UNIVERSITY OF COLORADO FINANCIAL AND COMPLIANCE …

UNIVERSITY OF COLORADO FINANCIAL AND COMPLIANCE AUDIT

June 30, 2015 and 2014

LEGISLATIVE AUDIT COMMITTEE 2015 MEMBERS

Representative Lucia Guzman Chair

Representative Dan Nordberg Vice-Chair

Senator Chris Holbert Senator Cheri Jahn Senator Tome Neville

Representative Dianne Primavera Representative Su Ryden Representative Lori Saine

Office of the State Auditor Staff

Dianne E. Ray State Auditor

Kerri Hunter Deputy State Auditor

Jeffrey Kahn Contract Monitor

CliftonLarsonAllen LLP Contractor

An electronic version of this report is available at state.co.us/auditor

A bound report may be obtained by calling the Office of the State Auditor 303.869.2800

Please refer to Report Number 1505F when requesting this report

TABLE OF CONTENTS

Contents

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Abbreviations and Acronym ...................................................................................................... 1 Report Summary ......................................................................................................................... 2 Recommendation Locator.......................................................................................................... 4 Financial and Compliance Audit Report

Description of the University of Colorado .......................................................................... 5 Finding and Recommendation............................................................................................. 7 Disposition of Prior Audit Finding and Recommendation .............................................. 12 Independent Auditors' Report ........................................................................................... 13 Management's Discussion and Analysis (Unaudited) ..................................................... 16 Basic Financial Statements

Statements of Net Position ............................................................................................... 30 Statements of Revenues, Expenses, and Changes in Net Position ................................. 32 Statements of Cash Flows ................................................................................................ 34 Notes to Financial Statements .......................................................................................... 36 Required Supplementary Information Funding Status of Other Postemployment Benefits .......................................................... 84 Funding Status of Alternate Medicare Plan ...................................................................... 84 Schedule of University's Proportionate Share of PERA Liability....................................... 84 Schedule of Contributions to PERA Pension .................................................................... 85 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ......... 86 Required Communications to the Legislative Audit Committee .................................... 88 Summary of Audit Differences........................................................................................... 92

ABBREVIATIONS AND ACRONYMS

18th Avenue .......................................18th Avenue, LLC 33rd Street .........................................33rd Street, LLC 457 ....................................................PERA Deferred Compensation Plan AED...................................................Amortization Equalization Disbursement AHEC ................................................Auraria Higher Education Center AMP ..................................................Alternate Medicare Plan ARC...................................................Annual Required Contribution ARRA ................................................American Recovery and Reinvestment Act Children's Colorado...........................Children's Hospital Colorado Association COF...................................................College Opportunity Fund C.R.S.................................................Colorado Revised Statutes CU Anschutz Medical Campus .........University of Colorado Anschutz Medical Campus CU-Boulder .......................................University of Colorado Boulder CU Denver ........................................University of Colorado Denver CU Foundation ..................................University of Colorado Foundation CU UK ...............................................University of Colorado UK Foundation Limited CUREF..............................................University of Colorado Real Estate Foundation CVA...................................................Campus Village Apartments DPCU ................................................Discretely Presented Component Units ERIP..................................................Early Retirement Incentive Program Foothills.............................................Foothills Medical Office Building, LLC GAAP ................................................Generally Accepted Accounting Principles GASB ................................................Governmental Accounting Standards Board HCTF.................................................Health Care Trust Fund HDS...................................................Housing and Dining Services Hospital Authority ..............................University of Colorado Hospital Authority LHV LLC............................................Land Holdings Venture, LLC OPEB ................................................Other Postemployment Benefits ORP ..................................................Optional Retirement Plan PDPA ................................................Public Deposit Protection Act PERA ................................................Public Employees' Retirement Association of Colorado PERA DC Plan ..................................PERA Defined Contribution Retirement Plan PHV LLC ...........................................Partnership Holdings Venture, LLC Regents.............................................Board of Regents S&P ...................................................Standard and Poor's SAED ................................................Supplemental Amortization Equalization Disbursement SDTF.................................................State Division Trust Fund SEC...................................................Securities and Exchange Commission SEEC ................................................Sustainability, Energy and Environment Complex SOM ..................................................School of Medicine State..................................................State of Colorado Surgery Center..................................Children's Hospital North Surgery Center, LLC TABOR..............................................Taxpayer's Bill of Rights TriWest..............................................TriWest Healthcare Alliance Corp. Trust ..................................................University of Colorado Health and Welfare Trust TWE ..................................................The Wildlife Experience UAAL.................................................Unfunded Actuarial Accrued Liability UCCS ................................................University of Colorado Colorado Springs ULEHI................................................University License Equity Holding, Inc. University ..........................................University of Colorado UPI ....................................................University Physicians, Inc.

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UNIVERSITY OF COLORADO REPORT SUMMARY

Year Ended June 30, 2015

Purposes and Scope of Audit

Authority, Purpose and Scope

The Office of the State Auditor, State of Colorado, engaged CliftonLarsonAllen LLP (CliftonLarsonAllen) to conduct a financial and compliance audit of the University of Colorado (the University) for the fiscal year ended June 30, 2015. CliftonLarsonAllen conducted the audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States of America. We conducted the related fieldwork from May 2015 to October 2015.

The purpose and scope of our audit were to:

Express opinions on the basic financial statements of the University as of and for the year ended June 30, 2015. Our independent auditors' report refers to a report on internal control over financial reporting and compliance as required by auditing standards generally accepted in the United States of America and Government Auditing Standards.

Evaluate compliance with laws, regulations, contracts, and grants governing the expenditure of federal and state funds.

The University's schedule of expenditures of federal awards and applicable opinions thereon by the Office of the State Auditor, State of Colorado, are included in the Fiscal Year Ended June 30, 2015 Statewide Single Audit Report issued under separate cover.

Audit Opinions and Reports

We expressed unmodified opinions on the University's basic financial statements as of and for the year ended June 30, 2015.

There were two audit adjustments that was proposed and not made to the basic financial statements:

An adjustment that would have decreased beginning net position by approximately $10.6 million and increased current year revenues by this same amount to reflect a prior period change in recording transfers of investments between the University and the Foundation.

An adjustment that would have increased beginning net position by approximately $7.7 million and decreased current year operating expenses by this same amount to reflect the impact of the prior year passed adjustment on the accrual of projected operating expenses not accrued.

This adjustment was not made by the University as management determined these amounts were not quantitatively or qualitatively material to the financial statements.

We issued a report on the University's compliance and internal control over financial reporting based on an audit of the basic financial statements performed in accordance with Government Auditing Standards. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency or a combination of deficiencies in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

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