defined contribution component range from 5 to 15 percent of salaries, based on member choice. Members who do not choose a contribution rate default to a 5 percent rate. There are currently no requirements for employer contributions to the defined contribution component of PERS Plan 3. PERS Plan 3 defined contribution retirement benefits are dependent upon the results of investment activities. Members may elect to self-direct the investment of their contributions. Any expenses incurred in conjunction with self-directed investments are paid by members. Absent a member’s self-direction, PERS Plan 3 contributions are invested in the retirement strategy fund that assumes the member will retire at age 65. Members in PERS Plan 3 are immediately vested in the defined contribution portion of their plan, and can elect to withdraw total employee contributions adjusted by earnings and losses from investments of those contributions upon separation from PERS-covered employment. 25 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 C. STATE PARTICIPATION IN PLANS ADMINISTERED BY DRS Public Employees’ Retirement System Plan Description. The Legislature established the Public Employees’ Retirement System (PERS) in 1947. PERS retirement benefit provisions are established in chapters 41.34 and 41.40 RCW and may be amended only by the Legislature. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior Courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. PERS members who joined the system by September 30, 1977, are Plan 1 members. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by either, February 28, 2002, for state and higher education employees, or August 31, 2002, for local government employees, are Plan 2 members unless they exercised an option to transfer their membership to PERS Plan 3. PERS participants joining the system on or after March 1, 2002, for state and higher education employees, or September 1, 2002, for local government employees, have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. Employees who fail to choose within 90 days default to PERS Plan 3. Refer to section B of this note for a description of the defined contribution component of PERS Plan 3. Benefits Provided. PERS plans provide retirement, disability, and death benefits to eligible members. PERS Plan 2 members are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. There is no cap on years of service credit and a COLA is granted based on the Consumer Price Index, capped at 3 percent annually. The AFC is the average of the member’s 60 highest paid consecutive months. PERS Plan 2 members have the option to retire early with reduced benefits. The defined benefit portion of PERS Plan 3 provides members a monthly benefit that is 1 percent of the AFC per year of service. There is no cap on years of service credit. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. Effective June 7, 2006, PERS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. 26 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS Plan 3 members have the option to retire early with reduced benefits. PERS members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3 employer contribution rates. Contribution requirements are established and amended by state statute. Members in Plan 2 can elect to withdraw total employee defined benefit contributions and interest thereon, in lieu of any retirement benefit, upon separation from PERS-covered employment. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Investment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in:    Expected annual return. Standard deviation of the annual return. Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. 27 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Asset Class Fixed Income Tangible Assets Total 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates (including PERS Plan 2/3 employers whose rates include a component for the PERS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, the Bookstore reported $110,059 for its proportionate share of the collective net pension liability for PERS 2/3. The Bookstore’s proportion for PERS 2/3 was 0.005 percent, a decrease of 0.0001 percent since the prior reporting period. The proportions are based on the Bookstore’s contributions to the pension plan relative to the contributions of all participating employers. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of the Bookstore as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. 28 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS 2/3 Bookstore's proportionate share of Net Pension Liability (Asset) 1 % Decrease $ 459,080 Current Discount Rate $ 1 1 0,059 1 % Increase $ (1 56,528) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, the Bookstore recognized a PERS 2/3 pension expense of $(20,557) thousand. At June 30, 2014, PERS 2/3 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Bookstore PERS 2/3 Deferred Deferred Outflows of Resources Inflows of Resources Difference between ex pected and $ actual ex perience - $ - Changes of assumptions - - Net Difference between projected and actual earnings on pension plan inv estments - 1 1 6,664 Change in proportion Contributions subsequent to the measurement date Total (3,894) - 37 ,1 05 $ 33,21 1 $ 1 1 6,664 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: 29 ASSOCIATED STUDENTS BOOKSTORE NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS 2/3 201 5 $ (865) 201 6 $ (865) 201 7 $ (865) 201 8 $ (865) 201 9 $ (433) Thereafter $ - TABLE 1: Required Contribution Rates The required contribution rates (expressed as a percentage of current year covered payroll) at June 30, 2014 are as follows: Required Contribution Rates PERS State agencies, local gov ernmental units Administrativ e fee PERS Plan 1 UAAL Total Em ploy er (Univ ersity ) Plan 1 Plan 2 Plan 3 9.03% 0.1 8% 0.00% 9.21 % 4.98% 0.1 8% 4.05% 9.21 % 4.98% 0.1 8% 4.05% 9.21 % Plan 1 * Em ploy ee Plan 2 Plan 3 6.00% 4.92% ** *Plan 3 defined benefit portion only . **Variable from 5% to 1 5% based on rate selected by the member. N/A indicates data not applicable. NOTE 7. OTHER POST-EMPLOYMENT BENEFITS WWU funds OPEB obligations at a university-wide level on a pay-as-you-go basis. Disclosure information, as required under GASB 45, does not exist at department levels, and as a result, the AAL is not available for auxiliary entities. WWU is responsible for the annual payment; therefore, the annual required contribution (ARC) is not recorded on the Bookstore’s financial statements. 30 ASSOCIATED STUDENTS BOOKSTORE REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 RSI REQUIRED SUPPLEMENTARY INFORMATION 31 ASSOCIATED STUDENTS BOOKSTORE REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedule of the Bookstore’s Proportionate Share of the Net Pension Liability Schedule of the Bookstore's Proportionate Share of the Net Pension Liability Public Employees' Retirement System (PERS) Plan 2/3 Measurement Date ended June 30 * 2014 Books tore PERS 2/3 empl oyers ' proporti on of the net pens i on l i a bi l i ty 0.005445% Books tore PERS 2/3 empl oyers ' proporti ona te s ha re of the net pens i on l i a bi l i ty $110,059 Books tore PERS 2/3 empl oyers ' coveredempl oyee pa yrol l $469,996 Books tore PERS 2/3 empl oyers ' proporti ona te s ha re of the net pens i on l i a bi l i ty a s a percenta ge of i ts covered-empl oyee pa yrol l 23.42% Pl a n fi duci a ry net pos i ti on a s a percenta ge of the tota l pens i on l i a bi l i ty 93.29% * As of June 30; thi s s chedul e i s to be bui l t pros pecti vel y unti l i t conta i ns ten yea rs of da ta . 32 ASSOCIATED STUDENTS BOOKSTORE REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Public Employees' Retirement System (PERS) Plan 2/3 Fiscal Year Ended June 30 Bookstore Fiscal Year Contributions in relation to the Contractually Contractually Required Required Contributions Contributions Contribution deficiency (excess) 2015 $ $ 38,864 $ 37,105 1,759 Coveredemployee payroll $ Contributions as a percentage of coveredemployee payroll 421,975 8.79% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pecti vel y unti l they conta i n ten yea rs of da ta . 33 This page intentionally left blank 34 ASSOCIATED STUDENTS BOOKSTORE OTHER INFORMATION June 30, 2015 and 2014 OTHER INFORMATION 35 ASSOCIATED STUDENTS BOOKSTORE OTHER INFORMATION June 30, 2015 and 2014 FIVE-YEAR CONDENSED VIEW OF STATEMENTS OF NET POSITION Years ended June 30, 2015, 2014, 2013, 2012, and 2011 Assets 2015 Current assets Non-current assets Capital Assets Total assets $2,615,877 899,314 1,233,459 4,748,650 Deferred outflows 33,211 2014 2013 2012 2011 $2,520,680 838,546 1,275,866 4,635,092 $2,533,957 592,301 1,327,887 4,454,145 $2,583,960 430,440 1,365,618 4,380,018 $2,238,423 518,356 1,414,541 4,171,320 218,846 219,108 213,996 89,112 142,075 360,921 87,464 306,572 88,820 302,816 75,754 164,866 $4,274,171 $4,147,573 $4,077,202 $4,006,454 Liabilities Accounts payable and accruals Pension liability Due to other WWU departments Total liabilities 290,905 110,059 100,016 500,980 Deferred inflows 116,664 Total Net Position Current ratio (current assets/current liabilities) Return on assets (change in net postion/total assets) $4,164,217 6.69 6.98 8.27 8.53 13.58 -2.3% * 2.7% 1.6% 1.6% 1.4% * During fiscal 2015, the Bookstore implemented GASB Statement No. 68 - Reporting for pensions - w hich required the Bookstore to recognize its share of the net pension liability of the defined benefit plans and restate fiscal 2015 beginning net position. This restatement caused the decrease in ROA. 36 ASSOCIATED STUDENTS BOOKSTORE OTHER INFORMATION June 30, 2015 and 2014 FIVE-YEAR STATEMENTS OF REVENUES AND EXPENSES Years ended June 30, 2015, 2014 2013, 2012, and 2011 2015 2014 2013 2012 2011 Net sales $6,666,612 $6,857,195 $6,745,860 $6,384,528 $6,399,545 Cost of goods sold (5,192,360) (5,265,778) (5,217,483) * (4,858,228) (4,819,995) 1,474,252 1,591,417 1,528,377 1,526,300 1,579,550 61,757 62,909 69,114 63,929 61,686 Salaries and benefits 887,579 999,942 1,003,125 984,520 1,035,613 General and administrative expense 291,019 266,155 256,220 295,263 244,883 Facilities expense 80,832 58,529 63,615 64,456 89,687 Depreciation 51,253 52,021 51,319 48,923 48,789 Bank card expense 61,442 64,776 70,428 77,303 92,925 1,372,125 1,441,423 1,444,707 1,470,465 1,511,897 163,884 212,903 152,784 119,764 129,339 8,047 5,770 5,051 5,804 6,619 Gross profit Other Operating Revenues Operating expenses Total operating expense Income (loss) from operations Nonoperating revenues (expenses) Investment income Distribution from Associated Students of WWU 32,200 50,000 Distribution to Associated Students of WWU (58,561) (101,597) (45,404) (45,751) (35,202) Distribution to WWU Athletics Department (41,455) (40,478) (42,060) (43,069) (40,552) (59,769) (86,305) (82,413) (49,016) (69,135) $104,115 $126,598 $70,371 $70,748 $60,204 22.1% 23.2% 22.7% 23.9% 24.7% Total nonoperating revenues (expenses) Increase (decrease) in net assets - 34,000 - Gross profit percentage (gross profit/net sales) * Beginning with fiscal 2013, freight out costs for returned merchandise are included in costs of goods sold rather than an operating expense. 