WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE ...

WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE

CONSOLIDATED FINANCIAL STATEMENTS

Year Ended June 30, 2020

Independent Auditor's Report

The Board of Directors Wichita State University Foundation and Affiliate Wichita, Kansas

We have audited the accompanying consolidated financial statements of Wichita State University Foundation and Affiliate (collectively referred to as the "Organization"), which comprise the consolidated statement of financial position as of June 30, 2020, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Report on the Financial Statements

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wichita State University Foundation and Affiliate as of June 30, 2020, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the financial statements, the Organization adopted FASB Accounting Standards Update (ASU) 2018-08, Not-for-Profit Entities, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made effective July 1, 2019. The guidance has been applied on a modified prospective basis to agreements not completed as of the effective date and agreements entered into after the effective date. Our opinion is not modified with respect to this matter. Report on Summarized Comparative Information We have previously audited the Organization's 2019 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated September 30, 2019. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2019, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

September 30, 2020 Wichita, Kansas

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WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

June 30, 2020 (With Summarized Financial Information at June 30, 2019)

AS S E T S

2020

2019

Cash and cash equivalents Pledges receivable, less allowance for uncollectible

pledges (2020, $642,309; 2019, $758,628) Investments Investment at equity

Real estate Buildings, equipment, furniture and software, at cost,

less accumulated depreciation Cash surrender value of life insurance Collections Other assets

$ 6,770,213

23,492,076 286,039,128

2,824,646 653,075

623,550 4,933,998 17,361,095

839,820

$ 19,076,972

27,754,267 286,982,415

2,922,529 597,175

634,647 4,485,292 16,064,075 3,195,433

TOTAL ASSETS

$ 343,537,601 $ 361,712,805

L I AB I L I T I E S

Accounts payable and accrued expenses

$

Annuities payable

Due to WSU Alumni Association

Due to WSU Board of Trustees

Due to WSU Departments

Due to WSU Intercollegiate Athletic Association, Inc.

Note payable

592,200 $ 925,342 1,751,755 7,466,590 148,771 6,777,189 491,400

670,515 933,723 1,803,198 7,771,685 149,523 9,275,177

-

TOTAL LIABILITIES

N E T AS S E T S

18,153,247

20,603,821

Net assets without donor restrictions: Undesignated Board designated quasi-endowment Total net assets without donor restrictions

Net assets with donor restrictions

11,786,049 782,775

12,568,824 312,815,530

10,243,759 846,725

11,090,484 330,018,500

TOTAL NET ASSETS

325,384,354

341,108,984

TOTAL LIABILITIES AND NET ASSETS

$ 343,537,601 $ 361,712,805

See Notes to Consolidated Financial Statements - 3 -

WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE

CONSOLIDATED STATEMENTS OF ACTIVITIES

Year Ended June 30, 2020 (With Summarized Financial Information for the Year Ended June 30, 2019)

REVENUE, GAINS, AND OTHER SUPPORT

Contributions Net investment return (loss) Other income Net assets released

from restriction

TOTAL REVENUE, GAINS, AND OTHER SUPPORT

EXPENSES Program Services: Scholarships University support Supporting activities: Management and general Fundraising

TOTAL EXPENSES

Increase (decrease) in net assets before transfers from Wichita State University

Transfers from Wichita State University

INCREASE (DECREASE) IN NET ASSETS

NET ASSETS, BEGINNING OF YEAR

NET ASSETS, END OF YEAR

Without Donor Restrictions

$

487,707

2,317,759

894,653

30,598,750

34,298,869

6,015,509 21,358,700

2,549,369 2,896,951 32,820,529

1,478,340 -

1,478,340

11,090,484 $ 12,568,824

2020 With Donor Restrictions

TOTAL

2019 TOTAL

$ 13,065,718 (2,381,311) 1,211,373

$ 13,553,425 (63,552)

2,106,026

$ 24,361,074 11,803,076 2,930,838

(30,598,750)

-

-

(18,702,970)

15,595,899

39,094,988

-

6,015,509

5,811,337

-

21,358,700

9,902,621

-

2,549,369

2,498,700

-

2,896,951

2,807,903

-

32,820,529

21,020,561

(18,702,970) 1,500,000

(17,202,970)

(17,224,630) 1,500,000

(15,724,630)

18,074,427 4,000,000

22,074,427

330,018,500 $ 312,815,530

341,108,984 $ 325,384,354

319,034,557 $ 341,108,984

See Notes to Consolidated Financial Statements - 4 -

WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

Year Ended June 30, 2020 (With Summarized Financial Information for the Year Ended June 30, 2019)

Program Services

Scholarships

University Support

Total Program Services

Books Change in the value of split

interest agreements Computer software and maintenance Contract labor Contributions Depreciation Donor development Dues and subscriptions Fellowships Furniture, fixtures and equipment Grants Honorarium Insurance KMUW Marketing and communication Outside services Professional fees and services Recruitment Registration Rent, repairs and maintenance Salaries and benefits Scholarships Seminar expenses Staff development Supplies and postage Travel and entertainment Trust distributions Other

