The University of Colorado and the Office of University Controller (OUC) are pleased to offer the 2016 Annual Financial Report. In an ongoing effort to increase the transparency and accessibility of our financial reports, the 2016 Annual Financial Report has been produced as a website. Benefits to this format include:
While this HTML version of the report is printer-friendly, you can still opt to download a PDF version of the financial data.
The Office of University Controller developed a website to help make financial report information easier to understand. Go to CU Financials Explained: An Illustrated Guide to the Annual Financial Report.
©Office of University Controller 2017. This report must be considered in its entirety.
The University of Colorado (the University) is a comprehensive degree-granting research university in the State of Colorado (the State). It is governed by a nine-member Board of Regents (the Regents) elected by popular vote in the State's general elections. Serving staggered six-year terms, one member is elected from each of the State's seven congressional districts with two Regents elected from the State at large. The University comprises the system office and the following three accredited campuses, each with its unique mission as detailed below:
To accomplish its mission, the University has over 7,000 instructional faculty serving approximately 61,000 students through 421 degree programs in 26 schools and colleges.
The University's financial reporting entity includes the operations of the University and all related entities for which the University is financially accountable. Financial accountability may stem from the University's ability to appoint a majority of the governing board of the related organization, its ability to impose its will on the related organization, its ability to access assets, or its responsibility for debts of the related organization. Blended component units generally include those entities (1) that provide services entirely to the University, (2) in which there is a financial benefit or burden relationship, or (3) in which management of the University has operational responsibility. The University has the following blended component units:
Established in 2016 with operations starting in Fiscal Year 2017, CUPCO holds, invests, maintains, operates, and administers real and personal property for the benefit of the University. CUPCO is a nonprofit entity under Section 501(c)(3) of the Internal Revenue Code. The University appoints CUPCO's governing body, is able to impose its will on the organization, and the organization provides services entirely to the University. There was no financial activity for CUPCO during the year ended June 30, 2016.
Originally established in 1992, with a significant reorganization in 2001, ULEHI facilitates certain licensing activities for the University. ULEHI is a nonprofit entity under Section 501(c)(3) of the Internal Revenue Code. The University appoints a voting majority of ULEHI's governing body, is able to impose its will on the organization, and the organization provides services entirely to the University.
Detailed financial information may be obtained directly from ULEHI at 12635 East Montview Boulevard, Aurora, Colorado 80045.
Established in 1982, UPI performs the billing, collection, and disbursement services for the professional health services rendered for CU Anschutz as authorized in Section 23-20-114, Colorado Revised Statutes (C.R.S.). UPI is the School of Medicine's faculty practice plan with approximately 2,800 member physicians. It does not employ physicians or practice medicine directly; it provides the business and administrative support for the clinical faculty employed by the School of Medicine. It is a nonprofit entity under Section 501(c)(3) of the Internal Revenue Code. Medical care is provided to patients throughout the Rocky Mountain region through a statewide and regional network of services. The University appoints a majority of UPI's governing body, and is able to impose its will. Additionally, UPI exclusively benefits the University by providing the services described above.
In 1997, UPI acquired a 30 percent interest in the University of Colorado Hospital Authority's (the Hospital Authority) investment in TriWest Healthcare Alliance Corp. (TriWest). Since that time, the Hospital Authority sold 50 percent of the joint TriWest investment back to TriWest resulting in a revised ownership split between the Hospital Authority and UPI whereby UPI held 60 percent of the Hospital Authority's 15 percent investment. UPI received $0 in dividends during the years ended June 30, 2016 and 2015, respectively. In April 2013, TriWest was replaced by United Health Care as the network management services provider under the Department of Defense's TRICARE management contract. As a result of that event, TriWest recapitalized the corporation and completed a stock repurchase of all outstanding shares in February 2014. UPI received $17,151,000 for its ownership interest, which was included in investment income during the year ended June 30, 2014. A total of $9,731,000 was in the form of cash at closing, $3,250,000 of the proceeds were reinvested by UPI in the new TriWest entity, and the remaining $4,170,000 was paid in April 2015. UPI's new interest in TriWest represents 35 percent of a combined $9,250,000 investment held by the Hospital Authority. UPI and the Hospital Authority's investment in TriWest represented approximately 3 percent of the book value of the entity at closing of the transaction. UPI accounts for its participation in TriWest on the cost basis, and includes it in noncurrent other assets.
In December 2010, UPI, the Hospital Authority, and the University's School of Medicine (SOM) entered into a joint operating agreement to develop and operate a radiology imaging facility. No contributions were made in 2016 or 2015. Capital contributions and division of revenue and expenses will be split between the partners based upon the operating agreement. The University did not contribute any funds to the facility and has no equity interest in it. UPI recorded $894,000 and $1,026,000 in dividends during the years ended June 30, 2016 and 2015, respectively.
During 2009, UPI purchased 49 units representing a 24.5 percent share in The Children's Hospital North Surgery Center, LLC (Surgery Center) for $490,000. The Surgery Center was formed by the Children's Hospital Colorado Association (Children's Colorado), UPI, and individual community physicians for the purpose of owning and operating a multi-specialty ambulatory surgery center focused on pediatric care. UPI accounts for its participation in the Surgery Center on the cost basis. In addition to its interest in the entity, UPI has issued a maximum guarantee up to $1.2 million in support of a $4.7 million loan taken by the Surgery Center in support of its operations. The loan guarantee was approved by the UPI's Board of Directors in May 2012. In the event of default, UPI and Children's Colorado would be responsible for their proportionate interest in this indebtedness to the extent it could not be satisfied by liquidating any remaining interest in the venture. The separate financial statements of the joint ventures are available to UPI on at least an annual basis.
Detailed financial information may be obtained directly from UPI at P.O. Box 111719, Aurora, Colorado 80042-1719.
Additionally, financial statements for UPI's joint ventures may be requested at the addresses listed below:
TriWest Healthcare Alliance Corporate Office, PO Box 42049, Phoenix, Arizona 85080-2049.
Children's North Surgery Center, 469 West State Highway 7, Suite 2, Broomfield, Colorado 80023.
At the October 18, 2016 Board of Directors meeting, the Board approved renaming UPI to University of Colorado Medicine.
The University's financial statements include certain supporting organizations as discretely presented component units (DPCU) of the University (labeled component units). The majority of the resources, or income thereon that the supporting organizations hold and invest, are restricted to the activities of the University by the donors.
Because these restricted resources held by the supporting organizations can only be used by, or for the benefit of, the University, the following supporting organizations are considered DPCU of the University (see Note 17 for additional information):
Established in 1967, the CU Foundation solicits, receives, holds, invests, and transfers funds for the benefit of the University. The CU Foundation, a nonprofit entity under Section 501(c)(3) of the Internal Revenue Code, has a 15-member board of directors, of which a member of the Regents, the president of the University, and another University designee serve as ex-officio non-voting members. The board of directors elects its own members, other than those serving as ex-offcio non-voting members. The CU Foundation, as a not-for-profit entity, follows Financial Accounting Standards Board guidance in the preparation of its financial statements, which are then modified to match the University's financial reporting format.
Under an agreement between the CU Foundation and the University, the CU Foundation provides certain development and investment services to the University in exchange for a fee.
Detailed financial information may be obtained directly from the CU Foundation at 1800 Grant Street, Suite 725, Denver, Colorado 80203.
Established in August 2002, CUREF solicits and manages real estate investments for the sole benefit of the University. CUREF, a nonprofit entity under Section 501(c)(3) and 509(a)(3) of the Internal Revenue Code, has up to a 14-member board of directors. Nine are voting members, of which four are appointed by the University. There are up to five ex-officio non-voting members.
Campus Village Apartments, LLC (CVA), a Delaware limited liability company, was formed under the laws of the State of Delaware on May 25, 2005, with CUREF as the sole member. CVA is organized, operated, and dedicated exclusively to the charitable purposes of promoting the general welfare, development, growth, and well-being of the University, and specifically for the primary purpose of acquiring, constructing, improving, equipping, and operating a student housing facility located in Denver, Colorado, as well as improvements and amenities related to this facility.
18th Avenue, LLC (18th Avenue), a Colorado limited liability company, was formed under the laws of the State of Colorado on April 26, 2006, with CUREF as the sole member. 18th Avenue is organized, operated, and dedicated exclusively to promoting CUREF's charitable purposes and to promoting the general welfare, development, growth, and well-being of the University, and specifically for the primary purpose of acquiring, owning, operating, and maintaining real property consisting of an office building in Denver, Colorado.
33rd Street, LLC (33rd Street), a Colorado limited liability company, was formed under the laws of the State of Colorado on April 26, 2006, with CUREF as the sole member. 33rd Street is organized, operated, and dedicated exclusively to promoting the general welfare, development, growth, and well-being of the University, and specifically for the primary purpose of acquiring, owning, operating, and maintaining real property consisting of an industrial building in Boulder, Colorado.
Partnership Holdings Venture, LLC (PHV LLC), a Colorado limited liability company, was formed under the laws of the State of Colorado on January 10, 2008, with CUREF as the sole member. PHV LLC is organized, operated, and dedicated solely to promoting the general welfare, development, growth, and well-being of the University, and specifically for the primary purpose of acquiring, ownership, operation, management, sale, and disposition of investments including membership interest in real estate limited liability companies.
Land Holdings Venture, LLC (LHV LLC), a Colorado limited liability company, was formed under the laws of the State of Colorado on January 10, 2008, with CUREF as the sole member. LHV LLC is organized, operated, and dedicated solely to promoting the general welfare, development, growth, and well-being of the University, and specifically for the primary purpose of acquiring, ownership, operation, management, sale, and disposition of investments including holdings in land.
The University of Colorado UK Foundation Limited (CU UK), a charitable company with limited liability, was formed under the laws of England and Wales and incorporated February 25, 2010, with CUREF as the sole shareholder. CU UK's purpose is to advance and promote education for the public benefit, in particular for any educational and charitable purposes connected with the University, its affiliates, and its past and present students and staff. CU UK owns property in London.
Foothills Medical Office Building, LLC (Foothills LLC), a Colorado limited liability company, was formed under the laws of the State of Colorado on December 10, 2012, with CUREF as the sole member. Foothills is organized, operated, and dedicated solely to promoting the general welfare, development, growth, and well-being of the University, and specifically for the primary purpose of developing, operating, and maintaining a medical office building in Boulder, Colorado. During Fiscal Year 2015, the prospective tenant of the building informed CUREF that it would not move forward with its contemplated occupancy. CUREF has written off costs incurred as a write-off of development costs of $991,000.
Effective May 21, 2015, the Board of Directors of CUREF approved a resolution to develop a memorandum of agreement for the transfer of assets, debts and obligations from CUREF to the University, the CU Foundation, and CUPCO and to begin a process that will result in the CUREF Board of Directors being transitioned to a real estate advisory committee working for the Office of the President of the University. As a part of that transition, a plan to transfer the assets, liabilities and obligations of CUREF to the University or its affiliated entities was approved on December 10, 2015, and various asset transfer agreements that provide the transfer provisions were approved May 3, 2016. During the year ended June 30, 2016, CUREF transferred $1,721,000 to the CU Foundation.
As of September 30, 2016, it is planned that all remaining assets, debts and obligations will be transferred to the University, the CU Foundation, or CUPCO with an anticipated completion by June 30, 2017. CUREF will cease to exist subsequent to these transfers. See Note 20.
Detailed financial information may be obtained directly from CUREF at 1800 Grant Street, Suite 725, Denver, Colorado 80203.
The University has associations with the following organizations for which it is not financially accountable, or has primary access to the resources. Accordingly, these organizations have not been included in
the University's financial statements. Information regarding the nature of the relationships is included in Note 18.
Article VIII, Section 5 of the Colorado Constitution declares the University to be a state institution. The Regents of the University are elected by popular vote of the citizens of the State. Therefore, the Board of the University is entirely different from the governing board of the State. Management of the University is completely separate and distinct from management of the State. The services provided by the University benefit the citizens of the State, rather than serving the State government. The services include provisions of undergraduate and graduate education to the citizens of the State, and conducting extensive amounts of federally and other funded research for the benefit of the citizens of the State, the nation and the world. Additionally, the University offers more than 200 public outreach programs serving Coloradans and their communities. All outstanding debt of the University is expected to be repaid entirely with resources generated by the University. No State funds are used to repay any debt issued by the University.
The income generated by the University, as an instrumentality of the State, is generally excluded from federal income taxes under Section 115(a) of the Internal Revenue Code. The University also has a determination letter from the Internal Revenue Service stating it is exempt under Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3). Income generated from activities unrelated to the University's exempt purpose is subject to tax under Internal Revenue Code Section 511(a)(2)(B). There was no tax liability related to income generated from activities unrelated to the University's exempt purpose as of June 30, 2016 and 2015.
For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned, and expenses are recorded when an obligation is incurred.
