University of Missouri KWMU-FM Radio

Transcription

1 Financial Statements as of and for the Years Ended June 30, 2014 and 2013, Supplemental Schedule for the Year Ended June 30, 2014, and Independent Auditors Report Main tel Main fax St. Louis, MO 7733 Forsyth Blvd. Suite 1200 St. Louis MO St. Charles, MO 2460 Executive Drive St. Charles MO Irvine, CA 2010 Main Street Suite 340 Irvine CA Mueller Prost is a member of PKF North America, an association of more than 100 legally independent firms. Advising with Vision

2 KWMU-FM RADIO TABLE OF CONTENTS Page Management s Discussion and Analysis 1 Independent Auditors Report 6 Basic Financial Statements as of and for the Years Ended June 30, 2014 and 2013: Statements of Net Position 8 Statements of Revenues, Expenses and Changes in Net Position 9 Statements of Cash Flows 10 Notes to Basic Financial Statements 11 Supplemental Information for the Year Ended June 30, 2014: Supplemental Schedule of Non-Federal Financial Support 23

3 KWMU-FM RADIO MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) This Management s Discussion and Analysis ( MD&A ) of (the Station ) and The Friends of KWMU, Inc. ( Friends ) provides an overview of the Station s financial performance for the fiscal years ended June 30, 2014 and Please read it in conjunction with the basic financial statements for the period and the annual report to the Corporation for Public Broadcasting ( CPB ) that accompanies the basic financial statements. OVERVIEW OF THE OPERATIONS The Station is a department of the St. Louis campus of the University of Missouri (the University ) and operates under a FCC license issued to the Curators of the University of Missouri. The University provides on-going, line item funding as well as indirect institutional support. The University s indirect institutional support to the Station is significant to the Station s financial activities and is fully described in the annual report to CPB. The University is classified by the IRS as an entity of the State of Missouri and is chartered under Missouri state law. The Station s financial activities are managed under policies and procedures of the University and are subject to internal audit and control by the University. The University and the Station both receive annual external audits. For the Station, the external audit is a condition of annual grant funding from CPB. CPB is a private, non-profit corporation created by Congress in CPB is not a governing agency. It promotes public telecommunications services (television, radio and on-line) for the American people. KWMU-FM ACCOUNTING AND FINANCIAL REPORTING This report includes three financial statements: the Statements of Net Position, the Statements of Revenues, Expenses and Changes in Net Position, and the Statements of Cash Flows. The basic financial statements of the Station are prepared in accordance with generally accepted accounting principles in the United States of America as prescribed by the Governmental Accounting Standards Board ( GASB ). The notes to the basic financial statements provide required disclosures and other information that are essential to fully understand the material data provided in the statements. The notes present information about the Station s accounting policies, significant account balances and activities, material risks, obligations, commitments, contingencies and subsequent events, if any. The Station s annual basic financial statements and reports to CPB are on the Station s website and also available for public inspection during business hours in the Station s public file located at 3651 Olive Street, St. Louis, MO STATEMENTS OF NET POSITION THE STATION The Statements of Net Position present the financial position of the Station as of June 30, 2014 and 2013, including all assets and liabilities of the Station segregated into current and noncurrent components. The net position presents the current financial condition of the Station. Assets and liabilities are generally measured using current values, with certain exceptions, such as capital assets, which are stated at cost less accumulated depreciation. 1

4 KWMU-FM RADIO MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) A summary of the Station s assets, liabilities, and net position at June 30, 2014 and 2013, is as follows: Assets Fiscal Year 2014 Fiscal Year 2013 Current Assets $ 5,674,949 $ 4,753,051 Noncurrent Assets 8,018,712 6,732,587 Total Assets $ 13,693,661 $ 11,485,638 Liabilities and Net Position Current Liabilities $ 850,268 $ 509,087 Noncurrent Liabilities 69,061 51,653 Total Liabilities 919, ,740 Net Position: Invested in Capital Assets, Net of Related Debt 362, ,541 Restricted Nonexpendable - Endowment 510, ,581 Restricted Expendable - Capital 6,346,232 6,286,892 Unrestricted 5,554,371 3,742,884 Total Net Position 12,774,332 10,924,898 Total Liabilities and Net Position $ 13,693,661 $ 11,485,638 Fiscal Year 2014 Compared to Fiscal Year 2013 Total assets increased $2,208,023, or 19.2%, to $13,693,661, primarily due to an increase in the noncurrent note receivable of $765,928 in conjunction with the financing of the new Station building at Grand Center (see Note 1), and an increase in short term and long term pledges receivable of $429,925 and $592,009, respectively, related to revenues received from the Beacon Gift Fund. Total liabilities increased by a net $358,589, or 63.9%, to $919,329, primarily due to unexpended Community Service Grants increasing by $325,722. Net Position reflects an increase of $1,849,434. STATEMENTS OF NET POSITION FRIENDS The only item on the Statement of Net Position is cash which decreased from $115,789 at June 30, 2013 to $63,880 at June 30, 2014 largely due to increased contributed support to the Station during the year. 2