$

-

6,015,509 -

$ 22,173 $ 22,173

(334,618) 43,275 17,071 35,806 55,805 -

133,833 323,905 265,441 8,141,379

42,898 -

297,461 30,519

7,984,306 2,223,913

19,360 86,171 156,749

821 5,755 477,134 492,364 646,195 190,984

(334,618) 43,275 17,071 35,806 55,805 -

133,833 323,905 265,441 8,141,379

42,898 -

297,461 30,519

7,984,306 2,223,913

19,360 86,171 156,749

6,015,509

821 5,755 477,134 492,364 646,195 190,984

$ 6,015,509 $ 21,358,700 $ 27,374,209

Supporting Activities

Total

Management

Supporting

and General Fundraising Activities

$

-

$

-

$

-

199,743

17,263 34,011 76,805 102,905 286,667 1,695,144 7,176 53,326 45,715 30,614

$ 2,549,369

342,859 2,554,092 -

$ 2,896,951

199,743

342,859 17,263 34,011 76,805 102,905 286,667 4,249,236 7,176 53,326 45,715 30,614

$ 5,446,320

2020 Total Expenses

$ 22,173

2019 Total Expenses

$ 65,235

(334,618) 243,018

17,071 35,806 55,805 342,859 151,096 323,905 265,441 8,141,379 42,898 34,011 297,461 107,324 7,984,306 2,326,818 19,360 86,171 443,416 4,249,236 6,015,509

821 12,931 530,460 538,079 646,195 221,598

$ 32,820,529

309,379 155,063

24,993 26,650 50,560 440,608 104,715 233,263 297,213 5,861,448 78,351 41,690 337,816 127,109 564,538 81,064 15,474 111,660 303,828 4,160,279 5,811,337 18,000 10,443 276,447 650,557 696,672 166,169

$ 21,020,561

See Notes to Consolidated Financial Statements - 5 -

WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended June 30, 2020 (With Summarized Financial Information for the Year Ended June 30, 2019)

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES

Increase (decrease) in net assets

$ (15,724,630) $ 22,074,427

Adjustments to reconcile the increase (decrease) in net

assets to net cash flows from operating activities:

Depreciation

55,805

50,560

Gain on equity method investment

(190,667)

(230,540)

Contributions for permanent endowment

(6,034,847)

(7,976,221)

Net realized and unrealized (gain) loss on investments

3,365,700

(8,486,764)

Fair value of donated collection items

(895,770)

(156,751)

Fair value of donated investments and real estate

(849,232)

(3,696,569)

Donated facilities recorded as contributions

(154,842)

(158,316)

Donated facilities recorded as rent expense

154,842

158,316

Decrease (increase) in cash surrender value of life insurance

(448,706)

422,922

Transfers from Wichita State University

(1,500,000)

(4,000,000)

Decrease (increase) in operating assets:

Pledges receivable

3,472,406

4,162,667

Other assets

2,355,613

(187,323)

Increase (decrease) in operating liabilities:

Accounts payable and accrued expenses

(78,315)

80,119

Annuities payable

(8,381)

261,747

NET CASH FLOWS FROM OPERATING ACTIVITIES

(16,481,024)

2,318,274

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of buildings, equipment, furniture & software Purchase of collections Net purchases of investments Distributions received from equity method investment Principal payments received on mortgage receivable

(44,708) (401,250) (1,629,081) 288,550

-

(307,440) -

(15,737,511) 238,800 32,683

NET CASH FLOWS FROM INVESTING ACTIVITIES

(1,786,489) (15,773,468)

CASH FLOWS FROM FINANCING ACTIVITIES Contributions received for permanent endowment Transfers from Wichita State University Decrease in due to affiliated entities Proceeds from issuance of note payable

NET CASH FLOWS FROM FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

6,824,632 1,500,000 (2,855,278)

491,400

5,960,754

(12,306,759)

19,076,972

7,976,221 4,000,000 (1,353,442)

-

10,622,779

(2,832,415)

21,909,387

CASH AND CASH EQUIVALENTS, END OF YEAR

$ 6,770,213 $ 19,076,972

See Notes to Consolidated Financial Statements - 6 -

WICHITA STATE UNIVERSITY FOUNDATION AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

( 1 ) Summary of significant accounting policies

Nature of operations - Wichita State University Foundation (the "Foundation") provides support for the educational undertakings of Wichita State University and all related beneficial activities. It derives most of its revenue from contributions and earnings on investments. WSUF Real Estate Holdings, LLC (the "LLC") is a wholly owned subsidiary of the Foundation formed during 2016. It derives its revenue from donated real estate. All activity from the LLC has been included within the consolidated financial statements. These entities are collectively referred to as the "Organization". Significant inter-company accounts and transactions have been eliminated.

Use of estimates - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial statement presentation - Financial statement presentation follows the recommendations of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958-205, Financial Statements of Not-for-Profit Organizations. Under FASB ASC 958-205, the Organization is required to report information regarding its financial position and activities in two classes of net assets: net assets without donor restrictions and net assets with donor restrictions. Net assets with donor restrictions are those which have been limited by donors to a specified time period or purpose or maybe required to be maintained in perpetuity by the Organization.

Basis of accounting - The Organization's policy is to prepare the consolidated financial statements on the accrual basis of accounting; consequently, the consolidated financial statements reflect all significant receivables, payables, and other liabilities.

Income taxes - The Foundation is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, the Foundation qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under Section 509(a)(2). The Foundation is subject to federal income tax on any unrelated business taxable income.

The LLC does not incur income taxes; instead, its earnings are included in the Foundation's income tax return and taxed depending on the Foundation's tax situation. The consolidated financial statements, therefore, do not include a provision for income taxes for the LLC.

The Organization's present accounting policy for the evaluation of uncertain tax positions is to review those positions on an annual basis. A liability would be recorded in the financial statements during the period which, based on all available evidence, management believes it is more likely than not that the tax position would not be sustained upon examination by taxing authorities and the liability would be incurred by the Foundation. The Organization did not have any material uncertain tax positions as of June 30, 2020.

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