The University applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
Cash and Cash Equivalents are defined for the purposes of reporting cash flows as cash on hand and deposit accounts. Investments in mutual funds and money market funds and securities are presented as investments. UPI and the CU Foundation consider money market funds and securities with a maturity, when acquired, of three months or less to be cash equivalents.
Investments are reported in the financial statements at fair value, which is determined primarily based on quoted market prices as of June 30, 2016 and 2015. Amortized costs (which approximate fair value) are used for money market investments. These money market accounts are held with Securities and Exchange Commission (SEC) registered investment companies under Rule 2a7 of the Investment Company Act of 1940.
The classification of investments as current or noncurrent is based on the underlying nature and restricted use of the asset. Current investments are those without restrictions imposed by third parties that can be used to pay current obligations of the University. Noncurrent investments include investments with a maturity in excess of one year, restricted investments, and those investments designated to be used for long-term obligations.
The University's investment policies permit investments in fixed-income and equity securities and alternative strategies. These policies are implemented using individual securities, mutual funds, commingled funds, and alternative investments for the endowments. All of the University's alternative investments are held at the CU Foundation and follow its valuation methods.
Investments of the CU Foundation include those held as agency funds for the University. The CU Foundation records investment purchases and contributions, at the fair values of the investment assets received at the date of contribution. Investments in equity securities with readily determinable fair values and all investments in debt securities are stated at their fair values. The fair values of alternative investments publicly traded on national security exchanges are stated at their closing market prices at June 30, 2016 and 2015, respectively. The fair values of alternative investments not publicly traded on national security exchanges represent the CU Foundation's pro-rata interest in the net assets of each investment and are based on financial information determined and reported by investment managers, subject to review, evaluation, and adjustment by the management of the CU Foundation, or on the basis of other information developed, obtained, and evaluated periodically by the CU Foundation. Because of the inherent uncertainties in the valuation of alternative investments, those estimated fair values may differ significantly from the values that would have been used had ready market for the investments existed. Included in the investments portfolio are real estate and note receivable assets. These assets are booked at cost and present value, respectively.
Endowments and similar gift instruments owned by the University and the CU Foundation are primarily recorded as investments in the accompanying financial statements. Endowment funds are subject to the restrictions of donor gift instruments requiring the principal to be invested in perpetuity. Life income funds are used to account for cash or other property contributed to the University subject to the requirement that the University periodically pay the income earned on such assets to a designated beneficiary. The assets of life income funds become the property of the University or the CU Foundation upon the death of the designated beneficiary. Annuity funds are used to account for property contributed to the University or the CU Foundation in exchange for a promise to pay a fixed amount to the donor for a specified period of time. In addition, certain funds have been established by the Regents to function as endowment funds until the restrictions are lifted by the Regents. Gifts-in-kind are recorded at the fair market value as of the date of donation.
Accounts, Contributions, and Loans Receivable are recorded net of estimated uncollectible amounts, approximating anticipated losses.
Contributions receivable for the CU Foundation are unconditional promises to give that are recorded at their estimated net realizable value, discounted using risk-free interest rates effective at the date of the promise to give, if expected to be collected within one year and at the present value of their expected future cash flows if expected to be collected in more than one year. Subsequent to the initial recording of the contribution receivable, the CU Foundation uses the allowance method to record amounts estimated to be uncollectible. The allowance is based on the historical collectability of contributions promised to the CU Foundation and on management's analysis of specific promises outstanding.
For all other receivables, individual accounts are written off against the allowance when collection of the account appears doubtful. Bad debts substantially consist of write-offs for uncollectible balances on self-pay patients and contributions receivable.
Inventories are primarily accounted for using the consumption method and are stated at the lower of cost or market. Cost is determined using either first-in, first-out, average cost, or retail method.
Other Assets consists of prepaid expenses, travel advances, patent acquisition costs, and other prepaid items.
Capital Assets are stated at cost at the date of acquisition or at fair value at the date of donation. For equipment, the capitalization policy includes all items with a value of $5,000 or more, and an estimated useful life of greater than one year.
Intangibles (including software) and renovations to buildings and other improvements that significantly increase the value or extend the useful life of the structure are capitalized. For intangibles and renovations and improvements, the capitalization policy includes items with a value of $75,000 or more. Routine repairs and maintenance are charged to operating expense. Major outlays for capital assets and improvements are capitalized as construction in progress throughout the building project. Interest incurred during the construction phase is included as part of the value of the construction in progress.
All collections, such as works of art and historical artifacts, have been capitalized at cost at the date of acquisition or fair value at the date of donation. The nature of certain collections is such that the value and usefulness of the collections does not decrease over time. These collections have not been depreciated in the accompanying financial statements.
Assets under capital leases are recorded at the present value of future minimum lease payments and are amortized using the straight-line method over the shorter of the lease term or the estimated useful life. Such amortization is included as depreciation expense in the accompanying financial statements.
Depreciation is computed using the straight-line method and monthly convention over the estimated useful lives of the assets as displayed in Table 1.1, Asset Useful Lives.
20 - 40*
Improvements other than buildings
10 - 40
3 - 20
Library and other collections
6 - 15
5 - 10
* Certain buildings are componentized and the components may have useful lives similar to improvements or equipment.
Compensated Absences and Other Postemployment Benefits and related personnel expenses are recognized based on estimated balances due to employees upon termination or retirement. The limitations on such payments are defined by the rules associated with the personnel systems at the University. Employees accrue and vest in vacation and sick leave earnings based on their hire date and length of service. Professional exempt and 12-month faculty employees accrue sick leave with pay at the rate of 10 hours per month with a maximum accrual of 960 hours while classified employees earn 6.67 hours per month with a maximum accrual of 360 hours for employees hired after June 30, 1988. Employees hired before June 30, 1988, can accrue up to 360 hours in excess of amount of sick leave earned as of June 30, 1988. Employees earn and accrue vacation leave per the rates in Table 1.2, Compensated Absence Accrual Rates for Vacation. Vacation accruals are paid in full upon separation, whereas only a portion of sick leave is paid upon specific types of separation, such as retirement.
Type of Employee
Days Earned Per Month*
Classified employees hired on or after January 1, 1968
24 - 42 days
Professional exempt and 12-month faculty employees
* Rates are for full-time employees; part-time employees earn at pro-rata based on percentage of appointment.
The liability for compensated absences is expected to be funded by various sources of revenue that are available in future years when the liability is paid.
Other postemployment benefits (OPEB) consist of University-provided post-retirement healthcare and life insurance benefits for retired employees in accordance with the Regents' authority, as a single-employer plan. Substantially all University employees may become eligible for those benefits if they reach normal retirement age while working for the University. The University's contributions are made on a pay-as-you-go basis. The University's annual OPEB expense is calculated based on the annual required contribution (ARC) of the University, an amount actuarially determined. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or fund excess) of the plan over a period not to exceed 30 years.
Unearned Revenue consists of amounts received for the provision of education, research, auxiliary goods and services, and royalties that have not yet been earned.
Bonds, Leases, and Notes Payable are debt by borrowing or financing usually for the acquisition of buildings, equipment, or capital construction. Bonds are addressed in Note 9.
Capital leases consist of various lease-purchase contracts and other lease agreements. Such contracts provide that any commitments beyond the current year are contingent upon funds being appropriated for such purposes by the Regents. It is reasonably assured that such leases will be renewed in the normal course of business and, therefore, are treated as non-cancelable for financial reporting purposes.
Split-interest Agreements are beneficial interests in various agreements, which include gift annuities, charitable remainder annuity trusts and unitrusts, and a pooled income fund. The CU Foundation typically serves as trustee, although certain trusts are administered by outside trustees.
For trusts administered by the CU Foundation, specified earnings are typically paid to a named beneficiary. After termination of the trusts, the assets revert to the CU Foundation to create an endowment to support University activities or to be temporarily restricted for other purposes at the University. Assets received under such agreements are typically marketable equity and fixed-income securities, are recorded at their market value, and are included in investments in the accompanying financial statements. The estimated net present value of the obligation to named beneficiaries is recorded as a liability under split-interest agreements. A risk-free rate, using U.S. Treasury bonds at the date of the gift, is used in conjunction with actuarially determined life expectancies to calculate present values. The fair value of assets received in excess of the obligation is recognized as contribution revenue at the date of the gift. Changes in the value of the investments are combined with the changes in the estimated liability and are recorded in the accompanying financial statements.
In cases where a split-interest agreement is administered by an outside trustee, the CU Foundation records the estimated fair value of future cash flows from the trust as a contribution receivable from charitable remainder trusts at the point at which the CU Foundation becomes aware of its interest in the trust. Under certain circumstances, the CU Foundation accepts and manages trust funds for which the University or the CU Foundation has beneficial interest but is not the sole beneficiary of the trust. Funds received for which the University or the CU Foundation is not the ultimate beneficiary are included as other liabilities in the accompanying financial statements and are not included in contributions revenue.
Custodial Funds consist of funds held by the CU Foundation for endowments legally owned by other entities, including the University.
Alternate Medicare Plan is described in Note 15.
Early Retirement Incentive Plan is described in Note 15.
Other Liabilities are addressed in Note 10 and consist of risk financing, construction contract retainage, funds held for others, and miscellaneous.
Net Position is classified in the accompanying financial statements as follows:
Net investment in capital assets represents the total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent, debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.
Restricted for nonexpendable purposes consists of endowments and similar instruments 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.
Restricted for expendable purposes represents net resources in which the University or the DPCU is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Unrestricted net position represents net resources derived from student tuition and fees, fee-for-service contracts, and sales and services of educational departments. These resources are used for transactions relating to the educational and general operations of the University and may be used at the discretion of the Regents to meet current expenses for any purpose. These resources also include those from auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty, and staff.
Internal Transactions occur between University operating units, including its formal self-funded internal service units and blended component units. Examples of self-funded operating units are telecommunications, cogeneration, and storerooms. Transactions include the recognition of revenues, expenses, receivables, and payables in the appropriate accounts of the operating units. To accommodate external financial reporting, the internal revenues and receivables are netted against expenses and payables, respectively, and are eliminated at year-end.
Classification of Revenues and Expenses in the accompanying financial statements has been made according to the following criteria:
Operating revenues are derived from activities associated with providing goods and services for instruction, research, public service, health services, or related support to entities separate from the University and that are exchange transactions. Examples include student tuition and fees, fee-for-service contracts, sales and services of auxiliary enterprises, healthcare and patient services, grants, and contracts. Tuition and fee revenue for sessions that are conducted over two fiscal years are allocated on a pro-rata basis. Operating revenues of the DPCU also include contributions, which are derived from their fundraising mission.
Other operating revenues include rental income, charges for services, transcript and diploma fees, other miscellaneous fees, and miscellaneous revenues from UPI.
Operating expenses are paid to acquire or produce goods and services provided in return for operating revenues and to carry out the mission of the University.
Nonoperating revenues and expenses include all revenues and related expenses that do not meet the definition of operating revenues, capital revenues, or endowment additions. They are primarily derived from activities that are non-exchange transactions (e.g., gifts, including those from the CU Foundation), from activities defined as such by the GASB cash flow standards (e.g., investment income) and also federal funds allocated to state governments, such as the Pell Grant, and insurance recoveries.
Scholarship Allowances are the difference between the stated charge for the goods and services provided by the University and the amount that is paid by the students or by other third parties making payments on the students' behalf. Tuition and fee revenue and certain other auxiliary enterprise revenues are reported net of scholarship allowance in the accompanying financial statements. Certain grants from external governmental and private programs are recorded as either operating or nonoperating revenues in the accompanying financial statements. To the extent that such grant revenues are used to satisfy tuition and fees and other student charges, the University records scholarship allowances. The student aid line under operating expenses represents the amount of financial aid disbursed to students net of the aid applied to the student's account to pay for tuition and fees.
Health Services Revenue from Contractual Arrangements is recognized by UPI as a result of providing care to patients covered under various third parties such as Medicare and Medicaid, private insurance companies, and managed care programs, primarily from fixed-rate agreements. The federal and state governments annually update fixed-rate agreements for Medicare and Medicaid, respectively. In addition to the standard Medicaid program, UPI provides substantial care to Medicaid patients under the Colorado Access program. Contractual arrangements with insurance companies and managed care plans are negotiated periodically for future years.
Health services revenue is reported at the estimated net realizable amounts due from third-party payers and others for services rendered. Net patient services revenue includes care provided to patients who meet certain criteria under UPI's medically indigent care policy as reimbursed with funds provided by the State processed by the Hospital Authority, and co-payments made by care recipients. In accordance with UPI's mission and philosophy, UPI members annually provide substantial levels of charity care to patients who meet certain defined criteria. Charity care relates to services rendered for which no payment is expected.