5 KWMU-FM RADIO MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION THE STATION The Statements of Revenues, Expenses and Changes in Net Position present the Station s results of operations. The Statements distinguish revenues and expenses between operating and non-operating categories. Fiscal Year 2014 Fiscal Year 2013 Operating Revenues: Membership Contributions and Contributed Support $ 3,153,078 $ 3,039,178 Community Service Grants from CPB 340, ,981 Underwriting Income 1,583,860 1,361,362 Beacon Gift Support 2,571,575 - Special Events & Other Operating Revenue 238, ,897 Total Operating Revenues 7,887,853 5,162,418 Operating Expenses: Program Services - Broadcasting 511, ,178 Programming and Production - Local 3,874,526 3,023,551 Program Information 319, ,710 Total Program Services 4,705,843 3,935,439 Support Services 3,097,619 2,941,057 Depreciation Expense 75,697 75,494 Total Operating Expenses 7,879,159 6,951,990 Operating Income (Loss) Before Non-operating Revenues (Expenses) 8,694 (1,789,572) Non-operating Revenues (Expenses): Capital Campaign, Net 74, ,180 Support from the University of Missouri 23, ,080 Donated Facilities and Administrative Support from University of Missouri 1,196, ,892 Other Grants 58, ,756 Other In-Kind Nonoperating Revenue 11,139 54,683 Investment Income 145, ,137 Interest on Note Receivable 181, ,761 Interest Expense - (4,929) Contributed Support from Friends of KWMU 150,000 77,000 Total Non-operating Revenues (Expenses) 1,840,740 2,374,560 Increase in Net Position 1,849, ,988 Net Position, Beginning of Year 10,924,898 10,339,910 Net Position, End of Year $ 12,774,332 $ 10,924,898 3

6 KWMU-FM RADIO MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) Fiscal Year 2014 Compared to Fiscal Year 2013 Total Operating Revenues for fiscal year 2014 increased $2,275,435, or 52.8%, over fiscal year 2013 primarily due to the Beacon Gift Account contributions received during the year of $2,571,575 related to the merger of the Station and the St. Louis Beacon. In addition, Membership contributions and Underwriting income increased by $113,900, or 3.8%, and $222,498, or 16.3%, respectively, while Community Service Grants from CPB decreased by $127,394, or 27.2%, from fiscal year It should be noted that this revenue amount is reflective of expended grant funds. The CPB grant received during fiscal 2014 totaled $666,309 compared with $593,596 in fiscal Total Non-Operating Revenues for fiscal year 2014 decreased $533,820, or 22.5%, from fiscal year The decrease is primarily due to a decrease in Support from the University, a decrease in Capital Campaign revenue of $172,058, or 70.0%, and an increase in Donated Facilities and Administrative Support from the University of Missouri of $244,955, or 25.7%. Contributions from Friends of KWMU-FM amounted to $150,000 in 2014, an increase of $73,000, or 94.8%, over Investment income in 2014 increased $37,507, or 34.7%, over 2013, primarily due to improvements in market conditions. Operating expenses increased $927,169, or 13.3%, over fiscal year Most of this growth is in programming and production costs which increased by $850,975, or 28.1%, over This is reflective of increased personnel cost resulting from the merger with St. Louis Beacon in December Support services, including fundraising, management and general, and depreciation expense increased by $156,562, or 5.2%, over Programming cost comprised 59.7% and 56.6% of total operating expense in 2014 and 2013, respectively. STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FRIENDS Operating revenues increased from $70,140 for the year ended June 30, 2013 to $102,132 for the year ended June 30, 2014 due to increased contributions received. Total expenses for the same period decreased from $5,466 to $4,055 which resulted in an increased operating income of $98,077 for the year ended June 30, 2014 compared to $64,074 for the year ended June 30, Friends transferred $150,000 for the Station during the year ended June 30, 2014 compared to $77,000 for the year ended June 30, ECONOMIC OUTLOOK The economic outlook for the Station is directly related to the ability of management to garner continued and increasing support from several funding sources. Corporation for Public Broadcasting: The federal government s fiscal year 2013 appropriation for CPB was $460 million, and decreased $15 million for fiscal year The appropriation for 2014 is $445 million. CPB had requested a $451 million advance appropriation for fiscal year 2014, a 9% decrease over the fiscal year 2013 funding. Stations have been faced with flat CPB funding for the better part of the past decade. The impact of this has been magnified by the economic conditions of the last few years. CPB funding source should remain stable during fiscal year Because of the current economic and/or political climate, all federal funding appropriations are being reviewed, requiring CPB to prepare funding justifications. CPB funding beyond 2014 is not guaranteed at this time. CPB recognizes the evolving state of public media toward quick and easy access to contemporaneous and historical content across various platforms such as on-air, online, podcasts, and mobile phone screens. The merger between the Station and St. Louis Beacon, a digital news producer, enhanced both newsroom coverage and distribution of content across multiple platforms. 4