37 ASSOCIATED STUDENTS BOOKSTORE OTHER INFORMATION June 30, 2015 and 2014 FIVE-YEAR NET SALES AND COST OF GOODS SOLD Net Sales and Cost of Goods Sold (in thousands) Amounts in Thousands $8,000 $7,000 $6,000 $6,857 $6,666 $5,192 $5,266 $6,746 $5,217 $6,385 $6,400 $4,820 $4,858 Net Sales $5,000 $4,000 Cost of Goods Sold $3,000 $2,000 $1,000 $0 2015 2014 2013 2012 2011 Years Ended June 30 FIVE-YEAR TOTAL OPERATING EXPENSES 38 ASSOCIATED STUDENTS BOOKSTORE OTHER INFORMATION June 30, 2015 and 2014 FIVE-YEAR INCOME FROM OPERATIONS AND GROSS MARGIN AS PERCENTAGE OF SALES 39 This page intentionally left blank PARKING SERVICES Table of Contents Management’s Discussion and Analysis ............................................................................................... 3 Independent Auditor’s Report .............................................................................................................. 9 Financial Statements Statement of Net Position ................................................................................................................. 12 Statement of Revenues, Expenses and Changes in Net Position ...................................................... 13 Statement of Cash Flows .................................................................................................................. 14 Notes to the Financial Statements..................................................................................................... 15 Required Supplementary Information Schedules of Parking Services Proportionate Share of the Net Pension Liability ........................... 34 Schedules of Contributions ............................................................................................................... 37 This page intentionally left blank PARKING SERVICES MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Overview Western Washington University’s Parking Services (Parking Services) is responsible for managing the parking space available on the Western Washington University (WWU) campus. Operations include assigning and issuing parking permits, enforcing parking regulations, maintaining parking lots, and managing parking paystations and metered parking. Parking Services also manages special event parking, vendor and contractor parking and related special use parking on the university campus. The following discussion and analysis provide an overview of the financial activities and financial position of Parking Services for the years ended June 30, 2015, 2014, and 2013. The discussion has been prepared by management and should be read in conjunction with the accompanying financial statements and accompanying notes. Using the Financial Statements Parking Services financial report includes the Statement of Net Position, the Statement of Revenue, Expenses, and Changes in Net Position and the Statement of Cash Flows. The statements are prepared in accordance with Governmental Accounting Standard Board (GASB) principles, which establish standards for external financial reporting for public colleges and universities. The financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when an obligation has been incurred. Statement of Net Position The Statement of Net Position presents the financial condition of Parking Services at the end of the fiscal year and report all assets and liabilities. The amounts in these statements represent the assets available to continue the operations of Parking Services and identify what is owed to vendors and other parties. The difference between assets, deferred outflows, liabilities and deferred inflows is net position. Net position is one indicator of the current financial condition of Parking Services. The change in net position measures whether the overall financial condition has improved or deteriorated during the fiscal year. Below is a condensed view of the Statement of Net Position as of June 30, 2015, 2014 and 2013: 3 PARKING SERVICES MANAGEMENT’S DISCUSSION AND ANALYSIS 2015 Assets Current assets Noncurrent assets Nondepreciable capital assets, net Depreciable capital assets, net Total assets Deferred Outflows Liabilities Current liabilities Noncurrent liabilities Total liabilities Deferred Inflows Net Position Net investment in capital assets Restricted Unrestricted Total net position June 30, 2015 and 2014 2014 2013 $942,549 695,386 3,612,592 553,534 5,804,061 $600,503 477,848 3,503,223 599,724 5,181,298 $697,689 266,328 3,503,223 4,147,171 8,614,411 38,469 - - 414,390 1,835,382 2,249,772 322,515 1,820,000 2,142,515 427,415 1,935,000 2,362,415 2,167,947 870,836 $3,038,783 2,063,612 685,161 $2,748,773 161,915 2,346,126 25,114 1,059,603 $3,430,843 Total current assets increased $342,046 (57.0%) during fiscal 2015 due to an increase in cash and cash equivalents and short-term investments. The increase in short-term investments is due to WWU’s investment strategy to ensure liquidity needs while optimizing investment returns (See Note 2). Total current assets decreased $97,186 (-13.9%) during fiscal 2014 primarily due to a decrease in accounts receivable, as the remaining Federal Transit Administration (FTA) grant funds for the Lincoln Creek Transportation Center (LCTC) were received. Total noncurrent assets, excluding capital assets, increased $217,538 (45.5%) during fiscal 2015 and $211,520 (79.4%) during fiscal 2014 primarily due to increases in long-term investments as Parking Services continues to build the appropriate level of reserves. Capital assets, net increased $63,179 (10.5%) during fiscal 2015 due to Parking Service’s parking lot improvements offset with depreciation. Parking Services has developed a schedule for repairing and maintaining the parking lots throughout WWU. Capital assets, net decreased $44,224 (-6.9%) during fiscal 2014, due to depreciation offset by the purchase of a $23,323 new vehicle. Current liabilities increased $91,875 (28.5%) during fiscal 2015 primarily due to the timing of invoices related to parking lot improvements. Current liabilities decreased $104,900 (-24.5%) during fiscal 2014 due primarily to decreases in accounts payable (timing of invoices payments), accrued salaries and benefits and the payoff of the Certificate of Participation (COP) for parking pay box stations (Note 4). Noncurrent liabilities increased $15,382 (0.8%) during fiscal 2015 due to a $135,382 (100.0%) increase in the net pension liability combined with scheduled principal payment for the outstanding lease balance on LCTC. During fiscal 2015, Parking Services adopted GASB Statement No. 68 Accounting and Financial Reporting for Pensions. This statement requires Parking Services to present its share of the net pension liability for the pension plans administered by the Department of Retirement System (See note 6). During fiscal 2014, noncurrent liabilities decreased $115,000 (-5.9%) due to scheduled principal payment of the LCTC lease. 4 PARKING SERVICES MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Total net position increased $392,060 (12.9%) during fiscal 2015. This increase is primarily due to decreases in operating expenditures, combined with a beginning net position restatement of $286,542 as part of the adoption of GASB Statement No. 68. Had this restatement not been required, total net position would have increased $678,602. During fiscal 2014, total net position increased $290,010 (10.6%) due to increases in net investment in capital assets from scheduled principal payments on debt and capital purchases, as well as the transfer of certain institutional expenses from Parking Services to WWU. Statement of Revenues, Expenses and Changes in Net Position The changes in total net position, as presented on the Statement of Net Position, are detailed in the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The statements present Parking Services results of operations. In accordance with GASB reporting principles, revenues and expenses are classified as operating and non-operating. Also in accordance with GASB Statement No. 34, fines revenues are recognized when collected. In general, operating revenues are those received for providing goods and services to the customers of Parking Services, primarily permit sales to staff, faculty and students. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues. Nonoperating revenues are monies received for which goods and services are not provided. Under GASB reporting principles, investment income is classified as non-operating. Following is a condensed version of the Statement of Revenues, Expenses and Changes in Net Position for the fiscal years ended June 30, 2015, 2014 and 2013: 2015 Operating revenues Operating expenses Operating income Nonoperating (expenses) revenues Income from operating and non-operating activities Capital grant revenue Increase in net position Net position, beginning of year Restatement Net position, end of year 2014 2013 $1,787,055 (1,258,383) 528,672 149,930 $1,697,403 (1,548,945) 148,458 141,552 $1,603,727 (1,690,591) (86,864) (83,632) 678,602 290,010 (170,496) 678,602 290,010 122,797 (47,699) 3,038,783 (286,542) 2,748,773 2,796,472 $3,430,843 $3,038,783 $2,748,773 Revenues Parking permit revenue comprises the largest source of revenue for Parking Services. Permit revenue for fiscal 2015 decreased slightly $8,651 (-0.8%) as more customers purchased parking permits via pay box stations (see discussion below). Permit revenue increased $43,867 (4.1%) when comparing fiscal 2014 to fiscal 2013 due to additional permits sold in the 12A employee parking lot and the 16CR resident overflow parking. 