Donor Restricted Endowment disbursements of the net appreciation (realized and unrealized) of investments of endowment gifts are permitted by state law, except where a donor has specified otherwise. The amount of earnings and net appreciation available for spending by the University and the CU Foundation is based on a spending rate set by the CU Foundation board on an annual basis. For the years ended June 30, 2016 and 2015, the authorized spending rate was equal to the greater of 4 percent of the current market value of the endowment or 4.5 percent of the endowment's trailing 36-month average fair market value. Earnings in excess of the amount authorized for spending are available in future years and are included in the value of the related investment. Earnings authorized to be spent are recognized in the University's financial statements as investment or gift revenue for University or CU Foundation-owned endowments, respectively. As of June 30, 2016 and 2015, there was $13,355,000 and $13,280,000, respectively, in net appreciation of investments available for authorization for expenditure as reported in restricted expendable net position.
Application of Restricted and Unrestricted Resources is made on a case-by-case basis by management depending on overall program resources.
Use of Estimates is made in order to prepare financial statements in conformity with accounting principles generally accepted in the United States of America. Management is required 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 expense during the reporting period. Actual results could differ significantly from those estimates.
Reclassifications of certain prior year balances have been made to conform to the current year's financial statement presentation.
The University adopted the provisions of GASB Statement No. 72 Fair Value Measurement and Application (Statement No. 72) effective July 1, 2014. Statement No. 72 generally requires investments to be measured at fair value. It also establishes a hierarchy of inputs to valuation techniques used to measure fair value and changes required footnote disclosures. For the University, the adoption of Statement No. 72 had no prior period impact on reported investment balances as the standard altered disclosures only. Investment disclosures for Fiscal Year 2015 have been changed to conform with Fiscal Year 2016 presentation.
Effective July 1, 2014 the University adopted the provisions of GASB Statement No. 68 Accounting and Financial Reporting for Pensions, as amended (Statement No. 68). Statement No. 68 requires the University, as a participant of the multiple employer cost-sharing Public Employees' Retirement Association (PERA) defined benefit retirement program, to record its proportionate share of PERA's unfunded pension liability. As allowed by Statement No. 68 the University elected to adopt this standard as a cumulative effect in the Fiscal Year 2015. Fiscal Year 2015 reflects the impact of the adoption, which included a one-time decrease to unrestricted net position of $989,588,000 and varied increases to operating expense categories.
The University’s cash and cash equivalents are detailed in Table 2, Cash and Cash Equivalents.
|Cash on hand (petty cash and change funds)||$395||$362|
|Deposits with U.S. financial institutions||87,551||102,481|
|Deposits with foreign financial institutions||59||50|
|Total Cash and Cash Equivalents - University||$88,005||$102,893|
Custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be returned to it. To manage custodial credit risk, deposits with U.S. and foreign financial institutions are made in accordance with University and State policy, including the Public Deposit Protection Act (PDPA). PDPA requires all eligible depositories holding public deposits to pledge designated eligible collateral having market value equal to at least 102 percent of the deposits exceeding those amounts insured by federal depository insurance. Deposits collateralized under the PDPA are considered to be collateralized with securities held by the pledging institution in the University's name. Deposits with foreign financial institutions are not PDPA-eligible deposits and thus are exposed to custodial credit risk and require separate authorization as depositories by the State. During the years ended June 30, 2016 and 2015, all deposits with foreign financial institutions were authorized.
The University's investments generally include direct obligations of the U.S. government and its agencies, commercial paper, municipal and corporate bonds, asset-backed securities, mutual and commingled funds, repurchase agreements, corporate equities, negotiable certificates of deposit, and alternative non-equity securities. CU Foundation investments are similar to the University's but also include alternative non-equity securities in hedge funds and commodities. Endowments are pooled to the extent possible under gift agreements. The CU Foundation manages certain of these endowments for the University in accordance with its investment policy.
To the extent permitted, and excluding the University's blended entities, the University pools cash balances for investment purposes. An investment policy statement approved by the Regents directs the Treasurer of the University to meet the following investment objectives:
For financial statement purposes, investment income (loss) is reported on a total return basis and is allocated among operational units based on average daily balances, using amortized costs. Average daily balances, based on amortized costs, approximated $1,589,702,000 and $1,535,574,000 for the years ended June 30, 2016 and 2015, respectively. The total return on this pool (excluding blended component units) was -0.16 and 1.85 percent for the years ended June 30, 2016 and 2015, respectively.
The University categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles (GAAP). Under Statement No. 72, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. In determining this amount, three valuation techniques are available:
Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs should be maximized in fair value measures, and unobservable inputs should be minimized.
Statement No. 72 establishes a hierarchy of inputs to the valuation techniques above. This hierarchy has three levels:
The University owns an interest in several Collective Investment Trust Funds. These trust funds own investment assets, but the University owns an interest in the private trust itself rather than an interest in each underlying asset. Therefore, the unit of account is the University's ownership interest in the trust, rather than a percentage in individual assets held by the trust. The assets could be sold at an amount different than the Net Asset Value (NAV) per share (or its equivalent) due to the liquidation policies in each of the respective trusts' agreements with the investors.
The recurring fair value measurements as of June 30, 2016 for the University are included in Table 3.1, Investments.
|University||Level 1||Level 2||Level 3||Total|
|U.S. government securities||$294,417||53,558||-||347,975|
|Certificates of deposit||-||1,241||-||1,241|
|Alternative non-equity securities:|
|Absolute return fund||13||-||-||13|
|Fixed income trusts||42,400|
|Investments not requiring fair value:|
|Money market funds||313,507|
|Total Investments - University||$2,361,851|
The recurring fair value measurements as of June 30, 2015 for the University are included in Table 3.1, Investments.
|University||Level 1||Level 2||Level 3||Total|
|U.S. government securities||$260,878||38,680||-||299,558|
|Certificates of deposit||-||2,912||-||2,912|
|Alternative non-equity securities:|
|Absolute return fund||17||-||-||17|
|Fixed income trusts||42,271|
|Investments not requiring fair value:|
|Money market funds||322,649|
|Total Investments - University||$2,468,636|
Details of investments by type for the CU Foundation are included in Table 3.2, Investments
|Alternative non-equity securities:|
|Absolute return funds||136,277||95,403|
|Total Investments - CU Foundation||$1,451,490||1,474,293|
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty, the University will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Therefore, exposure arises if the securities are uninsured, not registered in the University's name, and are held by either the counterparty to the investment purchase or the counterparty's trust department or agent but not in the University's name. Open-ended mutual funds and certain other investments are not subject to custodial risk because ownership of the investment is not evidenced by a security. None of the University's investments are subject to custodial risk.
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Credit risk only applies to debt investments. This risk is assessed by national rating agencies, which assign a credit quality rating for many investments. The University's investment policies for the Treasury pool do not permit investments in debt securities that are below investment grade at the time the security is purchased. University policy allows no more than 20 percent of investments to be rated below Baa (Moody's) or BBB (Standard & Poor's (S&P) and Fitch) at the time of purchase. There are two other investment policies tailored to non-pooled investments. Those policies do not restrict investments to a particular credit quality standard. Credit quality ratings are not required for obligations of the U.S. government or obligations explicitly guaranteed by the U.S. Government. The CU Foundation does not have a policy concerning credit quality risk. A summary of the University's debt investments and credit quality risk as of June 30, 2016, and 2015 is shown in Table 3.3, Debt Investments and Credit Quality Risk. The University obtains ratings from both Moody's and S&P, and primarily reflects the Moody's ratings in Table 3.3 unless S&P is lower. The ratings reflected are S&P for UPI and the CU Foundation. Table 3.3 is a subset of Table 3.1 and does not include $969,381,000 of non-debt securities and $251,639,000 of debt investments that are backed by the full faith and credit of the U.S. government as of June 30, 2016, and does not include $1,026,209,000 of non-debt securities and $219,586,000 of debt investments that are backed by the full faith and credit of the U.S. government as of June 30, 2015.
|% of Rated||% of Rated|
|Fair||Fair||Value by||Fair||Fair||Value by|
|Value||Value||Credit Rating||Value||Value||Credit Rating|
|U.S. government securities||$27,492||68,846||100% Aa||$-||92,246||100% Aa|
|Bond mutual funds||180,517||-||-||174,366||-||-|
|Certificates of deposit||1,241||-||-||2,912||-||-|
|Corporate bonds||14,162||137,518||63% Aaa/Aa/A||9,816||122,664||65% Aaa/Aa/A|
|35% Baa/Ba/B||33% Baa/Ba/B|
|1% C||1% C|
|1% D||1% D|
|Money market mutual funds||-||326,283||100% Aaa||-||325,326||100% Aaa|
|Municipal bonds||4,346||3,554||84% Aaa||4,485||3,560||84% Aaa|
|16% A||16% A|
|Asset-backed securities||57,846||38,084||73% Aaa||85,049||33,262||52% Aaa|
|17% Aa/A||21% Aa/A|
|6% Baa/Ba/B||13% Baa/Ba/B|
|4% Caa/Ca||14% Caa/Ca|
|Corporate Bonds - UPI||-||116,478||4% Aaa||-||97,516||49%A|
|31% Aa||36% Aa/Aaa|
|Asset-backed securities - UPI||-||63,615||36% Aa||-||52,768||45% Aa|
|64% Aaa||55% Aaa|
|Municipal Securities - UPI||-||12,484||1% A||-||-||-|
|Total Debt Investments - University||$373,969||766,862||$495,499||727,342|
Interest rate risk is the risk that changes in the market rate of interest will adversely affect the value of an investment. Interest rate risk only applies to debt investments. The University, except for UPI, manages interest rate risk in its investment portfolios by managing the duration, the maximum maturity, or both. University investment policies establish duration and maturity guidelines for each portfolio. The duration method uses the present value of cash flows, weighted for those cash flows as a percentage of the investment's full price. UPI manages interest rate risk using weighted average maturity. Weighted average maturity is a measure of the time to maturity in years that has been weighted to reflect the dollar size of the individual investment within an investment type. The University's investment policy mitigates interest rate risk through the use of maturity limits for each of the investment segment pools.
A summary of the fair value of the University's debt investments and interest rate risk as of June 30, 2016 and 2015 is shown in Table 3.4, Debt Investments and Interest Rate Risk. Table 3.4 is a subset of Table 3.1 and does not include $1,295,718,000 of non-debt securities as of June 30, 2016, and does not include $1,351,589,000 of non-debt securities as of June 30, 2015. The main difference in the amount of non-debt securities excluded in Table 3.3 and Table 3.4 is that money-market mutual funds are included in Table 3.3 as they have credit risk but they are excluded from Table 3.4, as they do not have interest rate risk. Also, U.S. backed securities are not subject to credit risks but are subject to interest rate risks and are included here but not in the credit quality risk section.
The University has investments in asset-backed securities, which consist mainly of mortgages, home equity loans, student loans, automobile loans, equipment trusts, and credit card receivables. These securities are based on cash flows from principal and interest payments on the underlying securities. An asset-backed security has repayments that are expected to significantly vary with interest rate changes. The variance may present itself in terms of variable repayment amounts and uncertain early or extended repayments.
|U.S. government securities||$276,803||4.4||$250,759||5.1|
|Bond mutual funds||180,517||2.3||174,366||2.7|
|Certificates of deposit||1,241||4.0||2,912||3.1|
|Collateralized mortgage obligations||-||-||3,675||-|
|Total asset-backed securities||95,930||14.46||118,311||14.57|
|Amount||Weighted Average Maturity||Amount||Weighted Average Maturity|
|U.S. government securities - UPI||$71,120||5.48||$61,019||4.76|
|Commercial paper - UPI||-||-||-|
|Corporate bonds - UPI||116,478||5.19||97,516||3.15|
|Asset-backed securities - UPI||63,615||3.54||52,768||3.57|
|Municipal securities - UPI||12,484||4.90||-||-|
|Total Debt Investments - University||$1,066,133||1,117,047|
Concentration of credit risk is the risk of loss attributed to magnitude of an entity's investment in a single issuer other than the federal government. The University's policy is that exposure of the portfolio to any one issuer, other than securities of the U.S. government or agencies, or government-sponsored corporations, shall not exceed 10 percent of the market value of the fixed income portfolio. The University had no investments exceeding 5 percent and is therefore not subject to concentration of credit risk.
Assets held by the CU Foundation under split-interest agreements are included in investments and consisted of the following as of June 30, 2016 and 2015, as shown in Table 3.5, CU Foundation Investments Held under Split-interest Agreements.
|Charitable remainder trusts||$34,325||40,192|
|Charitable gift annuities and pooled income funds||3,176||3,927|
|Total Investments Held under Split-interest Agreements||$37,501||44,119|
Table 4.1, Accounts, Contributions, and Loans Receivable, segregates receivables as of June 30, 2016 and 2015, by type.
|Type of Receivable||Gross Receivables||Allowance||Net Receivables||Net Current Portion|
|Student accounts||$ 66,540||23,448||43,092||43,090|
|Direct financing lease||19,519||-||19,519||750|
|Total accounts receivable||422,230||31,320||390,910||369,876|
|Total Receivable - University||$ 493,587||34,192||459,395||398,388|
|Type of Receivable||Gross Receivables||Allowance||Net Receivables||Net Current Portion|
|Student accounts||$ 63,963||23,872||40,091||39,895|
|Direct financing lease||19,778||-||19,778||489|
|Total accounts receivable||337,555||32,871||304,684||283,534|
|Total Receivable - University||$ 396,436||35,927||360,509||290,141|
UPI grants credit without collateral to its patients. The mix of gross receivables from patients and third-party payers as of June 30, 2016 and 2015 is detailed in Table 4.2, UPI Concentration of Credit Risk.
|Other third-party payers||7.5||7.6|
Table 5, Capital Assets, presents changes in capital assets and accumulated depreciation by major asset category for the years ended June 30, 2016 and 2015.