7 KWMU-FM RADIO MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) Underwriting support: Shortly after the close of fiscal 2013, the Station engaged a consultant to review underwriting practices and develop actionable recommendations for improvement. As a result, the Station continues to implement strategies to increase underwriting volume. University of Missouri support: Station management believes University funding will decrease in coming years because of pressure to constrain cost growth in higher education. The University, however, views the Station as a significant asset as evidenced by Administration s support of the building at Grand Center, and the acquisition of St. Louis Beacon in recent years. The University is also collaborating with The Nine Network (KETC), to operate the newly constructed Grand Center Commons, a parcel between The Nine Network and KWMU-FM, as an innovative multi-media community event venue. Special event funding: The Station will continue to view events as a way to increase community awareness of the rich educational value of public media. While events are not a significant source of funding when costs are considered, they are an invaluable source of new listeners/viewers of public content. Private Donations: Membership continues to be a strong source of Station funding. Management anticipates developing new and innovative strategies to grow this important funding source. Other funding: The Station has several smaller grants which contribute to the overall funding in a much appreciated, though minor, way. Management contemplates seeking new sources of grant and foundation funding for the future. Investment Income: The Station s investments are managed by the University. Investment income is dependent upon market conditions of relatively low earnings rates. 5

8 INDEPENDENT AUDITORS REPORT To the Board of Curators University of Missouri St. Louis, MO We have audited the accompanying financial statements of the University of Missouri (the Station ), as of and for the years ended June 30, 2014 and 2013, and the related notes to the 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 opinions 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. 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 entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Station, as of June 30, 2014 and 2013, 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. Emphasis of Matter As discussed in Note 1, the financial statements present only the Station and do not purport to, and do not present fairly the financial position of the University of Missouri, as of June 30, 2014 and 2013, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Main tel Main fax St. Louis, MO 7733 Forsyth Blvd. Suite 1200 St. Louis MO St. Charles, MO 2460 Executive Drive St. Charles MO Irvine, CA 2010 Main Street Suite 340 Irvine CA Mueller Prost is a member of PKF North America, an association of more than 100 legally independent firms. Advising with Vision

9 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and yearly comparison information on pages 1-5 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 Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the Station s basic financial statements. The Supplemental Schedule of Non-Federal Financial Support for the year ended June 30, 2014, required by the Public Telecommunication Financing Act of 1978, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The Supplemental Schedule of Non-Federal Financial Support is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audits of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. December 18, 2014 St. Louis, Missouri Certified Public Accountants 7

10 KWMU-FM RADIO STATEMENTS OF NET POSITION As of June 30, 2014 and 2013 AS S ETS University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit Current Assets: Cash and Cash Equivalents $ 452,499 $ 63,880 $ 810,335 $ 115,789 Cash and Cash Equivalents - Restricted 3,574,495-2,655,931 - Short-Term Investments - Restricted - - 2,281 - Accounts Receivable, Net 123, ,805 - Grants Receivable 11,625-9,000 - Pledges Receivable, Net 1,408, ,281 - Prepaid Lease Expense 83,043-83,043 - Prepaid Expense 21,215-31,375 - Total Current Assets 5,674,949 63,880 4,753, ,789 Noncurrent Assets: Long-Term Investments - Restricted 498, ,412 - Pledges Receivable, Net 1,468, ,046 - Note Receivable 5,491,388-4,725,460 - Capital Assets, Depreciable, Net 362, ,541 - Prepaid Lease Expense 197, ,128 - Total Noncurrent Assets 8,018,712-6,732,587 - Total Assets $ 13,693,661 $ 63,880 $ 11,485,638 $ 115,789 LIABILITIES AND NET PO SITIO N Current Liabilities: Accounts Payable and Other Accrued Expenses $ 141,429 $ - $ 96,328 $ - Accrued Vacation 169, ,093 - Unearned Revenue 70, ,335 - Unexpended Grants 468, , , ,087 - Noncurrent Liabilities: Accrued Vacation 69,061-51,653 - Total Noncurrent liabilities 69,061-51,653 - Total Liabilities 919, ,740 - Net Position: Invested in Capital Assets, Net of Related Debt 362, ,541 - Restricted Nonexpendable - Endowment 510, ,581 - Restricted Expendable - Capital 6,346,232-6,286,892 - Unrestricted 5,554,371 63,880 3,742, ,789 Total Net Position 12,774,332 63,880 10,924, ,789 Total Liabilities and Net Position $ 13,693,661 $ 63,880 $ 11,485,638 $ 115,789 The notes to basic financial statements are an integral part of these statements. 8