5 PARKING SERVICES MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Parking meter and pay box station revenues increased $39,848 (17.7%) primarily due to continued increase in the pay box stations. WWU visitors may select to use a free standing pay station machine or a parking meter rather than purchasing a parking permit. Parking meter and pay box station revenues increased $6,691 (3.1%) when comparing fiscal 2014 to fiscal 2013 due to increased use of self-serve pay box stations. Parking fines revenue increased $45,629 (14.8%) when comparing fiscal 2015 to fiscal 2014 as a result of continued regular billing and the added option and convenience of paying citations online. Parking fines revenue increased $40,802 (15.3 %) when comparing fiscal 2014 to fiscal 2013 as Parking Services resumed a monthly billing schedule. Other revenues increased $13,326 (29.4%) when comparing fiscal 2015 to fiscal 2014, due to an increase in parking lot rentals for WWU events. Other revenues decreased $3,529 (-7.2%) when comparing fiscal 2014 to fiscal 2013, due to a decrease in event lot rentals. 6 PARKING SERVICES MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Expenses Salaries and benefits decreased $179,586 (-18.4%) when comparing fiscal 2015 to fiscal 2014 due to various position vacancies, a reduction in the employer portion of health care benefits and the adoption of GASB Statement No. 68, which reduced Parking Services fiscal 2015 pension contributions by $52,828 (these expenses will be recognized in fiscal 2016, See Notes 1 & 6). Salaries and benefits decreased $100,761 (9.3%) when comparing fiscal 2014 to fiscal 2013 due to the reallocation of position funding for several positions, including Emergency Communications, to WWU as institutional expenses. During fiscal 2014 Parking Services began implementation of an online permit and citation payment function within their system. During fiscal 2015, Contract Services decreased $8,610 (-6.9%), as the implementation of the online parking system was completed. Contract services expense increased by $50,762 (69.1%) during fiscal 2014 due to the onset of the implementation of the new online function. During fiscal 2015 and fiscal 2014, repairs and maintenance expenses decreased $65,738 (-54.1%) and $15,489 (-11.3%), respectively due to a reduction in lot maintenance. Lots will be actively repaired in accordance with the maintenance schedule of ongoing lot maintenance, which will be capitalized as improvements. Telephone service expenses increased $2,174 (16.0%) during fiscal 2015 as a result of initiating a new contract to cover six cellular connections for the electronic parking ticket hardware. Telephone expense increased $3,593 (36.0%) during fiscal 2014 due to providing cellular service to parking enforcement. Bank fees increased $4,425 (19.2%) during fiscal 2015 and $2,383 (11.6%) during fiscal 2014, as online payments by credit cards increased. Total nonoperating revenues (expenses) increased by $8,378 (5.9%) due to an increase in investment earnings offset by a reduction of the interest expense on the LCTC lease. Total nonoperating revenues (expenses) increased $225,184 (269.3%) in fiscal 2014 as a result of $194,155 institutional support provided for LCTC debt service payments as well as bond issuance costs having been completely amortized in fiscal 2013. 7 PARKING SERVICES MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2015 and 2014 Economic Factors and Significant Events The Parking Services operational review of processes, positions and overall structure continues. Parking operating software and use of pay box stations is also under review. The Parking lot maintenance plan has been approved, lot improvements to be scheduled. 8 Washington State Auditor’s Office INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS Board of Trustees Western Washington University Parking Services Bellingham, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the Western Washington University Parking Services (Parking Services), Whatcom County, Washington, as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the Parking Services’ basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; 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. Auditor’s Responsibility 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 the standards applicable to financial audits contained in 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 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 auditor’s 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 Parking Services’ 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 Parking Services’ 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Western Washington University Parking Services, as of June 30, 2015 and 2014, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 1, the financial statements of the Western Washington University Parking Services, a department of the University, are intended to present the financial position, and the changes in financial position, and cash flows of only the respective portion of the activities of the University that is attributable to the transactions of the Parking Services. They do not purport to, and do not, present fairly the financial position of the University as of June 30, 2015 and 2014, the changes in its financial position, or its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. As discussed in Note 1 to the financial statements, in 2015, Parking Services adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages, and the schedules of Parking Services proportionate share of the net liability and schedule of contributions pension trust fund information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2015 on our consideration of the Parking Services’ 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Parking Services’ internal control over financial reporting and compliance. JAN M. JUTTE, CPA, CGFM ACTING STATE AUDITOR OLYMPIA, WA November 16, 2015 PARKING SERVICES STATEMENT OF NET POSITION Assets Current assets Cash and cash equivalents (Note 2) Investments (Note 2) Accounts receivable Prepaid expenses Total current assets 2015 2014 $600,050 342,147 80 272 942,549 $445,836 154,614 23 30 600,503 670,272 25,114 553,534 3,612,592 4,861,512 477,848 599,724 3,503,223 4,580,795 Total assets 5,804,061 5,181,298 Deferred Outflows Relating to pensions 38,469 Noncurrent assets Investments (Note 2) Restricted net pension Depreciable capital assets, net (Note 5) Non depreciable capital assets, net (Note 5) Total noncurrent assets Liabilities Current liabilities Accounts payable and accrued liabilities Accrued salaries and benefits Current portion of notes payable (Note 4) Unearned revenue Total current liabilities Noncurrent liabilities Net pension liability Note 6) Note payable, less current portion (Note 4) Total noncurrent liabilities Total liabilities Deferred Inflows Relating to pensions 12 June 30, 2015 and 2014 - 113,241 76,516 120,000 104,633 414,390 25,114 85,515 115,000 96,886 322,515 135,382 1,700,000 1,835,382 1,820,000 1,820,000 2,249,772 2,142,515 161,915 Net Position Net investment in capital assets 2,346,126 Restricted for pensions 25,114 Unrestricted 1,059,603 Total net position $3,430,843 See Accompanying Notes to the Financial Statements - 2,167,947 870,836 $3,038,783 PARKING SERVICES STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION June 30, 2015 and 2014 2015 2014 $1,102,496 264,407 353,625 58,590 7,937 1,787,055 $1,111,147 224,559 307,996 45,264 8,437 1,697,403 798,143 80 115,648 55,749 55,200 15,759 27,431 77,916 38,123 28,144 46,190 1,258,383 977,729 1,781 5,875 124,258 121,487 35,878 13,585 23,006 77,872 71,584 28,343 67,547 1,548,945 528,672 148,458 Nonoperating Revenues (Expenses) Contribution for building rent and utilities Institutional Support Interest income Interest on indebtedness Amortization of bond issuance costs Total nonoperating revenues (expenses) 28,144 194,655 6,403 (79,272) 149,930 28,343 194,155 3,340 (84,286) 141,552 Increase in Net Position 678,602 290,010 3,038,783 (286,542) 2,752,241 2,748,773 $3,430,843 $3,038,783 Operating Revenues Parking permits Parking meters and pay box stations Parking fines Other revenues Services funded by WWU Total operating revenues Operating Expenses Salaries and benefits Viking Express bus pass City contracts Contract services Repairs and maintenance Printing and supplies Telephone service Bank fees Administrative assessment Other expenses Rent and utilities Depreciation and amortization Total operating expenses Operating income Total Net Position, Beginning of Year Restatement (Note 1) Total Net Position, Beginning of Year restated Total Net Position, End of Year See Accompanying Notes to the Financial Statements 13 PARKING SERVICES STATEMENT OF CASH FLOWS June 30, 2015 and 2014 2015 Cash flows from operating activities Cash received from students, employees and visitors Cash received from the university Cash paid to employees Cash paid to suppliers Net cash provided by operating activities 2014 $1,786,808 7,937 (859,970) (298,021) 636,754 $1,804,608 8,437 (1,004,784) (473,849) 334,412 6,403 (379,957) (373,554) 3,340 (165,627) (162,287) 194,655 (115,000) (109,369) (79,272) 194,155 (148,559) (23,323) (84,286) (108,986) (62,013) Net decrease in cash and cash equivalents 154,214 110,112 Cash and cash equivalents, beginning of year 445,836 335,724 $600,050 $445,836 $528,672 $148,458 Cash flows from investing activities Interest income received Net sales of investments in internal pool Net cash provided by investing activities Cash flows from capital and related financing activities Institutional support for debt service payments Payments on note payable Purchase of capital assets Interest paid on indebtedness Net cash provided by (used in) capital and related financing activities Cash and cash equivalents, end of year Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income Adjustments to reconcile operating income to net cash flows from operating activities Depreciation and amortization Net pension expense Contributed building rent and utilities Net changes in assets and liabilities Receivables Prepaid Accounts payable and accrued liabilities Accrued salaries and benefits Deferred revenue Net cash provided by operating activities 14 46,190 (52,828) 28,144 (57) (242) 88,127 (8,999) 7,747 $636,754 See Accompanying Notes to the Financial Statements 67,547 28,343 118,676 42,729 (41,251) (27,056) (3,034) $334,412 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Western Washington University Parking Services (Parking Services), a division of Business and Financial Affairs, is a self-supporting, auxiliary enterprise of Western Washington University (WWU) and is responsible for the oversight and operation of the parking facilities and public transportation services of the University. Parking Services facilitates access to the University for over 15,000 students, faculty, staff, vendors and guests. To supplement approximately 