Interest expense related to capital asset debt incurred by the University during the years ended June 30, 2016 and 2015 approximated $68,862,000 and $69,845,000, respectively. Of this amount, approximately $13,802,000 and $18,913,000, respectively, was capitalized as part of the value of construction in progress.
The University had insurance recoveries of $4,031,000 and $4,290,000 in the years ended June 30, 2016 and 2015, respectively, which are included in nonoperating revenues.
|Nondepreciable capital assets|
|Construction in progress||534,173||277,799||10,303||(526,899)||274,770|
|Total nondepreciable capital assets||616,612||278,014||10,303||(526,898)||357,425|
|Depreciable capital assets|
|Improvements other than buildings||202,631||4,738||113||44,707||251,963|
|Library and other collections||361,353||18,781||979||-||379,155|
|Total depreciable capital assets||4,438,776||71,450||42,535||526,898||4,994,589|
|Less accumulated depreciation|
|Improvements other than buildings||107,184||9,630||46||-||116,768|
|Library and other collections||255,023||15,483||712||-||269,794|
|Total accumulated depreciation||1,848,704||181,191||36,472||-||1,993,423|
|Net depreciable capital assets||2,590,072||(109,741)||6,063||526,898||3,001,166|
|Total Net Capital Assets - University||$ 3,206,684||168,273||16,366||-||3,358,591|
|*Adjustment to buildings when asset was retired.|
|Nondepreciable capital assets|
|Construction in progress||266,229||409,208||3,597||(137,667)||534,173|
|Total nondepreciable capital assets||341,213||416,279||3,659||(137,221)||616,612|
|Depreciable capital assets|
|Improvements other than buildings||190,587||146||4,558||16,456||202,631|
|Library and other collections||345,375||17,657||1,679||-||361,353|
|Total depreciable capital assets||4,391,533||105,524||195,502||137,221||4,438,776|
|Less accumulated depreciation|
|Improvements other than buildings||103,416||8,316||4,548||-||107,184|
|Library and other collections||240,100||15,569||646||-||255,023|
|Total accumulated depreciation||1,847,830||180,843||179,969||-||1,848,704|
|Net depreciable capital assets||2,543,703||(75,319)||15,533||137,221||2,590,072|
|Total Net Capital Assets - University||$ 2,884,916||340,960||19,192||-||3,206,684|
Table 6, Accrued Expenses, details the accrued expenses as of June 30, 2016 and 2015 by type.
|Accrued salaries and benefits||$237,806||223,344|
|Accrued interest payable||4,194||4,405|
|Other accrued expenses||1,474||1,149|
|Total Accrued Expenses - University||$243,474||228,898|
Table 7.1, Compensated Absences, and Table 7.2, Other Postemployment Benefits, present changes in compensated absences and postemployment benefits other than pension benefits for the years ended
June 30, 2016 and 2015.
|Beginning of year||$182,404||166,505|
|End of year||$204,028||182,404|
|Current compensated absences||14,691||13,516|
During the years ended June 30, 2016 and 2015, approximately 4,900 and 4,700 retirees, respectively, met the eligibility requirements and are receiving benefits under the University-administered single-employer postemployment benefit (non-pension) program. This program was established by the Regents who have the authority to amend the program provisions. Under this program, the University subsidizes a portion of healthcare and life insurance premiums on a pay-as-you-go basis. This program does not issue a separate financial report.
|Annual required contribution (ARC)||$65,667||65,667|
|Interest on net obligation||10,880||8,801|
|Adjustment to ARC||(14,843)||(12,007)|
|Annual OPEB expense||61,704||62,461|
|Estimated benefit payments||(14,350)||(16,269)|
|Increase in OPEB||47,354||46,192|
|Beginning of year||241,779||195,587|
|End of year||$289,133||241,779|
Funded Status and Funding Progress. As of July 1, 2015, the most recent actuarial valuation date, the plan was 0 percent funded, and the actuarial accrued liability for benefits was $523,409,000. The actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $523,409,000. For the year ended June 30, 2016, the covered payroll (annual payroll of active employees covered by the program) was $1,336,248,000 and the ratio of the UAAL to the covered payroll was 39.17 percent.
For the years ended June 30, 2016, 2015 and 2014, the annual OPEB cost was $61,704,000, $62,461,000, and $46,842,000, respectively. The University contributed $14,350,000, $16,269,000, and $12,529,000, respectively, which was 23 percent, 22 percent, and 27 percent, respectively, of the annual OPEB cost. The net OPEB obligation was $289,133,000, $241,779,000, and $195,587,000, respectively.
Actuarial Methods and Assumptions. Actuarial valuations of an ongoing program involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the program and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive program (the program as understood by the employer and the program members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and program members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
The projected unit credit actuarial cost method is used. The discount rate used in the valuation is 4.5 percent based on the University's expected long-term rate of return. The healthcare trend assumption reflects healthcare cost inflation expected to impact the plan based on forecast information in published papers from industry experts (actuaries, health economists, etc.). This research suggests a 5.5 percent long-term average increase for all healthcare benefits, trending down to an ultimate 5 percent increase for 2024 and later years. It was assumed that all members would be entitled to the maximum life insurance benefit amount; therefore, no salary increase rate is assumed. The UAAL is being amortized as a level dollar on an open basis over a period of 30 years.
The University contributes to the Health Care Trust Fund (HCTF), a cost-sharing multiple-employer healthcare trust administered by PERA. The HCTF benefit provides a health care premium subsidy and health care programs (known as PERACare) to PERA participating benefit recipients and their eligible beneficiaries. Title 24, Article 51, Part 12 of the Colorado Revised Statutes (C.R.S.), as amended, establishes the HCTF and sets forth a framework that grants authority to the PERA Board to contract, self-insure and authorize disbursements necessary in order to carry out the purposes of the PERACare program, including the administration of health care subsidies. PERA issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for the HCTF. That report can be obtained at www.copera.org/investments/pera-financial-reports.
The University is required to contribute at a rate of 1.02 percent of PERA-includable salary for all PERA members as set by statute. No member contributions are required. The contribution requirements for the University are established under Title 24, Article 51, Part 4 of the C.R.S., as amended. The apportionment of the contributions to the HCTF is established under Title 24, Article 51, Section 208(1)(f) of the C.R.S., as amended. The total PERA-defined payroll of employees covered by this plan was approximately $299,112,000 and $295,357,000 for the years ended June 30, 2016 and 2015, respectively. The University contributed a total of 19.57 percent and 18.62 percent, respectively, of the employee's gross covered wages to PERA in accordance with the following allocations and amounts detailed in Table 7.3, University Contributions to PERA. These contributions met the contribution requirement for each year.
As of June 30, 2016 and 2015, the University recorded an accounts payable to PERA of $6,914,000 and $6,364,000, respectively, which represents the amount due for the June 30, 2016 and 2015 payroll, respectively.
|Health Care Trust Fund||1.02% after July 1, 2004||$3,051||3,013||2,947|
|Defined Benefit Plan||The balance remaining||55,479||51,994||47,751|
|Total University Contribution||$58,530||55,007||50,698|
As of June 30, 2016 and 2015, the types and amounts of unearned revenue are shown in Table 8, unearned revenue.
|Tuition and fees||$29,482||29,482||31,589||31,589|
|Grants and contracts||100,366||100,366||85,696||85,696|
|Total Unearned Revenue - University||$169,507||159,610||153,682||143,211|
As of June 30, 2016 and 2015, the categories of long-term obligations are summarized in Table 9.1, Bonds and Capital Leases.
|Type||Interest Rates||Final Maturity||2016||2015|
|Enterprise system revenue bonds (including premium|
|of $138,021 in 2016 and $139,421 in 2015)||0.76-6.26%||6/1/47||$1,665,811||1,679,786|
|UPI fixed bonds||2.30%||11/1/24||9,833||11,009|
|Total revenue bonds||1,675,644||1,690,795|
|Total Bonds and Capital Leases - University||$1,691,046||1,707,630|
Table 9.2, Changes in Bonds and Capital Leases, presents changes in bonds and capital leases for the years ended June 30, 2016 and 2015.
|Additions||Retirements||Balance 2016||Current Portion|
|Revenue bonds||$ 1,551,374||188,240||201,991||1,537,623||61,646|
|Plus unamortized premiums||139,421||22,960||24,360||138,021||13,231|
|Net revenue bonds||1,690,795||211,200||226,351||1,675,644||74,877|
|Total Bonds and Capital Leases - University||$ 1,707,630||212,682||229,266||1,691,046||77,241|
|Additions||Retirements||Balance 2015||Current Portion|
|Revenue bonds||$ 1,396,750||493,320||338,696||1,551,374||56,231|
|Plus unamortized premiums||96,529||61,308||18,416||139,421||13,444|
|Net revenue bonds||1,493,279||554,628||357,112||1,690,795||69,675|
|Total Bonds and Capital Leases - University||$ 1,508,897||558,692||359,959||1,707,630||72,080|
A general description of each revenue bond issue, original issuance amount, and the amount outstanding as of June 30, 2016 and 2015 is detailed in Table 9.3, Revenue Bonds Detail.
|Issuance Description||Original Issuance
|Outstanding Balance 2016||Outstanding Balance
|Enterprise system revenue bonds:|
|Series 2006A -|
|Used to fund capital improvements at CU Boulder, UCCS, and CU Denver||$101,425||-||3,365|
|Refunding Series 2007A -|
|Used to refund all of the revenue bond Refunding Series 1999A and Certificates of Participation Series 2003A and 2003B and a portion of revenue bond Refunding Series 1995A, Refunding and Improvement Series 2001B, Series 2002A, and 2002B||184,180||79,928||86,508|
|Series 2007B -|
|Used to fund acquisition and capital improvements at CU Boulder||63,875||2,104||4,146|
|Series 2009A -|
|Used to fund acquisition and capital improvements at CU Boulder, UCCS and CU Denver||165,635||14,878||19,478|
|Series 2009B-1 -|
|Used to fund capital improvements at CU Boulder and CU Anschutz||76,725||13,956||22,695|
|Series 2009B-2 -|
|Used to fund capital improvements at CU Boulder and CU Anschutz||138,130||138,130||138,130|
|Series 2009C -|
|Used to refund Enterprise System Refund Series 1997, Enterprise System Revenue Refund Bonds Series 2001A for years 2012 through 2026, and Enterprise System Revenue Bonds Series 2002A for years 2014 through 2018||24,510||11,775||16,242|
|Series 2010A -|
|Used to fund acquisition and capital improvements at CU Anschutz||35,510||29,070||30,360|
|Series 2010B -|
|Used to refund Enterprise System Revenue Bonds Series 2002A and Enterprise System Revenue Bonds Series 2003A||56,905||33,688||39,528|
|Series 2010C -|
|Used to fund capital improvements at CU Anschutz||4,375||3,255||3,495|
|Series 2011A -|
|Used to fund capital improvements at CU Boulder and UCCS||203,425||48,331||210,795|
|Series 2011B -|
|Used to partially refund Enterprise System Revenue Bonds Series 2002B, 2003A, 2004, and 2005A||52,600||52,647||53,719|
|Series 2012A-1 -|
|Used to partially refund Enterprise System Revenue Bonds Series 2003A, 2004, 2005A, 2005B, 2006A, and 2007B||121,850||135,516||138,735|
|Series 2012A-2 -|
|Used to partially refund Enterprise System Revenue Bonds Series 2004, 2005A, and 2005B||53,000||57,711||58,262|
|Table 9.3. Revenue Bonds Detail (continued) (in thousands)|
|Series 2012A-3 -|
|Used to partially refund Enterprise System Revenue Bonds Series 2005A, 2005B, 2006A, and 2007B||$47,165||43,070||51,144|
|Series 2012B -|
|Used to fund capital improvements at CU Boulder, CU Denver and UCCS||95,705||103,285||105,800|
|Series 2013A -|
|Used to fund capital improvements at CU Boulder, CU Anschutz and UCCS||142,460||146,826||149,672|
|Series 2013B -|
|Used to fund capital improvements at CU Anschutz||11,245||11,015||11,245|
|Series 2014A -|
|Used to fund capital improvements at CU Boulder||203,485||233,557||235,742|
|Series 2014B-1 -|
|Used to partially refund Enterprise System Revenue Bond Series 2005B, 2006A, 2007B and 2009A.||100,440||108,631||110,016|
|Series 2015A -|
|Used to partially refund Enterprise System Revenue Bonds Series 2006A, 2007B, and 2009.||102,450||114,720||116,135|
|Series 2015B -|
|Used to partially refund Enterprise System Revenue Bonds Series 2005A||3,925||3,497||4,279|
|Series 2015C -|
|Used to partially refund Enterprise System Revenue Bonds Series 2007A||71,325||69,020||70,295|
|Series 2016A -|
|Used to fund capital improvements at CU Denver and UCCS||31,430||37,703||-|
|Series 2016B-1 -|
|Used to partially refund Enterprise System Revenue Bonds Series 2011A||156,810||173,498||-|
|Total enterprise system revenue bonds||2,248,585||1,665,811||1,679,786|
|Series 2014 - UPI Fixed Rate Bonds -|
|Used to fund capital improvements at UPI||20,500||9,833||11,009|
|Total revenue bonds||1,675,644||1,690,795|
|Total Outstanding Revenue Bond Principal - University||$1,537,623||1,551,374|
The University's revenue bonds are payable semiannually, have serial and term maturities, and contain optional redemption provisions. The optional redemption provisions allow the University to redeem, at various dates, portions of the outstanding revenue bonds at prices varying from 100 to 101 percent of the principal amount of the revenue bonds redeemed.