11 KWMU-FM RADIO STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION For the years Ended June 30, 2014 and 2013 University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit Operating Revenues: Membership Contributions and Contributed Support $ 3,153,078 $ 102,132 $ 3,039,178 $ 70,140 Community Service Grants from Corporation for Public Broadcasting 340, ,981 - Underwriting Income 1,583,860-1,361,362 - Beacon Gift Support 2,571, Special Events & Other Operating Revenue 238, ,897 - Total Operating Revenues 7,887, ,132 5,162,418 70,140 Operating Expenses: Program Services - Broadcasting 511, ,178 - Programming and Production - Local 3,874,526-3,023,551 - Program Information 319, ,710 - Total Program Services 4,705,843-3,935,439 - Support ing Services - Management and General 1,292,547 4,055 1,177,510 5,466 Depreciation Expense 75,697-75,494 - Fundraising and Membership Development 1,805,072-1,763,547 - Total Supporting Services 3,173,316 4,055 3,016,551 5,466 Total Operating Expenses 7,879,159 4,055 6,951,990 5,466 Operating Income (Loss) Before Nonoperating Revenues (Expenses) 8,694 98,077 (1,789,572) 64,674 Nonoperating Revenues (Expenses): Capital Campaign, Net 74, ,180 - Support from the University of Missouri 23, ,080 - Donated Facilities and Administrative Support from University of Missouri 1,196, ,892 - Other Grants 58, ,756 - Other In-Kind Nonoperating Revenue 11,139-54,683 - Investment Income 145, , Interest on Note Receivable 181, ,761 - Interest Expense - - (4,929) - Payments to (from) Friends of KWMU 150,000 (150,000) 77,000 (77,000) Total Nonoperating Revenues (Expenses) 1,840,740 (149,986) 2,374,560 (76,987) Increase (Decrease) in Net Position 1,849,434 (51,909) 584,988 (12,313) Net Position, Beginning of Year 10,924, ,789 10,339, ,102 Net Position, End of Year $ 12,774,332 $ 63,880 $ 10,924,898 $ 115,789 The notes to basic financial statements are an integral part of these statements. 9

12 KWMU-FM RADIO STATEMENTS OF CASH FLOWS For the years Ended June 30, 2014 and University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit University Fund Business Type Activity Friends of KWMU Discretely Presented Component Unit Cash Flows from Operating Activities: Membership Contributions and Contributed Support $ 2,131,144 $ 102,132 $ 3,350,659 $ 70,140 Corporation for Public Broadcasting Grant 666, ,596 - Underwriting Income 1,585,347-1,428,170 - Beacon Gift Support 2,571, Payments to Suppliers and Employees (6,494,997) (4,055) (6,318,837) (5,466) Other Receipts 238, ,897 - Net Cash Provided by (Used in) Operating Activities 698,131 98,077 (652,515) 64,674 Cash Flows from Capital and Related Financing Activities: Capital Campaign 74, ,180 - Purchase of Capital Assets - - (162,093) - Other grants 55, ,269 - Payments for Prepaid Lease 51,668-83,043 - Principal Payments on Note Payable - - (160,275) - Interest Payments on Note Payable - - (4,929) - Net Cash Provided by Capital and Related Financing Activities 181, ,195 - Cash Flows from Noncapital Financing Activities: Payments and Contributions from University of Missouri & Other Sources 23, ,080 - Payments to/from Friends of KWMU 150,000 (150,000) 77,000 (77,000) Net Cash Provided by (Used in) Noncapital Financing Activities 173,691 (150,000) 756,080 (77,000) Cash Flows from Investing Activties: Sale of Investments, Net (53,272) - (65,530) - Investment Income 145, , Issuance of Note Receivable (765,928) - (1,013,376) - Interest on Note Receivable 181, ,761 - Net Cash Provided by (Used in) Investing Activities (492,480) 14 (837,008) 13 Net Increase (Decrease) in Cash and Cash Equivalents 560,728 (51,909) (601,248) (12,313) Cash and Cash Equivalents, Beginning of Year 3,466, ,789 4,067, ,102 Cash and Cash Equivalents, End of Year $ 4,026,994 $ 63,880 $ 3,466,266 $ 115,789 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Operating Income (Loss) $ 8,694 $ 98,077 $ (1,789,572) $ 64,674 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities - Depreciation Expense 75,697-75,494 - Donated Facilities and Administrative Support from the University 1,196, ,892 - Other In-Kind Nonoperating Revenue 11,139-54,683 - Changes in Assets and Liabilities: Accounts, Grants and Pledges Receivable, Net (962,995) - 319,141 - Prepaid Expense 10,160-20,264 - Accounts Payable and Other Accrued Expenses 45,101 - (496,054) - Accrued Vacation 45,218-26,874 - Unexpended Grants and Unearned Revenue 268, ,763 - Net Cash Provided by (Used in) Operating Activities $ 698,131 $ 98,077 $ (652,515) $ 64,674 Noncash Activity: Administrative Support from the University of Missouri $ 1,196,847 $ - $ 951,892 $ - Non-Cash Contributions of Services and Other Assets 11,139-21,870 - The notes to basic financial statements are an integral part of these statements. 10