3,400 campus parking spaces, the transportation program provides assistance, education and incentives for walking, transit use, bicycling and carpooling. Financial Statement Presentation The financial statements are presented in accordance with generally accepted accounting principles and follow the guidance given by the Governmental Accounting Standards Board (GASB). These statements are special purpose reports reflecting the net position, results of operations and cash flows of Parking Services. The financial statements present only a selected portion of the activities of the University. They are not intended to and do not present either the financial position, results of operations, or changes in net position of the University. Basis of Accounting The financial statements of Parking Services have been prepared using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Cash, Cash Equivalents and Investments WWU records all cash and cash equivalents at cost. Investments held by WWU are recorded at fair value. To maximize investment income, the University combines funds from all departments into an investment pool. Parking Services records their share of cash, cash equivalents and investments in the same relation as the University investment pool itself. Investment income is allocated to Parking Services in proportion to its average balance in the investment pool. Deferred outflows of resources and deferred inflows of resources Changes in net pension liability not included in pension expense are reported as deferred outflows of resources or deferred inflows of resources. Employer contributions subsequent to the measurement date of the net pension liability are reported as deferred outflow of resources. Capital Assets, net Land, vehicles, pay box stations, and improvements other than buildings and equipment are stated at cost. Parking Services capitalizes items with a cost of $5,000 or more and an estimated useful life greater than one year. Depreciation is calculated on the straight-line basis over the estimated lives of the assets, five to seven years for vehicles, pay box stations, and equipment. Unearned Revenue and Revenue Recognition Unearned revenues are parking permit sales collected in advance that relate to subsequent accounting periods. Parking permit revenues are recognized during the period to which the permits relate. Grant revenues are recognized when the related expenditures are incurred. Citation and pay-box revenues are recognized when earned. Fines revenues are recognized when collected. 15 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Net pension liability Parking Services records pension obligations equal to the net pension liability for its defined benefit plans. The net pension liability is measured as the total pension liability, less the amount of the pension plan’s fiduciary net position. The fiduciary net position and changes in net position of the defined benefit plans has been measured consistent with the accounting policies used by the plans. The total pension liability is determined based upon discounting projected benefit payments based on the benefit terms and legal agreements existing at the pension plan’s fiscal year end. Projected benefit payments are discounted using a single rate that reflects the expected rate of return on investments, to the extent that plan assets are available to pay benefits, and a tax-exempt, high-quality municipal bond rate when plan assets are not available. Pension expense is recognized for benefits earned during the measurement period, interest on the unfunded liability and changes in benefit terms. The differences between expected and actual experience and changes in assumptions about future economic or demographic factors are reported as deferred inflows or outflows and are recognized over the average expected remaining service period for employees eligible for pension benefits. The differences between expected and actual returns are reported as deferred inflows or outflows and are recognized over five years. Restatement of Net Position During FY 2015, Parking Services adopted GASB Statement No. 68 “Accounting and Financial Reporting for Pensions-an amendment of GASB Statement No. 27”. Statement No. 68 requires that Parking Services record in its statements its proportional share of the State’s net pension liability for the defined benefit pension plans that are administered by the State and to restate the beginning net position of the earliest period presented. The amount of restatement to the beginning FY 15 net position was $286,542. The net pension liability information is provided to Parking Services by the Department of Retirement Systems (DRS) and the Office of State Actuary (OSA). The information provided by DRS and OSA only allowed Parking Services to restate FY 15 beginning net position due to the measurement period of June 30, 2014 for the net pension liability. Net Position Parking Services’ net position is classified as follows: Net investment in capital assets. This represents the total investment in capital assets, net of outstanding debt obligations related to those capital assets. Unrestricted. This represents resources derived from operations and investing activities. Classification of Revenue, Expenses and Transfers Operating revenue includes activities that have the characteristics of exchange transactions, such as the sale of parking permits, parking meter, pay box and fine revenue. Operating expenses are those costs incurred in daily operations, such as salaries, repairs and depreciation. Nonoperating revenue includes items that do not have the characteristics of exchange transactions, such as contributed income and interest income. Nonoperating expenses include costs related to financing or investing activities, such as interest on indebtedness. Tax Exemption The University, and Parking Services as an auxiliary enterprise, is an instrumentality of the State of Washington organized under the provisions of Section 115(a) of the Internal Revenue Code and is exempt from federal income taxes on related income. 16 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain accounts in the prior year financial statements may have been reclassified for comparative purposes to conform to the presentation in the current year financial statements. NOTE 2. CASH, CASH EQUIVALENTS AND INVESTMENTS Interest Rate and Credit Risk Parking Services’ cash and cash equivalents and investments are part of the University’s internal investment pool. The pool is invested in demand deposits, time certificates of deposit, the Washington State Local Government Investment Pool (LGIP) and U.S. Treasury and Agency securities. The LGIP is comparable to a Rule 2a-7 money market fund recognized by the Securities and Exchange Commission (17CFR.270.2a-7). Rule 2a-7 funds are limited to high quality obligations with limited maximum and average maturities, the effect of which is to minimize both market and credit risk. The LGIP is an unrated investment pool. Bank balances (including time certificates of deposit) are insured by the Federal Deposit Insurance Corporation (FDIC) or by a collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). U.S. Treasury and Agency securities are rated AA+ by Standard & Poor’s and Aaa by Moody’s Investors Service. WWU manages its exposure to fair value losses in the internal investment pool by targeting the portfolio duration to 2.25 years and limiting the weighted average maturity to a maximum of 3 years. WWU generally does not invest operating funds in securities maturing more than five years from the date of purchase. 2015 Cash and cash equivalents Weighted Average Maturity (in years) 2014 Weighted Average Maturity (in years) $600,050 0.001 $445,836 0.001 85,954 1.033 62,525 2.033 U.S. Treasuries 284,186 2.41 51,843 1.085 U.S. Agencies 642,279 1.614 518,094 2.657 Investments Certificates of deposit $1,612,469 $1,078,298 17 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 3. LINCOLN CREEK TRANSPORTATION CENTER (LCTC) The LCTC project is a key component to an overall transportation management plan of providing access to the University and local region while supporting transit services and traffic mitigation. The LCTC encourages alternative modes of transportation, including carpooling and bicycling, and provides incentives to reduce use of single occupancy vehicles. The site is located approximately 2 miles east of the main campus. The project was funded with a Federal Transit Administration (FTA) grant, which ended in 2013. NOTE 4. NOTES PAYABLE Parking Services financed the purchases of the Lincoln Creek property through the issuance of Certificates of Participation by the Washington State Treasurer at an interest rate of 4.42% and payable over 20 years. The program offers lease financing to state agencies to purchase capital assets and property. The University will own the property outright after all payments have been made. The long-term debt has a carrying value of $1,820,000 at June 30, 2015 Following are the changes in noncurrent long-term liabilities for the year ended June 30, 2015 and 2014: Notes Payable Certificates of Participation Notes Payable Certificates of Participation Balance June 30, 2014 Additions $1,935,000 - Balance June 30, 2013 Additions $2,083,559 - Payments Balance June 30, 2015 Current Portion (115,000) $1,820,000 $120,000 Payments Balance June 30, 2014 Current Portion (148,559) $1,935,000 $115,000 Parking Services debt service requirements for this agreement for the next five years and thereafter are as follows: Fiscal Year 2016 2017 2018 2019 2020 2021-2025 2026-2030 Total 18 Principal Interest 120,000 125,000 130,000 135,000 140,000 800,000 370,000 74,955 70,055 64,955 59,655 54,015 172,931 16,875 1,820,000 513,441 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 5. LAND AND CAPITAL ASSETS, NET The depreciation and amortization expense for the fiscal years ended June 30, 2015 and 2014 was $46,190 and $67,547, respectively. Following are the changes in capital assets for the year ended June 30, 2015: June 30, 2014 Non-depreciable capital assets Land Construction in progress Additions Reductions June 30, 2015 $3,503,223 $ - - $ 109,369 - $3,503,223 109,369 $3,503,223 $ 109,369 $ - $3,612,592 - 148,650 Depreciable capital assets Pay-box stations 148,650 Vehicles and equipment 184,192 Improvements other than building - 184,192 1,019,303 - - 1,019,303 4,855,368 109,369 - 4,964,737 Accumulated depreciation (402,246) (46,190) Accumulated amortization (350,175) Total cost Total depreciation and amortization Capital