The Enterprise System Revenue Bonds are secured by a pledge of all net revenues of auxiliary services, student fees, other self-funded services, and research services, in addition to 100 percent of the University's tuition, 100 percent of the University's capital student fees, and 100 percent of the University's indirect cost recoveries. During the year ended June 30, 2015, 10 percent of the University's tuition was pledged in addition to the other revenue sources. All University revenue bonds are special limited obligations of the Regents and are payable solely from the pledged revenues (or the net income of the facilities as defined in the bond resolution). The revenue bonds are not secured by any encumbrance, mortgage, or other pledge of property, except pledged revenues, and do not constitute general obligations of the Regents.
The University's bonds are payable through June 1, 2047. During the years ended June 30, 2016 and 2015, the total principal and interest paid on the University's bonds was $127,784,000 and $125,695,000, respectively, which is 12 percent and 38 percent of the total net pledged revenues of $1,064,815,000 and $330,208,000, respectively. Net pledged revenues are 35 percent and 12 percent of the total specific revenue streams, respectively.
On June 2, 2016, the University issued $31,430,000 of Tax-Exempt University Enterprise Revenue Bonds, Series 2016A and $156,810,000 of Tax-Exempt University Enterprise Refunding Revenue Bonds, Series 2016B-1. The proceeds were used to defray a portion of the cost of financing certain capital improvement projects, financing the payment and discharge of all or a portion of certain outstanding obligations of the Board and paying certain costs relating to the issuance of the Series 2016 Bonds. The refunding of the Series 2016B-1 resulted in an economic gain of $13,445,000 and accounting loss of $15,802,000, which is deferred and amortized over the life of the new bonds. The debt service cash flow decreased by $17,990,000. Series 2016A has an interest rate ranging from 1.50 percent to 5.00 percent, and the bonds mature through June 1, 2027. Series 2016B-1 has rates ranging from 2 percent to 5 percent, and the bonds mature through June 1, 2027.
The University's revenue bonds contain provisions to establish and maintain reasonable fees, rates, and other charges to ensure gross revenues are sufficient for debt service coverage. The University is also required to comply with various other covenants while the bonds are outstanding. These covenants, among other things, restrict the disposition of certain assets, require the Regents to maintain adequate insurance, and require the Regents to continue to operate the underlying programs. Management believes the University has met all debt service coverage ratios and has complied with all bond covenants.
In December 2002, UPI entered into a loan agreement with the Fitzsimons Redevelopment Authority to issue variable-rate bonds, Series 2002, in the amount of $20,500,000. Proceeds from the sale of these bonds were used to fund the development, construction, and equipping of UPI's administrative office building. In October 2014, UPI refinanced its variable-rate debt with a fixed-rate bank-direct purchase obligation. The borrowing, funded by US Bank, included a $3,500,000 reduction in principal to a net amount outstanding at the time of the refinance of $11,695,000. The obligation is amortizable over 10 years and carries a fixed rate of 2.3 percent. UPI management believes it is in compliance with its debt service requirements and financial covenants.Future minimum payments for revenue bonds are detailed in Table 9.4, Revenue Bonds Future Minimum Payments.
|Years Ending June 30||Principal||Interest||Total|
|2022 - 2026||372,962||249,381||622,343|
|2027 - 2031||326,290||165,300||491,590|
|2032 - 2036||280,685||91,697||372,382|
|2037 - 2041||159,975||36,637||196,612|
|2042 - 2046||63,065||7,620||70,685|
Previous revenue bond issues considered to be extinguished through in-substance defeasance under GAAP, are not included in the accompanying financial statements. The amount of debt in this category, covered by assets placed in trust to be used solely for future payments, amounted to approximately $380,475,000 and $312,505,000 as of June 30, 2016 and 2015, respectively. As of June 30, 2016, the amount of debt defeased totaled $145,760,000, and escrow agent payments were $77,790,000. As of June 30, 2015, the amount of debt defeased totaled $267,145,000, and escrow agent payments were $188,640,000.
The University's capital leases are primarily for equipment. The University also has a capital lease with a related party. During the year ended June 30, 2009, CU Denver entered into a $10,272,000 site lease agreement with AHEC associated with the build-out of educational space for CU Denver. As of June 30, 2016 and 2015, the University paid base rent to AHEC of approximately $838,000 annually for each year. Amortization expense is included in depreciation expense.
As of June 30, 2016 and 2015, the University had an outstanding liability for all its capital leases approximating $15,402,000 and $16,835,000, respectively, with underlying gross capitalized asset cost approximating $26,479,000 and $26,615,000, respectively, with accumulated amortization of $10,189,000 and $10,233,000 respectively, resulting in underlying net capitalized assets of $16,290,000 and $16,382,000, respectively.Future minimum payments for all the University's capital lease obligations are detailed in Table 9.5, Capital Leases.
|Years Ending June 30||Principal||Interest||Total|
|2022 - 2026||4,543||1,196||5,739|
|2027 - 2031||1,848||100||1,948|
On October 23, 2008, the State issued State of Colorado Higher Education Capital Construction Lease Purchase Financing Program Certificates of Participation, Series 2008, with a par value of $230,845,000, at a net premium of $181,000. The certificates have interest rates ranging from 3.0 to 5.5 percent and mature in November 2027. Annual lease payments are made by the State and are subject to annual appropriations by the Legislature. As a result, this liability is recognized by the State and not included in the University's financial statements.The certificates are secured by the buildings or equipment acquired with the lease proceeds and any unexpended lease proceeds. The proceeds were used to fund various capital projects for the benefit of certain State-supported institutions of higher education in Colorado, including UCCS and CU Boulder. The underlying capitalized assets are contributed to the University from the State. As of June 30, 2016, the University had underlying gross capitalized assets at UCCS costing approximately $17,735,000 with accumulated amortization of $4,582,000 resulting in an underlying net capitalized asset of $13,153,000. As of June 30, 2016, the University had underlying gross capitalized assets at CU Boulder costing approximately $796,000, with accumulated amortization of $79,000 resulting in an underlying net capitalized asset of $717,000. As of June 30, 2016, the University had underlying gross capitalized assets at CU Anschutz costing approximately $188,801,000, with accumulated amortization of $41,527,000 resulting in an underlying net capitalized asset of $147,274,000.
Table 10.1, Other Liabilities, details other liabilities as of June 30, 2016 and 2015.
|Type||Total||Current Portion||Total||Current Portion|
|Construction contract retainage||19,821||19,821||17,878||17,878|
|Funds held for others||16,757||16,757||17,026||17,025|
|Total Other Liabilities - University||$70,338||52,818||63,838||48,394|
The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; medical malpractice; employee occupational injuries; graduate medical students' health; and natural disasters. The University finances these risks through various self-insurance programs. The University finances the cost and risks associated with employee health benefit programs through the Trust, a related organization as discussed in Note 18 to the financial statements. Under the terms of the Trust, the University is self-insured for medical claims beginning July 1, 2010. However, the risk of loss has been transferred to the Trust. Therefore, no liability was reported as of June 30, 2016 or 2015 for unpaid claims.
The University utilizes a protected self-insurance program for its property, liability, and workers' compensation risks. The University has established a separate self-insurance program for the purpose of providing professional liability coverage for the CU Denver | Anschutz Medical Campus and the Hospital Authority. A separate self-insurance program has also been established to provide health insurance for graduate medical students and eligible dependents at CU Anschutz.
All self-insurance programs, other than employee health benefit programs, assume losses up to certain limits and purchase a defined amount of excess insurance for losses over those limits. These limits range from $350,000 to $1,500,000 per occurrence.
Reserves for unpaid claims under these programs are actuarially reviewed and evaluated for adequacy each year. The Property, General Liability, and Workers' Compensation reserve is reported on an undiscounted basis, and the CU Denver | Anschutz Medical Campus Professional Liability reserve of $11,469,000 is reported at a discount basis using 4 percent. Settlements have not exceeded coverages for each of the past three fiscal years. There were no significant reductions or changes in insurance coverage from the prior year.
The amount recorded as risk financing-related liabilities represents reserves based upon the annual actuarial valuation and includes reserves for incurred but not reported claims. Such liabilities depend on many factors, including claims history, inflation, damage awards, investment return, and changes in legal doctrine. Accordingly, computation of the claims liabilities requires an annual estimation process. Claims liabilities are reevaluated on a periodic basis and take into consideration recently settled claims, frequency of claims, and other relevant factors.
Changes in the balances of risk financing-related liabilities for the years ended June 30, 2016 and 2015 are presented in Table 10.2, Risk Financing-related Liabilities.
|Property, General Liability, and Workers’ Compensation||Professional Liability||Graduate Medical Student Health Benefits||Total|
|Balance as of June 30, 2014||$14,445||7,139||1,710||23,294|
|Fiscal Year 2015:|
|Claims and changes in estimates||8,684||4,060||7,644||20,388|
|Balance as of June 30, 2015||$13,858||9,498||1,799||25,155|
|Fiscal Year 2016:|
|Claims and changes in estimates||10,180||2,883||7,233||20,296|
|Balance as of June 30, 2016||$16,727||11,469||1,666||29,862|
The University participates in two student lending programs operated by the federal government, Direct Student Loan and the State School as Lender. These programs enable eligible students or parents to obtain a loan to pay for the student’s cost of attendance directly through the University rather than through a private lender. The University is responsible for handling the complete loan process, including funds management as well as promissory note functions.
For the Direct Lending program, the University is not responsible for collection of these loans or for defaults by borrowers; therefore, these loans are not recognized as receivables in the accompanying financial statements. Direct lending activity during the years ended June 30, 2016 and 2015 was $371,437,000 and $371,511,000, respectively.
Unrestricted Net Position is one component of the University's financial statements, which represents the net position held by the collective units of the University as of June 30. Balances fluctuate throughout the year and are reported as of a point-in-time. The University designates unrestricted net position by their intended purpose. Unobligated funds are generally available for campus use or support of schools, colleges, departments, or units. These funds are generated by nonrecurring revenue surpluses (such as departmental share unspent indirect cost recoveries) or year-end balances resulting from lower than expected spending levels (such as vacancy savings from an unfilled position). Campus leadership holds these funds in general categories based on internal policy or intended use. Their designation may change in accordance with directives from leadership, including Regent directives. Obligated Funds are unrestricted net position that are obligated to specific projects or are held for contractual payments (such as faculty start-up).
University policy requires each campus provide the Regents prior to December 31 a detailed report on designated net position. This report enhances clarity and frequency of internal communications and provides context for Regent decisions on key budget items. These reports are available on the Regents' website.
In November 1992, the Colorado voters passed Section 20, Article X of the Colorado Constitution, commonly known as the Taxpayer's Bill of Rights (TABOR). TABOR contains revenue, spending, tax, and debt limitations that apply to all local governments and the State, including the University. During the year ended June 30, 2005, the Colorado State Legislature determined in Section 23-5-101.7 of the C.R.S. that an institution of higher education may be designated as an enterprise for the purposes of TABOR so long as the institution's governing board retains authority to issue revenue bonds on its behalf and the institution receives less than 10 percent of its total annual revenues in grants as defined by TABOR. Further, so long as it is so designated as an enterprise, the institution shall not be subject to any of the provisions of TABOR.