13 NOTES TO BASIC FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The major policies followed by (the Station ) are presented below to assist the reader and to enhance the usefulness of the basic financial statements. Organization The Station is a non-profit, non-commercial radio station operated by the University of Missouri (the University ) on its St. Louis campus in St. Louis, Missouri. The financial activity of the Station is included in the financial statements of the University. The accompanying basic financial statements were prepared based on the combination of various accounts associated with the Station and its related operations and do not present the financial position or changes in financial position or cash flows of the University. The Station is dependent upon support from the Corporation for Public Broadcasting, the University, and the public. Reporting Entity Governmental Accounting Standards Board ( GASB ) Statement No. 14, The Financial Reporting Entity, provides guidance as to the financial reporting of component units (legally separate organizations for which the Station is financially accountable). Effective July 1, 2003, the Station adopted GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. This statement amends GASB Statement No. 14 to provide additional guidance for determining whether certain organizations for which the Station is not financially accountable should be reported as component units based on the nature and significance of their relationship to the Station. The Friends of KWMU, Inc. meets the criteria set forth for discretely presented component units under GASB Statement No. 39, and the financial statements include the accounts of the Friends of KWMU, Inc., a non-profit Missouri Corporation. The Friends of KWMU, Inc. (the Organization ) is a not-for-profit organization that follows generally accepted accounting principles ( GAAP ) under the Financial Accounting Standards Board ( FASB ). The Organization, exempt from taxation under Section 501(c)(3) of the Internal Revenue Code, provides financial support for the objectives, purposes, and programs of the Station. The Organization solicits funds for the benefit of and with approval of the Station. Although the Station does not control the timing, purpose, or amount of receipts from the Organization, the resources which the Organization holds and invests are restricted to the activities of the Station. During the years ended June 30, 2014 and 2013, the Organization distributed $150,000 and $77,000, respectively, to the Station for unrestricted purposes. Separate financial statements for the Organization are not available. Financial Statement Presentation In accordance with GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 1989 FASB and AICPA Pronouncements, which incorporated into the GASB s authoritative literature certain accounting and financial reporting guidance issued on or before November 30, 1989, which does not conflict or contradict GASB pronouncements. In addition, the Station applies all applicable FASB Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins, except those that conflict with a GASB pronouncement. The Station has adopted GASB Statement No. 35, Basic Financial Statement and Management s Discussion and Analysis for Public Colleges and Universities, as amended by GASB Statements No. 37 and No. 38. GASB Statement No. 35 establishes standards for external financial reporting for public colleges and universities. The basic financial statement presentation provides a comprehensive entity-wide perspective of the Station s net position, revenues, expenses and changes in net position and cash flows replacing the fund-group perspective previously required. Basis of Accounting The Station s basic financial statements have been prepared using the economic resource focus and the accrual basis. The Station reports as a Business Type Activity, as defined by GASB Statement No. 34. Business Type Activities are those that are financed in whole or in part by funds received from external parties for goods or services. 11