assets, net (752,421) $4,102,947 (46,190) $63,179 $ (448,436) - (350,175) - (798,611) $4,166,126 Following are the changes in capital assets for the year ended June 30, 2014: 19 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Non-depreciable capital assets Land Construction in progress June 30, 2015 and 2014 Additions Reductions June 30, 2014 $3,503,223 $ - - $ - - $3,503,223 - $3,503,223 $ - $ - $3,503,223 Depreciable capital assets Pay-box stations 148,650 - - 148,650 Vehicles and equipment 177,923 23,323 (17,054) 184,192 Improvements other than building 1,019,303 - - 1,019,303 4,849,099 23,323 (17,054) 4,855,368 Accumulated depreciation (351,753) (67,547) 17,054 (402,246) Accumulated amortization (350,175) - (350,175) 17,054 - (752,421) $4,102,947 Total cost Total depreciation and amortization Capital assets, net (701,928) $4,147,171 (67,547) (44,224) $ NOTE 6. PENSION PLAN A. SUMMARY WWU offers five defined benefit pension plans and three defined benefit/defined contribution plans: the Washington State Public Employees' Retirement System (PERS) plans 1-3, the Washington State Teachers Retirement System (TRS) plans 1-3, the Law Enforcement Officers' and Firefighters' Retirement System (LEOFF) plan 1 and the Western Washington University Retirement Plan (WWURP). Parking Services employees in eligible positions are participants in WWURP, PERS plans 2 and 3, and LEOFF plan 2. Parking Services contributes to PERS and LEOFF cost sharing multiple-employer defined benefit pension plans administered by the State of Washington Retirement System. Refer to sections B and C of this note for descriptions of the plans. Parking Services contributed approximately $51,830, $53,054 and $49,877 to these plans in fiscal 2015, 2014 and 2013, respectively. An actuarial valuation of the plans for Parking Services as a standalone entity is not available. Parking Services implemented Statement No. 68 of the Governmental Accounting Standards Board (GASB) Accounting and Financial Reporting for Pensions for the fiscal year 2015 financial reporting. Parking Services defined benefit pension plans were created by statutes rather than through trust documents. With the exception of the supplemental defined benefit component of the higher education retirement plan, they are administered in a way equivalent to pension trust arrangements as defined by the GASB. In accordance with Statement No. 68, Parking Services has elected to use the prior fiscal year end as the measurement date for reporting net pension liabilities. The state Legislature establishes and amends laws pertaining to the creation and administration of all state public retirement systems. Additionally the state Legislature authorizes state agency participation in plans other than those administered by the state. 20 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Basis of Accounting Pension plans administered by the state are accounted for using the accrual basis of accounting. Under the accrual basis of accounting, employee and employer contributions are recognized in the period in which employee services are performed; investment gains and losses are recognized as incurred; and benefits and refunds are recognized when due and payable in accordance with the terms of the applicable plan. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all plans and additions to/deductions from all plan fiduciary net position have been determined in all material respects on the same basis as they are reported by the plans. The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB Statement No. 68 for Parking Services, for fiscal year 2014: Aggregate Pension Amounts - All Plans Pension liabilities $ (135,382) Pension assets 25,114 Deferred outflows of resources related to pensions 38,469 Deferred inflows of resources related to pensions (161,915) Pension expense/expenditures (52,828) Investments The Washington State Investment Board (WSIB) has been authorized by statute as having investment management responsibility for the pension funds. The WSIB manages retirement fund assets to maximize return at a prudent level of risk. Retirement funds are invested in the Commingled Trust Fund (CTF). Established on July 1, 1992, the CTF is a diversified pool of investments that invests in fixed income, public equity, private equity, real estate, and tangible assets. Investment decisions are made within the framework of a Strategic Asset Allocation Policy and a series of written WSIB-adopted investment policies for the various asset classes in which the WSIB invests. Department of Retirement Systems. As established in chapter 41.50 of the Revised Code of Washington (RCW), the Department of Retirement Systems (DRS) administers eight retirement systems covering eligible employees of the state and local governments. The Governor appoints the director of the DRS. The DRS administered systems that Parking Services offers its employees are comprised of three defined benefit pension plans and one defined contribution plans. Below are the DRS plans that Parking Services offers its employees:  Public Employees’ Retirement System (PERS) Plan 2 - defined benefit Plan 3 - defined benefit/defined contribution 21 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014  Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) Plan 2 - defined benefit Although some assets of the plans are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to the members of that plan in accordance with the terms of the plan. Administration of the PERS and LEOFF systems and plans was funded by an employer rate of 0.18 percent of employee salaries. The DRS prepares a stand-alone financial report that is compliant with the requirements of Statement 67 of the Governmental Accounting Standards Board. Copies of the report may be obtained by contacting the Washington State Department of Retirement Systems, PO Box 48380, Olympia, Washington 98504-8380 or online at http://www.drs.wa.gov/administration/annual-report/. Higher Education. As established in chapter 28B.10 RCW, eligible higher education state employees may participate in higher education retirement plans. These plans include a defined contribution plan administered by a third party with a supplemental defined benefit component (on a pay as you go basis) which is administered by the state. B. DEFINED CONTRIBUTION PLANS Western Washington University Retirement Plan (WWURP) Plan Description The WWURP is a defined contribution single employer pension plan with a supplemental payment, when required. The plan covers faculty, professional staff, and certain other employees. It is administered by WWU. WWU’s Board of Trustees is authorized to establish and amend benefit provisions. Contributions to the plan are invested in annuity contracts or mutual fund accounts offered by one or more fund sponsors. Benefits from fund sponsors are available upon separation or retirement at the member’s option. Employees have at all times a 100% vested interest in their accumulations. Funding Policy Employee contribution rates, which are based on age, range from 5% to 10% of salary. WWU matches the employee contributions. All required employer and employee contributions have been made. Supplemental Component The supplemental payment plan determines a minimum retirement benefit goal based upon a one-time calculation at each employee's retirement date. Parking Services makes direct payments to qualified retirees when the retirement benefit provided by the fund sponsor does not meet the benefit goal. During fiscal year ending June 30, 2011, WWU amended the supplemental retirement plan, limiting participation to those individuals who were active participants on June 30, 2011. Public Employees’ Retirement System Plan 3 Plan Description The Public Employees’ Retirement System (PERS) Plan 3 is a combination defined benefit/defined contribution plan administered by the state through the Department of Retirement Systems (DRS). Refer to section C of this note for all PERS Plan descriptions. 22 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contribution component. As established by chapter 41.34 RCW, employee contribution rates to the defined contribution component range from 5 to 15 percent of salaries, based on member choice. Members who do not choose a contribution rate default to a 5 percent rate. There are currently no requirements for employer contributions to the defined contribution component of PERS Plan 3. PERS Plan 3 defined contribution retirement benefits are dependent upon the results of investment activities. Members may elect to self-direct the investment of their contributions. Any expenses incurred in conjunction with self-directed investments are paid by members. Absent a member’s self-direction, PERS Plan 3 contributions are invested in the retirement strategy fund that assumes the member will retire at age 65. Members in PERS Plan 3 are immediately vested in the defined contribution portion of their plan, and can elect to withdraw total employee contributions adjusted by earnings and losses from investments of those contributions upon separation from PERS-covered employment. C. STATE PARTICIPATION IN PLANS ADMINISTERED BY DRS Public Employees’ Retirement System Plan Description. The Legislature established the Public Employees’ Retirement System (PERS) in 1947. PERS retirement benefit provisions are established in chapters 41.34 and 41.40 RCW and may be amended only by the Legislature. Membership in the system includes: elected officials; state employees; employees of the Supreme, Appeals, and Superior Courts (other than judges currently in a judicial retirement system); employees of legislative committees; community and technical colleges, college and university employees not in national higher education retirement programs; judges of district and municipal courts; and employees of local governments. PERS is a cost-sharing, multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution plan. Although members can only be a member of either Plan 2 or Plan 3, the defined benefit portions of Plan 2 and Plan 3 are accounted for in the same pension trust fund. All assets of this Plan 2/3 defined benefit plan may legally be used to pay the defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, as defined by the terms of the plan. Therefore, Plan 2/3 is considered a single defined benefit plan for reporting purposes. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. PERS members who joined the system by September 30, 1977, are Plan 1 members. Plan 1 is closed to new entrants. Those who joined on or after October 1, 1977, and by either, February 28, 2002, for state and higher education employees, or August 31, 2002, for local government employees, are Plan 2 members unless they exercised an option to transfer their membership to PERS Plan 3. PERS participants joining the system on or after March 1, 2002, for state and higher education employees, or September 1, 2002, for local government employees, have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. Employees who fail to choose within 90 days default to PERS Plan 3. Refer to section B of this note for a description of the defined contribution component of PERS Plan 3. Benefits Provided. PERS plans provide retirement, disability, and death benefits to eligible members. 23 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 PERS Plan 2 members are vested after completing five years of eligible service. Plan 2 members are eligible for normal retirement at the age of 65 with five years of service. The monthly benefit is 2 percent of the AFC per year of service. There is no cap on years of service credit and a COLA is granted based on the Consumer Price Index, capped at 3 percent annually. The AFC is the average of the member’s 60 highest paid consecutive months. PERS Plan 2 members have the option to retire early with reduced benefits. The defined benefit portion of PERS Plan 3 provides members a monthly benefit that is 1 percent of the AFC per year of service. There is no cap on years of service credit. Plan 3 provides the same COLA as Plan 2. The AFC is the average of the member’s 60 highest paid consecutive months. Effective June 7, 2006, PERS Plan 3 members are vested in the defined benefit portion of their plan after 10 years of service; or after five years of service, if 12 months of that service are earned after age 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. PERS Plan 3 members have the option to retire early with reduced benefits. PERS members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, with reduced benefits. Contributions. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Contribution requirements are established and amended by state statute. Members in Plan 2 can elect to withdraw total employee defined benefit contributions and interest thereon, in lieu of any retirement benefit, upon separation from PERS-covered employment. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Investment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. 24 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in:    Expected annual return. Standard deviation of the annual return. Correlations between the annual returns of each asset class with every other asset class. WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Asset Class Fixed Income Tangible Assets Total 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be 25 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 made at contractually required rates (including PERS Plan 2/3 employers whose rates include a component for the PERS Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, Parking Services reported $135,382 for its proportionate share of the collective net pension liability for PERS 2/3. Parking Services’ proportion for PERS 2/3 was 0.009 percent, a decrease of 0.0008 percent since the prior reporting period. The proportions are based on Parking Services’ contributions to the pension plan relative to the contributions of all participating employers. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of the Recreation Center as an employer, calculated using the discount rate of 7.50 percent, as well as what the net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. PERS 2/3 Parking proportionate share of Net Pension Liability (Asset) 1% Decrease $ 564,707 Current Discount Rate $ 135,382 1% Increase $ (192,543) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, Parking Services recognized a PERS 2/3 pension expense of $(47,071). At June 30, 2014, PERS 2/3 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Parking Services PERS 2/3 Difference between expected and $ actual experience Changes of assumptions Net Difference between projected and actual earnings on pension plan investments Change in proportion Contributions subsequent to the measurement date Total $ 26 Deferred Inflows of Resources - $ - - - - 143,506 (26,356) - 61,265 - 34,909 $ 143,506 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: PERS 2/3 2015 2016 2017 2018 2019 Thereafter $ $ $ $ $ $ (5,857) (5,857) (5,857) (5,857) (2,928) - Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan Description. The Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) was established in 1970 by the Legislature. LEOFF retirement benefit provisions are established in chapter 41.26 RCW and may be amended only by the Legislature. Membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. LEOFF membership is comprised primarily of non-state employees, with Department of Fish and Wildlife enforcement officers who were first included effective July 27, 2003, being an exception. LEOFF is a cost-sharing, multiple-employer retirement system, comprised of two separate defined benefit plans. LEOFF members who joined the system on or after October 1, 1977, are Plan 2 members. Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established by Initiative 790 to provide governance of LEOFF Plan 2. The board’s duties include adopting contribution rates and recommending policy changes to the Legislature. Benefits Provided. LEOFF Plan 2 provides retirement, disability, and death benefits to eligible members. LEOFF Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members are eligible for retirement at the age of 53 with five years of service, or at age 50 with 20 years of service. Plan 2 members receive a benefit of 2 percent of the FAS per year of service. FAS is based on the highest consecutive 60 months. Members who retire prior to the age of 53 receive reduced benefits. A cost of living allowance (COLA) is granted based on the Consumer Price Index, capped at 3 percent annually. LEOFF members meeting specific eligibility requirements have options available to enhance their retirement benefits. Some of these options are available to their survivors, generally with reduced benefits. Contributions. LEOFF retirement benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays through legislative appropriations. Employer and employee contribution rates are developed by the Office of the State Actuary to fully fund the plans. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. The methods used to determine the contribution requirements are established under state statute. 27 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 Members in LEOFF Plan 2 can elect to withdraw total employee contributions and interest earnings upon separation from LEOFF-covered employment. The Legislature, by means of a special funding arrangement, appropriates money from the state General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. For fiscal year 2014, the state contributed $55.6 million to LEOFF Plan 2. Beginning in 2011, when state General Fund revenues increase by at least 5 percent over the prior biennium’s revenues, the State Treasurer will transfer, subject to legislative appropriation, specific amounts into a Local Public Safety Enhancement Account. Half of this transfer will be proportionately distributed to all jurisdictions with LEOFF Plan 2 members. The other half will be transferred to a LEOFF Retirement System Benefits Improvement Account to fund benefit enhancements for LEOFF Plan 2 members. However, this special funding situation is not mandated by the State Constitution and this funding requirement could be returned to the employers by a change of statute. Required contribution rates for fiscal year 2014 are presented in the table in section C.1 of this note. The following information applies to WWU as a LEOFF 2 employer. Actuarial Assumptions. The total net pension asset was determined by an actuarial valuation as of June 30, 2013 with the results rolled forward to the June 30, 2014 measurement date using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.75% Investment rate of return 7.50% Mortality rates were based on the RP-2000 Combined Healthy Table and Combined Disabled Table published by the Society of Actuaries. The Office of the State Actuary applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis, meaning members are assumed to receive additional mortality improvements in each future year, throughout their lifetime. The actuarial assumptions used in the June 30, 2013, valuation were based on the results of the 2007-2012 Experience Studies. Additional assumptions for subsequent events and law changes are current as of the 2013 actuarial valuation report. The long-term expected rate of return on pension plan investments was determined using a building-block method in which a best estimate of expected future rates of return (expected returns, net of pension plan investment expense, but including inflation) are developed for each major asset class by the WSIB. Those expected returns make up one component of WSIB’s Capital Market Assumptions (CMAs). The CMAs contain the following three pieces of information for each class of assets the WSIB currently invests in:    28 Expected annual return. Standard deviation of the annual return. Correlations between the annual returns of each asset class with every other asset class. PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 WSIB uses the CMAs and their target asset allocation to simulate future investment returns over various time horizons. The long-term expected rate of return of 7.50 percent approximately equals the median of the simulated investment returns over a fifty-year time horizon, increased slightly to remove WSIB’s implicit and small short-term downward adjustment due to assumed mean reversion. WSIB’s implicit short-term adjustment, while small and appropriate over a ten to fifteen year period, becomes amplified over a fifty-year measurement period. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2014, are summarized in the following table: Target Long-Term Expected Allocation Real Rate of Return 20% 0.80% 5% 4.10% Real Estate 15% 5.30% Global Equity 37% 6.05% Private Equity 23% 9.05% Asset Class Fixed Income Tangible Assets Total 100% The inflation component used to create the above table is 2.70 percent, and represents WSIB’s most recent longterm estimate of broad economic inflation. There were no material changes in assumptions, benefit terms or method changes for the fiscal year 2014 reporting period. Discount Rate. The discount rate used to measure the total pension liability was 7.50 percent, the same as the prior measurement date. To determine the discount rate, an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to make all projected future benefit payments of current plan members. Consistent with current law, the completed asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent with the long-term expected rate of return, a 7.50 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue to be made at contractually required rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total pension liability. Collective Net Pension Liability/Asset At June 30, 2014, Parking Services reported an asset of $25,114 for its proportionate share of the collective net pension asset for LEOFF 2. Parking Services’ proportion for LEOFF 2 was 0.001892 percent, an increase of 0.001453 percent since the prior reporting period. The proportions are based on Parking Services’ contributions to the pension plan relative to the contributions of all participating employers. Sensitivity of the Net Pension Liability/Asset to Changes in the Discount Rate. The following presents the net pension liability/asset of WWU as an employer, calculated using the discount rate of 7.50 percent, as well as what 29 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 the employers’ net pension liability/asset would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate. LEOFF 2 Parking's proportionate share of Net Pension Liability (Asset) 1% Decrease $ 10,747 Current Discount Rate $ (25,114) 1% Increase $ (52,026) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. For the year ended June 30, 2014, Parking Services recognized a LEOFF 2 pension expense of $(5,757). At June 30, 2014, LEOFF 2 reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Parking Services LEOFF 2 Difference between expected and $ actual experience Changes of assumptions Net Difference between projected and actual earnings on pension plan investments Change in proportion Contributions subsequent to the measurement date Total $ Deferred Inflows of Resources - $ - - - - 18,409 - 5,122 3,560 - 3,560 $ 23,531 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in the fiscal years ended June 30: 30 PARKING SERVICES NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 and 2014 LEOFF 2 2015 2016 2017 2018 2019 Thereafter $ $ $ $ $ $ (800) (800) (800) (800) (800) (1,120) TABLE 1: Required Contribution Rates The required contribution rates (expressed as a percentage of current year covered payroll) at June 30, 2014 are as follows: Required Contribution Rates PERS State agencies, local gov ernmental units Administrativ e fee PERS Plan 1 UAAL Total LEOFF Ports and univ ersities Administrativ e fee Total Em ploy er (Univ ersity ) Plan 1 Plan 2 Plan 3 9.03% 0.1 8% 0.00% 9.21 % 4.98% 0.1 8% 4.05% 9.21 % 4.98% 0.1 8% 4.05% 9.21 % N/A 8.41 % 0.1 8% 8.59% N/A Plan 1 * Em ploy ee Plan 2 Plan 3 6.00% N/A 4.92% 8.41 % ** N/A *Plan 3 defined benefit portion only . **Variable from 5% to 1 5% based on rate selected by the member. N/A indicates data not applicable. NOTE 7. OTHER POST-EMPLOYMENT BENEFITS (OPEB) The university funds OPEB obligations at a university-wide level on a pay-as-you-go basis. Disclosure information, as required under GASB 45, does not exist at department levels, and as a result, the actuarial accrued liabilities (AAL) are not available for auxiliary entities. The University is responsible for the annual payment, the annual required contribution (ARC) is not recorded on Parking Service’s financial statements. 31 This page intentionally left blank. PARKING SERVICES REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 RSI REQUIRED SUPPLEMENTARY INFORMATION 33 PARKING SERVICES REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Parking Services Proportionate Share of the Net Pension Liability Schedule of Parking Services Proportionate Share of the Net Pension Liability Public Employees' Retirement System (PERS) Plan 2/3 Measurement Date ended June 30 * 2014 Pa rki ng Servi ces PERS 2/3 empl oyers ' proportion of the net pens i on l i a bi l i ty 0.006698% Pa rki ng Servi ces PERS 2/3 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty $135,382 Pa rki ng Servi ces PERS 2/3 empl oyers ' coveredempl oyee pa yrol l $578,785 Pa rki ng Servi ces PERS 2/3 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty a s a percentage of i ts covered-empl oyee pa yrol l 23.39% Pl a n fi duci a ry net pos i tion a s a percentage of the total pens i on l i a bi l i ty 93.29% * As of June 30; thi s s chedul e i s to be bui l t pros pectivel y until i t contai ns ten yea rs of da ta. 34 PARKING SERVICES REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Parking Services Proportionate Share of the Net Pension Liability Schedule of Parking Services Proportionate Share of the Net Pension Liability Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plan 2 Measurement Date ended June 30 * 2014 Pa rki ng Servi ces LEOFF 2 empl oyers ' proportion of the net pens i on l i a bi l i ty (a s s et) 0.001892% Pa rki ng Servi ces LEOFF 2 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty (a s s et) ($25,114) Pa rki ng Servi ces LEOFF 2 empl oyers ' coveredempl oyee pa yrol l $31,621 Pa rki ng Servi ces LEOFF 2 empl oyers ' proportiona te s ha re of the net pens i on l i a bi l i ty (a s s et) a s a percentage of i ts covered-empl oyee pa yrol l (79.42%) Pl a n fi duci a ry net pos i tion a s a percentage of the total pens i on l i a bi l i ty (a s s et) 116.75% * As of June 30; thi s s chedul e i s to be bui l t pros pectivel y until i t contai ns ten yea rs of da ta. 35 PARKING SERVICES REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Public Employees' Retirement System (PERS) Plan 2/3 Fiscal Year Ended June 30 Parking Contributions in relation to the Contractually Contractually Fiscal Required Required Year Contributions Contributions Contribution deficiency (excess) 2015 $ $ 60,351 $ 61,265 (913) $ Coveredemployee payroll Contributions as a percentage of coveredemployee payroll 655,282 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pectivel y until they contai n ten yea rs of da ta. 36 9.35% PARKING SERVICES REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 and 2014 PENSION PLAN INFORMATION Cost Sharing Employer Plans Schedules of Contributions Schedule of Contributions Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plan 2 Fiscal Year Ended June 30 Parking Contributions in relation to the Contractually Contractually Fiscal Required Required Year Contributions Contributions Contribution deficiency (excess) 2015 $ $ 3,560 $ 3,560 0 Coveredemployee payroll $ Contributions as a percentage of coveredemployee payroll 41,440 8.59% 2016 2017 2018 2019 2020 2021 2022 2023 2024 Notes : Thes e s chedul es wi l l be bui l t pros pectivel y until they contai n ten yea rs of da ta. 37 WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by: Senior Vice President Eileen Coughlin, Enrollment and Student Services Vice President Richard Van Den Hul, Business and Financial Affairs DATE: December 11, 2014 SUBJECT: Student Right-to-Know and Clery Act PURPOSE: Information Item Purpose of Submittal: Provide the Board of Trustees with information regarding Western Washington University’s compliance with the federal Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act. Western Washington University Security and Fire Safety Report Update December 2015 Background: In November 1990, the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (referred to as the “Clery Act”) was signed into law. As a result, all institutions participating in federal student aid programs are required to:  Prepare and distribute an annual security and fire safety report to all members of the campus community (http://www.wwu.edu/vpess/annualsafetyreport.shtml) which sets forth the law enforcement authority of campus police, includes information on where and how crimes should be reported, and discloses three years’ worth of crime trends including alcohol and other drug-related statistics, arrests and disciplinary referrals for the campus, areas immediately adjacent to or running through the campus, and certain non-campus facilities including leased housing and remote classrooms; and  Provide timely warning to the campus community of crimes which may pose a threat to the safety and/or welfare of students and employees. In 2014, the Western Alert System, through which timely warnings are conveyed, was utilized on six occasions to send messages to the campus community regarding safety concerns and one time to issue inclement weather warnings. The system is also tested during fall and spring quarters, when the majority of students are on campus. Security and Fire Safety Report: All information that Western is required to distribute annually to the campus community under state and/or federal mandates is compiled into one publication, the Security and Fire Safety Report. Published each fall, the report includes educational materials, key policies and procedures, resources for students and employees, and an annual summary of campus crime and residence hall fire statistics.  