In July 2005, the Regents designated the University as a TABOR enterprise pursuant to the statute. During the years ended June 30, 2016 and 2015, the University believes it has met all requirements of TABOR enterprise status. Specifically, the Regents retain the authority to issue revenue bonds and the amount of State grants received by the University was 1.40 percent and 1.31 percent during the years ended June 30, 2016 and 2015, respectively, as shown in Table 12, TABOR Enterprise State Support Calculation.
|Tobacco Litigation Settlement Appropriation||12,429||13,008|
|State COP annual debt service payments for CU Anschutz||14,290||14,089|
|State COP annual debt service payments for UCCS||1,480||1,548|
|State COP annual debt service payments for CU-Boulder||31||33|
|Total State Support||$53,090||46,871|
|Total TABOR enterprise revenues||$3,797,784||3,566,852|
|Ratio of State support to total revenues||1.40%||1.31%|
A portion of the University is subject to revenue and expense limitations imposed by the Colorado State Legislature through the annual appropriation process. For the years ended June 30, 2016 and 2015, the University's appropriated funds included $63,181,000 and $62,353,000, respectively, received for students that qualified for stipends from the College Opportunity Fund (COF) and $121,440,000, and $104,745,000, respectively, as fee-for-service contract revenue, as well as certain cash funds as specified in the State's annual appropriations bill. For the years ended June 30, 2016 and 2015, expenses were within the appropriated spending authority.Non-appropriated funds include certain grants and contracts, gifts, indirect cost recoveries, certain auxiliary revenues, in addition to the student-paid portion of tuition, certain fees, and certain other revenue sources. All other revenues and expenses reported by the University represent non-appropriated funds and are excluded from the annual appropriations bill.
During the years ended June 30, 2016 and 2015, scholarship allowances were provided by the following funding sources in amounts detailed in Table 13, Scholarship Allowances.
|For years ended June 30||
|Funding Source Description||Tuition
|Auxiliary Enterprise Revenues||Total||Tuition
|Auxiliary Enterprise Revenues||Total|
|University general resources||$80,309||2,026||82,335||70,286||1,758||72,044|
|University auxiliary resources||10,766||345||11,111||10,209||296||10,505|
|Colorado Commission on Higher Education financial aid program||21,686||255||21,941||18,817||244||19,061|
|Federal programs, including Federal Pell grants||53,302||930||54,232||51,953||925||52,878|
|Other State of Colorado programs||74||2||76||82||2||84|
|Total Scholarship Allowances - University||$183,348||3,902||187,250||168,884||3,579||172,463|
Health services revenue of $781,257,000 and $707,198,000 is recorded net of contractual adjustments approximating $1,102,249,000 and $1,015,132,000 and bad debt expense on uncollectible patient account receivables approximating $30,463,000 and $34,520,000 from UPI and $159,000 and $237,000 from various departments at CU Anschutz for the years ended June 30, 2016 and 2015, respectively. Charity care provided during the years ended June 30, 2016 and 2015, based on estimated service costs of providing charity care, totaled approximately $7,155,000 and $7,349,000, respectively.
Employees of the University eligible for retirement benefits participate in one of four retirement plans. Eligible student employees participate in a student retirement plan that is funded solely by contributions from the student employees. The student retirement plan is a defined contribution plan administered by a consortium of higher educational institutions in the State. All other eligible employees of the University participate in one of the three additional plans, PERA plan, the University's optional retirement plan, and UPI's retirement plan. The CU Foundation and CUREF offer a retirement plan for certain employees.
The University participates in the State Division Trust Fund (SDTF), a cost-sharing multiple-employer defined benefit pension fund administered by PERA. The net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position of the SDTF have been determined using the economic resources measurement focus and the accrual basis of accounting.
For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Eligible employees of the University are provided with pensions through the SDTF. Plan benefits are specified in Title 24, Article 51 of the C.R.S., administrative rules set forth at 8 C.C.R. 1502-1, and applicable provisions of the federal Internal Revenue Code. Colorado State law provisions may be amended from time to time by the Colorado General Assembly. PERA issues a publicly available comprehensive annual financial report that can be obtained at www.copera.org/investments/pera-financial-reports.
The University of Colorado has both classified and non-classified employees. All classified employees participate in PERA. Prior to legislation passed during the 2006 session, higher education employees may have participated in social security, PERA's defined benefit plan, or the institution's optional retirement plan. Currently, the University's employees, except classified employees, are required to participate in their institution's optional plan, if available, and social security unless they are active or inactive members of PERA with at least one year of service credit. In that case, they may elect either PERA or their institution's optional plan.
PERA provides retirement, disability, and survivor benefits. Retirement benefits are determined by the amount of service credit earned and/or purchased, highest average salary, the benefit structure(s) under which the member retires, the benefit option selected at retirement, and age at retirement. Retirement eligibility is specified in tables set forth at C.R.S. § 24-51-602, 604, 1713, and 1714.
The lifetime retirement benefit for all eligible retiring employees under the PERA Benefit Structure is the greater of the:
In all cases, the service retirement benefit is limited to 100 percent of highest average salary and also cannot exceed the maximum benefit allowed by federal Internal Revenue Code.
Members may elect to withdraw their member contribution accounts upon termination of employment with all PERA employers; waiving rights to any lifetime retirement benefits earned. If eligible, the member may receive a match of either 50 percent or 100 percent on eligible amounts depending on when contributions were remitted to PERA, the date employment was terminated, whether 5 years of service credit has been obtained and the benefit structure under which contributions were made.
Benefit recipients who elect to receive a lifetime retirement benefit are generally eligible to receive post-retirement cost-of-living adjustments, referred to as annual increases in the C.R.S. Benefit recipients under the PERA benefit structure who began eligible employment before January 1, 2007 receive an annual increase of 2 percent, unless PERA has a negative investment year, in which case the annual increase for the next three years is the lesser of 2 percent or the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the prior calendar year. Benefit recipients under the PERA benefit structure who began eligible employment after January 1, 2007 receive an annual increase of the lesser of 2 percent or the average CPI-W for the prior calendar year, not to exceed 10 percent of PERA's Annual Increase Reserve (AIR) for the SDTF.
Disability benefits are available for eligible employees once they reach five years of earned service credit and are determined to meet the definition of disability. The disability benefit amount is based on the retirement benefit formula shown above considering a minimum 20 years of service credit, if deemed disabled.
Survivor benefits are determined by several factors, which include the amount of earned service credit, highest average salary of the deceased, the benefit structure(s) under which service credit was obtained, and the qualified survivor(s) who will receive the benefits.
Eligible employees and the University are required to contribute to the SDTF at a rate set by Colorado statute. The contribution requirements are established under C.R.S. § 24-51-401, et seq. Eligible employees are required to contribute 8 percent of their PERA-includable salary. The employer contribution requirements for all employees are summarized in Table 15.1, Employer Contribution Requirements.
Fiscal Year 2015
Fiscal Year 2016
Employer Contribution Rate1
Amount of Employer Contribution Apportioned to the Heath Care Trust Fund as specified in C.R.S. Section 24-51-208(1)(f)1
Amount Apportioned to the SDTF
Amortization Equalization Disbursement (AED) as specified in C.R.S. Section 24-51-4111
Supplemental Amortization Equalization Disbursement (SAED) as specified in C.R.S., Section 24-51-4111
Total Employer Contribution Rate to the SDTF1
1 Rates are expressed as a percentage of salary as defined in C.R.S. 24-51-101(42).
Employer contributions are recognized by the SDTF in the period in which the compensation becomes payable to the member and the University is statutorily committed to pay the contributions to the SDTF. Employer contributions recognized by the SDTF from the University were $55,479,000 for the year ended June 30, 2016 and $51,994,000 for the year ended June 30, 2015.
As of June 30, 2016 and 2015, the University reported a liability of $1,175,591,000 and $1,060,337,000, respectively, for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2015 and 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2014 and 2013. Standard update procedures were used to roll forward the total pension liability to December 31, 2015. The University's proportion of the net pension liability was based on the University's contributions to the SDTF for the calendar year 2015 and 2014 relative to the total contributions of participating employers to the SDTF. At December 31, 2015 and 2014, the University's proportion was 11.16 percent and 11.27 percent, respectively, which was a decrease of 11 basis points.
For the years ended June 30, 2016 and 2015, the University recognized pension expense of $103,125,000 and $82,480,000, respectively. Table 15.2 details the sources of the University's deferred outflows of resources and deferred inflows of resources related to pensions at June 30, 2016.
|Deferred Outflows of Resources||Deferred Inflows of Resources||Deferred Outflows of Resources||Deferred Inflows of Resources|
|Difference between expected and actual experience||$17,119||36||-||79|
|Change of assumptions or other inputs||-||13,916||-||-|
|Net difference between projected and actual earnings on pension plan investments||88,580||-||21,620||-|
|Changes in proportionate share of contributions||-||9,878||-||7,238|
|Contributions subsequent to the measurement date||29,850||-||27,674||-|
The $29,850,000 reported as deferred outflows of resources related to pensions as of June 30, 2016, resulting from contributions subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. The $27,674,000 reported as deferred outflows of resources related to pensions as of June 30, 2015, resulting from contributions subsequent to the measurement date, was recognized as a reduction of net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as detailed in Table 15.3, Future Amortization of Deferred Outflows and Deferred Inflows.
|Years ending June 30:|
The actuarial assumptions and other inputs used to determine the total pension liability in the December 31, 2014 actuarial valuation are detailed in Table 15.4, Actuarial Assumptions.
|Actuarial cost method||Entry age|
|Price inflation||2.80 percent|
|Real wage growth||1.10 percent|
|Wage inflation||3.90 percent|
|Salary increases, including wage inflation||3.90 - 9.57 percent|
|Long-term investment Rate of Return, net of pension plan investment expenses, including price inflation||7.50 percent|
|Future post-retirement benefit increases:|
|PERA Benefit Structure hired prior to 1/1/07;|
|and DPS Benefit Structure (automatic)||2.00 percent|
|PERA Benefit Structure hired after 12/31/06;|
|(ad hoc, substantively automatic)||Financed by the Annual Increase Reserve (AIR)|
Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on a projection of Scale AA to 2020 with Males set back 1 year, and Females set back 2 years.
The actuarial assumptions used in the December 31, 2014 valuation were based on the results of an actuarial experience study for the period January 1, 2008 through December 31, 2011, adopted by PERA's Board on November 13, 2012, and an economic assumption study, adopted by PERA's Board on November 15, 2013 and January 17, 2014.
Changes to assumptions or other inputs since the December 31, 2013 actuarial valuation are as follows:
The SDTF's long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation) were developed for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation.
As of the November 15, 2013 adoption of the long-term expected rate of return, by the PERA Board, the target allocation and best estimates of geometric real rates of return for each major asset class are summarized in Table 15.5, Target Allocation and Expected Rate of Return.
|Asset Class||Target Allocation||10 Year Expected Geometric Real Rate of Return|
|U.S. Equity - Large Cap||26.76%||5.00%|
|U.S. Equity - Small Cap||4.40||5.19|
|Non U.S. Equity - Developed||22.06||5.29|
|Non U.S. Equity - Emerging||6.24||6.76|
|Core Fixed Income||24.05||0.98|
|Long Duration Gov't/Credit||0.53||1.57|
|Emerging Market Bonds||0.43||3.04|
In setting the longer term expected rate of return, projections employed to model future returns provide a range of expected long-term returns that, including expected inflation, ultimately support a long-term expected rate of return assumption of 7.50 percent.
Per PERA, the discount rate used to measure the total pension liability was 7.50 percent. The projection of cash flows used to determine the discount rate applied the actuarial cost method and assumptions shown above. In addition, the following methods and assumptions were used in the projection of cash flows:
Based on the above actuarial cost method and assumptions, the SDTF's fiduciary net position was projected to be available to make all projected future benefit payments of current members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The discount rate determination does not use the Municipal Bond Index Rate. There was no change in the discount rate from the prior measurement date.
The proportionate share of the net pension liability calculated using the discount rate of 7.50 percent, as well as what the proportionate share of the net pension liability 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 are presented in Table 15.6, Sensitivity of the University's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate.
|1% Decrease (6.50%)||Current Discount Rate (7.50%)||1% Increase (8.50%)|
|Proportionate share of the net pension liability||$1,485,194||1,175,591||916,618|
|1% Decrease (6.50%)||Current Discount Rate (7.50%)||1% Increase (8.50%)|
|Proportionate share of the net pension liability||$1,359,608||1,060,337||808,609|
Detailed information about the SDTF's fiduciary net position is available in PERA's comprehensive annual financial report which can be obtained at www.copera.org/investments/pera-financial-reports.
Employees of the University that are also members of the SDTF may voluntarily contribute to the Voluntary Investment Program, an Internal Revenue Code Section 401(k) defined contribution plan administered by PERA. Title 24, Article 51, Part 14 of the C.R.S., as amended, assigns the authority to establish the Plan provisions to the PERA Board of Trustees. PERA issues a publicly available comprehensive annual financial report for the Program. That report can be obtained at www.copera.org/investments/pera-financial-reports. The Voluntary Investment Program is funded by voluntary member contributions up to the maximum limits set by the Internal Revenue Service, as established under Title 24, Article 51, Section 1402 of the C.R.S., as amended. The employees' contributions to this 401(k) plan approximated $4,475,000 and $4,338,000 for the years ended
June 30, 2016 and 2015, respectively.