14 NOTES TO BASIC FINANCIAL STATEMENTS The Station s policy for defining operating activities as reported on the Statements of Revenues, Expenses and Changes in Net Position are those that generally result from exchange transactions such as payments received for providing services and payments made for services or goods received. Membership Contributions and Contributed Support are deemed program revenue and therefore operating revenue as prescribed by the Corporation for Public Broadcasting. Certain significant revenue streams relied upon for operations are recorded as non-operating revenue as defined by GASB Statement No. 34. Non-operating revenues include revenues from activities that have the characteristics of non-exchange transactions, such as support from the University, certain grants, permanent endowment contributions, capital contributions, and investment income. Cash and Cash Equivalents The Station participated in the University s pooled cash accounts and pooled investment accounts for fiscal years 2014 and For purposes of the basic financial statements cash and cash equivalents consist of funds held by the University on behalf of the Station. Accounts Receivable Accounts receivable are presented at the net amount. Accounts receivable consists of amounts due to the Station for underwriting contracts and other miscellaneous revenue sources. An allowance of $21,680 and $8,267 as of June 30, 2014 and 2013, respectively, has been made for uncollectible accounts receivable based upon management s expectations regarding the collectability of the accounts and the Station s historical collection experience. Pledges Receivable The Station receives unconditional promises to give (pledges) through private donations from corporations, alumni, and various other supporters of the Station. These pledges have been recorded as pledges receivable on the Statements of Net Position and as a portion of Membership Contributions and Contributed Support on the Statements of Revenues, Expenses, and Changes in Net Position, at the present value of the estimated future cash flows. An allowance of $377,275 and $299,685 as of June 30, 2014 and 2013, respectively, was made for uncollectible pledges based upon management s expectations regarding the collectability of the pledges considering the Station s historical collection experience. Prepaid Lease Expense The Station has expended funds relating to the lease of the facility noted below. These expended funds are recognized as expense through the lease term of the facility. Note Receivable On September 24, 2010, the University of Missouri Board of Curators agreed to enter into a lease/purchase agreement for the acquisition of a facility that was constructed as the new office of the Station and classroom space for the use of the University. The lease payments began with occupancy in 2012 and continue up to seven years from occupancy, at which point the purchase option can first be exercised. As of June 30, 2014 and 2013, the Station had made payments in the accumulated amount of $5,491,388 and $4,725,460, respectively which are recorded as a note receivable from the University. When the purchase option is exercised, the building will be purchased through the release of the note receivable plus additional consideration. Capital Assets Under the University s policy, individual assets costing $5,000 or more are capitalized at cost if purchased, or at fair value on the date of the gift if donated. Depreciation of capital assets is provided on a straightline basis over the estimated useful lives of the respective assets generally ten to forty years for buildings improvements and five to fifteen years for transmission, antenna, tower, studio and broadcast equipment and furniture and fixtures. Expenditures for repairs and maintenance are charged to operating expenses as incurred. Deferred Revenue and Unexpended Grants Amounts reflected in the Statements of Net Position as of June 30, 2014 and 2013 represent cash the Station has received under contracts for future performance of services. Grant revenues are recognized when eligibility requirements are met. 12

15 NOTES TO BASIC FINANCIAL STATEMENTS Net Position The Station s net position is classified for financial reporting in the following net position categories: Invested in Capital Assets, Net of Related Debt: Property and equipment, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. Restricted Nonexpendable Endowment: Station net position in the University s permanent endowment funds are subject to externally imposed stipulations that the principal be maintained in perpetuity. Restricted Expendable Capital: Net position whose use by the Station is subject to externally imposed stipulations that can be fulfilled by actions of the Station pursuant to those stipulations or that expire by the passage of time. Unrestricted: Net position that is not subject to externally imposed stipulations. Unrestricted net position may be designated for specified purposes by action of the Board of Curators (the Board ) or may otherwise be limited by contractual agreements with outside parties. Underwriting Income Underwriting income consists of advertising spots purchased by sponsors and are recognized when the spots are aired by the Station. In-Kind Contributions In-kind contributions are recorded as revenue and expense in the accompanying Statements of Revenues, Expenses and Changes in Net Position. In-kind contributions consist of donated property and professional services. These donations are recorded at fair value at the time of the gift. Donated Facilities and Administrative Support Donated facilities from the University consist of office and studio space. The cost of these facilities, together with the related occupancy costs, is recorded in revenues and expenses at depreciable value in accordance with valuation guidelines established by the Corporation for Public Broadcasting. Indirect administrative support from the University is included in revenues under donated facilities and administrative support. Support from the University consists of allocated general and administrative expenses incurred on behalf of the Station. Use of Estimates The preparation of basic financial statements in conformity with United States 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 basic financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Pronouncements Effective for fiscal year 2014, the University adopted GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, which intends to improve financial reporting by clarifying the appropriate use of the financial statement elements deferred outflows of resources and deferred inflows of resources to ensure consistency in financial reports. In adopting this standard and to comply with this naming convention, the Station changed Deferred Revenue to Unearned Revenue in the current liabilities section of the Statement of Net Position. Effective for fiscal year 2014, the University adopted GASB Statement No. 67, Financial Reporting for Pension Plans-an amendment of GASB Statement No. 25, which intends to improve financial reporting by state and local governmental pension plans. Effective for fiscal year 2014, the Station adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment to GASB Statement No. 27, which enhances accounting and financial reporting by state and local governments for pensions and improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. Adoption of these standards had no effect on the Station s financial statements. Effective for fiscal year 2014, the University adopted GASB Statement No. 66, Technical Corrections which intends to improve financial reporting by resolving conflicting guidance that resulted from issuance of two 13

