{Central Michigan University}

BOARD OF TRUSTEESSeptember 17, 2015

2

PLANTE MORAN

Central Michigan University Presentation to Board of Trustees

Summary of Presentation to Board of Trustees:• Audited Financial Statements

Clean, unmodified opinion – highest level of assurance Emphasis of Matter for Adoption of GASB 68 Reporting Entity

Blended with the University statementso CMU College of Business Administration Foundationo CMU Foundation

Discretely presented within the University statementso Central Health Advancement Solutions

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PLANTE MORAN

Central Michigan University Reporting Entity Relationship

Central Michigan University

Central Health Advancement

Solutions

CMU Medical Education Partners

Saginaw Cooperative Hospitals, dba previously

Synergy Medical Education Association, current dba CMU Medical Education

Partners

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PLANTE MORAN

Central Michigan University Financial Highlights

Summary of Presentation to Board of Trustees:• Graphics Presentation with 2015 and 2014 financial highlights

$51.1 million increase in total assets and deferred outflows, primarily due to a $32.6 million increase in net capital assets and an increase of $24.8 million in restricted cash for unspent bond proceeds

$141.2 million increase to total liabilities and deferred inflows, primarily due to an increase of $40.1 million increase long-term debt and an increase of $93.4 million in net pension liability related to the implementation of GASB 68

$20.1 million increase in operating revenue, primarily from increased student tuition revenue and revenue from auxiliary enterprises

$12.8 million increase in operating expenses, primarily from a $6.8 million increase in compensation ($1.7 million was benefit increases) due to added FTE’s and compensation increases

$27.9 million decrease in nonoperating revenue, primarily due to a $34.8 million decrease in investment income mostly due to unrealized losses as a result of unfavorable market conditions offset by a $6.8 million increase in state appropriations

Overall, net position decreased $90.2 million ($91.5 million due to adoption of GASB 68) to a total of $603.8 million

PLANTE MORAN

Central Michigan UniversityRevenues, Expenses and Changes in Net Position (in millions)

20.5

1.3

143.6

117.1

439.1

451.9

316.0

336.1

0 50 100 150 200 250 300 350 400 450

2014

2015

MillionsOperating Revenues Operating ExpensesNonoperating & Other Revenues - Net Change in Net Position

5

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PLANTE MORAN

Central Michigan UniversityOperating Revenues – Comparative (in millions)

Tuition and Fees67%

Federal Grants & Contracts

2%

Departmental Activities

6%

State & Local Grants & Contracts

1%Auxiliary

Enterprises24%

2015 Operating Revenue = $... million

Tuition and Fees67%

Federal Grants & Contracts

2%

Departmental Activities

6%

State & Local Grants & Contracts

2%Auxiliary

Enterprises23%

2014 Operating Revenue = $316.0 million

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2015 Operating Revenue = 336.1 million

PLANTE MORAN

Central Michigan University2015 Operating Expenses (in millions)

Operating expenses were $451.9 million and $439.1 million in 2015 and 2014, respectively with little change in percentage by area or classification.

Instruction36%

Research2%

Public service4%

Academic Support

9%

Student Services4%

Institutional Support

8%

Scholarships/ fellowships

4%

Auxiliary enterprises

20%

Operation/maint.6%

Depreciation6%

Student loan/other less than

1%

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PLANTE MORAN

Central Michigan UniversityNon-operating and Other Revenues (Expenses) (in millions)

80.874.0

4.4 4.82.6

37.4

-5.3 -5.8

0.0 0.1

28.4 28.3

1.6 2.04.6 2.8

-$10

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2015 2014

State Operating Appropriations Gifts Investment IncomeInterest on Capital Debt Other Pell GrantsCapital Gifts Permanent Endwoments

Non-operating and other revenues (expenses) totaled $117.1 million and $143.6 million in 2015 and 2014, respectively.

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PLANTE MORAN

Central Michigan UniversityAssets and Deferred Outflows – Comparative (in millions)

Cash & cash equivalents

4%

Receivables8%

Other assets1%

LT investments

36%Capital assets50%

Deferred outflows

1%

Assets and deferred outflows were $998.3 million and $947.2 million in 2015 and 2014, respectively.

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9

Cash & cash equivalents

3%

Receivables8%

Other assets1%

Restricted cash and cash

equivalents2%

LT investments34%

Capital assets51%

Deferred outflows

1%

2015 2014

PLANTE MORAN

Central Michigan UniversityLiabilities and Deferred Inflows – Comparative (in millions)

Liabilities and Deferred Inflows were $394.5 million and $253.3 million in 2015 and 2014, respectively.10

10

2015 2014Accounts payable/

accrued liab.24%

Unearned revenue

6%

Accrued compensated

4%

Fair value of derivative

3%

Long term debt61% Federal Perkins

2%

Accounts payable/

accrued liab.16%

Unearned revenue

4%Accrued

compensated 2%

Fair value of derivative

2%

Long term debt51%

Net pension liability

24%Federal Perkins

1% 20142015

PLANTE MORAN

Central Michigan UniversityNet Position (formerly known as Net Assets)

317.6 322.5

76.854.848.2 43.4

161.2

273.2

050

100150200250300350

2015 2014

Mill

ions

Net investment in capital assets Restricted - expendable

Restricted - nonexpendable Unrestricted

Net Position totaled $603.8 million and $693.9 million in 2015 and 2014, respectively.

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PLANTE MORAN

• The scope of our audit was as planned.

• Complete cooperation was given to us throughout the audit by everyone at the University.

• Letter Comments: Upcoming items

GASB issues Statement No. 72, Fair Value Measurement and Application

GASB issues Statement No. 75, Accounting for Postemployment Benefits

• Audit of the Federal Programs is complete. Only major (tested) program was the Student Financial Aid Cluster

We noted one finding from our testing that is a common issue around timeliness of return of funds when a student withdraws

Central Michigan UniversityResults of Audit

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PLANTE MORAN

• GASB issues Statement No. 72, Fair Value Measurement and Application Provides guidance on determining a fair value measurement for

financial reporting purposes

Requires enhanced disclosures including a breakout of investments by “level” based on the amount of subjectivity in the fair value measurement

Will be effective for June 30, 2016

Central Michigan UniversityUpcoming Pronouncement

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PLANTE MORAN

• GASB Issues Statement No. 75, Accounting for Postemployment Benefits Other Than Pensions Applicable to all governments (not just Michigan)

Postemployment benefits for retiree healthcare

Recording the unfunded OPEB obligation as a liability on University’s Statement of Position

University’s proportionate share of MPSERS liability

Very similar to GASB No. 68 except applicable to OPEB

Will directly reduce unrestricted net position in year of implementation (June 30, 2018)

Central Michigan UniversityUpcoming Pronouncement

{Thank you}

We appreciate the opportunity to serve Central Michigan University