The PERA Deferred Compensation Plan (457) was established July 1, 2009, as a continuation of the State's deferred compensation plan, which was established for state and local government employees in 1981. At July 1, 2009, the State's administrative functions for the 457 plan were transferred to PERA, where all costs of administration and funding are borne by the plan participants. In calendar year 2015, participants were allowed to make contributions of up to 100 percent of their annual gross salary (reduced by their 8 percent PERA contribution) to a maximum of $18,000. Participants who are age 50 and older, and contributing the maximum amount allowable, were allowed to make an additional $6,000 contribution in 2015 for total contributions of $24,000. Contributions and earnings are tax deferred. At December 31, 2015, the plan had 17,814 participants. The employees' contributions to the 457 plan approximated $13,571,000 and $13,372,000 for the years ended June 30, 2016 and 2015, respectively.
Under the University's optional retirement plan (ORP), certain members of the University are required to participate in a defined contribution retirement plan administered by the University for the benefit of full-time faculty and exempt staff members. The State constitution assigns the authority to establish and amend plan provisions to the Regents. The contribution requirements of plan members and the University are established and may be amended by the Regents. Generally, employees are eligible for participation in the ORP upon hire and are vested immediately upon participation.
For the years ended June 30, 2016 and 2015, the University's contribution to the defined contribution retirement plan was equal to 10 percent of covered payroll, and the employee contribution was equal to 5 percent of covered payroll. The University's contribution under the ORP approximated $116,728,000and $106,024,000 during the years ended June 30, 2016 and 2015, respectively. The employees' contribution under the ORP approximated $58,183,000 and $52,850,000 during the years ended June 30, 2016 and 2015, respectively.
Participants in the University's ORP choose to invest all contributions with one or more of three designated vendors. In addition, participants in the University's ORP are covered under federal Social Security. Federal Social Security regulations require both the employer and employee to contribute a percentage of covered payroll to Social Security.
The University provides a voluntary retirement savings plan to most employees referred to as a 403(b) plan. Employee salary deferrals into the 403(b) plan are made before income tax is paid and allowed to grow tax-deferred until the money is taxed as income when withdrawn from the plan. For calendar year 2016 and 2015, the plan had a contribution limit of $18,000. In addition, the plan allowed catch-up contributions of $6,000. The plan is administered by the University and the benefit terms are established and can be amended under the Employee Retirement Income Security Act (ERISA). The employees' contributions to this 403(b) plan approximated $36,882,000 and $33,833,000 for the years ended 2016 and 2015, respectively.
The University provides an Alternate Medicare Plan (AMP) to retirees aged 65 and over. The AMP was established by the University who also administers and has the authority to amend benefits. The AMP is available to the employee and eligible spouse/same gender domestic partner. Coverage is not provided for dependent children. The AMP provides a monthly cash payment of approximately $140 for a retiree and approximately $238 for a retiree plus spouse/same gender domestic partner to offset medical plan costs for non-university Medicare Risk or Medicare-Eligible plan. No retiree contribution is permitted. As these monthly cash payments are not restricted as to use, they are considered a pension rather than a postemployment benefit. As of June 30, 2016 and 2015, based on the July 1, 2015 actuarial valuation, the unfunded actuarial accrued liability was $34,100,000. The AMP is not subject to Statement No. 68, as amended.
For the years ended June 30, 2016, 2015 and 2014, the annual AMP cost was $3,000,000, $3,100,000, and $2,600,000, respectively. The University contributed $1,300,000, $1,400,000 and $1,100,000, respectively, which was 43 percent, 45 percent, and 42 percent, respectively, of the annual AMP cost. The net pension obligation was $11,600,000, $9,900,000, and $8,200,000, respectively. Additional information is presented in the RSI.
The actuarial method used is the projected unit credit cost method and the discount rate used is 4.5 percent. The UAAL is being amortized straight-line over a closed period of 30 years.
Table 15.7, Alternate Medicare Plan presents changes in the AMP for the years ended June 30, 2016 and 2015.
|Annual required contribution (ARC)||$3,200||3,200|
|Interest on net obligation||400||400|
|Adjustment to ARC||(600)||(500)|
|Net pension expense||3,000||3,100|
|Contributions made during the year||(1,300)||(1,400)|
|Increase in AMP||1,700||1,700|
|Beginning of year||9,900||8,200|
|End of year||$11,600||9,900|
The University provides an early retirement incentive program (ERIP) to tenured professors who are at least 55 years of age and whose age and years of service total at least 70. These professors must also be participants in the University's Optional Retirement Plan. The ERIP provides eligible participants with an incentive equal to twice the professor's base salary and supplemental pay. In return, the participants will retire and relinquish tenure immediately. There were 81 and 77 participants as of June 30, 2016 and 2015, respectively. Benefits under the ERIP are payable over a five-year period. Participation in this program does not impact the Optional Retirement Plan or OPEB. The liability as of June 30, 2016 and 2015 was $7,222,000 and $9,102,000, respectively, measured at a discounted present value using a rate of 5 percent. Table 15.8, Early Retirement Incentive Program, presents changes in the ERIP for the years ended June 30, 2016 and 2015.
|Beginning of year||$9,102||10,851|
|End of year||$7,222||9,102|
UPI sponsors a defined contribution retirement plan for its permanent employees that is administered by the Teachers Insurance Annuities Association's College Retirement Equities Fund. The board of directors for UPI has the authority to amend plan provisions. Employees are eligible for participation in the plan after completing one year of service. On behalf of eligible employees, UPI contributed an amount equal to 7 percent of eligible employees' salaries for the years ended June 30, 2016 and 2015. UPI's contributions for covered payroll to the retirement plan for the years ended June 30, 2016 and 2015, approximated $1,948,000 and $1,872,000, respectively.
The University's contributions to its various health insurance programs approximated $174,503,000 and $157,066,000 during the years ended June 30, 2016 and 2015, respectively. See Note 18 for discussion of the Trust.
As of June 30, 2016 and 2015, the University has one segment, UPI. UPI is also a blended component unit of the University.
UPI has identifiable activities for which UPI Fixed-Rate bonds approximating $9,833,000 and $11,009,000 are outstanding as of June 30, 2016 and 2015, respectively. The activities of this segment include all the SOM's faculty practice plan.
The University paid UPI rental amounts of $2,315,000 and $1,962,000 during the years ended June 30, 2016 and 2015, respectively. As UPI is a blended component unit, these amounts are eliminated.
Summary financial information as of and for the years ended June 30, 2016 and 2015, is presented in Table 16, Segment Financial Information.
|As of and for the year ended June 30||2016||2015|
|Condensed Statement of Net Position|
|Cash and cash equivalents||$84,577||98,891|
|Other current assets||87,754||82,235|
|Total current assets||225,289||219,146|
|Capital assets, net||43,082||44,112|
|Other noncurrent assets||5,753||5,253|
|Total noncurrent assets||262,965||226,518|
|Accounts payable and accrued expenses||$43,721||49,158|
|Accounts payable to University of Colorado||6,639||7,062|
|Bonds, leases, and notes payable||1,308||1,369|
|Total current liabilities||51,668||57,589|
|Bonds, leases, and notes payable||8,893||10,194|
|Total noncurrent liabilities||8,893||10,194|
|Net investment in capital assets||$32,881||32,549|
|Total Net Position||$427,693||377,881|
|Condensed Statement of Revenues, Expenses, and Changes in Net Position|
|Operating revenues (expenses)|
|Other operating expenses||(695,012)||(625,251)|
|Nonoperating revenues (expenses)|
|Interest expense on capital asset-related debt||(253)||(203)|
|Other nonoperating expenses||(15,800)||(15,035)|
|Total nonoperating revenues (expenses)||(4,688)||(10,626)|
|Increase in Net Position||49,812||40,033|
|Net Position, beginning of year||377,881||337,848|
|Net Position, end of year||$427,693||377,881|
|Condensed Statement of Cash Flows|
|Net cash flows provided by (used for)|
|Non-capital financing activities||(15,899)||(15,029)|
|Capital and related financing activities||(4,974)||(7,664)|
|Net (Decrease) Increase in Cash and Cash Equivalents||(14,314)||31,766|
|Cash and cash equivalents, beginning of year||98,891||67,125|
|Cash and Cash Equivalents, End of Year||$84,577||98,891|
Summary financial information as of and for the years ended June 30, 2016 and 2015, for the University’s DPCU are presented in Table 17, DPCU Summary Financial Statements.
|Condensed Statement of Net Position||As of June 30, 2016|
|Cash and cash equivalents||$34,693||4,890||39,583|
|Accounts and contributions receivable, net||20,774||192||20,966|
|Other current assets||554||1,115||1,669|
|Total current assets||56,021||13,992||70,013|
|Assets held under split-interest agreements||37,501||-||37,501|
|Contributions receivable, net||90,784||-||90,784|
|Capital assets, net||434||71,386||71,820|
|Total noncurrent assets||1,587,639||77,327||1,664,966|
|Accounts payable - University||8,966||-||8,966|
|Bonds, leases, and notes payable||-||6,755||6,755|
|Total current liabilities||25,134||8,570||33,704|
|Bonds, leases, and notes payable||-||63,931||63,931|
|Total noncurrent liabilities||346,598||83,073||429,671|
|Net investment in capital assets||$-||24,030||24,030|
|Restricted for nonexpendable purposes||495,077||-||495,077|
|Restricted for expendable purposes||721,412||954||722,366|
|Total Net Position||$1,271,928||(324)||1,271,604|
|Statement of Revenues, Expenses, and Changes in Net Position||For the Year Ended June 30, 2016|
|Total operating revenues||179,547||18,518||198,065|
|Gifts and income distributed to University and related parties||106,214||65||106,279|
|Other program services||4,282||4,763||9,045|
|Depreciation and amortization||-||2,309||2,309|
|Total operating expenses||131,245||7,525||138,770|
|Nonoperating revenues (expenses)|
|Pledges assigned to affiliate||-||(1,721)||(1,721)|
|Interest expense on capital asset-related debt||-||(3,715)||(3,715)|
|Increase in Net Position||27,218||5,802||33,020|
|Net Position, beginning of year||1,244,710||(6,126)||1,238,584|
|Net Position, End of Year||$1,271,928||(324)||1,271,604|
|Condensed Statement of Cash Flows|
|Net cash flows provided by (used for)|
|Non-capital financing activities||38,879||14,669||53,548|
|Capital and related financing activities||(201)||-||(201)|
|Net Increase (Decrease) in Cash and Cash Equivalents||16,200||(818)||15,382|
|Cash and cash equivalents, beginning of year||18,493||5,708||24,201|
|Cash and Cash Equivalents, End of Year||$34,693||4,890||39,583|
|Condensed Statement of Net Position||As of June 30, 2015|
|Cash and cash equivalents||$18,493||5,708||24,201|
|Accounts and contributions receivable, net||20,383||142||20,525|
|Other current assets||505||1,129||1,634|
|Total current assets||39,381||15,137||54,518|
|Assets held under split-interest agreements||44,119||-||44,119|
|Contributions receivable, net||65,405||-||65,405|
|Capital assets, net||341||55,845||56,186|
|Total noncurrent assets||1,590,613||62,617||1,653,230|
|Accounts payable - University||6,221||-||6,221|
|Bonds, leases, and notes payable||-||627||627|
|Total current liabilities||20,291||2,415||22,706|
|Bonds, leases, and notes payable||-||69,155||69,155|
|Total noncurrent liabilities||364,993||81,465||446,458|
|Net investment in capital assets||$-||(6,076)||(6,076)|
|Restricted for nonexpendable purposes||451,210||-||451,210|
|Restricted for expendable purposes||723,887||1,743||725,630|
|Total Net Position||$1,244,710||(6,126)||1,238,584|
|Statement of Revenues, Expenses, and Changes in Net Position||For the Year Ended June 30, 2015|
|Total operating revenues||131,735||11,456||143,191|
|Gifts and income distributed to University and related parties||109,204||706||109,910|
|Other program services||4,586||17,606||22,192|
|Depreciation and amortization||228||2,278||2,506|
|Total operating expenses||132,219||20,924||153,143|
|Nonoperating revenues (expenses)|
|Pledges assigned to affiliate||-||-||-|
|Interest expense on capital asset-related debt||(5)||(3,737)||(3,742)|
|Increase (Decrease) in Net Position||41,454||(12,958)||28,496|
|Net Position, beginning of year||1,203,256||6,832||1,210,088|
|Net Position, End of Year||$1,244,710||(6,126)||1,238,584|
|Condensed Statement of Cash Flows|
|Net cash flows provided by (used for)|
|Non-capital financing activities||18,138||175||18,313|
|Capital and related financing activities||(445)||-||(445)|
|Net Increase (Decrease) in Cash and Cash Equivalents||1,202||(2,571)||(1,369)|
|Cash and cash equivalents, beginning of year||17,291||8,279||25,570|
|Cash and Cash Equivalents, End of Year||$18,493||5,708||24,201|
Distributions made by the CU Foundation to the University were approximately $108,843,000 and $116,639,000 during the years ended June 30, 2016 and 2015, respectively. This amount has been recorded as University grant or gift revenue and DPCU operating expense in the accompanying financial statements and does not include undistributed income on University endowments.