16 NOTES TO BASIC FINANCIAL STATEMENTS pronouncements, Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions and Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Adoption of GASB Statement No. 66 had no effect on the Station s financial statements. Effective for fiscal year 2014, the University adopted GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees which intends to improve financial reporting by state and local governments that extend and receive nonexchange financial guarantees. Adoption of GASB Statement No. 70 had no effect on the Station s financial statements. In January 2013, GASB issued GASB Statement No. 69, Government Combinations and Disposals of Government Operations effective for financial statements for periods beginning after December 15, 2013, which intends to improve financial reporting by establishing standards for reporting government combinations and disposals of government operations. The Station has not yet determined the effect that adoption of GASB Statement No. 69 will have on its financial statements. Discretely Presented Component Unit Friends of KWMU Operating Revenue Operating revenue consists of grants awarded to and special fundraising events provided by the Organization for the Station s benefit. Grant revenues are recognized when eligibility requirements are met. 2. CASH AND CASH EQUIVALENTS RISKS Custodial Credit Risk Deposits KWMU-FM The custodial credit risk for deposits is the risk that in the event of bank failure, the University s deposits may not be recovered. State law requires collateralization of all deposits with federal depository insurance, bonds and other obligations of the United States Treasury, United States Agencies and instrumentalities of the state of Missouri; bonds of any city, county, school district or special road district of the state of Missouri; bonds of any state; or a surety bond having an aggregate value at least equal to the amount of the deposits. The University s cash deposits were fully insured or collateralized at June 30, 2014 and 2013, respectively. 3. INVESTMENTS Investments The Station participates in the University s pooled investment accounts, which are stated at fair value, and holds an equity investment in the pool. The investment policies of the University are established by the Board. The policies are established to ensure that the University funds are managed in accordance with Section of the Revised Statues of Missouri and prudent investment. The University s investment securities are held in bookentry form in brokerage, custody, and safe keeping accounts in the University s name. The general investment pools, managed by the University, averaged a total return of 16.7% and 12.6% including unrealized gains and losses, for the years ended June 30, 2014, and 2013, respectively. 14

17 NOTES TO BASIC FINANCIAL STATEMENTS At June 30, 2014 and 2013, the Station held investments, by investment type, as follows: Carrying Value Carrying Value as of as of June 30, 2014 June 30, 2013 Debt Securities $ 90,366 $ 86,853 Corporate Stocks 310, ,067 Cash and Cash Equivalents held by the University 4,016,480 3,455,379 Real Estate 23,265 22,899 Absolute Return 59,343 53,874 Money Market Funds 8,650 9,031 Risk Parity 15,323 - Other Cash Equivalents 1,864 1,856 Total Investments and Cash Equivalents $ 4,525,959 $ 3,911,959 Interest Rate Risk Interest rate risk is the risk that changes in interest rates over time will adversely affect their fair value of an investment. Debt securities with longer maturities are likely to be subject to more variability in their fair values as a result of future changes in interest rates. The University does not have a formal policy that addresses interest rate risk; rather, such risk is managed by each individual investment manager, as applicable. The University and Pension Trust Funds invest in forward settling To Be Announced (TBA) Mortgage Back Securities (MBS). TBA MBS with notional amounts totaling $110,000,000 and $4,000,000 and fair values of ($119,916,000) and ($4,553,000) were in place at June 30, 2014 for the University and Pension Trust Funds, respectively. The forward settling MBS instruments expose the University to interest rate risk of mortgage back securities. 15

18 NOTES TO BASIC FINANCIAL STATEMENTS At June 30, 2014 and 2013, the Station s portion of the University s debt securities matures as follows: As of June 30, 2014 Less than More than No Carrying 1 Year 1-5 Years 6-10 Years 10 Years Maturity Value U.S. Treasury Obligations $ - $ - $ - $ 11,804 $ - $ 11,804 U.S. Agency Obligations Commingled Debt Securities ,028 50,028 Asset Backed Securities - (377) (377) Foreign Government Obligations - - 9, ,157 U.S. Corporate Bonds & Notes , ,171 Foreign Corporate Bonds & Notes - - 4, ,583 Total $ - $ (377) $ 28,911 $ 11,804 $ 50,028 $ 90,366 As of June 30, 2013 Less than More than No Carrying 1 Year 1-5 Years 6-10 Years 10 Years Maturity Value U.S. Treasury Obligations $ - $ - $ - $ 2,597 $ - $ 2,597 U.S. Agency Obligations Commingled Debt Securities ,103 48,103 Asset Backed Securities - 3, ,601 Foreign Government Obligations , ,798 U.S. Corporate Bonds & Notes , ,988 Foreign Corporate Bonds & Notes , ,609 Total $ - $ 3,601 $ 32,552 $ 2,597 $ 48,103 $ 86,853 Credit Risk - Investments An investment s credit risk is the risk that the issuer or other counterparty will not meet its obligations. For investments in debt securities, this credit risk is typically measured by the credit quality ratings provided by a nationally recognized statistical rating organization such as Moody s Investors Service ( Moody s ) or Standard & Poor s Ratings Group ( S&P ). For General Investments, the University s policy is to hold corporate bonds rated A or better by S&P. Also within General Investments, commercial paper and other short-term securities should be rated A-1/P-1 or better. Disposition of securities whose ratings have been downgraded after purchase is generally left to the discretion of the respective investment manager after consideration of individual facts and circumstances. All holdings of commercial paper and variable rate demand notes were rated A-1/P-1 or better at June 30, 2014 and 2013, respectively. All holdings of money market funds were rated AAA at June 30, 2014 and 2013, respectively. 16