The Clery Act specifies the crimes/violations that are to be published. These are reflected in the 2015-16 Security and Fire Safety Report, on pages 16-18. Campus Security Authorities: Staff members who have “significant responsibility for student and campus activities” are required to document any Clery Act-designated crime reported to them for inclusion in Western’s annual campus crime statistics. Western has identified staff members whose positions fall under the Department of Education’s definition of campus security authorities (CSAs). Reports submitted by CSAs are forwarded to University Police for follow-up and verification. Prevention and outreach efforts Western has continued its commitment to actively provide outreach and educational programming to the Western community. Prevention and Wellness Services has been providing, and continues to provide, training on bystander intervention to varsity athletic teams, club sports, and to all students via an online tutorial. Programs to prevent domestic violence, dating violence, sexual assault and stalking are provided to the Associated Students Board and Resource and Outreach Programs Coordinators; University Police; Resident Advisors, students studying abroad (during pre-departure); international students; Peer Health Educators and peer advisors from a variety of programs, and through faculty request to a variety of academic classes. In addition, these prevention efforts are being augmented in order to meet the new requirements in the Campus Sexual Assault Violence Elimination Act (SaVE Act) provision of the Violence Against Women Reauthorization Act (revised 2014). During the 2014/2015 academic year, all WWU students were offered the opportunity to participate in the HAVEN violence prevention on-line training. Over 10,000 Western students participated in this training. Additionally, for the 2015/2016 academic year, in alignment with Western’s culture and values and in response to a change in the Western’s policy on Preventing and Responding to Sex Discrimination, Including Sexual Misconduct, participation in the Haven training is required of all students new to Western. HAVEN is an interactive training where students have the opportunity to increase skills in creating healthy relationships, explore the importance of consent, and identify the many ways they can help to create a safe campus community. Haven also empowers students to be active bystanders by teaching the skills needed to help prevent sexual violence. It gives the information needed to identify risky situations and offers skills to increase safety for themselves, friends and the community. Students also learn about Western’s resources, reporting options and policies regarding sexual violence. 19. DATE FOR NEXT REGULAR MEETING • February 11 & 12, 2016 o in Seattle at the Washington Athletic Club 20. Adjournment WESTERN WASHINGTON UNIVERSITY ITEM SUBMITTED TO THE BOARD OF TRUSTEES TO: Members of the Board of Trustees FROM: President Bruce Shepard by Provost Brent Carbajal DATE: December 11, 2015 SUBJECT: University Academic Presentation – Recreation Degree Program Dr. Keith Russell, Department of Health and Human Development PURPOSE: Presentation Purpose of the Submittal: Keith Russell, faculty member in the Department of Health and Human Development, together with Abby Gamble, Hadley Underwood, Brittney Lazaro and Alex Bain, who are students in the program look forward to sharing information with the Board of Trustees about Western’s Recreation degree program. The focus of this presentation is to provide an overview of the Recreation Degree Program, including the purpose and intent of the cohort or “Phase” and their commitment to teaching principles of social justice in and out of the classroom. The curriculum consists of four “phases” or curricular sections. All majors begin Phase I spring quarter and continue as a cohort through three additional phases over a period of a year and a half. Phase I consists of introductory foundational courses that all students take. The purpose of Phase I is to give students a broad understanding of leisure services and a firm grounding in the principles and values of the Recreation Program, and an introduction to professional foundations rooted in social justice. Phase II occurs the following winter quarter. While attention to principles and values continue, Phase II is best characterized as the “toolbox” quarter. Understanding and skill are emphasized through courses in management, programming and human relations, as well as four elective courses in specialized areas of programming (outdoor, tourism, community, and therapeutic recreation). The translation of principles of social justice to professional practice is emphasized. Phase III, a full-time internship, occurs either spring or summer quarter. The internship is a minimum of 10 weeks, but students often complete 12 or more weeks. Through the advising process, they are encouraged to seek internships at the site best suited to meet their professional goals, with the best person to serve as a mentor, and, if possible, in a geographic area that will expand their cultural horizons. Students working toward Therapeutic Recreation Certification meet NCTRC internship standards. Students may do their internship anywhere in the world that is approved by their advisor and meets all university travel regulations. Held fall quarter, Phase IV is their capstone experience in the program. Using their internships as a context, and social justice as a platform, students explore professional trends and issues. Further exploration is done in a far more relevant fashion through seminars in tourism, community development, therapeutic recreation, and adventure programming. Further, they take advanced courses in program evaluation and budget and finance due to the context provided by experiences they had in their internships. The Phase curriculum, however, is more than just an unconventional structure; it is also a process in which the values and mission that the Recreation Program teaches in its classes are actively learned through the students’ collective experience in building community. Developing and managing relationships ultimately leads to self-awareness, integrity, and interpersonal growth. Each Phase begins with an overnight retreat, where students form bonds of trust and commitment with each other and the faculty. They also discuss goals, expectations, and effective behaviors for creating an optimal learning environment. Retreats are also times to celebrate individual and collective successes and to discuss how to better deal with the inevitable problems and challenges that occur in groups. Needless to say, the retreats are learning laboratories that students later apply to their academic experiences and professional work. Because of the community nature of the phases, there are daily opportunities for vital learning experiences that we like to refer to as “the curriculum in the curriculum.” For instance, all Phase I students plan and lead an overnight camp for nearly 75 teens and adults with developmental disabilities. Most of the students have had little, if any, prior contact with persons who have disabilities. Invariably, it is a profound experience that asks students to engage their hands and hearts, and leaves no one unchanged. Because the Phase curriculum is collectively coordinated by faculty and students, learning activities and field experiences can be planned and implemented to serve learning objectives across the curriculum. There are other, more mundane, but still vital learning experiences. For instance, the faculty believes that character development is an integral part of students’ education. Accordingly, it is not unusual to stop in the middle of a class to discuss the implications of not giving one’s best effort or failing to address group dynamics. Again, all of this can be related to behaviors that are relevant to their professional lives. We enjoy reminding our students when they talk about “getting in the real world” that the “real world” includes here, and the habits they develop will transfer to their professional lives. Finally, between 200 and 300 students, families, friends, faculty, and staff conclude with a formal banquet and graduation ceremony at the end of Phase IV. Many students and their families report that this event is more significant than graduation, because their experience at Western Washington University has been largely defined by their time in the Recreation Program. In the academic year 2009-2010, the faculty began discussing ways to more formally frame the values and beliefs that are taught in and through the Phase program. What emerged from this retreat, and has continued, was a commitment to embracing the principles associated with what is broadly referred to as social justice. In our most recent accreditation process, the reviewers were impressed with our intentional efforts in this area and noted that we were the only accredited program in the country with this commitment. In this way, the faculty has honored the legacy that had guided the program through the decades, while also framing the current and future mission around a more structured and intentional framework. In our program, we begin our discussions about social justice applied to recreation with the simple idea that recreation is a public good that benefits individuals, communities, and society in a variety of ways. Although situations will vary, the entitlement to recreation and leisure, then, is equally relevant to overworked families as it is to unemployed persons, youth at risk, and isolated older adults. Accordingly, students should be able to plan and deliver recreation and leisure services to everyone. Social justice taken to the next level is seen by many as the first principle of democracy and promoting it in a professional context acts to reduce, and eventually, eliminate oppression in whatever form it may appear. In turn, students learn to apply critical thinking skills to recognize where leisure services are not being delivered, what is preventing them from being provided, and how barriers can be removed in order to achieve social justice. When considering social justice action on a particular issue, recreation professionals need to place ethical concerns at the forefront of action, commit to a structural analysis of the problem or task at hand, adopt an activist or ally orientation, and seek identification with others to help address or act on the issue. To conclude, the philosophy of the WWU Recreation Program is grounded in principles of social justice, delivered in a cohort-based curricular structure referred to as the Phase, and designed to develop recreation professionals who think critically about the planning and delivery of recreation and leisure services. Department of Health and Human Development Recreation Degree Program Alex B. Abby Gamble Brittney Lazaro Hadley Underwood Keith C. Russell Conducted from a foundation of liberal education and framed on principles of social justice, the Recreation Program prepares students to enhance the quality of individual and community life through the provision of recreation and leisure services for all people. The 4-quarter cohort program involves overnight retreats, a dedicated classroom, and service learning opportunities, designed to develop a sense of community for students, faculty and community members to facilitate active and engaged learning. Students spend 240 hours in leadership and 400 hours during their Phase III internship experience while in the program 38,400 hours a year of service Each year the program puts on a two-day camp called Camp T.E.A.M for 60 persons with disabilities and their caregivers Each year our Ecotourism students visit Neah Bay and spend three days with the Makah and share stories and experiences about sustainable tourism ….on Genuineness https://www.youtube.com/watch?v=K97wxhYldAk&feature=youtu.be