Since July 1, 2007, the University has contracted with the CU Foundation to manage a portion of its investments. As of June 30, 2016 and 2015, respectively, $153,379,000 and $159,245,000 is being managed by the CU Foundation. The University is the ultimate beneficiary of substantially all restricted and trust funds held by the CU Foundation and is income beneficiary of a significant portion of endowment funds held by the CU Foundation. In addition, the University contracts with the CU Foundation to manage its endowments. The University has endowments and other assets held by the CU Foundation approximating $172,291,000 and $178,972,000 as of June 30, 2016 and 2015, respectively. The CU Foundation retained an investment management fee equal to 1 percent.
The CU Foundation paid the University $20,749,000 to help cover development costs during the year ended June 30, 2016, which is reported as other operating revenue.
As of June 30, 2016 and 2015, the University recorded an accounts receivable from the CU Foundation of $8,966,000 and $6,221,000, respectively. As of June 30, 2016 and 2015, the University recorded an account payable to the CU Foundation of $710,000 and $603,000, respectively.
For the years ended June 30, 2016 and 2015, CUREF distributed approximately $65,000 and $706,000, respectively, reported as operating expense, to the University, which recognized an equal amount of gift revenue.
During the year ended June 30, 2015, the University increased its existing unsecured line of credit to CUREF to an amount of $16,000,000, which expires on July 1, 2025. Interest rates and any amortization of principal are determined at the time a draw on the line of credit is made. Interest payments on the draw are due semiannually on June 30 and December 31. Any amortizing principal payments are due on or before June 30 of each fiscal year with no prepayment penalty. The outstanding balance as of June 30, 2016 is $14,449,000 and accrues interest at the rate of 1.03 percent per annum.
CUREF has a long-term agreement with the University to rent portions of facilities from 18th Avenue and 33rd Street. For the years ended June 30, 2016 and 2015, the University paid approximately $2,473,000 and $2,415,000, respectively, in base rent of which approximately $455,000 and $442,000, respectively was prepaid at June 30, 2016 and 2015, to CUREF, which recognized an equal amount of other operating revenues.
Effective as of July 1, 2015, the University entered into an agreement with CUREF to provide certain administrative, financial and operational services. CUREF paid the University $457,000 for these services during the year ended June 30, 2016.
As of June 30, 2016 and 2015, the University had no accounts receivable owed from (other than the line of credit discussed above) and no accounts payable due to CUREF.
See Note 20 regarding the future of CUREF.
In accordance with 1991 State legislation, the Hospital Authority was established as a separate and distinct entity. Detailed financial information may be obtained directly from the Hospital Authority at Mail Stop F-401, P.O. Box 6506, Aurora, Colorado 80045.
CU Denver | Anschutz and UPI have several types of financial transactions with the Hospital Authority. On an annual basis, CU Denver | Anschutz or UPI and the Hospital Authority enter into agreements specifying the fees to be charged for services and the allocation of expenses between the two organizations. In certain circumstances, CU Denver | Anschutz may bear the entire cost of certain services in exchange for educational or other services provided by the Hospital Authority. In some instances, the fee charged by CU Denver | Anschutz, UPI, or the Hospital Authority is a set amount for specific services to be provided.
In other circumstances, the fee charged is based upon the amount or type of services requested by either CU Denver | Anschutz or the Hospital Authority.
Examples of services provided by CU Denver | Anschutz to the Hospital Authority include telecommunications services, rental of office space, and resident doctors. Examples of services provided by the Hospital Authority to CU Denver | Anschutz include medical and patient services for sponsored research projects. In general, amounts receivable from, or payable to, the Hospital Authority are settled within the following calendar quarter.
Total payments issued by the Hospital Authority to CU Denver | Anschutz approximated $57,868,000 and $46,626,000 for years ended June 30, 2016 and 2015, respectively. Total payments issued by CU Denver | Anschutz to the Hospital Authority for the years ended June 30, 2016 and 2015 approximated $12,902,000 and $12,538,000, respectively.
For the years ended June 30, 2016 and 2015, the Hospital Authority distributed approximately $35,206,000 and $14,307,000, respectively, reported as gift revenue by the University.
During the years ended June 30, 2016 and 2015, UPI recognized approximately $39,772,000 and $39,541,000, respectively, in health services revenue from the Hospital Authority in support of clinical and academic missions. UPI also received approximately $42,640,000 and $37,729,000 during the years ended June 30, 2016 and 2015, respectively, from the Hospital Authority for amounts earned for services performed by UPI faculty members but required to be processed through the Hospital Authority (such as the State medically indigent program, Ryan White, and other miscellaneous programs).
As of June 30, 2016 and 2015, the University recorded an accounts receivable from the Hospital Authority of $7,401,000 and $5,893,000, respectively, for various services provided. As of June 30, 2016 and 2015, the University recorded an accounts payable to the Hospital Authority of $0 and $20,000, respectively. Generally, amounts due are paid during the current or subsequent month.
AHEC, established by legislation in 1974, is jointly governed and utilized by CU Denver, the Community College of Denver, and Metropolitan State University of Denver. The institutions share the costs of operating common educational, library, and other auxiliary facilities. Costs of the common facilities are shared in accordance with an operating agreement between AHEC and the respective institutions. During the years ended June 30, 2016 and 2015, the University incurred expenses related to the common facilities approximating $10,651,000 and $10,285,000, respectively, for payments to AHEC.
As of June 30, 2016 and 2015, the University recorded an accounts payable to AHEC of $999,000 and $93,000, respectively, for services rendered but not yet paid, and for fees collected for the spring end of term but not yet paid. As of June 30, 2016 and 2015, the University had accounts receivable due from AHEC of $1,000 and $12,000, respectively.
In addition, the University leases space from AHEC. As of June 30, 2016 and 2015, the University has future operating lease payment obligations to AHEC of $2,653,000 and $2,703,000. For related party lease transactions, see Note 9.
Detailed financial information may be obtained directly from AHEC at 1201 5th Street Suite 370, Denver, Colorado 80217-336.
The Trust was formed June 28, 2010. Trust members are the University, the Hospital Authority, and UPI. The purpose of the Trust is to provide healthcare benefits to the employees of the Trust members on a self-insured basis. The University does not have financial accountability over the Trust. Self-insured risks are transferred to the pool.
The Trust paid medical claims on behalf of the University of $176,226,000 and $137,535,000 during the years ended June 30, 2016 and 2015, respectively. The University's contributions to the Trust were $174,503,000 and $153,360,000 for the years ended June 30, 2016 and 2015, respectively, and the employees' contributions were $22,515,000 and $17,495,000, respectively. As of June 30, 2016 and 2015, the University had accounts receivable owed from the Trust of $8,000 and $567,000, respectively, and accounts payable due to the Trust of $272,000 and $1,253,000, respectively.
Detailed financial information may be obtained directly from the Trust at 1800 Grant Street, Suite 225, Denver, Colorado 80203.
The University leases various buildings and equipment under operating lease rental agreements. Operating leases do not give rise to property rights or meet other capital lease criteria and, therefore, the related assets and liabilities are not recorded in the accompanying financial statements. For the years ended June 30, 2016 and 2015, total rental expense under these agreements approximated $15,096,000 and $11,613,000 for the University, respectively. Future minimum payments for these operating leases are shown in Table 19, University Operating Leases Minimum Lease Obligations.
|Years Ending June 30||Minimum Lease Obligation|
|Total Operating Lease Obligations||$88,162|
Contracts have been entered into for the purpose of planning, acquiring, constructing, and equipping certain building additions and other projects with outstanding amounts totaling approximately $259,294,000 and $212,694,000, as of June 30, 2016 and 2015, respectively. These additions will be funded or financed by donor contributions, appropriations from the State, issuance of revenue bonds, and other financings. As of June 30, 2016 and 2015, the amount of capital construction appropriations authorized from the State for these projects approximated $46,279,000 and $44,410,000, respectively.
Substantial amounts are received and expended by the University under federal and state grants and contracts, and are subject to audit by cognizant governmental agencies. This funding relates to research, student aid, and other programs. University management believes that any liabilities arising from such audits will not have a material effect on the University's financial position or operations.
UPI, as a member of the healthcare industry, is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, and government healthcare program participation requirements; reimbursement for patient services; and Medicare and Medicaid fraud and abuse. Government activity has continued to increase with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs, together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. UPI management believes that UPI is in substantial compliance with fraud and abuse statutes as well as other applicable government laws and regulations. While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time.
The University is a defendant in a number of legal actions. While the final outcome of many of these legal actions cannot be determined at this time, management is of the opinion that the ultimate liability not covered by insurance, if any, for these legal actions will not have a material effect on the University's financial position or operations.
CUREF is involved in litigation whereby the owner of an off-campus student housing project has filed claims against CVA challenging, as a federal antitrust conspiracy to monopolize, the decision of the University to require, according to the plaintiff, "with very few exceptions [that] all first-time domestic freshmen and international students" at CU Denver live at Campus Village Apartments. A jury trial was held during the fiscal year, and the jury returned a verdict in favor of the plaintiff on its antitrust claim and awarded damages of $3,261,000, which have been trebled under the Clayton Act for a total of $9,783,000. Attorneys' fees and costs totaling $1,417,000 were also awarded. Post-judgment interest is accruing on the total amount awarded at the rate of 0.17 percent per annum as of February 3, 2015, the date of entry of judgment.
A notice of appeal was filed September 24, 2015, following the denial of two post-trial motions. The appeal was fully briefed, and oral arguments were held before the appeals court on September 20, 2016. There is no timeline for a decision on the appeal. The judgement remains stayed under a $12,000,000 supersedeas bond posted by CVA. The bond is secured by two restricted investment accounts totaling $5,035,000 as of June 30, 2016 and also by a $7,000,000 indemnification agreement with the University.
Effective as of September 16, 2016, CVA and the plaintiff entered into a settlement agreement in order to mutually limit the monetary risks arising from the uncertainty of the appeal decision. The agreement provides for a payment to the plaintiff of $6,150,000, which has been made by CUREF on behalf of CVA. The parties will continue to litigate the issues in dispute until a decision is made by the appeals court. In the event the appeals court returns a decision reversing the verdict and vacating the judgment, CVA will have no further payment obligation. If the appeals court remands the case to the district court for rehearing, the plaintiff agrees to dismiss the original claims, as well as pending newer claims. If the appeals court affirms the district court's judgement, CVA agrees to pay the plaintiff an additional $100,000, and the plaintiff agrees to acknowledge that the judgment has been satisfied and will dismiss all claims.As a result of the settlement, agreement the $12,000,000 liability previously reflected as claims and judgments on CUREF's consolidated statement of financial position was reduced to $6,150,000 as of June 30, 2016. As of June 30, 2016, there has been no accrual of any post-judgment interest since the settlement agreement eliminates any post-judgment interest. Additionally, there has been no accrual for additional legal fees, nor for the contingent $100,000 payment that may be due to the plaintiff under the settlement agreement if the appeal is not successful.
On July 1, 2016, LHV LLC transferred its ownership interest in various vacant land holdings and in a residential home to CUPCO, which were carried at $4,054,000 as of June 30, 2016. Additionally, on the same date, LHV LLC transferred its interest in an option agreement to purchase vacant land to CUPCO, carried at $15,659,000 as of June 30, 2016. No consideration was received by LHV LLC as a result of these transfers, and any debt associated with the transferred interests was assumed by CUPCO.
CUREF, as a sole shareholder, assigned its single share in CU UK to the CU Foundation effective as of July 1, 2016. The net assets of CU UK of $956,000 were consolidated into CUREF as of June 30, 2016. No consideration was received by CUREF as a result of the assignment.
On July 7, 2016, LHV LLC executed a binding commitment to sell real property to a third party for $1,200,000, subject to certain contingencies. LHV LLC transferred the same real property to CUPCO on July 13, 2016, subject to the purchase and sale commitment. The carrying value of this property was $600,000 as of June 30, 2016.
As a result of transfers of all assets from PHV LLC to the CU Foundation and from CVA II to CUPCO, PHV LLC and CVA II were dissolved as of July 31, 2016.
Effective as of August 1, 2016, CUREF transferred its membership interest in 18th Avenue to the University. 18th Avenue's net assets of $1,705,000 were consolidated into CUREF as of June 30, 2016. No consideration was received by the Foundation as a result of the transfer. Additionally, the University replaced CUREF as a limited guarantor of the note.
On August 1, 2016, 33rd Street sold real property to the University, subject to existing leases, under terms of a purchase and sale agreement dated October 31, 2013, and amended July 26, 2016.
Additionally, on October 31, 2013, 33rd Street and the University executed a binding commitment to sell real property on August 1, 2016 ("the closing date"). The property closed as scheduled and the related mortgage was fully satisfied by 33rd Street.
Settlement was reached in the litigation involving claims against CVA more fully described in Note 19.