19 NOTES TO BASIC FINANCIAL STATEMENTS Based on investment ratings provided by Moody s or S&P, the Station s portion of the University s credit risk exposure as of June 30, 2014 and 2013, is as follows: As of June 30, 2014 Foreign U.S. Foreign Commingled U.S. Treasury U.S. Agency Government Corporate Corporate Debt Obligations Obligations Obligations Debt Debt Securities Total U.S. Agency Obligations $ - $ (5,621) $ - $ - $ - $ - $ (5,621) U.S. Treasury Obligations 11, ,804 Mortgage-Backed Securities Guaranteed by U.S. Agencies Debt Securities in Commingled Funds ,028 50,028 Aaa/AAA , ,511 Aa/AA ,411 A/A ,960 Baa/BBB ,825 1, ,658 Less than Baa/BBB - 4, ,771 1,545-18,153 Unrated , ,194-4,462 Total $ 11,804 $ (377) $ 9,157 $ 15,171 $ 4,583 $ 50,028 $ 90,366 As of June 30, 2013 Foreign U.S. Foreign Commingled U.S. Treasury U.S. Agency Government Corporate Corporate Debt Obligations Obligations Obligations Debt Debt Securities Total U.S. Agency Obligations $ - $ 157 $ - $ - $ - $ - $ 157 U.S. Treasury Obligations 2, ,597 Mortgage-Backed Securities Guaranteed by U.S. Agencies - 2, ,015 Debt Securities in Commingled Funds ,103 48,103 Aaa/AAA , ,657-6,560 Aa/AA , ,023-5,102 A/A , ,795-4,960 Baa/BBB ,024-1,936 Less than Baa/BBB ,800 1,418-10,729 Unrated , ,694 Total $ 2,597 $ 3,758 $ 10,798 $ 10,988 $ 10,609 $ 48,103 $ 86,853 Custodial Credit Risk For investments, custodial credit risk is the risk that in the event of failure of the counterparty to a transaction, the University will not be able to recover the value of the investments held by an outside party. In accordance with its policy, the University minimizes custodial credit risk by establishing limitations on the types of instruments held with qualifying institutions. Repurchase agreements must be collateralized by United States Government issues and/or United States Government Agency issues. All University investments are insured or registered and are held by the University or an agent in its name. Foreign Currency Risk The risk that changes in exchange rates will adversely affect the fair value of a foreign investment is referred to as foreign currency risk. The University s investment policy allows for exposure to non- United States dollar denominated equities and fixed income securities. Exposure to foreign currency risk from these securities is permitted and it may be fully or partially hedged using forward foreign currency exchange contracts. At June 30, 2014 and 2013, 4.2% and 5.1%, respectively, of the Station s total investments and cash and cash equivalents were denominated in foreign currencies. 17

20 NOTES TO BASIC FINANCIAL STATEMENTS The Station s portion of the University s exposure to foreign currency risk is as follows: Foreign Currency Risk International Investment Securities at Fair Value Currency Debt Securities Equity Securities Cash and Cash Equivalents 2014 Total 2013 Total Euro $ 4,231 $ 2,089 $ 155 $ 6,475 $ 8,495 Japanese Yen 43 4, ,457 6,906 British Pound Sterling 1,271 5, ,459 10,444 Australian Dollar 515 1, ,723 2,394 Canadian Dollar ,475 Swiss Franc - 4,070-4,070 4,512 Hong Kong Dollar - 2,785-2,785 2,560 Mexican New Peso Swedish Krona - 1,658-1,658 1,661 Danish Krone New Zealand Dollar Brazil Real 2, ,009 1,257 Israel Shekel Polish Zloty Other 30, , , ,956 Total $ 39,677 $ 148,256 $ 371 $ 188,304 $ 198,982 Concentration of Credit Risk The risk of loss attributed to the magnitude of investments in a single issuer is known as the concentration of credit risk. Investments issued or guaranteed by the United States government, investments in mutual funds, or external investment pools are excluded from this category. The University investment policies all specify diversification requirements across asset sectors. The investment policy for the general pool has specific single issuer limits in place for corporate bonds and commercial paper. Friends of KWMU Friends of KWMU does not have any investments within the University s pooled investment accounts at June 30, 2014 or CHANGES IN UNEXPENDED GRANTS The balance of unexpended grants at June 30, 2014 and 2013, for the Station is as follows: Unexpended Grants Balance, Beginning of Year $ 142,331 $ 16,716 Grants 724, ,352 Deductions, Amount Expended (398,808) (596,737) Balance, End of Year $ 468,053 $ 142,331 18